How can an elderly person gift money to a relative and not run afoul of Medicaid eligibility requirements?

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How can an elderly person gift money to a relative and not run afoul of Medicaid eligibility requirements?

I will inherit $100,000 from uncle who is 86 and very healthy, however, I need $50,000 to settle debts (otherwise I am facing bankruptcy). My brother is POAfor my uncle. He is leaving me at least $100,000 . Uncle would like to give me $50,000 to help but my brother is afraid to do so in case a few years from now our uncle would have to go into nursing home. He is afraid that if our uncle needs to apply for Medicaid they will want money accounted for. My view is it is his money (he is of very sound mind) to do what he wants with. My brother was advised that the only way to do this is a written contract and repayment plan. Should we speak to an elder care or estate planning attorney? In Trumbell County, OH. 

Asked on September 9, 2010 under Estate Planning, Ohio

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You both really have valid points here and are both correct on some level.  What may give your brother a bit of an edge in his thinking, though, may also help you tax wise.  If your Uncle gives you the money it may be subject to a gift tax, which may be a hefty sum.  If the money was considered a loan and the proper documentation was written up, then the interest may be able to be deducted from your taxes.  Your Uncle could choose to allow you to deduct the loan balance (or principal) from your inheritance upon his passing and waive any further right to repayment, as long as the law allows in your area.  You should speak with an estate planner for many issues regarding his assets and your concerns regarding his health as well as issues as to the loan.  Good luck.


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