When I talk with people about long term care and the Medicaid program I sometimes hear very strong opinions that “it is wrong to transfer assets in order to qualify for Medicaid to pay for nursing home care”. The person making the statement, however, typically hasn’t really given any thought to what that means in real life situations.
Let me give an example. Mom is 85 years old and living alone. While she clearly shows the signs of aging and should have put in place a plan in case she needs long term care, like most people, she hasn’t considered it at all. She receives a $100,000 inheritance from her brother. She has always considered her family first, ahead of her own needs, and wants to transfer this inheritance to her son, who is struggling to make ends meet and just lost his job. She believes she has everything she needs financially and her maternal instincts are to help her child. You may or may not believe she is being foolish in her thinking but it is her genuine belief.
Times are tough. Families do what they always do. They pitch in and help each other out. Except that if Mom gives this money to her son and needs nursing home care in the next 5 years she won’t qualify for Medicaid because of the transfer. So, is Mom trying to beat the system, transferring assets to qualify for Medicaid? No, I think we all would agree that this is not what is motivating her. But it’s not that simple. It never is in the real world. Mom ought to be thinking about her long term care needs but she isn’t.
Had she consulted with an elder law attorney she could have set up a plan that would allow her son to receive the inheritance (or she and her son could share the inheritance) by setting up a trust. And when an attorney sat down with Mom and explained to her what would happen if she needs long term care, she would quickly agree that it was not a good idea to simply transfer the inheritance to her son. She just had never had that conversation before and no one ever explained it to her in that way.
So, instead of having that conversation after she received the money, if we had it before the inheritance had been received, my advice to Mom would have been to keep the money in a trust, in case she needs it for long term care, but that it would be possible to transfer some of it to her son, should he need it. We would have to manage the trust very carefully but it is clearly doable. I wouldn’t call this beating the system. It is a case of families pulling together in times of need. Isn’t that what families are supposed to do? It also helps the long term care facility that will provide the care to Mom by ensuring sufficient private pay funds to support their vital care services.
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