As is common, many elders wish to make gifts and transfers to various charities during their lifetime. These gifts may include stock, cash, life insurance, and more. While people often are not interested in making significant gifts during their lifetime, as they feel they "need" the funds, as they get older they may become more attached to a charity or they may have been solicited and realized that they now wish to make a larger gift. It may also be that they realize they do not need the funds that they have accumulated and they are willing to make either an outright gift or a planned gift, such as a gift annuity or a charitable trust.
Gifts and the Medicaid Look-Back
At is at these times, when a person makes a gift, that in most states that gift or transfer made without adequate consideration causes a look-back of up to five years in order to qualify for Medicaid. Therefore, a gift may carry with it the restriction that it will be looked at by a Medicaid office that will question whether the gift was made as part of a lifetime giving plan or program, or if it was a single gift in order to spend down assets in order to qualify for Medicaid sooner.
In many jurisdictions, the gifting of funds to charity may be considered disqualifying transfers. However, if there have been significant gifts given over years, the Medicaid authority should review the gift and determine that it was not made with the intent to spend down to qualify for Medicaid, but, rather, was given with the intention of the donor to continue to make gifts even during incapacity.
A similar situation occurs when a person is working or receiving other assets and determines that he or she wishes to give a weekly or monthly gift to a charity, such as tithing. Most Medicaid offices have agreed that gifting to charity in this situation is not construed to be a disqualifying transfer and, therefore, the person would continue to qualify for Medicaid and not be forced to ask the charity to return the gifted assets. The return of such a gift would be a significant hardship for the charity, since they may have spent the funds or allocated them for some purpose. Giving back five years’ worth of assets also may be a significant moral, though not legal, liability to the charity, since they have determined and believed that these assets were without restrictions and were completed gifts without any "strings."
In many cases, so long as the person who is making the gift is not on his or her way to the long-term facility, they will probably be construed to have made a gift that should not be challenged. When in doubt, a request can be made to the attending physician to assess whether, at the time of the prior gifts, the donor was competent, of sound mind, and was not disabled to the extent that they required imminent institutionalized care.
Gift Giving Under Power of Attorney
The agent serving under a power of attorney for a donor has the authority to maintain the gift-giving program to family, as well as to charities. Within the document itself, the agent has the authority to maintain the charitable gift-giving pattern while the principal was alive and competent to do so. If the principal’s intentions are sufficiently well thought out within the power of attorney to allow these gifts to be made, these gifts should be respected by all governmental agencies. Certainly, they are construed to be gifts for income tax purposes when taking the gift as an itemized deduction on the income tax return. However, the Internal Revenue Service could, in fact, challenge that gift if there was no authority within the power of attorney itself to allow transfers and gifts to be made.
Pledges versus Gifts
A questionable gift may arise in the situation where a person has pledged to make a gift, but has not yet complied with the fulfillment of the gift. In this case, the pledge may be construed to be a contract to make the gift and the power of attorney may be acting within the authority to complete the payment of the pledge, even if the power of attorney document itself does not allow for gifts to be made, as this gift may merely be a completion of the contractual terms in fulfilling the obligation of the donor to the charity.
A charity should review the status of the gift in any questionable situation, when a power of attorney or other fiduciary may be making a gift, and the charity is aware that the principal has become incapacitated to the extent that they are unable to make legal and financial decisions for themselves. The charity should verify that there is a situation where either the principal has sufficient funds to pay for care for five years, or that the life expectancy of the donor may be short enough that there will be sufficient funds to pay for the care of the donor for the balance of their lifetime. If not, the charity may be asked to return gifts, so they should not place them in an irrevocable endowment fund or expend those funds for permanent expenditures, such as renovations or additions to a building, or where the funds may not be able to be returned. In these cases, it may be that an applicant for medical assistance through Medicaid would ask for a hardship waiver, since the gift would be difficult to recover, if at all. In these situations where the donor may not be 100 percent competent, it may well be that the charity should check with the accountant and attorney for the donor before the gift has been allocated to a specific fund.