The Perils of Doing Asset Protection Planning on Your Own

Dealing with asset protection planning along with long term care planning, is a daunting process. Very complicated state and federal Medicaid laws and regulations present many pitfalls for those who try to engage in that process on their own without working with a competent elder law attorney.  A 2015 Medicaid case from New Jersey is an example of a family that tried to go through the process on their own and now have some pretty nasty consequences.  The case is C.W. v. New Jersey Division of Medical Assistance and Health Services, NO. A-02352-13T2 (NJ Sup. Ct. App. Aug. 31, 2015).

“C.W.” was a 90 year old New Jersey resident who moved into a skilled nursing facility in 2007.  The following year, 2008, she transferred her home and $540,000 in assets to her children, which together were worth approximately $864,000.  In 2009, C.W. applied for Medicaid benefits.  Not surprisingly, the state Medicaid authorities imposed a penalty of 10 years and 4 months before they were willing to begin paying her nursing home costs.  At that point, her children tried to fix the problem.  They returned $235,000 to C.W. who then paid that amount to her nursing home.  Then, her children returned the home to her, which was then sold.  Strangely, the sale proceeds were then deposited into an account in the children’s names, not in C.W.’s name, with the children executing a written agreement to transfer the amount of C.W.’s care cost to her each month.  C.W. then reapplied for Medicaid and was again denied as before.

Let’s consider each of the many mistakes made by C.W.’s family and also consider how the results may have been different. Under the Medicaid rules, when a Medicaid penalty period is assessed, it takes the form of a time period before which benefits will be paid. The simple mathematical formula takes the total gifted amount and divides it by the average monthly cost of private-paid skilled nursing home in that state.  Currently in Washington, that divisor amount is now $297.  Dividing $864,000 by $297 would result in a penalty period of roughly 2,909 days, or 97 months.

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