A Family Theft – Part 1

                What happens if a family member takes money from another family member without permission and the second family member needs to apply for Medicaid?  That is exactly the scenario faced by Joe who called me about his two sisters, Mary and Sophie.

                Mary and Sophie had been living together for many years.  Sophie had always relied on Mary to take care of her finances.  While she had never been deemed incapacitated she had some mental health issues that prevented her from living independently.  Thankfully, Mary had been there for her and taken care of things – until Mary’s health deteriorated and she needed care herself.

                Mary moved out of state to live with her daughter.  That’s when Joe stepped in as power of attorney.  At that point Sophie could no longer walk, bath or dress herself.  She needed nursing home care.  Joe contacted me to help with the Medicaid application because within several months Sophie was expected to exhaust her assets – in Medicaid terms spend down her remaining assets.

                I explained to Joe the documentation we would need for a Medicaid application and that’s when he told me what he had discovered.  Mary had put her name on Sophie’s accounts which by itself wasn’t an insurmountable problem.  But, he told me that Mary spent much of Sophie’s money for her own benefit.  I explained that this would be subject to a Medicaid penalty because it would be considered a transfer for less than fair value.

                Joe estimated that the amount of money Mary took over the past 5 years totaled at least $100,000 and maybe more but he didn’t yet have all the records to say for sure.  That would result in an ineligibility period for Medicaid of about 10 months which would only begin running after Sophie spent the rest of her assets.  Of course, she had no way of paying a nursing home bill in that case.

                Joe protested that Sophie did not authorize these transfers and that Mary admitted to him that she helped herself to some of Sophie’s money.  I explained that this explanation by itself was unlikely to avoid the penalty.

                I did also tell him, however, that I had a plan.  Next week I’ll share that with you.