Yesterday was going along quite smoothly until I got a very belligerent call from three irate children. They told me their mom was in the hospital because she had fallen at home and their step-father had called an ambulance because he couldn’t pick her off of the floor. Mom suffers from Parkinson’s Disease and her condition has been deteriorating for the last three years. In the last three months, there has been a rapid decline and now they find out that she will not be able to return home safely. The option, after receiving rehabilitation, is long-term skilled nursing care and the cost will be $425.00 a day which comes out to $13,175 a month. Mom had accumulated substantial assets and the children were told that she would have to spend them down before she would be eligible for any government benefits. What’s more, mom had given each child $50,000 over the last five years for a total of $150,000 and they were told that they either had to repay that money or mom would be penalized when she applied for Medicaid. “It’s not fair,” they yelled, “it’s not fair. Mom gave us that money because she loves us and wanted us to have money to spend while she was alive and could enjoy our use of the money.”

I told them that we might be able to take steps to prevent the return of that money and to reduce the penalty, but first I had to know mom and her husband’s complete financial picture. After a lot of digging, here’s what our Medicaid Assistants found out:

Home - Joint with Husband $ 375,000
Checking - Joint with Husband$ 65,000
Savings - Joint with Husband$ 175,000
Investment Account - Joint with Three Children$ 300,000
Cottage - Life Estate, remainder to Children$ 225,000
IRA - Mom, Husband beneficiary, then children$ 750,000
IRA - Husband, Mom beneficiary, then his children$ 525,000
Prior gifts$ 150,000

They were right, between mom and her husband they had in excess of $2,000,000 if the gifts were included in their assets, After reviewing the spreadsheet, this is the plan we developed:

  1. We determined the available resources. In mom’s case, those resources are the checking and savings accounts and 25% of the joint investment account or a total of $285,000. All the other assets in this case are exempted by the Medicaid Laws.
  2. Next, we deducted the applicant’s resource allowance and the community spouse resource allowance. In this case, the total allowed is $141,870.00, which leaves a balance of $173,130.00.
  3. Mom can buy burial accounts for herself and her husband totaling $20,000, which leaves a balance of $153,130.
  4. The penalty for transferring the $150,000 to the three children over the last five years is 15 months, which means that Mom must privately pay for her Nursing Home costs for the next 15 months.
  5. We set up a loan to one of the children of all of mom’s excess resources of $153,130 be repaid to her in 15 monthly installments of $10,208.66 a month.
  6. When the monthly payment is added to mom’s income of $3,100 a month, she will have enough money to pay the nursing home for the entire penalty period.

This is how it worked out:

  • Mom will be eligible for Medicaid in month 16.
  • The children will not have to return one dime of the $150,000 transferred.
  • The total of the assets that will have to be used to pay for mom’s care is $153,130.
  • The total assets preserved $1,936,870.00.

While there were certainly some anxious moments, in the end, mom, her husband and all three of the children were very pleased with the result.

If you have any questions about the above material or wish to speak to an attorney, please contact us at (716) 204-1055.

Assets, estate planning, power of attorney, probate, trusts, Will