For many individuals who have capacity or who have executed a durable power of attorney with sufficient authorities granted to their agents, the ability to engage in a well-thought-out Medicaid plan is a given.

Beginning with a Court Proceeding

However, in situations where an individual has lost capacity and does not have a sufficient durable power of attorney in place, then the process of becoming Medicaid eligible and obtaining Medicaid coverage for his or her long-term care needs begins with a court proceeding.

If someone you love needs long-term care but no longer has the capacity to engage in Medicaid planning and does not have a sufficient durable power of attorney, then there is both a need for a guardianship and Medicaid planning.

There may also be a situation where a guardianship has already been established and a guardian of the personal needs and property management has been appointed, but the need for long-term care planning is now relevant, then the guardian may need to petition the court to expand his or her powers to engage in Medicaid planning and apply for Medicaid.

What to Do First

Someone who is either petitioning the court for a guardianship or an existing guardian who is now considering helping his or her ward become Medicaid eligible should seek the guidance of an Elder Law attorney who has experience in both Medicaid planning and guardianship.

Medicaid Planning

Medicaid planning can include transferring assets to appropriate persons so that the incapacitated person’s assets are not unnecessarily expended on long-term care. Examples of Medicaid planning authorized by the Court include spousal transfers of all assets; transfers to a child with disabilities; exempt transfers of residences to a live-in caregiver-child; non-exempt transfers to family; and signing renunciations and disclaimers of inheritances that can affect an incapacitated person’s ongoing Medicaid eligibility.

As a fiduciary, the guardian must act in the best interest of the incapacitated person. The guardian is also held to a standard of care and has a duty of loyalty that prohibits self-dealing and requires prudent judgment in the management of the guardianship estate. The very notion of a Medicaid plan that intentionally divests a significant portion of the incapacitated person’s assets may appear to be a violation of these fiduciary responsibilities. This is especially true when the guardian seeks to make gifts of the incapacitated person’s assets to a third party or to the guardian himself.

How to Obtain the Court’s Approval

To obtain the court’s approval of the Medicaid plan, the guardian (or the person who is petitioning for guardianship) must show, among other things, that the proposed gifts will not adversely affect the living conditions of the incapacitated person and would be consistent with past preferences of the incapacitated person. If there is no evidence of past preferences, then the guardian must show that a competent reasonable individual in the position of the incapacitated person would be likely to perform similar acts under the circumstances.

The guardian and/or petitioner should be aware that courts often approach Medicaid planning involving non-exempt transfers with caution. Similarly suspect may be cases in which the donees are charities or individuals who do not qualify as natural objects of the bounty. In the case of a Medicaid plan involving charitable gifting, courts have approved such a plan when the guardian has been able to successfully show evidence of a pattern of gifting or the incapacitated person consented to the charitable gifting.

Even in situations where the Medicaid plan calls for a transfer of assets that are exempt from transfer penalties, the guardian may need to show that the transfer does not contradict the incapacitated person’s previous testamentary plan, intestate inheritance, or an established trust arrangement.

Transfer of Assets Example

An example of such transfer could be a case where the guardian is seeking to transfer the incapacitated person’s home to only one sibling who has lived with the incapacitated person for many years and has an equity interest in the home. If the incapacitated person bequeaths his or her interest in the home to two siblings in his Last Will and Testament, or absent a testamentary instrument, the laws of intestacy dictate that both siblings inherit equally, then the Medicaid plan could disrupt the estate plan or interfere with an intestate inheritance.

In a case such as this, the guardian and/or petitioner should argue that utilizing the exemption is the only way to preserve the entire value of the house if the incapacitated person will need to apply for Medicaid. Furthermore, the guardian and/or petitioner should explain to the court that there will be transfer penalties if the title is given to the other sibling.

The main idea is that the Medicaid eligibility plan must be well-thought-out, in the best interest of the incapacitated person, and be consistent with the known wishes or testamentary scheme of the incapacitated person.

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