I really want to make gifts to my grandkids!

First, let us be very clear – we strongly discourage gifting as an estate planning tool! People often come to us and say they want to, for example, give away some of their assets now to avoid inheritance tax when they die. NO, NO, NO!! (See #1, below.)

Still, grandparents often want to help out their grandchildren, not as a planning strategy, but out of love and affection. The grandparents have achieved financial security, and want to share that with their grandchildren for many purposes, such as summer camp, college tuition, wedding costs, the down-payment on a first home, they don’t want their children and grandchildren to have to wait for an inheritance.

However, helping out family members raises a number of legal issues involving eligibility for public benefits and questions of fairness among family members. Here are six issues grandparents should consider before making gifts to grandchildren. (To be clear, these issues apply to anyone making gifts, not just grandparents.)

  1. Beware the Medicaid penalty. Grandparents need to be aware that if either of them needs skilled nursing level of care, either in a nursing or their own home, and they apply for Medicaid to pay for that care within five years of making the gift, then they will be ineligible for Medicaid benefits for some period of time, which will depend on the amount of the gifts.  
  2. Is it really a gift? Does the grandparent expect anything in return, for example that the funds be repaid or that the money is an advance on the grandchild’s eventual inheritance? If yes, this should be made clear, in writing, whether in an informal written agreement, a promissory note (if a loan), or the grandparent’s Will.
  3. Is everyone being treated equally? Not all grandchildren have the same financial needs, and grandparents don’t feel equally close to all of their grandchildren. Although it’s the grandparent’s money and she can do what she wants with it, if she’s not treating all of her grandchildren equally, she needs to consider whether unequal generosity will create resentment within the family. Many people may help out some children and grandchildren more than others based on need, with the expectation that this will be kept private. 
  4. 529 plans. Many grandparents want to help pay higher education tuition for grandchildren. But not all grandchildren are the same age, making it difficult to make sure that they all receive the same assistance. A great solution is to fund 529 accounts for each grandchild. These are special accounts that grow tax deferred, with the income and growth never taxed as long as the funds are used for higher education expenses. 
  5. Don’t be too generous. Grandparents need to make sure that they keep enough money to pay for their own needs. Too many gifts can quickly deplete a lifetime of scrimping and saving. It won’t do the family much good if a grandparent is just scraping by because he’s done too much to support his children or grandchildren.
  6. Beware taxable gifts. As there is no gift tax for the first $11.4 million (in 2019) each of us gives away, this isn’t a concern for most of us.  Also, there’s no limit or reporting requirement for payments made directly to medical and educational institutions for health care expenses and tuition for others.

There are other issues to consider based on specific family situations. Some grandchildren shouldn’t receive gifts because they have addictions, or the gifts may undermine the parents’ authority or plans for the grandchild. Communication with the middle generation is key to making certain that gifts achieve the best results for all concerned.

If you simply must those gifts, first talk to an elder law attorney about devising the best plan for you and for your grandchildren.  We can help.  Just fill out this simple online form and we’ll be in touch to get you the answers you need.


Coming Soon: Community HealthChoices

Effective January 1, 2020, big changes are coming the central Pennsylvania Medicaid recipients! The Pennsylvania Department of Human Services (DHS) is preparing to implement the Community HealthChoices (CHC) program in Central (which includes York County), Northeast and Northwest Pennsylvania, and the Lehigh Valley.

CHC is a new Medicaid program that uses managed care insurance companies (MCOs) to take the confusion out of healthcare and see that participants get the medical and social supports they need. The CHC program was created to:

  • Make Medicare, Medicaid, Behavioral Health, and Long-Term Services (help at home to live independently) work better together, so participants get all the benefits and help they need to live the life they want
  • Make it easier for people to live independently, rather than in nursing homes, by improving the quality of in-home support services
  • Better address other issues that can keep us from being healthy, like not having a safe place to live, or transportation

The stated purpose of CHC is to enhance care and service coordination, improve health outcomes, and increase availability of community living options for individuals requiring long-term services and supports, so that seniors can have the opportunity to work and spend time with their families, all while having access to long-term services they need.

How will CHC be different from the current Medicaid program? Instead of the Medicaid ACCESS card, Medicaid benefits from the state will come through the CHC health plan that each participant picks. There are 3 to choose from, and you can change your plan at any time:

  • AmeriHealth Caritas (known as Keystone First in the Southeast)
  • PA Health & Wellness
  • UPMC Community HealthChoices

Participants do not need to apply for CHC. It is a mandatory program for people who qualify, so the state DHS will send out information on how to enroll. Pennsylvania’s Independent Enrollment Broker (IEB) can help participants choose or change their plan. They can be reached at 1-844-824-3655 or Enroll CHC.com. 

What will be the same? Medicare. If you are covered by Medicare, you can keep your current Medicare plan and doctors. CHC is only about the Medicaid part of benefits. It does not change or replace Medicare coverage. Medicaid, through CHC, is your second insurance and will cover anything that Medicare doesn’t, like long-term care and transportation. It can also help pay your Medicare Part B premium, if your income qualifies. if you are unsure about what Medicare plan you have, you can talk with an APPRISE counselor at your local Office on Aging by calling 1-800-783-7067.

CHC was first launched in southwest Pennsylvania in January 2018 and southeast Pennsylvania in January 2019. When fully implemented across the state, CHC will cover more than 400,000 older Pennsylvanians and adults with physical disabilities, 94 percent of whom are dually eligible for both Medicare and Medicaid.

Ahead of the final implementation, MCOs will host both provider information sessions, and in the fall participant information sessions, which will offer eligible community members the opportunity to learn more about this program and to gather resources and ask questions to choose a plan that will meet their needs.

If you need help with your Medicare planning we can help.  The first step is joining us for one of our free “The Nuts & Bolts of Medicaid” workshops.  You can RSVP by clicking here now.

Sources: DHS May 13, 2019 Press Release and pahealthaccess.org/chc/