Spend down and gifted money. Can you fill us in?

Thank you! Igloo! This was very informative and I very much appreciate the time you took in responding to me. I know for a fact that nothing my Mother paid my sister was put into a written agreement. It was just demand from my oldest brother and he complied. When my Father passed away my oldest sister and her husband came forward and said they would take our Mother to live with them and provide for her care. They stated that they didn't want a dime from her. Since that time everything has changed. Both now claim that my sister has not received a penny for the care she has provided our Mother and that she is entitled to all of our Mothers monthly income for providing her care. My sister was given our mothers car. They are also paid "rent" monthly for our mother. None of this is reported to the IRS as additional income for them. Actually, my brother in law is in trouble with the IRS for not paying taxes on lucrative usiness deals he made in the past. He and my sister lost their home and acquired a large rental home way above their means and used my Mother as their excuse as to why they needed it. They stated we had to find a home that had a master suiits on the ground floor with a large bathroom to accommodate Mom.
You get the picture I'm sure. It's nice to know that they would be taxed on the additional income provided by our mother, because I know they have never reported it to the IRS. Your response has been enlighting and valuable. Thank you!

Danna - ok so this really is a family dynamics situation. I'm going to assume that what you say about Sissy is pretty on target. So really what can you do to safeguard your liability in all this...here are my thoughts and they are not going to be all kum-ba-ya and nice....I was executrix for 2 aunts and had to deal with duplicitous family members and being nice just sometimes doesn't work.

You live away so all this is going to fall first to the DPOA, who is your brother. Someone will have to do the application to Medicaid, whatever you do DO NOT be the one who does this. If mom has been living with Sissy, then she likely has the paperwork that the state requires for all this to be done. Not your problem. It is up to Sissy & Bro to get whatever to the elder law attorney to make the Medicaid application work. Yes, it actually was good that mom's funds paid for this as it needs to be done this way. If you think that the attorney is working in their favor and not including you in a transparent way, then you should send a certified letter to the attorney that is short & sweet to state who you are and that this is a formal request to be included in any & all correspondence regarding your mom's care and any application for Medicaid or any disposition on her assets. You don't know what Sissy has told this attorney, so you want to position yourself to be the concerned loving daughter that your are.

Now regarding the transfer penalty, if it comes down to the state doing a transfer penalty inquiry on mom's application, then they will be looking at ALL transfers of funds, most likely for the last 3 years but could go back to 5 years. The state can require detailed financial disclosure on mom income & assets. If mom had a home within the 5 year period, then 5 years is more likely the look-back period. The caseworker looks at each months bank statements, not just the checks mom gifted you. But any funds that mom gave Sissy or Bro are also subject to review and penalty. If Sissy says something to you like, but that money was for my caregiving.....well the state doesn't view it like that. In order for money paid for caregiving not be viewed as gifting, there needs to be a "personal services contract" in existence in which mom pays Sissy or whomever; mom files a W-2 on this; Sissy pays taxes on it. Bet that hasn't happened.

Some degree of reimbursement for the costs of mom living at Sissy's home seems to be allowed. But if it is thousands of dollars and now mom is penniless, then the state will decline to pay for mom's NH till that is worked out. The transfer penalty is sticky in that mom, since she is now penniless is accepted into Medicaid but because there is a penalty, Medicaid views her an ineligible for Medicaid's payment to the NH till the penalty period is paid or is up.

WHomever signed her into the NH now has that problem to be solved. Mom is toast on going into another facility until the transfer penalty is paid. Most of the time, family moves mom back into someone's home till the penalty period is done.

Now if the attorney is smart, he will do a personal services contract starting now so that mom can pay Sissy to be back living with her & BIL. So no future penalty problems, but they pay taxes on the income. BIL won't be happy about this nor about mom living with them, I would imagine.

Now about your transfer penalty liability, it is the problem of whomever signed her into the NH first & foremost. My mom gave her car to worthless nephew almost at the edge of the 5 year lookback. I got a transfer penalty inquiry on it at month 5 of my mom's application. I got it, not worthless nephew. So it would be up to me as my mom's DPOA and person who signed her into the NH, to either pay the transfer penalty or do whatever to have it gone. I was able to document enough work & damage on the car to have the Blue book value decreased so that it's value was low enough to be under the 2K in assets, so it worked out. But at no time was worthless nephew contacted about the car or the transfer penalty. The state sent me a specific letter on the vehicle with all the details on the penalty on it. If the checks mom gave you get a transfer penalty, I bet the same happens to whomever signed her into the NH. So when they come to you for the $, that is when you ask for a full accounting of all funds paid to Sissy & Bro that Medicaid is reviewing with a penalty. Then if you want to pay it back, say you will do what you possibly can to pay for 1/3 of mom's care under the transfer penalty period when she is in the NH but all your payments must be made directly to the NH and you want a copy of any & all agreements or contracts Sissy /Bro have done with the NH. Mom gave you the $, you did not ask for it, you cannot be held responsible for any penalty now, but you are willing to do your share @ 1/3 of the costs as 1 of the 3 children. You never sign off on any responsibility either.

If you think Sissy is just a total snake, I would open a bank account just for doing anything related to mom. So there never is any question as to what the check was for. Like if you buy mom pj's 2 target, or pay the NH for care, the check comes from that account only. I would not get an attorney just yet. But you have to be definite with Sissy & Bro and require documentation before agreeing to anything.
This will not be pretty but I think you are well aware that is likely already.

When I was named executrix for my aunt, it came as a total surprise as we were not close. There was a worthless cousin who had handled most of her affairs over the years and she had paid him over time a significant sum of money, loaned $ for business ventures, etc. I think she found him amusing when they were younger but nothing ever panned out sucessfully and she was over it. She moved into a CCRC and died maybe 2 months later of an aneurism. Worthless was some kinda mad at not being named executor. The attorney called me in to go over her mess of an estate and worthless had sent the attorney a demand letter for all his caregiving $ervice$ as she had paid in in the past for this and he was due money for the recent year, that if it wasn't paid immediately he would file a claim in probate, plus a bunch of other "I demand from her house" crap. Attorney had also tallied up all the $ she had given him for the last decade and asked me what I thought. Now her will left most to charity and I saw no need to change from her wishes. So what the attorney suggested and we did was to send worthless a certified letter and enclosed a W-9. The letter said that in order for him to be paid from the estate, he would need to fill out the W-9 as the monies to be paid are for services and subject to income tax, also we would be filing retro on past years taxes and there would be w-2 issued for those years too. If he failed to provide the w-9, a W-2 still would be filed & reported to the IRS but a letter would be enclosed by the CPA firm that the recipient refused to provide his tax ID #. Not another peep from him to the attorney ever again (although lots of talk to others). I mention this because, if the amount of $ Sissy has taken from mom is significant, then Sissy & BIL could find themselves in a IRS quagmire. Now you could also have a problem, depending on how much money mom gifted you and if she did not pay taxes on it, if it was enough to require taxes be paid. So figure out how much money she gave you and if there could be a tax issue. It may not ever come up, but you don't want it to come as a surprise if it does. Good luck, Danna.

Thank you for the responses. We are in the state of Virginia. An elder attorney has been obtained. My oldest sister had my mother living in her home. My mother was contributing to their rent and other things each month. At first it was they wanted nothing for her being there, but as her dementia progressed, so did the degree of care she needed. Recently she fell and broke her hip and after a three day stay in the hospital she was placed in a nursing home/rehab to reacculmate her to her walker. At this point my sister wants her to remain in a nursing facility as our Mother refuses to do anything for herself. She pretty much spends every day in her lounge chair and demands to be waited on. My sisters husband now says she can't return to live with them unless all of her monthly income is given to them for her care. My mother depends on my sister like a toddler does their mother and refuses to allow anyone else to help her. My oldest brother who holds the POA says that the elder care attorney pretty much is saying that the money gifted to us will need to be returned to Moms estate. My sister and her husband are the ones who found this attorney and set things in motion to her admitted to a nursing home. My brother, the POA willingly admits he doesn't understand what the attorney is advising be done. I get the stipulations after the fact according to my sister and brother. If I have to return the monies to my Mothers estate I want to be sure that the same applies to them. Both of them have benefitted greatly monetarily while overseeing my mother and no one is able to review her estate to see to what extent. Bottom line, my question is do I have the right to demand a financial disclosure of my mothers finances from the attorney they have hired? The money to hire this attorney was taken from my mothers account. Word is that my sister wants the gifted money returned to my mothers account so that she is paid for the care she has given our Mother. I understand that everyone has to pay their on way in this society, and I will step up to the plate for my Mother to see she is provided for, however I want to make sure my other siblings are doing the same and returning the gifts my Mother gave them as well. Will I have to hire my own attorney to interact with the attorney they have acquired?

Awwgh - typo, it should read.......your siblings may have the same issue if they do NOT have in place a personal services contract......

Danna - you probably will have 3 different issues going on for her qualifying for Medicaid: a possible Medicaid Transfer Penalty for what she gifted you and then her income ceiling to qualify for Medicaid and then other funds that were gifted or used by your sister & brother that could be a problem for Medicaid.

First I'd find out exactly what mom's monthly income is right now. Then what your state has as it's income maximum for Medicaid. If she is over that amount, that is whole other issue to get it to work for Medicaid. Her VA aid & attendance will help but to what degree depends on your state's programs and how VA works with Medicaid.

All the states have to do some sort of look-back compliance in order to participate in Medicaid. Now that being said, each state does this differently. Some states are very document demanding while others really just look at the past few months. For my mom the review was for 3 years & 6 months of all her banking. But the state can do a lookback of 5 years on all financials and also can crosscheck the state records for real property ownership for 5 years. If they do this for your mom, the $ she gifted you will come up. If she gifted your siblings, or they paid themselves from her $, that too will be a transfer penalty issue.Personally, if you think there will be a transfer penalty issue, I'd get an elder law attorney to do the Medicaid application for your mom. It will cost but it will cost someway, somehow one way or another.

How the transfer penalty works is based on your states reinbursement rate for Medicaid room & board. My mom's state is about $ 145.00 a day (TX); which is low. Other state reinburse at much higher rates. Now if mom gifted you $ 20,000 or transfer something to you of $ 20,000 in value (house or car), then in TX the transfer penalty would be such that for 138 days mom would not be eligible for the state Medicaid program to pay for her stay at the NH. Mom would still be on the Medicaid program but ineligible due to penalty. The NH would fully expect whomever did her application or signed off to be financially responsible for her, to private pay for her care till the 20K in penalty is worked through. The account could be turned over for collection by the NH and once this happens mom is pretty well toast on getting into another facility. Most of the time, either family finds a way to private pay for her stay or they bring the parent home till the penalty period expires. Sometimes it can be waived. This all gets terribly sticky and really you need an attorney to work this out. A transfer penalty on real property like a home or a car is somewhat able to be reduced if you can provide documentation that the value is not what they say but if it just money, and it is clearly in her bank statement or cancelled checks to you, you can't claim it was actually less.

Your siblings make have the same issue if they do have in place a personal services contract with mom and have been paying taxes on the funds as income too. Medicaid is very expensive for the states to do and if the caseworker senses that money has been diverted, they can require very specific financials in a very short time-frame or mom will be declined and then someone will have to private pay for mom or move her into their home. Really I'd see an attorney.

My mother gets a substantial amount of money each month from SS and my Father's union pension fund. Also.. It's my understanding that the VA is also going to pay for some of her care. Moms monthly income just compiles because only her hygienic supplies come out of these funds. I know that my brother and sister have benefitted greatly money wise from her estate funds. Is there some way of demanding disclosure of how it's being spent?

There are several items on this site covering the look back period involved with Medicaid. In the USA, we are expected to pay our own bills and long term care if we have assets. In some circumstances, those without sufficient income or assets MAY qualify for Medicaid. This government program helps those too poor to pay for their own care. As part of the requirements, checks are done to assure that people aren't hiding assets or passing them along to family members rather than paying for their own care. To this extent, the search goes back 5 years. Any gifting during that time counts as assets the individual could have used towards their own care. It is unfortuante that the POA didn't warn you that you may need to give it back if your Mom needed care within five years. Of course, if there are other income/assets, that would pay your mom's bills for as long as it lasted. Otherwise, you may want to start putting money aside now for this potential expense.