Don’t you hate to be the bearer of bad news? We all do. Unfortunately, sometimes we just can’t avoid it.
Consider the following situation:
Last month I had an appointment with Mrs. Jones. Her husband was diagnosed with Alzheimer’s three years ago, and the disease has progressed to the point where he needs long term nursing home care. At the time of the diagnosis, she talked to some friends of the family, and they told her to add the kids’ names to her bank accounts and mutual funds as a way to protect those assets from Medi-Cal. Now that her husband needs to be cared for in a nursing home, she wonders whether she did the right thing. Unfortunately, I had to break the bad news to her.
In California, Medi-Cal says that adding someone else’s name to a bank account or mutual fund does not transfer the ownership on that account. For example, if Mr. and Mrs. Jones had a bank account with $160,000 and Mrs. Jones added her daughter’s name to the account, the State would say that her daughter’s name was added for convenience purposes. In other words, the entire account still belongs to Mr. and Mrs. Jones. So even though the child’s name has been added, the practical effect, from a Medi-Cal standpoint, is that there has been no gift, and the entire account still belongs to Mr. and Mrs. Jones.
This is true whether we are talking about bank accounts, certificates of deposit, savings bonds, mutual funds or any other liquid asset. The law says there is no gift until, and unless, the child actually takes the money out of the account. Therefore, using this same example, if Mr. and Mrs. Jones added their daughter’s name to the account three years ago, there has been no gift made. If their daughter later takes some money out of the account, and moves it into her own name, then the gift is made at the time the daughter takes the money out of the account.
This general rule is not true where real estate is concerned. That’s because if someone’s name is added to real estate, then a completed gift has been made at the time the deed is signed and recorded. For instance, let’s say that Mrs. Thompson is a widow and she owns a rental home valued at $480,000. If she adds her son’s name to the house as joint tenant and then has the deed recorded, at that time she has made a completed gift. In California, every $8,092 (for 2015) given away during the three years prior to a Medi-Cal application creates a one month period of ineligibility. Therefore, Mrs. Thompson’s gift to her son of $240,000 would cause her to be ineligible for Medi-Cal for 30 months. At the end of that time, however, the Medi-Cal ineligibility would cease and the son’s share of the house, by virtue of its being in the joint tenancy, would be protected.
Whether or not it makes sense to add someone’s name to real estate or financial assets depends upon the facts and circumstances of each particular case. The legal, financial, tax and care planning issues facing the prospective nursing home resident and family can be particularly complex. Be sure to seek the advice of a competent elder law attorney before proceeding.
ABOUT THE Litherland, Kennedy & Associates, APC, Attorneys at Law
Roy W. Litherland is an attorney whose practice emphasizes elder law and estate planning. Roy has practiced law in the greater Bay Area for over 35 years and is certified as a legal specialist in Estate Planning, Trust and Probate Law by the California State Bar Board of Legal Specialization. In addition to his extensive legal background, Roy was also previously licensed as a Certified Public Accountant. Although Roy has an extensive background in accounting, he retired his license to practice as a CPA to devote his time and energy entirely to the practice of law, specializing in estate planning, trusts, Medi-Cal planning, and probate. Roy is a noted speaker on living trusts, Medi-Cal Planning, and estate planning. He is a member and designated Fellow of the American Academy of Estate Planning Attorneys, an organization that fosters excellence in estate planning.
The Litherland, Kennedy & Associates, APC, Attorneys at Law is a member of the National Academy of Elder Law Attorneys and the California Advocates for Nursing Home Reform.