It’s Dad’s Money. He Can Do What He Wants With It – Right?

HNWElder Law, Medicaid Eligibility and Asset Protection Planning

Fredrick P. Niemann, Esq., a NJ Medicaid Attorney

In February, 2006 Congress passed some significant changes to the Medicaid laws that created some very dangerous traps for unprepared families needing long term care. At the time I wrote about a case in which Granddad gifted his money to his Granddaughter who moved in to care for him. When she could no longer provide the care and applied for Medicaid she was told, mistakenly, that he was not eligible because of the gifts. It turned out that the Medicaid ineligibility period had expired.  An application for Medicaid was filed on her behalf and the application was approved. A happy ending, but one which at the time would not end so happily under the new law.

Last week a colleague related a story of a call with an all too common story. Mom had recently died. Dad moved in with Daughter, Jane and the plan was for him to live there the rest of his life. At the same time, Dad gifted $150,000 to Jane and her brother, Joe. “It’s Dad’s money. He can do what he wants with it”, she related.

Well, I think you can guess what happened. Jane was unprepared for the reality of long term care. The stress in her voice as she described the deterioration of Dad’s mental and physical state was telling, from the mood swings and erratic behavior to the declining personal hygiene and the inability to walk without assistance. His care needs were increasing and Jane was unable to handle the increased demands on her time while caring for her own young children.

“I just never expected this”, she exclaimed.”  I can’t do this anymore. I need to get Dad into a nursing home and he has $50,000 left.  What do I do?”.  My colleague explained to her that once his money was spent down he could qualify for Medicaid, but she and Joe would need to return the $150,000. But here was the problem. Jane and Joe had already spent the money and, therefore, couldn’t return it.  When Dad’s remaining $50,000 is spent down he still won’t be Medicaid eligible for another 4 years. That’s because the Medicaid penalty doesn’t start until he has less than $2000 to his name and he needs nursing home care.

“It’s so unfair,” she cried. “The government is forcing me into poverty to pay for Dad’s care.” I had to patiently explain to her that she and her brother did receive a substantial sum from Dad, money that should be spent for his own care before public funds could be tapped.  The sad truth, however, is that had the family consulted with an elder law attorney before the gifts were made, Dad could have transferred some assets but enough would have been preserved to cover the possibility that he would need long term care before Medicaid eligiblity.  Unfortunately, in Jane’s case there is no simple solution to her problem.  She would have to figure out how to care for her Dad or pay out of her own pocket until the Medicaid ineligibility period expired.  A cautionary tale for all.

For further information and advice in any Medicaid eligibility matter, do not hesitate to contact me at 732-863-9900, or fniemann@hnlawfirm.com/.

Previous PostNext Post