Medicaid is saying they need a letter stating it was not gifted. Actually it started out as being a loan I’m not sure what to write in this letter. Also. What would the Penalty be if they don’t accept my letter ?
I *think* what is being represented by OP is the loan was discharged without any or with limited repayment. That would then turn the loan into a gifting situation.
If this is indeed the case, there should be some documentation that the money was a loan at time of disbursement. If there is no documentation or history of repayment, there is little chance it would be a considered a loan from the Medicaid perspective. The old adage follow the money has a number one rule -- clear documentation available for government review. Verbal agreements almost ALWAYS need documentation to back them up.
Include with the letter any texts, emails, or other written proof that it wasn't a gift and then be prepared to immediately pay back the loan in full.
So was it a loan that you started to repay but then repayment was changed to your doing services provided for her instead? Is that it??? Debt changed to being repaid “in lieu of” rather than monetarily? So debt was not cancelled? That it is not cancelled is important as cancelled debt has 1099 requirements. So $ was actually not “gifting”? is it more of a mess due to her going into a NH?
My guess is that the letter is an attempt to find out and clarify if it was an actual loan (even if it was done somewhat casually and poorly thought out) and what the disposition the loan became over time. If it’s this type of inquiry, Medicaid needs from you clarification as to what it started out as and the amount, how you paid for it (whether or not the lady kept track is not your problem as long as you have yourself organized with documentation on this), then when it changed to your providing services to her in lieu of payment of the loan and what the balance of the loan is now that is owed. Medicaid / the caseworker needs something to justify that the $ could be considered a loan otherwise it has to be viewed as gifting with the lady having a transfer penalty placed on her LTC Medicaid application.
People do peer-to- peer loans. And they do them without doing Promissory Notes and getting witnesses and notary work done. This is exact the kind of ill conceived loan my MiL would have done. A hot mess. Not a good idea and especially bad idea when Medicaid application filed.
How a transfer penalty works roughly is this: Each State has a daily room&board reimbursement rate it pays a NH for custodial care under its LTC Medicaid program. Let’s say your State pays $234.56 reimbursement rate. If a caseworker finds the applicant did $10,000 in gifting that would be 43 days of transfer penalty placed in which Medicaid will not pay. 10K @ 234.56 = 42.64. The issue will be is that they are already living in the NH and the NH will be wanting someone to assure them via a financial responsibility contract or agreement to privately pay for those 43 days. The NH can do whatever in their authority to try to get the person moved out of the NH or get the bill paid.
Most transfer penalties are big amounts as it’s the elders homes that are transferred to one of their kids names. So hundreds of thousands of $ tends to be most penalties. Those are easily found in courthouse searches.
You are not family, correct? You are not her daughter or daughter in law or niece or relative, correct? So loan agreement at the time was between 2 unrelated individuals?
You say you were GIFTING. Then you say it was a loan. If this was a loan you need to get a loan to pay this loan back to this person or they are going to be penalized for this. I was warned that if I were to think I could in any way conceivably need aid then, if making a loan, even for college or other to grandson, needed to get this VERY OFFICIAL with documents as to loan, what for, terms of, payment of, and proof of payments being made. The government won't have any understanding of "Oh, yeah, I loaned my daughter 30,000 for her new car" unless this is documented meticulously.
This is a problem. I would consult an attorney how to go about fixing it. It serves as a warning to other seniors. While that surely doesn't help you or the elder who was trying to help YOU, it is what the Forum is all about. We simply cannot gift money to our family and then ask for the government to fund our care.
I hope you will update us as to how you remedied this. Sorry it happened.
Hello! I have an elder law attorney- actually 2 - and the way around “gifting” is this: you open a disability checking account in the disabled person’s name with yourself as POA. In my case, it is my husband’s very rich MIL. She can gift him ONLY through this account as he is her child. No age limit. He’s 75 with severe dementia and she’s 100 and perfectly fine. Go figure. She can dump thousands into that account only- no limit. And it’s Medicaid exempt. It’s used for any expenses we have.
If they arent' satisfied that it's a loan and that money isn't returned then most likely it will impact that person's ability to qualify (delayed or denied).
The letter should probably state the amount, the date, the terms of the loan (interest, repayment) and then has both of your signatures. Then you have to treat like it's a loan and if Medicaid needs it paid back in full tomorrow, you'll need to be able to do that.
On and off over the decades I have borrowed money from my Mom and Aunt for my business (why not pay them for a line of credit rather than a bank? They gave me a better borrowing rate and they earned more than average on interest). Each time I wrote up a document stating it was a loan, including the rate and terms of the loan, and then we both signed it. I keep the copy and they have the originals. neither of them are anywhere near needing Medicaid right now.
If it was a loan then pay it back. If it wasn't a loan then medicaid will consider it a gift and may want the money back before this persons medicaid is approved.
If this is indeed the case, there should be some documentation that the money was a loan at time of disbursement. If there is no documentation or history of repayment, there is little chance it would be a considered a loan from the Medicaid perspective. The old adage follow the money has a number one rule -- clear documentation available for government review. Verbal agreements almost ALWAYS need documentation to back them up.
Include with the letter any texts, emails, or other written proof that it wasn't a gift and then be prepared to immediately pay back the loan in full.
So was it a loan that you started to repay but then repayment was changed to your doing services provided for her instead? Is that it???
Debt changed to being repaid “in lieu of” rather than monetarily?
So debt was not cancelled? That it is not cancelled is important as cancelled debt has 1099 requirements.
So $ was actually not “gifting”?
is it more of a mess due to her going into a NH?
My guess is that the letter is an attempt to find out and clarify if it was an actual loan (even if it was done somewhat casually and poorly thought out) and what the disposition the loan became over time.
If it’s this type of inquiry, Medicaid needs from you clarification as to what it started out as and the amount, how you paid for it (whether or not the lady kept track is not your problem as long as you have yourself organized with documentation on this), then when it changed to your providing services to her in lieu of payment of the loan and what the balance of the loan is now that is owed. Medicaid / the caseworker needs something to justify that the $ could be considered a loan otherwise it has to be viewed as gifting with the lady having a transfer penalty placed on her LTC Medicaid application.
People do peer-to- peer loans. And they do them without doing Promissory Notes and getting witnesses and notary work done. This is exact the kind of ill conceived loan my MiL would have done. A hot mess. Not a good idea and especially bad idea when Medicaid application filed.
How a transfer penalty works roughly is this:
Each State has a daily room&board reimbursement rate it pays a NH for custodial care under its LTC Medicaid program. Let’s say your State pays $234.56 reimbursement rate. If a caseworker finds the applicant did $10,000 in gifting that would be 43 days of transfer penalty placed in which Medicaid will not pay. 10K @ 234.56 = 42.64. The issue will be is that they are already living in the NH and the NH will be wanting someone to assure them via a financial responsibility contract or agreement to privately pay for those 43 days. The NH can do whatever in their authority to try to get the person moved out of the NH or get the bill paid.
Most transfer penalties are big amounts as it’s the elders homes that are transferred to one of their kids names. So hundreds of thousands of $ tends to be most penalties. Those are easily found in courthouse searches.
You are not family, correct? You are not her daughter or daughter in law or niece or relative, correct?
So loan agreement at the time was between 2 unrelated individuals?
Then you say it was a loan.
If this was a loan you need to get a loan to pay this loan back to this person or they are going to be penalized for this.
I was warned that if I were to think I could in any way conceivably need aid then, if making a loan, even for college or other to grandson, needed to get this VERY OFFICIAL with documents as to loan, what for, terms of, payment of, and proof of payments being made. The government won't have any understanding of "Oh, yeah, I loaned my daughter 30,000 for her new car" unless this is documented meticulously.
This is a problem. I would consult an attorney how to go about fixing it.
It serves as a warning to other seniors. While that surely doesn't help you or the elder who was trying to help YOU, it is what the Forum is all about. We simply cannot gift money to our family and then ask for the government to fund our care.
I hope you will update us as to how you remedied this. Sorry it happened.
The letter should probably state the amount, the date, the terms of the loan (interest, repayment) and then has both of your signatures. Then you have to treat like it's a loan and if Medicaid needs it paid back in full tomorrow, you'll need to be able to do that.
On and off over the decades I have borrowed money from my Mom and Aunt for my business (why not pay them for a line of credit rather than a bank? They gave me a better borrowing rate and they earned more than average on interest). Each time I wrote up a document stating it was a loan, including the rate and terms of the loan, and then we both signed it. I keep the copy and they have the originals. neither of them are anywhere near needing Medicaid right now.
If it is a loan you must have a signed promissory note, interest bearing and Medicaid will collect on it when the OP dies if you have not repaid it.
You do not want OP to be denied and have to start the entire process again.
OP's money must be spent down for his or her use.