Last week we were talking about Brenda, who tried to apply for Medicaid for her grandfather, but ran into a snag. She provided the New Jersey Medicaid caseworker with 5 years of financial records and was told that Granddad still had to spend down another $30,000 from accounts that Brenda never knew existed.
When I looked at the statements Brenda gave to Medicaid, it was clear that the $30,000 in question was in two Uniform Gift to Minors Act accounts, which Granddad was acting as custodian for Brenda. I asked her why she gave those documents to Medicaid and Brenda didn’t have a good answer. “I just figured I would give them everything and they would tell me when he would be eligible and what I needed to do”, she replied.
It’s a very common response. Many people are under the erroneous belief that the Medicaid application process is a simple one. “I know there is a penalty if we gift money but we haven’t done that. We have legitimately spent down all the assets so we’ll just walk into the Medicaid office and tell them that, hand over everything and it will all be fine.” Unfortunately, it rarely works out that way and what you don’t know can really hurt you. You can’t rely on the state Medicaid caseworker because so often they are wrong. That was the case here.
You see, when Granddad set up the UGMA accounts 30+ years ago, when Brenda was a young child, he irrevocably transferred the money into those accounts for Brenda’s benefit. He remained a custodian of those accounts until Brenda reached 21, entrusted to manage those funds for her benefit. I explained to Brenda that for Medicaid purposes those funds were no longer Granddad’s so they shouldn’t be counted as his. The caseworker was wrong to tell her to cash out the accounts and spend down the funds for Granddad.
What Brenda needed to do now was to transfer those accounts to her name. She was now 45 so that should have happened 24 years ago. I told her that under the UGMA law she was entitled to access those accounts. And if you’re wondering whether the transfer to an account in her name will cause a Medicaid penalty, the answer is “it does not”. That’s because, again, the money was transferred out of Granddad’s name more than 5 years ago so it wouldn’t fall within the Medicaid look back period.
In fact, Granddad was taking the interest all these years, some of which went towards paying for his long term care in his later years. In other words, some of what was legally Brenda’s money went towards Granddad’s care already so Medicaid shouldn’t complain about that.
Brenda understood what I was saying but asked if I would step in and assist her to complete the process. I spoke to the New Jersey Medicaid caseworker and explained the situation. At first, she insisted that the money was Granddad’s but when I followed it up with a letter citing the applicable law she referred it to her supervisor. Several months later we received a favorable decision.
Brenda was able to keep the $30,000 and Granddad was approved for Medicaid. Brenda was appreciative and understood the mistake she made. “I guess I gave Medicaid too much information”, she said. “But, I didn’t really understand what those accounts were. I saw his name on them with mine and just assumed they were joint accounts. I didn’t know what the initials “UGMA” meant.” I told Brenda that her mistake was in relying on the state to steer her in the right direction. Luckily, we were there to save the day and save Brenda $30,000, which, by the way, would help reimburse her for funds she told me she paid for her grandfather’s care that she never reimbursed herself for.