Elder Law - Medicaid Planning - Wills - Trusts - Probate - Guardianship

Ready, Willing & Able

Claire Voiance has problems. Real problems. Her Mom is 84 and is paralyzed due to a stroke. Her brother is only 50 but he has Muscular Dystrophy and also needs help in all attributes of daily living. Years ago, Claire promised she would never put her Mom in a nursing home and would always be there to care for her brother. But what is she to do? She can’t care for them herself.

Claire decided the only way to provide proper care for both Mom and Bro was to arrange for both of them to be in a nursing home. She knew she couldn’t afford to pay for both, so she made some financial arrangements in advance.

This is what she did using previously obtained Durable Powers of Attorney. She sold Mom’s house and transferred the proceeds and all of Mom’s other assets to herself, figuring this would get Mom on Medicaid. Then she took all of Mom’s assets and all of Bro’s assets and put them into a Special Needs Trust for Bro, figuring this would get Bro on Medicaid.

Unfortunately, but not surprisingly, Medicaid turned down both applications. What’s worse, by arranging things just a little differently, both Mom and Bro could have been eligible for Medicaid. So where did Claire go wrong?

First, the transfer of Mom’s assets to Claire made Mom ineligible for Medicaid regardless of what Claire later did with the money. However, Mom didn’t have to give the assets to Claire. She could have sold her house and put the proceeds and her other assets into a Special Needs Trust (SNT) for Bro pursuant to 42 U.S.C. 1396p(c)(2)(B)(IV). This would have made Mom eligible for Medicaid immediately and still have provided funds for Bro’s care.

As far as Bro’s Medicaid was concerned, he could have been made eligible by having his assets placed into his own Special Needs Trust, but not where Claire created the Trust for him. The SNT must be created only by a parent, grandparent, legal guardian or a court and not by a sister. 42 U.S.C. §1396p(d)(4)(A). NOTE: An interesting anomaly: Under this law, Bro may not create a Special Needs Trust by himself with his own assets, even if he is capable of doing so. Therefore, the only way Bro’s assets could have been sheltered in this scenario is if Mom, a guardian or a court had created the Trust and Bro put his money into the Trust.

Furthermore, to allow Bro to qualify for Medicaid benefits, the Trust must contain a provision that says when Bro dies, the Trust repays Medicaid for Medicaid benefits paid for Bro.

Humor for the day: The cheese is always free in a mouse trap.

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