The Listen to Lawrence Letter: Will making gifts for college tuition affect my Medicaid eligibility?

June 3, 2021
Dear Clients and Friends,
Today’s LISTEN TO LAWRENCE LETTER is a follow-up question to Tuesday’s LETTER regarding a pattern of gifting and how Medicaid treats it. I hope this LETTER drives home the point.
I gift each year to my Grandkids towards their college tuition. Can these gifts be exempt from the Medicaid look back? I have been doing this for the last three years and will continue to do so. I am healthy and hopefully not headed for a nursing home anytime in the near future.
I have so many clients in this position, either paying directly for their grandchildrens’ college tuition or funding accounts like 529s. Kudos to you for making this a priority for your family. These annual contributions to their education are certainly “gifts” and, if caught in the look-back period, will be considered by Medicaid to be a disqualifying transfer. The next question then becomes, although considered a disqualifying transfer, can we get Medicaid to exclude this transfer from the Medicaid penalty (a number of months where you would not be eligible for Medicaid)?
Transfers will not be penalized if they were made for some purpose other than trying to protect assets from Medicaid. The fact that you were perfectly healthy at the time of the gift is a fact in your favor.
Another factor is whether or not you ever thought about Medicaid planning; in other words, have you done a Medicaid asset protection plan? Did you gift other assets to protect them from Medicaid? Did you set up a Medicaid trust? You see, it may be reasonable for Medicaid to think that these gifts to the grandchildren are just part of the overall plan to save your assets and divert the cost of your long-term care to them. On the one hand, if you did no other planning, then these gifts to the grandchildren may be safe. On the other hand, if you did no other planning, then all your other assets are not protected. Pick your poison.
Another factor in this analysis is whether or not after your gifts you still have adequate other monies to pay for your long-term care, at least for a reasonable amount of time. If you make a gift to your grandchildren, are you thereafter penniless, looking to Medicaid to pay for your care someday?……or do you still have plenty of money to pay for your care and the gifts to the grandchildren had nothing to do with saving assets.
Clearly, a long-term pattern of gifting (the longer the pattern the better), where all of the above factors are in play, will give you an excellent argument that these gifts fit the exception and should not be penalized. Sometimes, although rarely, we can get Medicaid to exclude them upfront, more often than not we have to make these arguments on appeal. It’s never really easy and after all, Medicaid may be thinking, from a public policy point of view, “Hey, why should the taxpayer be funding the education of your grandchildren?”
So the answer to the question above is MAYBE. 😊
I hope this helps! Please forward this information to your friends and relatives to share these informative answers to some very commonly asked questions.
And, if anyone you know would like to receive this
Listen to Lawrence Letter, just have them email me at and I’ll add them to the list!
As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.
Let’s stay connected.
Stay safe!
Until next time...peace, health and happiness.
Lawrence Eric Davidow