Our office is not only involved in estate planning but also in elder planning. As estate planners, we help our clients avoid probate and protect their assets. As elder planners, we help our clients provide for family members with special needs and assist them in pursuing benefits through the Medicaid program, which is part of the Social Security system. A Tennessee lady of mature years could have used our help in navigating these treacherous waters. Here is her story. (The names of the parties have been changed, and the story has been shortened for publication.)
THE INHERITANCE
Elizabeth, an octogenarian, owned her own home and received Medicaid benefits that provided in-home healthcare. On what should have been a blissful Valentine’s Day, Elizabeth received two checks representing her inheritance upon the death of her mother. The checks totaled almost $58,000.
THE PLAN
Elizabeth knew that if she were discovered to be holding more than a small amount of cash in a bank account, her Medicaid benefits could be jeopardized. Rather than consult an elder law attorney about how to handle her windfall, Elizabeth decided to adopt her own homemade Medicaid strategy. She advised her daughter of her newfound wealth. She asked her to provide the information necessary for Elizabeth to deposit the money into her daughter’s boyfriend’s bank account. It seems that Elizabeth did not trust her daughter, Lee, in financial matters, nor did she trust her son, Dick. She did, though, trust her daughter’s boyfriend, Scotty, to hold her money.
Lee helped Elizabeth deposit the checks into Scotty’s bank account. Elizabeth planned to hold the money there for a short time until she could sell her existing home and then use the sale proceeds, along with the inherited funds, to buy a new home closer to Lee.
THE WITHDRAWALS
At this point, Elizabeth was receiving plenty of help. Scotty was holding her money in the bank, and Lee was helping prepare the house for sale.
THE FIGHT
The week before Christmas, Elizabeth and Lee had an argument. Although it is unclear what prompted the disagreement, it is undisputed that it ended with Lee making a 911 call, which resulted in Elizabeth being transported to the hospital and treated for head and arm injuries.
THE FREEZE-OUT
After being discharged from the hospital, Elizabeth, accompanied by Dick, went to the bank to withdraw her money from Scotty’s account. To her great dismay, Elizabeth was informed that she could not withdraw any funds from the account without Scotty’s approval. Elizabeth called Scotty, but he refused to discuss the matter or answer her telephone calls. Elizabeth then wrote a letter and sent it by certified mail, demanding the return of her money, but Scotty did not respond. At Elizabeth’s instruction, her attorney subsequently wrote a demand letter seeking the return of Elizabeth’s funds. Scotty ignored that letter as well.
Somewhere during this process, Elizabeth discovered that Lee had made several withdrawals from the account, purportedly to pay for repairs that would prepare Elizabeth’s home for sale.
THE LAWSUIT
Elizabeth then filed suit against Lee and Scotty. By that point, almost all of Elizabeth’s money had been spent except for approximately $6,500, which Lee used to hire an attorney to defend herself against the lawsuit filed by Elizabeth.
THE TRIAL
When the case came to trial, numerous witnesses testified, including Elizabeth, Dick, Lee, Scotty, another relative, and a family friend. Many facts were disputed. Elizabeth testified that she had no idea Lee had the authority to withdraw money from Scotty’s bank account and that she never would have deposited the money with Scotty had she known Lee could access the funds. Elizabeth also testified that during their argument, Lee pushed her, causing her to fall and suffer her injuries. Lee testified that Elizabeth’s fall was entirely accidental and occurred when Lee’s dog broke free and ran from the house.
THE VERDICT
The experienced trial judge made several rulings at the conclusion of the case. First, the judge observed that this entire sequence of events began when Elizabeth attempted to conceal her inherited funds from Medicaid. The judge then ruled that Lee had misappropriated Elizabeth’s money from the bank account and that Scotty had benefited from much of the misappropriated money. Needless to say, no one in the family emerged from the litigation in particularly good standing.
The judge entered a judgment against Lee and Scotty in favor of Elizabeth. Instead of awarding the full amount taken, the judge awarded Elizabeth slightly more than one-half of that amount. Perhaps this can be viewed as a form of rough country justice. It was a hollow victory in any event, since it remains uncertain whether Lee and Scotty possess sufficient assets to satisfy the judgment.
Needless to say, everyone is upset. Elizabeth has lost her money. Dick has lost what he believed would have been a larger inheritance if the funds had been protected and used to purchase a new home for Elizabeth. Lee and Scotty are now judgment debtors to Elizabeth. These hardships are compounded by the fact that, because of her declining health, Elizabeth has moved into Lee’s home, where Lee now serves as her primary caregiver. As one judge observed in another case involving family conflict, “the parties find themselves in the distasteful position of cohabitating by night and litigating by day.”
WHAT COULD HAVE BEEN
Had Elizabeth come to our office when she inherited the money, we would have advised her that several techniques are available that allow Medicaid recipients to spend inherited funds in ways that preserve Medicaid eligibility. Since Lee had become Elizabeth’s caregiver because of Elizabeth’s declining health, Elizabeth could have entered into a caregiver agreement and transferred funds to Lee in exchange for those services.
Alternatively, because Elizabeth intended to purchase another home, she could have used the inherited funds to make improvements to her existing home and then used the proceeds from its sale, together with the inheritance, to purchase a new home. The equity in that new home could have been protected through proper planning without jeopardizing Medicaid eligibility. We could have helped Elizabeth enjoy her Valentine’s Day windfall instead of allowing it to become a family downfall.
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