Can a Tithe or Gift to a Church result in a Medicaid penalty?
Yes, gifts to churches can result in a Medicaid penalty. However, in many cases, proving a consistent, long-term pattern of giving can rebut the penalty.
What is a Medicaid Lookback Penalty?
Medicaid is intended for the needy, not those who can easily pay for their own care. Because of this, having too many assets can disqualify someone from receiving Medicaid benefits in Florida. For example, in 2021, you cannot have more than $2,000 in countable assets to qualify for Institutional Care Program (ICP) Medicaid benefits.
So what happens if you have too many assets but still need Medicaid? The answer is that you need do a little Medicaid planning. Medicaid planning allows you to reduce your countable assets through the use of spenddown plans and special needs trusts. But not all methods of reducing assets are a good idea, making it crucial to get a good attorney to help you. Medicaid planning is a complicated area of law with so many rules that even some attorneys get confused.
One important Medicaid rule is that giving your assets away can lead to something called a “lookback penalty.” A lookback penalty disqualifies you from receiving Medicaid benefits for a period of time (how long depends on the amount of care you need and the value of the asset you gave away). If you give anything away in the five years preceding your Medicaid application, you risk a lookback penalty. In fact, Medicaid presumes you deserve the penalty unless you can prove otherwise.
Will Tithing Cause Medicaid Problems?
Giving to a church will generally cause you to incur a Medicaid lookback penalty, but you might not incur a penalty if you can show a pattern of giving over the years that indicates your donations were not motivated by a desire to qualify for Medicaid. However, the best course of action is to stop giving once you realize you intend to apply for Medicaid benefits.
To understand this, think about the difference between a sudden, unexpected donation to a church and a donation from a church member who gives the regularly to the same church every week for decades. The person who gives unexpectedly and then applies to Medicaid within five years of the donation is likely going to incur a lookback penalty, regardless of the true donative intent. But the regular giver can provide evidence that the gifts are not motivated by a desire to qualify for Medicaid; rather, the regular pattern of giving for decades before applying likely indicates that all of the gifts were motivated by some other purpose—even those within the five year period.
This distinction becomes important if you have been regularly engaging in a “tithe.” According to Dr. Andy Pietrylo, a pastor in Jacksonville, FL, “Tithing basically refers to giving 10% of your income to your church. It is ongoing percentage practice that distinguishes itself from simply a donation.” If tithing is an ongoing practice of giving the same percentage of income every week, then tithing for a long period of time would likely be a “pattern of giving,” which is good news if you want to receive Medicaid benefits. Additionally, because tithing is a religious practice, it’s not hard to imagine someone tithing for reasons that have nothing to do with Medicaid qualification. Indeed, Pastor Brandon Demark states that tithing is a form of “worship” coming from an Old Testament practice in which a “recurring offering was an expression of gratitude toward God.”
Thus, consistent tithing that started before the five-year lookback period can be persuasive evidence that the gifts were motivated by religious devotion, not a desire to avoid paying for long-term care. This can lead to successfully rebutting the penalty. That being said, the presumption will be the tithing deserves a penalty, and it will be up to you to prove otherwise. Thus, if you expect that you will need long-term care in the next five years, the best practice is to cease all gifts, including tithes and other church donations.
Bottom Line
Any gift within the five-year period will result in a presumption that the gift was motivated by a desire to qualify for Medicaid. But a regular tither may be in a good position to rebut that presumption and avoid the penalty. However, if you plan to apply for Medicaid in the next five years, the best practice is to stop giving any assets away and speak with an elder law attorney.