Joint Bank Accounts could be Exposed to Long Term Care Costs

by Steven H. Stern, Esq. Many seniors own assets jointly with their children. Some retitle their assets so that in the event of death, the asset will pass quickly to the survivor. Others place their ...

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by Steven H. Stern, Esq.

Many seniors own assets jointly with their children. Some retitle their assets so that in the event of death, the asset will pass quickly to the survivor. Others place their children on bank accounts for convenience purposes, so that a child could purchase items for a parent, or even pay the bills if necessary. Although these may be good reasons, seniors must be aware that if the main purpose for making property joint is to protect assets from the high costs of long term care, this strategy will probably fail.

Seniors and their families are often under the mistaken impression that if they add children to the title of accounts (bank and/or brokerage) that this will render ownership of the assets to be at least 50/50. If the parent needs care in the future, the plan is to consider one-half of the asset as the child's. So many families without proper guidance make this idea the cornerstone of their plan. However, it is important to know that this arrangement will not protect any portion of the assets. Medicaid will view the situation a bit differently.

In the case of jointly held assets, the asset is considered by Medicaid to be transferred by the nursing home resident when any action is taken, either by the individual, the spouse, or by any other person, that reduces or eliminates the individual's ownership or control of the asset. Merely adding a name to the account, in general, does not deprive the original owner of the right to withdraw or otherwise control the entire asset. Thus, until assets are actually withdrawn from the account, the asset has not been transferred. In addition, applicable regulations provide that all of the funds in the account are presumed to be the property of the Medicaid applicant. 100% of the account will be treated as belonging to the parent who needs the care. However, this principle is rebuttable.

Upon applying for Medicaid assistance, the Medicaid Examiner must provide the opportunity to the applicant to rebut the presumption of 100% ownership. The intent of the parties and the facts and circumstances of each individual situation must be considered. If the child has contributed a portion of the account, or if the child has paid income taxes on interest, these facts could be useful in sustaining 50/50 treatment. However, in the majority of cases, the child will not be able to prove an ownership interest to rebut the presumption.

Seniors need to take appropriate steps to protect their assets in the event of long-term care in the future. But simply placing bank accounts into joint ownership with children is not the answer. It will not be effective for Medicaid purposes, and opens up other potential problems, such as family squabbles and loss of control. If the idea is protect the assets and retain some type of control during lifetime, perhaps an irrevocable trust would be the better option. With proper planning, it is possible to protect assets and accomplish other important goals of maintaining independence and control as well.