September 2023
Elder Law Update
 
 

They say something magical happens when a parent turns into a grandparent. Of course there’s the unconditional love and admiration for this child of your child; and there’s also the urge to shower them with toys, clothes, presents, money and other gifts!

Many people don’t want to wait until they are gone to give gifts to their grandchildren, and they think, ‘I want to spoil them while I’m still here!’ But that’s not always a good plan for the grandparent. Many state and federal programs – including Medicaid and Veteran’s Administration benefits – are needs-based programs, wherein making gifts could disqualify you from those programs. So what are some options to consider when giving money to grandchildren, nieces and nephews, or other intended beneficiaries?

 
Grandparents playing with their grand children in the leaves.

College Savings Programs

 

These programs, more commonly known as “529 plans”, are state-sponsored programs, authorized by the U.S. tax code. These allow grandparents (or parents, or anyone who wants to create one) to set aside money for their grandchild, specifically for higher education expenses later. These are great for a few reasons: they allow control over what the money is spent on, rather than writing the grandchild a blank check to spend on whatever they want; there are tax advantages for the account creators (grandparents); and some plans allow you to pay for tuition credits now, while tuition is presumably lower than what it may be in the future! There are a few downsides, however: limited ability to withdraw money from these accounts without penalty; not all states and not all schools participate; and these are still considered assets in the grandparents’ names if they later try to apply for Medicaid or other needs-based programs.

 

Smaller Gifts

 

Grandparents can still make typical gifts to their grandchildren, especially at gift-giving holidays and birthdays. However, this is not the time for a large gift. Depending on the state’s rules and how they apply them, gifts can be counted against you for Medicaid and VA purposes. As long as you stick to smaller amounts, you are less likely to be penalized for those gifts. And don’t make them a routine, either! Medicaid can total those gifts and penalize you for them.

 

Trusts

 

Utilizing trust planning for gifts to grandchildren is often the best route, unless delaying the gift until the grandparent’s death is not desirable. By setting up a trust during life, the grandparent can retain control over the assets, and, depending on the type of Trust, it may not count against them for Medicaid or other needs-based programs. When the grandparent passes away, the money can be left to grandchildren in trusts, where it is protected and managed for them, by someone the grandparent appointed during their lifetime. This allows for flexibility for the grandchild, while receiving the benefit of asset protection.

These are not all your gifting options, but just some things to consider the next time you want to spoil your beloved grandchildren.

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Prices are soaring. Many people’s monthly bills are increasing faster than the cost of living adjustment. Unfortunately prescription drugs have not been spared in the price increases, and people are having to choose which of their necessary medications they are going to have to give up. Fortunately, some help is on the way.
Mother and adult child checking documents in front of laptop.

Medicare Part D is an optional plan offered to anyone who qualifies for Medicare, and covers prescription drug charges. There have been many changes to Medicare Part D in 2023, including more vaccines being covered with no out-of-pocket cost to the recipient; lowered or fixed insulin prices; and the creation of the new “Extra Help” program.

The Extra Help program is for low-income individuals (less than $21,870 per year for a single person or $29,580 for a married couple living together) who also have limited resources ($16,660 for a single person or $33,240 for a married couple). If you qualify for Medicaid, Social Security Income, or a Medicare Savings Plan, you automatically qualify for the Part D Extra Help program. Extra Help offers full or partial benefits to the recipient.

Starting in January 2024, a further expansion to the Extra Help program will allow an even wider range of seniors to enroll. Currently, the applicant’s household income must be less than 135% of the federal poverty level. The 2024 change will expand it to more potential recipients by raising that amount to 150% of the federal poverty level. According to the Centers for Medicare and Medicaid Services, this change is expected to benefit more than 300,000 current enrollees who are only receiving partial benefits, who will now be eligible to receive full benefits under the program. There are even more changes coming in 2025 and beyond.

According to the Department of Health and Human Services, up to three million seniors could benefit from this Extra Help program, but are not currently enrolled.

To see whether you qualify under the current or soon-to-be-expanded program and to apply for the Extra Help program, visit the Social Security Administration website or visit your local Social Security Office.

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Should you have difficulty registering, please contact us at
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Yahne with her family on the beach in France.
Sunsetting at the beach.

Yahne went to France to visit her family.