Federal Tax Rules vs. ALTCS Rules

By January 14, 2009Uncategorized

Individuals applying for ALTCS commonly think they can give away $12,000 and become eligible for ALTCS. This belief comes from from the federal estate tax rules, which are much different from ALTCS rules. Although tax rules allow gifting of up to $12,000 per person per year without gift tax consequences, ALTCS rules severely penalize applicants who give away assets and then try to qualify for assistance.

If you’ve traded, sold or transferred money, vehicles or property, ALTCS may consider this a gift which may result in a penalty period or a denial of the ALTCS benefit.

The reason the state looks at this is because you are not allowed to give away, sell (without proper compensation), trade (without proper compensation) or transfer money, property or vehicles, that you otherwise could have used to pay for your long-term care. The penalty period for “gifting” is determined by a state regulation and will not start until the ALTCS applicant meets all other ALTCS eligibility criteria. As a result of this rule, many Arizona families have to pay privately for their care until the end of the penalty.

There are limited circumstances in which ALTCS allows gifting, but only if done in strict compliance with ALTCS rules. Applicants need to take extreme caution when giving away any assets. It is best for applicants to operate under the supervision of somebody familiar with ALTCS rules when making financial transfers or gifts.