Can a Medicaid Applicant Rescind a Charitable Gift?

 In Charitable Giving, Long-Term Care Planning


If an individual gave a substantial gift to a church a year or two before moving to a nursing home and needing to apply for Medicaid coverage, can the church be required to return the gift?


This is quite a dilemma since under the Medicaid rules, gifts can make the applicant for benefits ineligible for coverage for up to five years. (You can read more about these rules here.) I see three possible remedies:

First, if the individual did not have legal capacity when he or she made the gift, there’s a legal argument that the gift should be rescinded. This may especially be true if the church was aware or should have been aware of the individual’s incapacity. Even if the legal basis for rescission is not crystal clear, under these circumstances the church might be convinced to return the gift.

The second approach is along the lines of the first but is based on moral rather than legal grounds. While the individual may have had legal capacity at the time of the gift — for instance, he or she may have suffered a stroke afterwards — the church might still be convinced to return the gift due to the circumstances. It does seem odd that the individual would give away substantially all of his or her assets. Again, if the church was aware of this or should have been aware of it, there’s a moral claim that the church should return the funds.

The third avenue of attack would be to try to get relief from the Medicaid agency under two arguments. First, transfers are not supposed to be penalized if they were not made with the intent of qualifying for Medicaid benefits. So, if it can be shown that the individual was healthy at the time of the gift and that it was made totally out of devotion to the gift, the penalty might be avoided. In addition, there are provisions for hardship waivers to protect nursing homes from having to provide services without being paid where there’s no way to get the money back. Both of these are uphill battles with the Medicaid agency, but would probably be worth pursuing if the gift is not returned by the charity.

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