Full question:
In order to 'impoverish' his elderly parents, a man had convinced them to gift him and his brothers ' families some large sum of money so that when time came both his mom and dad would be able to obtain medicaid. But then , last November 2010, the elder situation changed suddenly, and all the family members had to quickly return the money. Then the elderly father passed away in November 2010 and the elderly mother with Alzheimer's was committed to a nursing home. On January 2011 that man checked his 88 years old now widowed mother out of the nursing home and brought her back to his home where she had lived for 6 years prior to going to the nursing home. He also bought some 'revocable burial plans' for himself and his family and did many other things...all this to hide their assets and to be able to have his mother qualify for medicaid. Currently he has had his old mother sign a bunch of blank checks. His old mother receives a total monthly income of $3,500 (including her deceased husband social security). So, he has also typed up a rental agreement stipulating that as of April 2011, his mother will pay him a monthly rent of $2,500 and he is planning to use her credit card to purchase his family groceries bill for $250 every week. Is it legal?
- Category: Medicaid
- Date:
- State: New York
Answer:
Whether the lease is valid with be governed by contract law principles and landlord tenant law. Whether the lease agreement is valid will also depend on whether the the mother had mental capacity to sign contracts at the time it was entered into, and was aware of the nature of the agreement and it's consequences at the time it was signed. A diagnosis of Alzheimer’s or dementia alone is not an indication of incompetence.
Legal capacity is the level of judgment and decision-making ability needed to sign official documents. In order to be competent or have legal capacity to sign documents, a person must be able to understand and appreciate the consequences of his/her actions. In most cases, the person with dementia is able to understand the meaning and importance of a given legal document.
Once a person is diagnosed with dementia, family and friends should help the person make legal plans. The sooner plans can begin, the more the person with dementia may be able to participate.
Planning for incompetence includes:
-Making plans for health care and long-term care coverage
-Making plans for finances and property
-Naming another person to make decisions on behalf of the person with dementia
A living will, power of attorney, and testamentary will should be prepared.
Whether the credit card purchases are legal will depend in part on whether the charges are made by a person named on the account, as a joint account holder or authorized user. It is possible that it could be viewed as a misuse of her assets, especially if you are a fiduciary, such as a guardian or agent under a power of attorney. It is highly recommended that you get specific advice for your situation. You may wish to consult with a local attorney who specializes in Elder law issues.
The look-back period for asset transfers was extended from 3 years to 5 years and the start of the penalty period or ineligibility period for transferred assets was changed from the date of the transfer of assets to the date when the elderly person applies for Medicaid and is otherwise qualified for Medicaid, generally at the time he or she enters a nursing home. Simply put, one of the key requirements for Medicaid eligibility is that the elderly person lacks assets, meaning he or she can't afford to pay for nursing home care. However, Medicaid will look back 5 years to see if the elderly person transferred any assets for less than fair market value, and if so, will deny Medicaid benefits for a period of time (the ineligibility period) based on the amount of assets transferred. This lookback period is the same for all states because this is a federal law.
If a transfer is created with knowledge of an impending claim, it is possible the transfer could be challenged as a fraudulent conveyance. For example, creating a trust right before filing bankruptcy may throw up red flags for examination.
The elements of a fraudulent conveyance transfer are defined as follows by the Uniform Fraudulent Transfer Act:
(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(i) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(ii) intended to incur, or believed or reasonably should have believed that he [or she] would incur, debts beyond his [or her] ability to pay as they became due.
Before you qualify for the government nursing home assistance program, there is a 60 month look back to see if and when you transferred your assets for less than fair cash value or you transferred your assets into a trust system or any system of transferring your wealth for the purpose of becoming eligible for the nursing home program depriving the state of all your available resources for your long-term health care.
Transferring, giving away or selling resources for less than fair market value is called a "disposal of resources". Under the Deficit Reduction act of 2005, the look back period (five years rather than three) will apply to transfers made on or after February 8, 2006. For every $4300 disposed of you will be disqualified for one month of Medical Assistance coverage of your nursing home care.
The penalty period for transfers made on or after February 8, 2006, starts on the later of: the first day of the month after which assets are transferred for less than fair market value, or the date on which you are eligible for Medical Assistance—Long Term Care. The change from 3 years to 5 will be phased in so that, for example, if you apply for Medical Assistance in March, 2009, the look-back period will be three years and one month. As of February, 2011, the full look-back period of five years will be fully in effect. If you give away property or money on more than one occasion, the second penalty does not begin to run until the end of the first one. The length of the disqualification depends on the value of the resources transferred.
Transferring a house to the following people does not affect eligibility for Medicaid:
-A spouse
-A child under the age of twenty-one or a child who is certified blind or certified disabled at any age
-A sibling with an equity interest in the home who has resided in the home at least one year immediately prior to the date the patient became institutionalized and continues to lawfully reside in the home
-A caretaker child who has resided in the home for at least two years immediately prior to the date the patient became institutionalized and who provided care.
If a person's equity interest in the home is $500,000 or less (or $750,000 or less in some cases) and the person intends on returning home, it will not be considered as a resource in determining eligibility for Medicaid. The equity value is derived by subtracting encumbrances such as liens and mortgages from the fair market value. Reverse mortgages and home equity loans can be used to reduce the equity interest.
Creating a life estate without the power to sell the house is a disposal of a resource that may disqualify you from Medical Assistance. If a life estate deed without the power to sell was created long enough ago that there is no penalty, the house is a countable resource, but your life estate without the power to sell has a market value of $0, so it would not disqualify you from Medical Assistance. The purchase of a life estate will be included in the definition of "assets" unless the purchaser resides in the home for at least one year after the date of purchase.
Creating a life estate deed with the power to sell the house is not a disposal, because you still have the power to sell the house at any time without anyone else's permission. However, the house could not be an exempt resource based only on your saying you intend to return home, because the State cannot put a lien on a house owned this way. The market value of the house would be counted as an available resource. If the house would be exempt for other reasons, such as because your spouse or a dependent relative lives in it, then it still would be exempt.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
