Is it a Gift or is it Theft? (Part 1)
It’s a scenario we’ve seen frequently of late. Mom’s mental health had been declining for some time. Rachel called because Mom’s savings are almost exhausted and she needs nursing home care. Rachel knows she must apply for Mediciaid. And then Rachel told me about her recent discovery.
Rachel only in the last month started handling her mother’s finances. Before that, her sister, Sara, was in charge but Rachel explained to me that Sara has her own problems, specifically substance abuse. She discovered that Sara was taking Mom to the bank to withdraw money from her accounts, sometimes at the teller and other times via the ATM machine. Mom then turned that money over to Sara. “Will this be a problem for Medicaid”, she asked.
I asked Rachel, “how much money are we talking about?” She replied that so far she had found about $50,000 in transfers but that was only in the past year. She hadn’t yet looked back farther so there very well could be more. Rachel was very angry with her sister for “stealing Mom’s money”, but the $64,000 question is, “will Medicaid see it that way or will they see it as a gift?”
What was Mom’s intent? Did she even understand what she was doing? Could she have resisted Sara’s determination to get the money? All good questions for which I didn’t have definitive answers since I wasn’t there at the time of each withdrawal. However, I told Rachel that Medicaid is likely to treat it all as gifts, which are transfers for less than fair value and subject to a Medicaid penalty. That penalty equates to a number of months that Mom will not be eligible for Medicaid, even if she meets all the other requirements.
After all, why wouldn’t the government assess a penalty? The State is trying to balance a budget and cut down on expenses so if it can turn Rachel away for 6 months or more, Mom may pass away before the State has to provide anything. But, is there anything Rachel can do?
It’s not a great situation but there are a few things Rachel can do to fix what happened. Next week I’ll share with you what I told her.