Is it a Gift or Theft (Part 2)

Last week we were discussing Rachel’s recent discovery that while her sister, Sara, was managing Mom’s finances, Sara was taking or being given – depending on which way you look at it – Mom’s money.  Now that Medicaid was looking like a real necessity, Rachel was concerned, and for good reason.  “Are those transfers going to be subject to a Medicaid penalty?” she asked.

 The state’s presumption is that transfers are subject to the Medicaid penalty and you have the burden of proving they were not.  In this case, Rachel’s mother didn’t receive anything of fair market value back in product or service.  We all agreed on that.  But, did she voluntarily give the money to Sara?  Rachel insisted she did not, but I told her that wouldn’t be enough to satisfy Medicaid.

 If Sara took the money without her mother’s permission or against her will, then we are talking about theft.  If that’s what we tell Medicaid, then a reasonable response would be to ask whether anyone filed a criminal complaint with the authorities.  To back up our claim, and strengthen our position, I suggested to Rachel that she needs to report the theft to the police. 

“But how can I do that?  She’s my sister,” was her response.  I understood completely.  Yet, how can you claim a theft occurred and not report it?  The State will conclude that it was a gift from Mom to Sara.  Sara was acting as agent under Power of Attorney during much of the time frame during which the transfers occurred.  Rachel could also file a civil complaint against her sister alleging she abused her role as agent.

 I knew what Rachel’s next response would be.  “Going to court is expensive, the likelihood of recovering any of the money is small and the police won’t do anything anyway”, she told me.  “Sara spent the money on drugs.  It’s long gone.”  I explained to her that the objective isn’t really to recover the money but to support our claim that there shouldn’t be a Medicaid penalty because it wasn’t a voluntary transfer.  People don’t file complaints for theft if the transfer was indeed a gift.

 Rachel insisted that her mother didn’t even have the mental capacity to understand what Sara was doing.  I told her that, if this is true, we’ll need her doctor to back that up.  An affidavit from her physician as to her mental state during the time of the transfers would be helpful to support our case.

 Rachel took it all in and asked me if this will really work.   I told her that it absolutely can work if we take these steps now, before we file the Medicaid application.  We must have our ducks lined up, the documentation to support our claim.  Rachel isn’t happy about the thought of filing a complaint against her sister but she also knows that she doesn’t have the money to pay for her mom’s care during a Medicaid penalty, which could add up to $70,000 or more.  So she hired us and we got started. 

And the lesson to be learned, again, is to address long term care issues as early as you can.  Unfortunately for Rachel, she didn’t get involved before Sara took the money.  On the other hand, fortunately for her, she found us before she filed the Medicaid application and we are able to help her fix the problem.