Recently, some family members came to see me who were very concerned that their aging mother, who suffers from dementia and who had recently broken her hip, would not be eligible for Medicaid and yet would not have enough money to cover the cost of care. On the face of it, it appeared that mom would be penalized for past financial decisions and she might have to spend down her nest egg while not being guaranteed that Medicaid would cover the cost of her long-term care. While complicated, we were able to find solution.

Mom currently lives in her home with two of her six children, her disabled step- daughter and a granddaughter. Her home is valued at $150,000 and she has $1,500 in a bank account, $60,000 in a joint investment account with her daughter, Christine. Beginning in 2005, Mom transferred all of her monthly income into an account in Christine’s name alone. Christine used the money to pay all of Mom’s bills. With a monthly income of $2,700, she transferred a total of $324,000 to Christine’s account over a 10- year period and, after paying mom’s bills, there is $212,000 left in the account.

They have been told that after the house is sold, and assuming that mom buys a pre-paid burial account, she will then have to spend down all the rest of her money except for $14,850, and she would still not be eligible for Medicaid because she would be penalized for the $324,000 that she had given to Christine to watch over for her. They wanted to know if this was true and what options they may have to ensure care for mom.

Looking deeper, we found some options. Because Christine is the Power of Attorney and there is a gifting provision, most of mom’s assets can actually be preserved. We recommended the following steps:

  • First of all, we only need to show transfers for the last 60 months, which reduces the $324,000 to $162,000. The issues with that account can be eliminated by transferring $162,000 back into mom’s account.
  • Next, if she goes into a nursing home, the house can be transferred to either of her sons under the caretaker child exception and there will be no penalty for the transfer.
  • Because the joint investment account with Christine is not in a bank and it is more than 5 years old, only half of the value of the account or $30,000 is available as a resource. Thus, instead of all of mom’s assets being at risk, including her house, 10 years of monthly income transfers, the money left in Christine’s account, the investment account and her own checking account, there really is only $193,000 at risk. Here’s how we did it:

Liquid Assets $61,500
House $150,000
Income Transfers for 10 Years $324,000
Total Assets and Transfers $535,500

Less 5 Years of transfers ($162,000)
Less Value of House ($150,000)
Less ½ of investment account ($30,000)
Total Reductions ($342,000)

Total at Risk $193,000

  • Of that $193,000.00, mom is allowed to keep $14,850 under Medicaid rules, she can prepay her own funeral $12,500 and the funerals of her four children and 2 stepchildren and their spouses at $5,000 apiece, $60,000.

Less Applicant’s resource allowance ($14,850.00)
Less burials for her children, step-children and their spouses @ $5,000 ($60,000.00)
Balance available for medical/legal exp. $105,150.00

  • Mom can use the $105,150.00 to cover her legal expenses, the cost of preparing and filing a Medicaid application and private pay for skilled nursing for several months. With this amount of available funds, it should be enough to get her into a nursing home of her choice.

The legal and financial issues associated with these types of situations can be complex and overwhelming. By digging deeper and working with professionals who are experienced in the legal, financial and long term care issues faced by families every day, this family was able to find a solution that ensures that their mom will have the care that she and her children want her to have and still be able to preserve over 80% of her assets.