Court Prevents Son From Doing Medicaid Planning on His Mother's Behalf

[This article was originally published on December 30, 2002.  The links were updated on June 20, 2018.]

A New Jersey appeals court blocks a son who is the guardian of his mother from selling his mother''s house and transferring a portion of the proceeds to make her eligible for Medicaid coverage of her nursing home care. The decision points up the need to have a good durable power of attorney that permits your agent to make gifts as part of Medicaid planning.

Mildred Keri, who lives alone and suffers from dementia, became entirely dependent on the care provided by her two sons. Feeling no longer able to care for their mother themselves, the sons wanted Mrs. Keri to move to a nursing home and have Medicaid pay for her care. However, Mrs. Keri's main asset, her home, was worth about $170,000. The son's plan was to sell the mother's home and gift $92,000 of the proceeds to themselves. The remainder of the money would be used to pay for Mrs. Keri's nursing home care during the period of Medicaid ineligibility that the gift would cause. 

In 1996, Mrs. Keri had executed a power of attorney naming her son Richard as her agent and authorizing him to apply for Medicaid on her behalf, but the power did not authorize him to make gifts on her behalf. Therefore, to do the Medicaid planning he wanted to do, Richard was forced to ask a court to appoint him his mother's guardian and seek the court's permission to sell the house, make the gifts, and to place his mother in a nursing home. The court allowed Richard to become his mother's guardian and ordered the sale of Mrs. Keri's home and her placement in a nursing home, but it refused to authorize the plan to distribute the proceeds in a way that would allow her to qualify for Medicaid. Richard appealed.

The Superior Court of New Jersey, Appellate Division, agrees that Richard and his brother should not be able to do the Medicaid planning they want to do. While the court sees no ethical problem with individuals engaging in estate planning to reduce or eliminate their taxes, the court is troubled by the prospect of individuals intentionally impoverishing themselves to qualify for Medicaid. The court notes that New Jersey courts have permitted guardians to engage in Medicaid planning for a ward only when the beneficiary of that planning is the ward's spouse. It's a different story when the beneficiaries are the ward's children and those children are able to support themselves, the court rules. The appeals court also reverses the order requiring the sale of Mrs. Keri's home and her placement in a nursing home, holding that her interests had not been adequately represented before the lower court.

All this could have been avoided had Mrs. Keri given her son a durable power of attorney that allowed him to make gifts to himself and others and to do Medicaid planning. With these powers, he would not have had to seek a guardianship or the court's permission to do Medicaid planning on his mother's behalf.

In the Matter of Keri (N.J. Super. Ct., App. Div., No. A-5949-01T5, Dec. 19, 2002). For the full text of the decision, click here.

Richard Keri was represented by member Donald D. Vanarelli.