client letters to estate planning attorney

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It Ain’t Heavy… It’s Your Letter!

Summertime… And The Letter Is Easy…

[Guaranteed Devoid Of Editing, Spelling, Grammar, Or Legal Advice]

Can a grown child give themselves proceeds from the sale of a parent’s home while the parent is on Medicaid in a nursing home?

The home is very modest, so it will likely be sold for less than six figures. The adult child understands that the parent will have to go off Medicaid until the sale proceeds are spent down. But before the sale proceeds start being spent on the parent, the adult child intends to “reimburse” themself for everything they’ve ever spent on the parent. This would consume a great amount of the proceeds from the sale. Also, the adult child has said that they intend to transfer the remaining money to an account in their own name, with the claim that it will only be spent on the parent. The adult child claims that they will then assist the parent in reapplying for Medicaid.

Is any of this legal?

I too am an adult child of this parent. I truly do not give a flying f*** what my sibling does, but as a matter of familial obligation, I do not want our parent to be involved in Medicaid fraud, or even the appearance of it. Thank you so much for your help.

Goodness And Niceness Are No Defense

Frequently, kids will spend their own money to help out mom and dad. Then they will want to get their money back. It is nice to be nice, but Medicaid is not nice and will not let you get your money back. At least not without imposing a penalty period. And sometimes, Adult Protective Services will get into the act and charge you with felony Financial Abuse of the Elderly. That is bad.

The Most Common Scenario. Mom lives alone. Mom has a hard time getting groceries. Kind child does Mom’s grocery shopping. Child rings up all the purchases together. Once at home, Child carefully separates out Mom’s purchases. Child carefully circles the prices on the store receipt. Child gets reimbursed by Mom, from Mom’s checking account, for Mom’s purchases. Child does not charge for gas or time or anything!

As far as Medicaid is concerned, Mom’s payback is bad divestment and will create a Penalty Period. Here’s the “reasoning”: Child did not have to buy groceries for Mom, so buying those groceries and delivering them to Mom was a GIFT. Mom had no legal obligation to pay Child for those groceries. Mom did not have to pay Child, so paying for the groceries was a GIFT.

Mom paying Child for groceries was a GIFT, therefore divestment, therefore Penalty Period for Mom. That means the nursing home will not get paid. Nursing Home does not like to not get paid. Nursing Home will sue Mom, seize the house, sell it, and get the bills paid.

Now Mom has lots of extra cash. Now Mom does not qualify for Medicaid because she has too much money. Now Nursing Home gets the rest of Mom’s money. Whoops! Moral of the Story: Do not spend your own money for Mom. Use Mom’s credit or debit card. Another Common Scenario. Mom lives at home. Child also lives in Mom’s house. Child cares for Mom. Mom pays child. Any amounts Mom pays Child are a gift, and divestment. Now when Mom needs nursing home care, Medicaid will not pay. And the family loses the house, again.

Just Answer The Letter, Will Ya… Is Any Of This Legal?

Answer: No, I don’t think so…

Our Letter Writer’s story is not unusual and demonstrates how a little knowledge is dangerous. Letter Writer’s sibling has heard the words “spenddown” and “Medicaid” and then made up the rest… A recipe for disaster!

1. Kid supposedly spent money on Parent. But did they? Who cares? It does not matter, since the Parent has no binding legal obligation to repay. Plus I’m guessing that there are some serious questions about proving how much Kid spent on Parent.

2. If Kid takes the house sale money and puts it in an account with Kid’s name on it, Kid just stole/ converted ALL the house sale money.

3. Kid keeps some of the money as “reimbursement.” Medicaid doesn’t care, you stole it all, Kid!

4. Kid spends the rest of the house sale money “spending down” by paying Parent’s nursing home bills. Medicaid doesn’t care how much was spent on the nursing home or medical bills or reimbursement or anything else. As soon as Kid puts the money in Kid’s account, the entire amount was stolen/gifted/ divested, and the Medicaid Penalty Period will have to be assessed. And the Penalty Period does not begin to run until Parent has no money.

5. Here’s what happens, if the house clears $100,000:

  • a. Kid takes $50,000 as reimbursement.
  • b. Kid spends $50,000 on nursing home (about 3 ½ months).
  • c. Kid runs out of money to pay Mom’s bills..
  • d. Kid applies for Medicaid.
  • e. Medicaid denies and assess a 10 month Penalty Period. Kid gets no “credit” for reimbursement or for paying the nursing home.
  • f. Nursing Home does not get paid and sues Mom. And the Kid. But there is no money. Nursing Home refers the matter to Adult Protective Services.
  • g. APS arrests Kid for Financial Abuse.

This could be done much differently. No need to lose the house. Kid could have been repaid. Medicaid could have taken care of the nursing home.

How could it have been done? Well, you did not ask THAT question. Maybe you should come to a LifePlan™ Workshop and find out!?

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