dberrysrus Asked April 2018
What do we do with outstanding loans upon applying for Medicaid?
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My mother in law owes two loans; one for a car she took a loan for her granddaughter, and one for a repo fee where she consigned for a loan and the person defaulted. When applying for Medicaid what needs to be done with those outstanding loans? The car and loan is all in her name, though the granddaughter pays the payment. She cannot get a loan for herself.
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Debts get defaulted on. Which has its own fallout issues down the line...
BUT what I’d more concerned about - like flying red flags in a storm concerned- is IF the loan she did that defaulted/repo’d AND the car loan she took out in her name for granddaughter could both be considered “gifting” by Medicaid. AND then what happens when the car is paid off...... because if the car is in mom’s name, then when it’s paid off & yeah I know granddaughter is paying note but if title in grans name then it’s legally according to the DMV grannies asset. She can’t just simply sign over title as on the face of it it totally looks like gifting.
Mom needs an elder law atty to review the 2 debts to see how to possibly get through this without it morphing into gifting AND before she turn in the Medicaid application.
Hopefully she had a notarized legal document on the defaulted one with some attempt to get repaid.
Car - if in grannies name - is grans asset for Medicaid. No matter if it’s exempt asset or whomever pays the note. If she transfers the title to granddaughter once loan is paid off, then it looks like “gifting” by Medicaid. Can you explain the “gifting”?, probably you can BUT the sticky is that what will likely happen is that once the matchup happens either though state database from tax assessor or DMV, or it’s reported as an asset in her annual Medicaid renewal, then Medicaid starts a transfer penalty inquiry and her eligibility could be suspended till inquiry resolved. Grannie, you as her dpoa and the NH all get a letter that inquiry happening. NH will likely want you to private pay for her care with contract signed by you in order for her to stay. Are you willing to deal with this and pay whatever fallout - possibly months - if there’s a glitch??
If she dies, car becomes either an asset of her estate (with whatever Kelly Blue book value as of DOD unless there’s paperwork - appraisal, accident report- to have it lower), OR becomes a debt of her estate if not paid off before she dies & they will repo the car unless you can pay off balance quickly after her death.
If it’s an asset of her estate, then MERP / Estate Recovery is required to attempt a recovery of any assets of her estate. If your state has an outside contractor for MERP, they are very very proactive as debt collectors. My point is dealing with car will be sticky no matter what.
How’s the insurance set up? In whose name and with granddaughter as a driver? how is insurance being paid? I’d be very straight with the insurance as they may want in writing where car is being garaged and not pay a claim if granddaughter is not on policy as a driver.
Also please try to find out IF your state Medicaid program has a ceiling on car value AND if so if this new/newer car is under the limit. If it’s over max value for car, she’ll be ineligible till it’s sold. Medicaid does a max value on homes too. & they both vary by state as each state administers its Medicaid uniquely.
So there’s a house being sold as well, right? If so only after she does a spend down of House sale $ can she apply for Medicaid. To me, your getting cart before horse on Medicaid. Could be many many months before Medicaid application is done....... I have a suggestion for you, since there’s a spend down happening anyways, try to get rid of the car as well during this period of time. There’s going to be a glitch somewhere. If granddaughter needs a car, she gets an older used car she can afford or you co-sign.