Gift or Theft (Part 1)

                The call from John involved another crisis planning case.  His sister, Mary was already in a nursing home and had a minimal amount of assets remaining to be spent down.  Before entering the facility she had lived for many years with her other brother, Jerry.

Although she was able to attend to her activities of daily living, Mary is mentally challenged to the extent that she could not handle her own finances, although she was legally competent.   Jerry had been handling her finances which in large part included funds left to Mary by their mom.  Now, however, Jerry was experiencing his own health issues and asked John to step in.

                We immediately asked John to gather 5 years of records for every account Mary owned as well as the trust accounts established to hold and manage Mary’s inheritance from her mom, of which Jerry had been the trustee.  It would only be a matter of months before we would be spent down and I needed to know quickly if there would be any potential Medicaid penalties to address.

                Sure enough there were.  We encountered numerous withdrawals from Mary’s accounts.  We also found many checks payable to Jerry.  Some were signed by Jerry who had power of attorney for Mary.  Others appeared to be signed by Mary but did not look like her signature.  That’s because when John agreed to step in, Mary, who has legal capacity, signed a new power of attorney document designated John as her agent.  Although she could not recall signing the checks in question, her signatures there looked very different from her signature on her new POA.

                John confronted Jerry who candidly admitted that he took some funds for himself because he had been experiencing financial problems.   He attempted to defend himself by stating he considered this to be a reimbursement for rent, food and utilities for the years Mary was living with him, however, there was no lease or other agreement to support what he was saying.

                The total amount of money taken was about $200,000.  I told John that Medicaid would presume that anything Jerry took would be viewed as a gift from Mary and subject to a Medicaid penalty.  In this case that would be a period of ineligibility of 19 months.  That penalty would only begin to run after Mary spent down her remaining assets and met all the other Medicaid requirements.  The question I knew that was coming from John was “how are we supposed to pay the nursing home during those 19 months”?

                Next week I’ll share with you what I said in response.