Last week we talking about Jennifer’s problem, which she didn’t realize was a problem until she spoke with us. She had been hiding her assets in her mother’s name to keep them out of the reach of her husband, who she was thinking she might divorce. I told her that if Mom needs Medicaid – a distinct possibility given her declining health and limited assets – it would be a real problem.
Then I told her how Medicaid works. “Your mom will have to spend down her assets to less than $2000 before she’ll qualify for Medicaid”, I explained. “If assets are titled in her name, Medicaid assumes they are hers. You have the burden of proving they aren’t hers but rather yours”, I told her. “She’ll have to sell that real estate you put in Mom’s name, spend that money down and then when it’s gone (along with her own assets) you’ll qualify her for Medicaid.”
“Ok, I understand. Not a problem”, Jennifer replied. “Maybe I’ll transfer them to my daughter, Jackie, if we need to get Medicaid.”
But that’s a problem because if we are claiming the assets are not Jennifer’s mother’s, Medicaid will ask us to prove it by producing statements showing the source of the funds placed in Mom’s name. Since the money didn’t come from Jackie in the first place, Medicaid would view the transfer to her from Mom as a transfer for less than fair value, subject to a Medicaid penalty. Only a transfer back to Jennifer would negate any penalty, as long as we could prove that Jennifer gave Mom the money in the first place.
Jennifer was starting to see the problem. She really didn’t want the assets back in her name since she had no idea when she might be getting divorced. “So, are there any other options”, she asked me.
I told her that putting assets into a trust could be an alternative. We’d have to determine whether to transfer the assets back to Jennifer first or have Mom transfer them directly to the trust. There are pros and cons to each option. But, the time to do it is now, because she still has $300,000 of her own assets and might not need Medicaid for several years. If we can get through the 5 year look back, meaning we don’t apply for Medicaid until more than 5 years from when assets are transferred into the trust, we’d be OK.
Jennifer liked that idea and was thankful that she found an elder law attorney when she did. I told her we could definitely set up the trust for her but I also strongly suggested that she speak with a divorce attorney who could tell her whether moving assets out of her name the way she was doing is advisable.