A widowed, 82-year-old woman is currently in a nursing home on Medicaid and is up for renewal of her Medicaid eligibility. The woman’s house recently sold. We need to spend down the proceeds to Medicaid’s $2,000 asset threshold. She owned the home with her children, who all received their checks from the sale of the home. The capital gains taxes due from the sale of the house will not be paid before the renewal of Medicaid. What options do we have to keep an amount to cover the taxes and not be penalized? What options do we have to spend down? Is gifting an option? This is in Wisconsin.

Once you begin to understand how the gift tax system really works, you may be pleasantly surprised to learn that most people can fund a special needs trust for a person with disabilities with a lot more than $14,000 a year.

If you transfer assets within five years of applying for Medicaid, you will likely be subject to a period of ineligibility. There is an exception, however, if enforcing the penalty period would cause the applicant an "undue hardship."