Do It Yourself And Lose a House?

How confident would you feel in replacing a washer that is causing a plumbing leak? How confident do you feel that you can change the oil in your car? How confident are you in your ability to protect $140,000 from nursing home bills?

The first two are fairly low risk jobs and with some research or a little experience you can probably complete the task successfully. The last job however, has a lot more risk ($140,000 worth of risk) and the greatest danger is how “easy” it may appear on the surface.

One of the provisions of Medicaid nursing home regulations that many families ask me about is the caretaker child exception. This is one of the more dangerous parts of Medicaid law because on the surface it might sound simple and straightforward, but your Woodlands Medicaid attorney knows that when you get into the legal specifics it is not as simple as it might sound. In an important court case, Reta and Karen found that out the hard way and rather than achieving their goal of protecting the home for Karen, their misguided attempt at do it yourself asset protection stuck Reta with a lengthy Medicaid penalty.

The Facts

Reta entered a nursing home on July 5. Her daughter Karen began to live with her mother three years before she entered a nursing home. The arrangement was designed to assist Reta, who was in declining health, and to provide Karen with a place to live at minimal cost. Karen helped her mother with housecleaning, laundry, meal preparation, and taking medications. For at least several months, Karen worked full time, forty hours per week. In the period ” immediately prior to her institutionalization,” Reta spent days at home alone.

On October 24, Reta proceeded to transfer her home worth $140,000 to Karen for one dollar. That transaction was a gift resulting in a Medicaid penalty unless Reta could prove the transfer meets the legal requirements to not be penalized. She thought the caretaker child exemption would protect her but she guessed wrong. Remember, the answer to the question “how much can a parent gift without creating a Medicaid penalty?” is $0 during the lookback period unless the transaction meets very specific requirements and you can prove it. A lot of people forget that they have to prove it to the caseworker and the hearing officer with more evidence than unsubstantiated statements and testimony.

As with every case involving the caretaker child regulations, the first issue was whether Reta’s condition was such that she would have required institutionalization without Karen’s services. The caseworker and later the hearing officer both said Karen did not provide enough evidence that Reta would have been institutionalized without the services from Karen. They noted Reta may have required some variety of assisted living without Karen, but she would not have required institutionalization in a nursing home. If you can’t prove with evidence the services provided by the child avoided institutionalization of the Medicaid applicant then your case is dead in the water right there.

The Outcome

Reta was stuck with a Medicaid ineligibility penalty of over 500 days because of this ill advised attempt at do it yourself asset protection.

The Alternative Outcome

Working with a Woodlands Medicaid attorney likely would have produced a different result for Reta and Karen. If they had come to me before Karen moved in and explained they intended to qualify for the caretaker child exemption in two years or more I could have worked with them to produce enough evidence to bolster their case. Even if they had come to me afterwards, there were likely some less problematic alternatives to protecting the house for Karen.