If you have grandchildren, you probably feel boundless love for them and may want to show that love by helping to provide for them as they grow. You may want to write them a check on their birthdays; contribute financially to their college goals; or help fund their passions, whatever they are.
The New York elder law attorneys at Landskind & Ricaforte Law Group, P.C. understand your desire to help provide for your grandchildren’s futures; however, they also know that doing so to spend down your assets to qualify for Medicaid can jeopardize your eligibility for benefits. Should you need financial support due to an unexpected illness, incapacitation, or failing health, you may turn to Medicaid as an option to pay for institutionalized health or assisted living, or any type of long-term care. But if you’ve gifted money or assets to your grandchildren, you could threaten your ability to receive Medicaid. Here, our knowledgeable attorneys discuss Medicaid’s strict financial requirements, what you should know about how Medicaid gift rules treat these gifts, and strategies that allow you to continue supporting your family while preserving your own financial security.
New York Medicaid’s Look-Back Period: Don’t Jeopardize Your Eligibility
If you need Medicaid coverage for nursing home care, assisted living, or in-home care, there are strict limits on the amount of assets you can have to receive benefits. Medicaid is a needs-based program intended for those with limited resources, and you must meet Medicaid’s financial requirements to be eligible.
When you apply for Medicaid in New York, the state examines all your financial transactions made during the 60 months before your application date. This five-year “look-back period” aims to prevent people from giving away assets to qualify for Medicaid coverage.
Most all gifts or transfers you make during the look-back period will trigger a penalty—this is a period when you’ll be ineligible for Medicaid benefits. During this penalty period, you’re not eligible for Medicaid benefits and must cover the costs of long-term care yourself. The penalty begins when you would otherwise qualify for Medicaid based on your medical and financial circumstances.
Medicaid Gift Rules for Grandchildren: Exceptions
There are some gifts and transfers you can make to your grandchildren that may be exempt from Medicaid penalty calculations, including the following:
- Gifts you make to a grandchild who has a disability. Transfers to a trust for a grandchild who is blind or permanently disabled are exempt if the trust meets specific criteria.
- Gifts you make for a grandchild’s tuition and/or medical expenses. Payments made directly to educational institutions for a grandchild's tuition or to medical providers for their healthcare are not considered gifts by Medicaid. It’s important to note that gifts for your grandchild’s room and board, books, or other college costs are not exempt, and if you write a check for these things, it may trigger a Medicaid penalty.
Medicaid Gift Rules and Federal Gift Tax Exemptions
It’s important to understand that the federal gift tax exemption doesn’t protect assets from Medicaid. These annual and lifetime federal gift tax exemptions don’t align with Medicaid rules. While you can give up to $19,000 per person annually (as of 2025) without incurring gift taxes, Medicaid still considers these transfers as potential gifts and subject to penalties.
Similarly, although federal estate and gift tax exemptions allow individuals to transfer up to $13.99 million (as of 2025) tax-free during life or at death, Medicaid does not recognize this exemption. Substantial gifts to grandchildren, even if they don't trigger gift taxes, can still impact Medicaid eligibility.
Strategies to Support Grandchildren and Protect Your Medicaid Eligibility
It’s understandable that you want to help your grandchildren while planning for your own long-term care. But balancing both can be a challenge. However, there are strategies that help you achieve both goals, including the following:
Plan in Advance
If you think you’ll need Medicaid in the future, you should begin your gift and asset protection planning as early as you can. Make sure that you make transfers and gifts long before the five-year look-back period, as these won’t be subject to Medicaid penalties. By starting the planning process early, you can provide for your grandchildren while helping to protect your Medicaid eligibility.
Establish an Income-Only Trust
By establishing an irrevocable income-only trust, also known as a Medicaid asset protection trust (MAPT), you can help preserve assets for your grandchildren while maintaining your Medicaid eligibility. When you transfer assets into this type of trust, it helps “spend down” your assets to help you qualify for Medicaid benefits because Medicaid won’t count them when it determines your financial eligibility for benefits. You can still receive income from the trust, but the principal is protected and can pass to your grandchildren after your death.
Create a Caregiver Agreement
If your grandchild provides caregiving services, a properly structured caregiver agreement can compensate them for the work they do without triggering Medicaid penalties. The agreement must outline the services provided, and compensation must align with fair market rates. Our New York elder law attorneys can help draft an agreement that helps meet Medicaid's requirements.
Purchase Life Insurance or an Annuity
If you purchase life insurance or fund an annuity, you can provide an inheritance for your grandchildren without impacting Medicaid eligibility. Certain types of life insurance policies and annuities are exempt from Medicaid asset calculations. It’s important to consult with our attorneys to discuss options that are appropriate for your situation.
Consult Our New York Elder Law Attorneys to Help Protect Your Medicaid Benefits
Working with Medicaid’s strict eligibility requirements isn’t easy, and finding strategies that work best for your family can be challenging. Consulting with a New York elder law attorney is essential to help ensure your plan protects your eligibility while providing for your grandchildren.
At Landskind & Ricaforte Law Group, P.C., we understand the importance of family and legacy. Our team will take the time to understand your wishes and craft a personalized plan that achieves your objectives. Whether you're just starting to think about long-term care or need to apply for Medicaid soon, we're here to guide you every step of the way. Read our testimonials to learn how we’ve helped other clients who’ve needed Medicaid benefits.