THERE’S NOTHING TO IT. HAND ME THE HAMMER.

Almost every day, a potential client comes to my office and asks how he can transfer his assets to his family without affecting his eligibility for Medicaid. Frequently, the client will think he should gift $10,000 to each of his family members. He thinks that by doing this, he’ll be able to purge himself of his assets and qualify for Medicaid without issue.

But he’s wrong. The $10,000 annual gifting program (now, $11,000 a year, actually) is concerned with gift tax, not qualification for the Medicaid program. Gifting $10,000 to, let’s say, 10 people isn’t going to get you anything with regard to Medicaid eligibility – other than making you ineligible for Medicaid for an extended period of time.

Now I don’t like to admit this, but in most cases where a person is seeking to qualify for Medicaid, the person does not come see me and ask for my advice. In fact, I think in the vast majority of cases where a person is looking to qualify for Medicaid, the individual does not retain the services of an attorney. He thinks he can go it alone. He’s heard of the $10,000 gifting, and that’s what he’ll do. What does he need an attorney for? Attorneys are just rich guys who don’t need to get any richer.

I wish. And, as for that line of thinking, it’s very perilous. The laws governing the Medicaid program are very complex. I work with those laws everyday, so do many of my colleagues, yet everyday, my colleagues and I find ourselves discussing those laws with one another trying to understand those laws better. It would be expecting far too much to think that a person who is not a lawyer, who does not work with the Medicaid program everyday will understand the law.

I’m not trying to flatter myself here. The fact of the matter is, it would take a lot of study and practice to do anything properly – carpentry, accounting, or surgery. If you studied and practiced for a long time, you might (might) be able to help yourself with Medicaid planning, but probably not. Given the fact that it would be your first – or at most, second – case, you’d probably make mistakes. And, mistakes, when it comes to Medicaid planning cost. Literally.

Mistakes cost because if you do things incorrectly, you won’t be eligible for Medicaid in the timeliest manner possible. Every month that you’re ineligible for Medicaid is another month that you have to private pay for your care. Since care can cost anywhere from $3,000 to $9,000 a month, the cost of not qualifying can add up very quickly.

If you make a mistake, the Medicaid program might come after your family and recoup the money that you transferred to your family as part of your gifting program. For example, assume that a Medicaid applicant gifted $10,000 to 10 of his family members. He thought, mistakenly, that he did nothing wrong. So, he fills out the Medicaid application, states that he has no assets, and qualifies for Medicaid.

Years later, after his death, Medicaid discovers his gifting program through an IRS cross-match (a records search that Medicaid does with the Internal Revenue Service). Medicaid could now sue his family members to recoup some or all of the money that he transferred to them. And, what if they spent the money? Too bad. They better come up with the money or Medicaid, as a judgment creditor, will be attaching their property, such as their house and cars.

Sure, a person can practice Medicaid planning on themselves. They can operate on themselves, too. I just wouldn’t recommend it.

Medicaid rules are complex, and small missteps can have big consequences. Understanding the potential pitfalls ahead helps you protect your assets and ensures your loved one receives the care they need.