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R ay and Cathy, both Baby Boomers, were struggling to work 40 hours per week and care for Ray's mom, Maxine, who was diagnosed with Alzheimer's disease. Initially, they were able to provide the part-time care that Maxine needed, but Maxine's condition worsened. The dementia quickly grew from short-term memory loss to difficulty in completing normal everyday tasks. Maxine needed help with basic daily activities, including showering, getting dressed, cooking, brushing her teeth, and using the restroom. Transportation was also an issue because her memory had deteriorated to the extent that she was unable to drive. Ray and Cathy could no longer care for Maxine while working full-time, so they looked into assisted living facilities and nursing homes. They had no idea what they were about to find.
The cost of assisted living and nursing homes was astronomical, ranging anywhere from $5,000 to $15,000 per month. Maxine did not have long-term care insurance or the financial ability to pay for long-term care, so Ray and Cathy turned to Medicaid. After visiting an elder-law attorney in town, they were stunned to learn that they would have to use Maxine's gross estate of $300,000 before she would qualify for Medicaid. It would take less than two years for the $300,000 estate to be used if they were to choose a medium-quality facility. Maxine wanted to leave some of her estate to her kids and grandchildren, but that dream was no longer a reality.
The attorney informed Ray and Cathy that if Maxine were to transfer any assets, Medicaid would deem that fraudulent activity. Medicaid has a five-year look back provision, which limits a person's ability to transfer assets (to anyone other than a spouse) in anticipation of qualifying for Medicaid (The Public Health and Welfare Act of 1944 [2017]). Transfers of property, other than transfers to a spouse, within the five-year period preceding the Medicaid application are treated as fraudulent transfers. The attorney explained that the public policy behind the five-year look back rule is to prevent a millionaire from distributing his or her assets on one day and qualifying for Medicaid the next.
If any fraudulent activity were detected, Maxine would have to pay the amount back before being eligible for Medicaid. Ray and Cathy's only...