By: Sanford R. Altman, Esq., retired

Jacobowitz & Gubits, LLP


My father is in a nursing home and, in our review of his finances to apply for Medicaid, we discovered that my brother had stolen a great deal of money from him. Aside from all the horrible family issues, will this, in anyway, affect my father’s Medicaid application?


First, let me say that I am sorry that you have to go through a very difficult time. However, you should be applauded for the work you are doing on behalf of your father and your foresight in exploring the possible impact that your brother’s misdeeds could have on your father.

It is true that the theft of funds from your father can negatively affect his Medicaid eligibility but there are steps that can be taken. Let’s first briefly look at the Medicaid process. When you submit the very lengthy Medicaid application, you must also bring a huge number of documents to support that application. The most burdensome is the five years worth of financial statements – from banks, brokerage companies, IRA’s, etc. What are they looking for when they examine these statements? They are looking for “uncompensated transfers”, which the rest of us call “gifts”. They don’t want someone who is very wealthy giving all of his or her money away to the children and become eligible for Medicaid the next day, which makes sense. In order to prevent this, the rule is that if you make a gift to anyone regardless whether it’s your children, a charity or even your religious organization, they will make you wait for nursing home Medicaid for as many months as you could have paid for with that gift. This is called the penalty period. An example would be if you gave away $150,000.00 and the average nursing home in your area costs $15,000.00 then your penalty period would be ten (10) months – the number of months you could have paid for.

What does this mean for our reader with the evil brother? To a Medicaid caseworker, in reviewing the financial statements, when he or she sees those statements showing the funds that were stolen, it will simply look like any other transfer. In short, it will be deemed to be a gift and a penalty period will be assessed. If it’s $150,000.00, the penalty period during which the victim will have to wait to get Medicaid will be ten (10) months. You will have to pay, somehow, for those ten months in the nursing home. In other words, not only will he have lost $150,000.00 to the thief but will also have to pay an additional $150,000.00 to the nursing home and just like that, the painful loss is doubled.

Essentially, once Medicaid views a transfer as a gift, even though you may know that it was actually stolen, it becomes your burden to prove to them that it was not given freely. This is very different from, for example, a large expenditure on the applicant’s house such as new roof for $30,000.00. In that case, you would have an invoice showing that it was not a gift. Since thieves rarely leave invoices, your first step is to forget that this is a relative and call the police. This is often difficult for family. The most frequent reaction is, “I don’t want him to go to jail, I just want my money back.” If you could have gotten it back, you would not be facing this problem in the first place. In addition, the law is not settled as to whether or not an arrest is sufficient to prove to Medicaid that the transfer was not a gift. An arrest is merely an accusation which must be proved for it to be an actual conviction. Could Medicaid hold out for a conviction? While I have heard horror stories from other areas where even a conviction led to more questions, my dealings with our local Nursing Home Medicaid units lead me to believe they generally use common sense and, even an arrest may be sufficient to show the transfer was not a gift.

When calling in police is not an option that is acceptable to the family, a second possibility is reporting the matter to the County’s Adult Protective Services (APS). Clearly, stealing funds from a senior falls into the category of financial elder abuse. A positive finding in an APS investigation may well suffice for Medicaid purposes. It should be pointed out, however, that if they determine that a crime has been committed, APS may forward it on to law enforcement, but, at least it is not as direct and is often more acceptable to the family than your going directly to the police.

In the case where the Medicaid applicant suffers from dementia, obtaining an Affidavit from the treating physician stating that the applicant did not have the mental capacity to intend to make a gift, may be sufficient. Under the law, in order for something to be considered a gift, there must be a showing of “donative intent.” Therefore, if an applicant cannot have that intent, it cannot be a gift. Whether or not a doctor is willing to sign such an Affidavit and whether or not Medicaid will accept this without your having to go through a hearing, is an open question but it is certainly a worthwhile endeavor on its own or in combination with the above mentioned alternatives.

As you can see, proving to Medicaid that funds that were actually stolen should not simply be considered a gift can be a difficult, though by no means impossible, task fraught with legal complexities and, if you find yourself in this situation, you are well advised to seek the help of an experienced elder law attorney.