Elder Law Answers
Proving That a Transfer Was Not Made in Order to Qualify for Medicaid
Medicaid law imposes a penalty period if you transferred assets within five years of applying, but what if the transfers h...
Read moreIs Money Gifted to Me for Medicaid Planning Purposes Considered My Money?
- January 29th, 2018
Q
I have been asked to participate in a "note and gift" Medicaid plan for an aunt who has no other relatives. She is currently eligible for Medicaid and in a nursing home, but she recently inherited a large amount of money. The plan requires me to open a bank account in my name. I would use the account to make a monthly payment on a promissory note and pay the nursing home for the length of the penalty period. How does this account fit into my personal finances? Do I disclose the account if I'm asked for my personal financial information? If I don't disclose it, am I breaking the law?
A
You describe a Medicaid planning strategy available in some states and not others. For it to work, the nursing home resident needs to transfer the funds entirely to you, half as a gift and half as a loan. The result is that this is your money, even though you will be committed to paying back half. So you should report it wherever you are required to list your assets. However, the payments to you are not income so you should not report them as such. In addition, the promissory note is an obligation to pay on your part, so it would be listed as a liability if you are asked to list those as well.
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Jeffrey Hammond
Hammond and Associates, LLC, Elder Law, Estate Planning, Wills, Trusts, Probate
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