Beware of Greeks Bearing Gifts
September 26, 2011
Perhaps it’s a phrase you’ve heard before but aren’t aware of the history behind it. (More on that in a minute.) A recent New Jersey court case brought the statement to mind and left me shaking my head because it just reinforces why clients so need my services. Allow me to explain.
The case involved I.M., a 79 year old grandmother who is the primary caregiver for her 21 year old mentally disabled grandson, J.M. (The court used initials to protect the family’s privacy.) Their sole source of income consisted of I.M.’s Social Security and J.M.’s disability benefits. They also both were Medicaid recipients.
One day the State of New Jersey’s Department of Developmental Disabilities sent I.M. a grant of $2000 to be used for J.M.’s benefit. She spent $500 and put the rest in the bank for later use, in a savings account payable on death to J.M. She later changed the account to show that I.M. held it as representative for J.M.
Well, maybe, if you are a frequent reader of my blog, you can guess what happened. That account, combined with another account I.M. owned, pushed her over the $2000 limit for Medicaid eligibility, or so said the government. The State demanded the money back on the threat that they would take away her Medicaid benefits. I.M. refused and the case went to court.
On appeal I.M. was victorious. The court said that the money wasn’t hers simply because she had physical access to it. She was merely acting in a fiduciary capacity, on J.M.’s behalf, as his representative. Of course the State gave her the money with that understanding in the first place, but that didn’t seem to stop it from taking action against her for accepting it.
And that’s what reminded me of the oft repeated phrase “Beware of Greeks bearing gifts”. The saying is a reference to the story of how the ancient Greeks defeated the Trojans in a long war that lasted 10 years. Cities at that time were surrounded by walls to protect against invading armies. The Greeks couldn’t penetrate the walls of the City of Troy so they devised a clever plan. They pretended to “give up” by offering the Trojans a peace offering of sorts, a wooden horse. They left the gift outside the city gates and sailed away. The Trojans saw this and brought the gift inside and proceeded to celebrate their “victory”. In actuality, the gift was a trick to gain access to the city. Hidden inside the horse were 30 Greek soldiers. At night, while the city inhabitants slept, they opened the gates for the Greek army which had surreptitiously returned. Victory was theirs.
I am sure that I.M. would agree with my thoughts. Accept the government grant to help her son but beware, because the same government will try to take away her Medicaid benefits. It sure sounds sneaky and just reinforces to me why I do what I do as an elder law attorney, on behalf of my clients.
Are You Making Gifts You Aren’t Even Aware of? (Part 2)
September 18, 2011
We were discussing Eddie’s problem last week. His Dad needs nursing home care and, at a cost of $11,000 per month, Eddie was concerned that there would not be anything left for Mom if he didn’t look to qualify for Medicaid quickly. However, the family was totally in the dark about how Medicaid works. So, when I explained to him that there could be a Medicaid penalty period, Eddie panicked. “Can you help me”, he pleaded. Here’s what I told him.
The first things we needed were the last 5 years of statements for every asset that Eddie’s parents owned. We then looked through each one to determine what amounts of money had been transferred from their accounts that Medicaid could consider “transfers for the less than fair value”, that is, transfers for which they did not receive something of equal value back in product or service. The monies Mom and Dad sent to Ecuador to support family members counted as transfers but we wanted to know what else there might be.
Eddie admitted he had no idea since his parents didn’t keep good records and they never discussed it with their 3 children. Our paralegal painstakingly went through what seemed like a mountain of documents. She found a total of $40,000 of cash withdrawals over a period of 5 years. “Not all of that money was sent to Ecuador,” Eddie explained. “My parents paid for things in cash. They didn’t believe in credit cards.” I told him if we could prove what some of that money was used for, by documentation (ie. receipts), we could knock that $40,000 down.
Our goal was to get that number as small as possible because that is what Medicaid divides by another number to tell us how long the Medicaid penalty would be, how long Mom would have to pay privately for Dad’s care before Medicaid would kick in. As it turned out, some of the cash was used to pay repairs on the home. I had Eddie contact the contractor to get an invoice. That was $10,000 right there. We also determined that $7500 had been sent to Ecuador 4 years and 10 months ago. I told Eddie that as long as we apply for Medicaid more than 5 years from the date of those transfers they would fall outside the lookback and we didn’t need to disclose that to Medicaid.
That left $22,500 unaccounted for consisting of numerous withdrawals of varying amounts from many different accounts over the 5 year period. I told Eddie that we should file for Medicaid and let’s see what they come up with. I was confident their number wouldn’t be bigger than ours because I was very conservative in terms of what could be considered a transfer for less than fair value. But I also know that much of this is subjective and Medicaid may “let certain transactions go”. That depends on the caseworker, his/her caseload, the timing of the application and my ability to walk the caseworker through our application and the documents we provided.
At worst, the penalty would be 3 months, meaning Eddie’s parents would have to pay an additional $33,000 at the nursing home’s private pay rate of $11,000 per month. But Mom still has a house worth $300,000 so, I explained, we could work out an arrangement to pay the nursing home from the proceeds of the house if she sells it or have her take a reverse mortgage or have one of the children loan her the money.
It all made sense to Eddie and that’s what we did. Medicaid in fact, found $14,000 in uncompensated transfers, resulting in a 2 month penalty. Eddie was pleased. Mom would have to pay the nursing home $22,000 but Medicaid then covered the rest. We ended up saving her at least $40,000, the amount of money she would have had to pay if the penalty had been as much as 6 months or more. Why? Because, if Eddie had filed the application himself he would have been totally unprepared to provide the documentation Medicaid needed and to plead his case. Being at the mercy of the State who knows how high that penalty would have been?
Are You Making Gifts You aren’t Even Aware of? (Part 1)
September 12, 2011
So often, when I explain to someone how the Medicaid lookback and transfer penalty work, the response I get back is, “Don’t worry. My parents haven’t made any gifts. We don’t have anything to worry about.” But, the term “gift” is such a subjective one. It can mean different things to different people. However, the only definition that matters is the one Medicaid uses. Let me explain.
Not too long ago, we handled a Medicaid application for a family. Some clients we have worked with for a period of years, guiding them through the various stages of long term care, which culminates in a Medicaid application. In other cases, we are called upon just before Medicaid is needed. Eddie’s call about his dad fit the second scenario. We knew nothing about his parents’ finances and Dad was in a nursing home. Eddie was panicked about applying for Medicaid as soon as possible to protect as much as possible for Mom.
I gave Eddie our Medicaid checklist of documents we would need to file the application, including 5 years of financial records for every account Mom and Dad owned. I explained that we need to closely scrutinize money going into and out of those accounts, looking for transfers for less than fair value. We want to determine, before we file the application, if there will be any transfers which will cause a Medicaid penalty. Sometimes we can correct them before we apply or at least gather as much paperwork as we can to present to Medicaid if and when it becomes an issue to limit the penalty.
Eddie told me not to worry. Mom and Dad didn’t make any gifts, he told me. The bank account statements I started to receive, however, painted a different picture. As soon as we started to review them, we noticed cash withdrawals of, in some cases, $2000 per month. Eddie told me, “Oh, my folks help out my aunt and her family in Ecuador. But, that’s not a problem for Medicaid, right?”
“Actually,” I said, “it is. That’s a transfer subject to a Medicaid penalty.” Eddie had a hard time grasping that. “It’s not a gift,” he said. “My aunt helped my family when my parents first came to this country when I was a young boy. My parents are really repaying a debt.” Unfortunately, Medicaid doesn’t look at it that way. Under their rules it’s subject to a penalty, a period during which Dad is not eligible for Medicaid, even though he meets all the other Medicaid qualifications.
Eddie was distraught until I told him what we needed to do but we had to work fast. Next week I’ll tell you what I told him
