The Pattern-of-Gifting Rule: What Seniors Need to Know Early

Many older adults make small, regular gifts to people they care about. Some give birthday checks to grandchildren. Others send annual support to nieces or nephews, help a close friend with living expenses, or make yearly donations to a church or favorite charity. These traditions feel modest and personal, and they often span decades.

However, once someone needs long-term care—such as nursing home services, assisted living with public funding, or in-home support—and applies for Medicaid or other government-funded long-term care programs, these same gifts can become legally significant. Wisconsin’s rules governing eligibility for these programs include a five-year “look-back” period, and certain transfers can create a divestment penalty unless they qualify for an exception. One important exception is the pattern of gifting rule, which protects long-standing, documented giving practices.

To use that exception effectively, the gifting pattern must be established well before the five-year look-back period begins.

What Is a “Pattern of Gifting” and Why Timing Matters?

Wisconsin allows certain gifts made during the look-back period without divestment penalty if they fit into a clear, pre-existing pattern of giving. To qualify:

• The gifting pattern must be continuous, with no unexplained gaps.

• Gifts must not exceed 15% of the giver’s gross annual income in the year they are made.

This rule applies regardless of who receives the gift—grandchildren, nieces and nephews, godchildren, close friends, charitable organizations, or others. The focus is not the relationship but the consistency and documentation of the giving over time.

Documentation Is Critical

The ability to prove that a gift has been made consistently over many years is essential. Without a clear record, Medicaid and other long-term care benefit programs will treat transfers during the look-back period as divestments, even when they reflect a lifetime of generosity. Cash gifts, inconsistent practices, and missing documentation make it difficult to show that a gifting pattern existed before long-term care needs arose.

In my experience, this issue becomes especially important after someone has entered a nursing home but has not yet qualified for public long-term care coverage. Individuals often want to continue the traditional gifts they have made in the past, but that is only safe if a well-established pattern is already documented. Proper recordkeeping ensures those gifts can continue without creating penalties or delaying eligibility.

Practical Steps to Create a Defensible Gifting History

Use checks or electronic transfers. Choose payment methods that leave a clear record. Bank statements, canceled checks, and electronic transfer histories are the strongest proof of a consistent gifting pattern. Skip cash: it cannot be documented reliably.

Maintain the pattern. If the goal is to preserve flexibility for future eligibility for Medicaid or other long-term care funding programs, the gifts must be made consistently. Skipped years or skipped special occasions undermine the “no gaps” requirement.

Keep a simple log. A notebook, folder, or spreadsheet listing recipients, dates, and amounts becomes valuable when combined with other documentation. It does not need to be detailed—only consistent.

Preserve charitable receipts and acknowledgement letters. Churches, nonprofits, and other organizations routinely issue receipts. Keep these in one place.

Monitor gift amounts. To qualify under the exception, the total annual gifts must remain below 15% of the giver’s annual gross income. Larger gifts may require separate planning.

Bottom Line: Start Early, Document Everything

When gifts are consistent, documented, and within the 15% income limit, the relationship between giver and recipient does not matter. To be treated as allowed transfers, the pattern must be established well before the five-year look-back period used for Medicaid and other long-term care financial assistance. Anyone who makes regular gifts should begin documenting them early and review their approach with an elder law attorney to avoid divestment penalties and protect future eligibility for nursing home and long-term care benefits.

For guidance tailored to Wisconsin’s Medicaid and long-term care rules, contact Hale Skemp to schedule a consultation. Our team assists older adults and families throughout La Crosse County and western Wisconsin with planning strategies that protect both assets and future care options.