Does Receiving a Cash Gift Affect Medicaid Eligibility?

Does Receiving a Cash Gift Affect Medicaid Eligibility in Maryland?

You’re planning your finances so you can be eligible for Medicaid, only to discover that a well-intentioned cash gift from a family member or friend could jeopardize your benefits.

If you’re planning for Medicaid, there’s a lot you need to be aware of to ensure your eligibility. But does receiving a cash gift affect Medicaid eligibility in Maryland?

In this article, we’ll discuss the impact of cash gifts on Medicaid eligibility, the five-year look-back period, and Medicaid planning strategies—so you’ll be prepared for your future Medicaid needs.

Understanding Long-Term Care Medicaid and Eligibility

Long-term care Medicaid is a government program that covers the significant costs of extended, daily medical care. It’s a lifeline for families who can’t afford long-term care and assisted living facilities on their own. Long-term care is often associated with older individuals, but it’s vital for anyone who requires care around the clock.

You need to meet specific criteria to qualify for long-term care Medicaid in Maryland, which has strict limits on how much income and assets you’re allowed to have to be eligible for Medicaid benefits.

Income refers to money from employment, Social Security, and pensions. Assets include property, investments, and bank accounts.

A single individual in Maryland applying for long-term care can retain assets up to $2,500.

But does receiving a cash gift affect your Medicaid eligibility? Cash gifts can affect your asset calculations, potentially impacting your eligibility for long-term care Medicaid.

Does Receiving a Cash Gift Affect Medicaid Eligibility?

If you’re wondering, “Does receiving a cash gift affect Medicaid eligibility?” the answer is that it could. It depends on several factors. When you receive a cash gift, it can impact your eligibility for Medicaid—because it may be considered an asset or income.

Medicaid’s definition of a “cash gift” is any money given to you without expecting repayment. This could include monetary gifts for:

  • Birthdays
  • Holidays
  • College graduations or other occasions
  • Financial assistance from family members or friends

If a cash gift pushes you above the asset limit, your Medicaid eligibility could be impacted.

Five-Year Look-Back

When receiving cash gifts, take Medicaid’s five-year look-back period into account. During these five years, Medicaid reviews all your financial transactions to determine if you’ve given away or sold assets for less than their fair market value.

Receiving substantial cash gifts within this look-back period could trigger a penalty, making you ineligible for Medicaid benefits for a certain time.

The impact of a cash gift on your Medicaid eligibility depends on:

  • The cash amount of the gift
  • When you receive the gift
  • Your current income and assets

To avoid jeopardizing your eligibility, speak with an experienced elder law attorney who will guide you through the ins, outs, and technicalities of Medicaid planning.

Let’s Look at an Example

Let’s consider a hypothetical example to illustrate how the Medicaid look-back period works:

John is applying for Medicaid to cover his long-term care expenses. However, three years ago, John received a cash gift of $15,000 from his sister to help with some home repairs.

When John applies for Medicaid, the caseworker will review his financial transactions during the five-year look-back period. They will discover the $15,000 cash gift from his sister, which occurred within this timeframe.

In this scenario, the cash gift could be considered a “disqualifying transfer” because it was gifted without receiving fair market value in return. Due to this, Medicaid may impose a period of ineligibility.

Penalties for Receiving Cash Gifts

Penalty Period

If you receive a cash gift that Medicaid considers a disqualifying transfer, you may face a penalty period, where you’ll be ineligible for benefits. The length of the penalty period depends on the gift amount and the average monthly cost of nursing home care (in Maryland, it’s around $7,000).

How to Calculate the Penalty Period

To calculate the penalty period, Medicaid divides the total value of the cash gift by the average monthly cost of nursing home care.

For example, let’s say you received a $21,000 cash gift and Maryland’s average monthly nursing home cost is $7,000. Your penalty period will be 3 months ($21,000 ÷ $7,000 = 3).

During these 3 months, you won’t be eligible for any Medicaid benefits and will have to pay out-of-pocket for long-term care costs until you become eligible again.

Strategies for Avoiding Penalties

If you’re worried about “Does receiving a cash gift affect Medicaid eligibility” there are legal strategies to avoid penalties. Here are a few of them:

Gifting Within Limits

One way to avoid Medicaid penalties is by examining your current income and assets and making sure that a cash gift does not push you over Medicaid’s limits. However, if in doubt, seek advice from an elder law attorney.


Another option to protect your assets and maintain Medicaid eligibility is establishing a Medicaid Asset Protection Trust (MAPT) or another type of irrevocable trust. Trusts can shelter your assets from Medicaid’s calculation of your resources.

However, it’s crucial to set up these trusts well before you need long-term care, as assets transferred to an irrevocable trust will still be subject to the five-year look-back period.

Professional Advice from an Elder Law Attorney

When you’re considering the question “Does receiving a cash gift affect Medicaid eligibility,” your best course of action is to speak with an experienced elder law attorney. They’ll help you understand how gifts impact eligibility and craft a personalized plan to protect your assets while ensuring you receive the care you need.

Key Takeaways

  • Receiving a cash gift can affect your Medicaid eligibility, depending on the amount and timing of the gift.
  • Medicaid has a five-year look-back period, during which gifts and transfers are scrutinized.
  • If you receive a disqualifying cash gift within the look-back period, you may face a penalty period of ineligibility.
  • Legal strategies, such as setting up trusts, help avoid Medicaid penalties.
  • Speak to an elder law attorney to develop a personalized plan for protecting your assets and maintaining your eligibility for Medicaid benefits.

Don’t Let a Well-Intentioned Gift Derail Your Medicaid Eligibility

At PathFinder Law Group, we understand how overwhelming Medicaid eligibility can seem—especially when it comes to accepting cash gifts from loved ones. While these gestures are well-intentioned, they can jeopardize your ability to qualify for the long-term care coverage you need.

With over 16 years of experience in estate planning and elder law, we’ve seen the costly mistakes that can occur when attempting to manage assets without proper legal guidance.

Our mission is to empower you to make informed decisions about your future—while making sure that your eligibility for vital Medicaid benefits remains intact. Ready to create a long-term care plan that works for you? Schedule a risk-free consultation today or call us at 443-579-4529.

About Adam Zimmerman

Adam Zimmerman is known for his unique ability to put people at ease. Within minutes of meeting Adam, his clients realize he is not the stereotypical attorney and is genuinely invested in helping them through their life situations. He is committed to empowering his clients to be decision makers in the process, so they are knowledgeable about the course of action they decide over their affairs.