It may have to be repaid. You might be able to argue that your father’s purpose in making the transfers had nothing to do with your father qualifying for Medicaid benefits, in which case the gifts should not be penalized. But the burden of proof will be against you. It may well depend on how much other money your father had. If he only had $40,000 to begin with, it will be a hard case to make. If he had $200,000, it will be much easier. Also, timing is important. Only those transfers made during the five years prior to your father applying for Medicaid need to be reported and need to be “cured” by a return of the funds.