All too often, we meet with clients who, with the best of intentions, have tried to effectuate Medicaid planning themselves or with an at- torney whose practice concentrates in other areas of the law and not elder law. Invariably, we are asked to fix the mistakes that were made. Regrettably, there are some mistakes that cannot be easily corrected.
We recently met with a family: mother and her adult children. Mother always expected all of her children to maintain a close and harmonious relationship. She had not anticipated that her children might grow apart. In 2010, she had decided totransfer her home to her children and retain a life estate in order to protect her largest single asset from the devastating costs of long-term care. She understood that transferring the house would make her ineligible for Medicaid nursing home care for up to five (5) years.
But, at the time, she was healthy and hoped to remain so for many years to come. She did not understand that she would continue to be obligated to pay all of the expenses of the house even if she could no longer reside there, including property taxes, insurance, maintenance and repairs. She also did not know that she would be entitled to a share of the proceeds of any future sale.
Mom should have engaged an experienced elder law attorney to assist her. Had she done so, that attorney would have identified potential pitfalls of transferring any part of her home to her children and could have suggested alternatives to protect the house without the risks. What could go wrong? Well, firstly, not all children cooperate with their parent’s expectations. Assuming that her children had the very best of intentions, many issues can and do arise: children sometimes predecease their parents; children some- times have their own financial problems which can expose their parents’ assets to their creditors; children can divorce. Any of these unfortunate life experiences could significantly de-rail Mom’splanning. Her “family” attorney, the person who helped her purchase her home, did not have the experience to identify these issues. He did not know how to accomplish her goals and minimize the potential problems. Instead, when she asked him to prepare a deed transferring the house to her children subject to her life estate, he did so.
Fast forward to 2020, when one of her sons moved in with her after his divorce. He was a heavy smoker but respected Mom’s wishes that he not smoke in the house. He did not contribute to the expense of running or maintaining the house. Early in 2021, Mom’s condition deteriorated and she moved in with one of her daughters who was able to provide assistance to Mom with bathing, dressing, toileting and other activities. Her son had made it plain that he could not provide sufficient care for her. When a Medicaid application needed to be submitted, again, rather than engage an elder law attorney, the family used a service. While they secured Medicaid benefits for Mom, the service was not equipped to counsel the family as to how to go about maintaining the house, paying the expenses or protecting Mom’s share of the proceeds of any future sale.
During all of 2021, the divorced son lived in the house alone. He no longer concerned himself with the effects that his chain-smoking would have on Mom or on her house. He no longer left the house to smoke. Instead, he placed ashtrays in the kitchen, his bedroom, the bathroom and the living room next to his favorite chair in front of the television (where he spent most of his days because he did not work). Of course, he still refused to contribute to the cost of maintain- ing the house, and a brother and sister paid for all of the expenses, including utilities that he refused to pay. The siblings kept meticulous records and,by year’s end, they had spent over $30,000.00. Moreover, when a contractor had been brought in to make repairs, he advised the siblings that the extreme smoke conditions had infiltrated the walls and were causing damage to the house that will cost thousands of dollars to correct. While all of the siblings, with the exception of the divorced brother, recognized that the house would have to be sold, the divorced son would not agree. Because he was a part owner ofthe house, it could not be sold without his cooperation.
The family finally sought our advice and counsel and this is what they learned: there is a way to remove the divorced son from the house and compel its sale but it involves suing their brother in Court. This could take years and the legal fees could be significant. In the interim, they must maintain the house and insure it in order that it holds its value for sale. When they finally have the ability to sell the house, they must eradicate the smoke which will continue to worsen the longer it takes to remove their brother. Mom’s share of the proceeds of the sale will disqualify her from receiving continuing Medicaid benefits. Ideally, some of her share of the proceeds should reimburse those of her children who have been carrying the house. Unfortunately, Medicaid considers payments children make on behalf of their parents to have been made “out of love and affection.” Repayment of those expenses will be considered by Medicaid to be a gift to those children and that will cause Mom to become ineligible again for nursing home benefits should her condition deteriorate. All of the problems this family is facing could have been avoided had we been involved from the outset.
This is a cautionary tale. Seek advice from those who have experience. Beware of attorneys who think they can do everything. They do not know what they don’t know and, more often than not, they do not even anticipate the problems that are likely to arise. Please do not make the same mistake. Our practice concentrates in elder law, Medicaid, estate and special needs planning, estate and trust administration and litigation in those areas. Please help us to help you by speaking with us when you need guidance, not after the mistakes have been made.