My parents got a $24K settlement after an accident. They are on Medicare and don't want to lose their benefits over the settlement. They want to gift the money to me but I'm afraid it will make me pay more taxes at the end of a year.
Should I accept or just let them cash the check out?
Did Medicare pay any hospital or medical bills caused by the accident?
If Medicare has paid medical expenses, and payment has been or can reasonably be expected to be made under workers comp, or under an automobile or liability insurance policy or plan or under no fault insurance, Medicare considers the payments it make to be conditional, and repayment to "the appropriate Trust Fund" is required.
www.law.cornell.edu/uscode/text/42/1395y
The question you posted here seems to be asking about transfer of asset rules pertaining to Medicaid.
But before considering Medicaid, a first step for you would be to find out who negotiated the settlement. Was Medicare notified?
Medicare- due to Medicare Secondary Payor Act - will want to be reimbursed for any health care expenses paid by Medicare that were included in the lawsuit.
Medicaid is based on income and getting 24k may effect this.
If your parents are collecting Social Security and they are under 66 then it may cause a problem. Under 66 you are only allowed to make a certain amt of money before SS penalizes you. It was 14k when retired six yrs ago. Not sure if a settlement will be considered income. This is something you need to call your local SS office about.
If parents are over 66 then no problem. They may have to declare it on their taxes though. Find out now how that will work. Maybe able to offset it with out of pockets health expenses. Don't wait till they r ready to do taxes.
Medicare won't be affected by a car accident settlement unless they are low income and receive Extra Help with prescriptions, copays, etc. Is that the case?
You do understand that all settlement payments will require tax id numbers when a check is issued? The government providing benefits through mediCARE (insurance program you pay into until age 65 or disability) or mediCAID (state run program for low income or poverty level people) will be able to track the money received by your parents and giving it to you will not make them safe from any benefits clawback or penalty. The money will need to be properly reported on your parents' tax return for the year received even if they don't owe any tax on it for federal or state purposes.
If they are on MediCAID, they cannot just gift the money to you. There are specific rules about reporting extra income like this. Did MediCARE pay for any medical care related to the car accident? There is a law that if you get a settlement that insurance (like Medicare or Medicaid) paid for any treatment on that the insurance company is entitled to be reimbursed the money they paid from any money you receive in a settlement. There is another person posting here that had a family member get a settlement and then not report it properly, resulting in a big mess with loss of benefits. Please have your parents talk with an attorney (they should have one if a settlement has been negotiated) about their specific situation so that they don't make any mistakes.