Long-term Care, Part XIX (Importance of Documentation)

The Greatest Financial Risk for Seniors: Paying for

Long-term Care, Part XIX (Importance of Documentation)

The previous article in this series looked at the opposite of exempt transfers – rather than outright gifts that do not affect Medicaid eligibility, there can also be transfers that you never intended as gifts but might well affect your Medicaid eligibility. That article discussed three situations in which this can happen, all resulting from three misunderstandings about the Medicaid rules. One was payments to family-member caregivers without a written care agreement in place; another was transfers to a so-called “Medicaid Qualifying Trust”; and the third was the persistent tendency to confuse the federal annual gift-tax exemption with the Medicaid gifting rules. This article concerns what is, perhaps, the most frustrating reason of all that results in clients making unintentional gifts: lack of documentation.

Clients sometimes ask, “But how would the Medicaid office even know about these transfers? Real estate and automobiles, sure, because then there would be a deed or a title certificate on the record. But what about cash gifts? How would they ever know about these?”

There are two answers to this question:

• One is the simple legal requirement to disclose on the Medicaid application any gifts made within the past 60 months. Suffice it to say that intentionally failing to disclose such gifts could result in a criminal fine, or worse.
• But the practical answer is that the Medicaid office isn’t going to simply rely on what you tell them. The Medicaid application has to include 60 months of statements for each current bank, credit-union, or brokerage account you have, as well as any such account that was closed in the prior 60 months. The Medicaid case worker in charge of the file will review these statements carefully and, if any items seem to be gifts (in excess of the $500-per-month limit), they will ask for additional documentation – such as copies of checks, or, if this isn’t sufficient (such as checks made payable to “cash”), receipts for items purchased – something to show that the transfers were not gifts. To put it another way, the Medicaid rules do not require the Medicaid office to prove that transfers were gifts; they require the person applying for Medicaid to prove they weren’t.

Here is an example of how the lack of documentation can come back to bite you. Some years ago we met with a son whose mother had recently moved to a nursing home. We were helping him with the Medicaid application. The son had been living with his mother for several years and providing care so that she could continue to remain at home.^[1] The son did all the shopping – groceries, clothing, household goods, everything needed for both of them, and every few months the mother would reimburse him for her share, with checks or cash. This had gone on for several years, and once the son was paid he hadn’t bothered to save all the receipts. Who would?^[2] But the bank statements with his mother’s Medicaid application showed lots of checks from mother to son as well as larger-than-usual cash withdrawals, with no documentation to show what they were for. With a lot of perseverance the son was able to retrieve some recent receipts (from her pharmacy and certain vendors), but his mother ended up with one additional month of ineligibility for Medicaid, resulting in an additional payment of about $8,000 to the nursing home, all because of reimbursements to her son for which she lacked adequate documentation to show they were not gifts.

The take-away from this:

• Keep 60 months of all financial accounts and credit-card records.
• Avoid cash transactions; use checks or credit cards.
• Make use of the “memo” field on checks to show what they were for.

The next article in this series will discuss crisis planning when a disabled child’s parent needs long-term nursing care.

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The content herein is for general informational purposes only and does not constitute legal advice. For specific questions you should consult a qualified elder law attorney

Note: Working with the long-term care system we have in this country, seniors and their families need to understand that despite the restrictions in the Medicaid law, it is almost never too late to protect part or your remaining assets, even when facing an immediate crisis and with no advance planning. Whether you are 75 years old and living in your own home, or have an 85-year-old spouse in a nursing home, there are steps you can be taking now to preserve part – and often a very significant part – of your life savings otherwise at risk of being spent on your nursing care. But “time works against you.” Every day of delay in a crisis can result in $250 or more of irretrievable loss, so it is important to contact a knowledgeable and experienced elder law attorney for advice sooner rather than later.

Kemp Scales is now retired, but elder-law attorney Schellart Los continues to serve clients throughout western Pennsylvania from offices in Erie and Titusville. She can be reached toll-free at (888) 827-2788 or by e-mail at schelly@losscaleselderlaw.com. The Law Offices of Schellart Joyce, LLC has an Internet presence at www.losscaleselderlaw.com.

1. We were able to make use of the “caregiver-child” exemption in the Medicaid rules to get the house transferred to the son without any effect on the mother’s Medicaid eligibility. (See Part XIV of this series for a more detailed discussion of this exemption.) ↑

2. Going forward, a practical problem we foresee for clients is that even if they do keep five years of receipts for every questionable transfer, the “disappearing ink” now being used on these slips will render them useless after a few months. ↑