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If I Get Denied Medicaid, Then I’ll Come to You – Part 2

We were discussing Diane’s 90 year old mother, who had just entered a nursing home from the hospital.  Diane called because she was anticipating the need for Medicaid and was concerned that the assets in a trust that had been established for her benefit would be countable under New Jersey’s Medicaid program.

When I explained that I need to see the trust to answer that question, Diane told me, “That’s OK.  I’ll file the Medicaid application myself and if I get denied then I’ll come back to you.”

Big mistake. If it turns out that the assets in the trust are countable, Diane will have to take them out of the trust and spend them down.  But, wouldn’t she have to do that anyway?  So, what’s the difference if she does it before the application is filed or instead files the application and then, if she gets denied, spend it down.

Well, the application may not be decided for 6 or 9 months or longer and that’s a real problem.  Let’s say she finds out 9 months after she files, that Mom is not eligible.  Then she’ll owe the nursing home for that time period and she’ll have to refile, asking Medicaid to start paying for the 10th month.  But, if she doesn’t have enough money to cover the 9 months at the nursing home’s private pay rate (remember there is only $60,000 in the trust) she’ll be short about 3 months.  And she won’t have funds to set aside for Mom’s burial either, which Medicaid permits her to place in an irrevocable trust.

There are other potential problems as well.  Diane has no idea if or when Mom put money into the trust.  She also does not know what is in the 5 years of financial records that must be turned over to the State of New Jersey as part of the Medicaid application.  It’s possible that Mom funded the trust within the 5 year look back.  If it turns out that the trust is irrevocable and the assets within it are not countable for Medicaid purposes, she still may face a Medicaid penalty as a result of Mom moving the assets to the trust.

If Mom funded the trust 4 years and 10 months ago, for example, it would be advisable to wait another 2 months till the transfer falls outside of the look back.  Yes, Mom will have to private pay for those 2 months but she’ll be better off than filing blindly and getting hit with a penalty.  There will be $40,000 left in the trust the first way, probably nothing the second way.

Diane listened carefully and then was quiet for a minute. I think it hit home to her.  She said she would get me a copy of the trust agreement right away and asked me when we could get started working on her Mom’s application.