But Mom Wanted Me to Have the Money

In the last few years readers of my blog know that many of my posts are real stories that highlight the pitfalls and dangers of not putting together a plan for long term care until you are on the doorstep of the nursing home.  Here’s another one, with names changed of course.

 Jane’s mom has been living at home with the assistance of Jane and some private aides.  Mom is now in her 90’s, her health is declining and she needs ever more assistance.  Jane called me because she is anticipating Mom’s money running out in a few months and Mom will probably need nursing home care.  As Jane explained, “I want to be prepared.”

 Jane told me that Mom is down to about $50,000 in assets.  I asked about transfers and that’s when she told me that 2 years ago Mom gave her a gift of $50,000.  I asked if she gave her other daughter, Mary, a gift as well .  Jane told me that Mary is well off, doesn’t need the money and that Mom wanted to “compensate” Jane for all the care she would be providing.

 Jane acted surprised when I told her that although she thought she was planning ahead she was actually too late and now, in what we call, “crisis mode”.  That’s because Mom’s gift makes her ineligible for Medicaid.  “But I’ve been providing care for Mom.   She’s really just paying me for care that, if I wasn’t providing, we would have to hire someone to do”, Jane exclaimed.

 I then related to her that the State doesn’t look at it that way.  In fact, I’ve had discussions with the State’s attorneys in which it is clear that, philosophically, they feel that families should provide care without compensation, that it is simply a case of hiding money.  In my view, that’s a simplistic and unrealistic way to look at it.  I see many cases where children stop working to care for aging parents.  They lose income that they need to support themselves.

 But, it doesn’t matter to Jane how things should be, just how they are. Mom could have transferred assets to her, but it had to be for fair value.  In other words, Mom and Jane needed to enter into a caregiver contract in which Mom paid Jane for care that, if not provided, she would have to pay an aide.  And, no, Jane can’t go back retroactively and sign that contract.  The State presumes Mom made a gift to Jane and that carries a Medicaid transfer penalty.  I told Jane that if Mom needs care she’ll either have to give the money back or pay for Mom’s care at the private pay nursing home rate for 7 months, the length of the penalty.

 Jane listened and then told me that she doesn’t have the money to give back, however, her sister, Mary does have the money.  “Shouldn’t she cover it since I have been taking care of Mom?”, she asked.   I told her that this could possibly be a solution but legally, Mary is under no obligation to do that.  

 So, where does that leave Jane?  In a predicament with no great solution.  But, again, one that could have been avoided with proper planning.