Will Cash Gifts Affect My Son-in-Law's Medicaid Eligibility?

This is a great question that many people have when trying to help a loved one on Medicaid. The short answer is: Yes, gifting a large amount of money can affect his Medicaid eligibility and could result in a penalty.

This is a common point of confusion because Medicaid rules are different from IRS gift tax rules.

Medicaid Rules vs. IRS Rules

You may be aware of the Internal Revenue Service (IRS) annual gift tax exclusion, which allows you to give a certain amount of money each year to as many people as you want without having to file a gift tax return. For 2025, that amount is $19,000 per person.

Since you and your wife want to give your son-in-law $29,000, you are both giving a gift. The IRS considers each of you as a separate donor, so you can each give up to $19,000. Your wife can give $19,000 and you can give $10,000, for a total of $29,000. From an IRS perspective, this is perfectly fine and you wouldn’t need to file a gift tax return.

However, Medicaid does not follow these same rules.

How a Gift Becomes a Problem

The $29,000 gift will be considered an asset once your son-in-law receives it. Medicaid has very low asset limits, typically around $2,000 for a single person.

• Receiving this gift would immediately put your son-in-law’s assets well over the limit.
• He would likely become ineligible for Medicaid until he “spends down” that money on approved expenses, such as paying down debt or prepaying for funeral expenses.
• If he then gives the asset away, he will be subject to a transfer of asset penalty due to what is known as Medicaid’s lookback period. To be eligible for Medicaid, you can’t have recently transferred assets. In most states, the lookback period for all transfers is 60 months (five years).

Key Takeaway

A gift of $29,000 will almost certainly affect your son-in-law’s Medicaid eligibility. The best way to help him is to do so in a way that doesn’t put his essential health benefits at risk.

What to do instead:

• Pay for his expenses directly. You can directly pay for his medical bills (that aren’t covered by Medicaid), rent, or other necessities. Direct payments to a vendor are generally not considered a gift that would count as a countable asset.
• Consult with an elder law attorney or Medicaid planner. Before giving any money to your son-in-law, it is crucial to speak with a professional who specializes in these rules. They can help you understand your state’s specific Medicaid regulations and find the best way to provide financial help without jeopardizing your son-in-law’s access to care.