Elder Advisers Put In Jeopardy Under New Law

A new law makes it a crime for the elderly to transfer assets to others knowingly for less than market value, then apply for long-term nursing care under Medicaid.

Uncle Sam wants to ensure that people too old and sick to care for themselves anymore are genuinely destitute before they get any help. So Congress passed a law, effective Jan. 1, that criminalizes the shifting of assets - if a state Medicaid administrator subsequently imposes a period of ineligibility on the elderly applicant.

Seniors organizations, financial planners, and elder law attorneys raised a ruckus, citing lack of debate and public awareness about this sneak attack on older Americans and the frail. They lobbied for a revision of language in the new law that threatened to throw Granny in jail, and got it.

But, ironically, in decriminalizing asset transfers for Granny, lawmakers saw fit to target estate planners for criminal action, reports Spokane elder law attorney David Hellenthal. In a letter to Washington’s congressional delegation, Hellenthal says if the government decides Granny cheated to get long-term care, she won’t go to jail, but her lawyer might.

That’s the effect of a new legal wrinkle quietly passed by both the Senate and House as part of the budget reconciliation process now in the hands of a conference committee, says attorney Hellenthal. In his letter to lawmakers, Hellenthal backgrounds the problem with the new legislation, thusly:

“On Tuesday of last week, a single 83-year-old woman came into my office with assets of $650,000. In one hour, I explained what federal estate and gift-tax law allows her to do - legally - to avoid paying estate taxes of about $18,500.

“Later that same day,” he went on, “I had a single woman of 80 come into my office who owned a home worth about $80,000 and a small savings account of about $3,000. This woman was concerned about losing her house if she ever needed to go into a nursing home. This second woman is the norm in my practice.”

A daughter has lived with her the past year and a half. If a child lives with an aging parent for at least two years, a home can be transferred and there is no period of ineligibility for Medicaid. Provided they can prove that the child’s care helped keep the parent out of a nursing home in the meantime.

“Six months from now,” says Hellenthal, “I will advise the mother that she may be able - legally - to transfer her home to her daughter. But we will not know for sure until and unless she needs to submit a Medicaid application.”

And if Medicaid rules that the daughter didn’t help keep the mother out of a nursing home, Hellenthal could go to jail.

That doesn’t make sense to him, considering no such potential penalty exists when counseling very wealthy people how legally to avoid paying federal estate and gift taxes.

“This legislation amounts almost to class warfare,” says the attorney and estate planner, who works mostly with poor and low-income people.

“Why should I be subject to a criminal offense because I counsel people who don’t have a lot of income how to protect legally what few assets they have against the possibility that they may someday need long-term care? As soon as the law starts putting tax advisers in jail for telling rich people how to minimize their taxes legally, then I’ll spend some time locked up with them.

“Meantime,” he promises, “I won’t chicken out on my professional obligation to give poor and middle-income people the best counsel I can, the same as the rich.

“Most of my brethren aren’t very brave,” says Hellenthal. “They’re already backing away from what could be a problem for them, and playing it safe.”

That means not giving elders all the information they need to take full advantage of their options. This, Hellenthal charges, unfairly penalizes older Americans and rewards the long-term-care insurance industry.

He advocates abandoning legislation in the works, and replacing it with criminal penalties for counseling that leads to the withholding of information relevant to disposition of assets with the intention to defraud. That, he says, ought to be a crime.

, DataTimes MEMO: Associate Editor Frank Bartel writes on retirement issues each Sunday. He can be reached with ideas for future columns at 459-5467 or fax 459-5482.

The following fields overflowed: CREDIT = Frank Bartel The Spokesman-Review