Gifts and the Look-Back

Giving to family is natural. Parents help children with a down payment, grandparents pay for school, families exchange birthday money. But when a person later applies for Long-Term Care Medicaid, gifts made in the past five years can cause a penalty period. This guide explains how Medicaid treats gifts, why the IRS gift rules do not help, and how to think about common situations.

Figures change periodically. Double-check current amounts before relying on them.

Medicaid and the IRS see gifts differently

Many people have heard that you can give a certain amount each year “tax-free.” That is true for federal gift tax, but it is a separate set of rules from Medicaid.

	Federal gift tax (IRS)	Long-Term Care Medicaid
Purpose	Decides whether a gift tax return must be filed and whether tax is owed	Decides whether a gift delays Medicaid payment for long-term care
Yearly amount	$19,000 per recipient in 2026 can be given without filing a gift tax return	No yearly safe amount. Any gift within the look-back can be reviewed
Who is affected	The person giving the gift	The person applying for Long-Term Care Medicaid (and their spouse)
Time period	Each calendar year	The 60 months before the application (in most states)

A gift that is well within the IRS annual exclusion can still create a Medicaid penalty. The two systems do not talk to each other.

What Medicaid counts as a gift

For Medicaid, a gift is anything of value given away, or sold, for less than fair market value. Examples:

cash or checks to children, grandchildren, friends or charities;
paying someone else’s bills, rent, tuition or car payments;
giving or selling a car, jewelry or other property below its value;
putting a child on the deed of a home as a co-owner;
lending money with no written terms and no repayment;
paying a relative for care with no written agreement made at the time;
donations to charity, which are treated the same as other gifts in most states.

Gifts by a spouse count too, even when the spouse is not the one applying.

Small and routine gifts

Medicaid does not have a national “small gift” exception. Some states have their own allowances for small amounts, such as modest holiday or birthday gifts, or treat gifts below a low monthly or yearly total as not worth penalizing. These allowances vary a lot and are often low. Families should not assume that regular giving is safe.

Keeping a simple record helps. If a parent gives $100 at every birthday and holiday, a list of those gifts shows a normal pattern of family giving rather than an attempt to move savings out.

Gifts made “for a reason other than Medicaid”

Federal law says a transfer should not be penalized if the person can show it was made only for a reason other than qualifying for Medicaid. For example, a gift made while the person was healthy, with no expected need for care, as part of a long pattern of giving.

States set a high bar for this. Typically they want evidence made at the time, such as:

medical records showing the person was in good health when the gift was made;
a history of similar gifts over many years;
documents showing a separate purpose for the gift.

This is decided case by case, and the state makes the call. If the state says no, you can appeal through a fair hearing.

Paying family for care

Many adult children care for a parent and are later paid for it. Without paperwork, Medicaid often treats those payments as gifts, because family help is presumed to be given for free.

To be treated as payment for services, most states expect:

a written agreement signed before the care is given, not after;
a description of the services and the hours;
pay at a reasonable rate for that kind of care in that area;
records (logs, timesheets) showing the care was actually provided;
payment as the care is given, not a lump sum for future care (many states are wary of prepaid lump sums).

Payments made for past care with no agreement in place at the time are usually treated as gifts.

Selling property to family

Selling a home, car or land to a relative is allowed if the price is fair market value. If the price is lower, the difference is treated as a gift. For example, selling a house worth $250,000 to a son for $150,000 creates a $100,000 gift for Medicaid purposes.

An appraisal or other objective valuation made at the time is the best evidence of fair value.

Joint accounts

Adding a child to a bank account as a joint owner is usually not a gift by itself, because the money still belongs to the parent for Medicaid purposes. However:

if the child withdraws money for their own use, that withdrawal is usually treated as a gift from the parent;
the full balance of the account is usually counted as the parent’s asset when they apply.

Gifts of the home

The home is often the largest asset a family has. Giving it to a child, or adding a child to the deed, is a transfer that can create a large penalty, unless an exemption applies. Exemptions include transfers of the home to:

a spouse;
a child under 21;
a child who is blind or disabled;
a sibling who already has an ownership share and lived there for at least a year before the parent entered care;
a “caregiver child” who lived in the home for at least two years and provided care that kept the parent out of a nursing home.

See Transfers that are allowed for details.

What if a gift has already been made?

If a gift was made within the look-back, a few things may help:

Gather records that show what the money was used for, or that fair value was received.
Check whether an exemption applies.
Consider whether the gift can be returned. A full return removes the penalty. See Curing a transfer.
Get experienced help. A Certified Medicaid Planner (CMP) can review the gifts and the options before you apply.
Understand the timing. The penalty starts only when the person has applied and is otherwise eligible. See How the penalty period is calculated.

Do not hide a gift on the application. Applications are signed under penalty of perjury, and states review bank records closely. Leaving out a transfer can lead to denial, repayment demands or worse.

Charitable gifts

Most states treat gifts to churches and charities the same as gifts to people. A tithe or regular donation may be reviewed during the look-back. Some states consider a long, steady history of donations as evidence that the giving was not done to qualify for Medicaid. Records of past giving help.

Common questions

Can I give each grandchild $19,000 a year? For federal gift tax, yes, without filing a return. For Long-Term Care Medicaid, those gifts can still create a penalty if they fall within the look-back.

What if I gave the gift more than five years ago? In states with a 60-month look-back, a gift made more than 60 months before the application is not reviewed.

Does paying my grandchild’s tuition directly count? For gift tax, tuition paid directly to a school is excluded. For Medicaid, it is still a gift.

Loans to family members

Families often lend money to each other. For Medicaid, a loan is treated as a real loan only if it looks like one. States commonly look for:

a written promissory note signed when the money was lent;
a repayment schedule with equal payments over a set time;
a reasonable interest rate;
no cancellation of the debt when the lender dies;
actual repayments being made.

A loan with no paperwork, or one that is never repaid, is usually treated as a gift. A loan that is later forgiven becomes a gift on the date it is forgiven. If the loan is a real loan, the note itself may count as an asset of the person who lent the money, depending on the state’s rules.

Helping a family member in need

Many parents want to help an adult child who has lost a job, has medical bills or is going through a divorce. Medicaid has no exemption for gifts to a child who is struggling, unless the child is blind or disabled. A gift to help a child in a hard time is reviewed the same way as any other gift during the look-back.

If help must be given, families sometimes think about whether it can be structured as a real loan, or whether the timing allows the gift to fall outside the look-back. These choices depend on the family’s situation and the state’s rules.

Gifts by someone holding a power of attorney

An agent under a power of attorney can only make gifts if the document allows it. Even when it does, any gift the agent makes from the parent’s money counts as a transfer by the parent for Medicaid purposes. Agents should keep careful records of every payment they make from the parent’s accounts, and what it was for. See Powers of attorney.

Keeping a gift record

A simple gift record can save a great deal of trouble later. For each gift, write down:

the date;
the amount or item;
who received it;
the reason (birthday, wedding, tuition, and so on);
how it was paid (check number or transfer).

Keep the record with bank statements for at least five years.

Last updated for 2026. General information only, not legal or financial advice. Medicaid Answers is a free educational resource published by Medicaid Answers Foundation.