The Pit Falls of Do-It-Yourself Medicaid Planning | Massachusetts Elderlaw Attorney
Off To A Good Start
We got a call the other day from Ben. He had prepared and filed his mother’s Medicaid application himself. From what he told us, it sounded like he did a great job.
He had hit a bit of a snag because Ben and his brother had been helping Mom out with her expenses. At first, the Medicaid caseworker treated the transfers into Mom’s account as additional income to her. However, Ben was successfully able to prove that the money was given to Mom to help pay some of her medical expenses. It wasn’t support and shouldn’t affect her Medicaid eligibility. He was successful and Medicaid was approved.
So Why Was He Calling?
Ben was calling us because his mother had inherited $75,000 from a family member. The first thing he wanted to know was whether there was any way they could keep the money. His thinking was that the inheritance would act as a reimbursement by Mom to Ben and his brother.
I told him that unfortunately I didn’t think it would work that way. The lesson here is that if Ben had consulted with us before he applied for Medicaid we would have taken steps to make sure that he could recoup some of the funds in the event that something like this happened. The reason his plan wouldn’t work is because he didn’t document that the money he gave to his mom was a loan. He said that he never could have foreseen that his mother could ever pay back the money and that at the time; he didn’t see the need to write up a contract. Unfortunately, from a Medicaid perspective, the Commonwealth of Massachusetts presumes that the money given to Mom is either income to support her, or a gift.
This Is Why You Should Consult A Professional
Remember, I told you that when Ben applied for Medicaid, the caseworker tried to peg it as income. Ben 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 her sons back, making any attempt now to do so a transfer subject to a Medicaid penalty.
Ben didn’t like my answer and tried to find a way around the system. “What about if Mom refuses to accept the inheritance,” he asked. “It would then pass to my brother and me.”
Disclaimers May Not Apply
Ben 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 Ben and his brother.
Sounds great so far doesn’t it, but it won’t work. By refusing to accept the money, Medicaid treats it as if Mom took the inheritance 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 either way.
So where does that leave Ben? He and Mom have 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 Massachusetts. Tough choices, I know. But, that’s what makes Medicaid so tricky when you are trying to navigate it alone, and why we always recommend professional guidance on your Medicaid journey.
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