Exempt Gifts - Caregiver Child Exception

One of the major exclusions to the gift penalty rules associated with Medicaid is a transfer to a caregiver child. On my web site you can find my article entitled, “Saving The Family Home” which details the caregiver child exception. We have been hearing grumblings from the State of New Jersey that they want to try and make it harder for caregiver children to take advantage of the exempt gift provision. For instance, at one point New Jersey authorities indicated that they wanted to see a contemporaneous log of the care the child provided for the two year period.

Another real problem with the caregiver child exception is that the rule is very complicated. Children often innocently give Medicaid officials the wrong facts that are then turned against the child. For instance, the child’s motivation for moving in the house should have been to care for the parent. It does not have to be the only motivation, but it has to be the reason conveyed to Medicaid. So if a child moved in because she was divorced or out of work, Medicaid will try and deny the use of the caregiver child exception.

In another case, a Massachusetts court ruled that the parent was not sick enough to need the level of services that the child has to provide in order to make use of the gift penalty exception. A child must provide care above a custodial level and the parent must have a special medical need requiring the care.

So for instance, if an entirely healthy parent suddenly has a stroke, the child may not be considered a caregiver child because the parent would not have needed care for the two years prior to the stroke.