Last week I was telling you about Joe’s call. His mother, who was on Medicaid, received notice of an inheritance of $75,000. Joe wanted to figure out a way to keep that money since he and his brother had given Mom money to pay some of her medical expenses that she never repaid.
I told Joe I didn’t think that was possible. The reason is because he didn’t document that the money was a loan. He said that he never could have foreseen that his mother could ever pay back the money. Unfortunately, from a Medicaid perspective, the State of New Jersey presumes that the money given to Mom is either income to support her or a gift.
Remember, last week I told you that when Joe applied for Medicaid, the caseworker tried to peg it as income. Joe successfully fought that. However, he didn’t see the gift vs. loan issue coming. Not knowing the Medicaid rules as I do, how could he have? Without a written agreement at the time he gave Mom the money, the presumption is that there was never an intention for Mom to pay it back, making any attempt now to do so a transfer subject to a Medicaid penalty.
Joe struggled with my answer. “What about if Mom refuses to accept the inheritance,” he asked. “It would then pass to my brother and I.”
Joe is referring to what is known as a disclaimer. A disclaimer is a legal statement filed by the heir who says, “I am supposed to receive this gift but I don’t want it”. Mom would be treated as having predeceased – died – before the relative leaving her the $75,000. Under his will, that money would have passed to Joe and his brother.
Sounds great , except that by refusing to accept the money, Medicaid treats it as if Mom took it and gave it away. It is no different than if she accepts it and then turns around and gives it to her children. It causes a Medicaid penalty.
So where does that leave Joe? Mom has two very unappealing choices. She can accept the money, come off of Medicaid and spend the money down and then reapply. Or, she can stay on Medicaid and give all the money to the State of New Jersey. Tough choices, I know. But, that’s what makes Medicaid so tricky when you are trying to navigate it alone.