Can we prove money gifted by Mom was used for her care when Medicaid reviews her look-back period?

A fellow caregiver asked...

Background: About three years ago, my mother, who knew she'd need care in the future directed that each of her three children receive about $24,000 to care for her in her time of need, when she couldn't take care of herself (Alzheimer's). At the time we were unaware of the requirements for qualifying for Medicaid, and nothing was put in writing (1st mistake). My brother put his share of the money into savings which was wise on his part, but he's financially very secure. My sister, with whom Mom was living at the time, used half of her money to pay off her house, car, etc., and saved the rest, which was pretty smart on her part. I, however, was forced to use my money as my husband was laid off, had been for some time, and things were very tight. This was a mistake on our part, but we really had no other choice.

Now, my sister is no longer to care for Mom. She did it for 10 years, when mom was able to get out, etc. For the past four months, after Mom has recovered from two hip fractures, she lives with us. She's blind, deaf, and Alzheimer's is in, what is known by some as, stage 6 of 7). We do everything for her, with some aid from hospice.

When she becomes more than we can handle, and we're forced to put her in a nursing home, is there any way that the money she gave us can be counted as room/board and general caring for her, or must we first pay up the $24,000 and my sister her $12,000 before Mom qualifies for Medicaid? We don't have the money, but could get it if necessary by selling one of our cars and maxing out our home equity line of credit, but don't know how we'd make the home equity payments.

Expert Answer

You've got a complicated -- but not necessarily a bad -- situation concerning your mother's future eligibility for Medicaid coverage of nursing home care, involving a Medicaid rule known as the five-year "look-back" period. That rule means that when your mother applies for Medicaid coverage of nursing home care, Medicaid will look back at any assets she's given away in the previous five years. If she has given away assets in order to "hide" them -- in other words, to keep them in the family while Medicaid pays for all her care -- then Medicaid may deny her coverage for a period of time, based on the amount she gave away.

In your mother's case, she gave you and your two siblings $24,000 each. But rather than doing so to hide the money from Medicaid, it seems like she was doing just the opposite, trying to set aside money so that you and your brother and sister would use that money for her care. What has happened to the money is a bit different in the case of each sibling, and so Medicaid is likely to treat each portion of the money differently.

"¢ If your brother still has all the money your mother gave him for her care, Medicaid will probably require that he spend it on your mother's nursing home care before Medicaid will begin to cover her costs there. (Medicaid has no authority to force your brother to do so, but it can withhold coverage for your mother if he doesn't.)

"¢ In your sister's situation, since your mother lived with her and she took care of your mother for ten years (at least some of which was after your mother gave her the money), she could very reasonably say to Medicaid that she has spent the money on your mother's care. Even though she may have "saved" half of the $24,000, she has almost surely spent the equivalent of much more than that in housing and caring for your mother. It seems likely that in your sister's case, Medicaid would not require your sister to spend any of her money on your mother's nursing home costs before Medicaid would begin to cover your mother's care.

In your situation, what Medicaid does may depend on how long you wind up caring for your mother before she applies for Medicaid nursing home coverage. If you take care of and pay for your mother's needs -- a place to live, food, utilities, personal items -- for more a year or more, Medicaid may consider that you've spent the money on her care and that there is no need for you to pay for her nursing home care, too, before Medicaid will begin coverage. Even if your mother only lives with you for a few months, though, you can certainly argue that your mother did not intend to "hide" the money from Medcaid and that she should not be penalized just because you used the money for things that your mother did not intend.