Secrets of Reading a Bank Statement – 2 of 3
Don’t let surprise income streams derail your Medicaid Long Term Care application. We’ve recently discussed the importance of doing a Bank Statement Review and the heartache you may incur by not doing this before filing an application for your parent or loved one. Now we’ll go over a few of the red flag items that stick out like a sore thumb when doing such a review:
Secrets of Reading a Bank Statement – When a loved one is going to a Nursing Home – Part 2 of 3
The “BIG 7” items to look for:
1. Uncompensated transfers.
These are usually easy to recognize. DHS will review past bank statements for Medicaid applicants. They may request only 3 months’ worth of statements or they may go back 5 years. At any rate, you will sign the Medicaid application, under penalties of perjury, that what you have stated therein is correct.
If there are any checks made out to one of the kids or other close relatives, it will be presumed to be an uncompensated transfer and most likely result in a penalty period.
2. Applicant Income over $2,163/month (2014 amount).
Monthly income is easily determined by looking at the recurring monthly deposits in the bank account. Again, the bank statements tell the story. Not only does a Medicaid applicant have to be asset eligible, they have to be income eligible. If monthly income exceeds $2,163 per month, then technically they are not. This problem can usually be solved by a Miller Trust (which we will be happy to explain to you.)
3. Stocks – Dividends – IRA – RMD Credits.
It is very possible that the parents would have stocks, bonds or brokerage accounts that are unknown to the adult children. Often this account spins off monthly income that is deposited monthly or quarterly into the checking account. A bank statement review will spot these items of income and lead to the underlying account.
4. Intra and Inter Account Transfers.
Sometimes an amount that “looks” like income will not be income, but a transfer from one account to another. It is important that these items be identified so that they can be explained to the DHS caseworker and not counted as income.
5. Life Insurance Premium Debits.
This item is explained in Case Study #2 from “Secrets of Reading a Bank Statement – 1 of 3,” previously posted here on our blog. The trail from a recurring deposit from a life insurance company often leads to proof that there is a life insurance policy with substantial cash value; or as in the situation explained in the earlier case study, dividend payments from an account at the insurance company.
6. Recurring Credits from Non – Retirement Income.
This could be the situation where there is monthly income from rental property, royalty payments from mineral rights or income from any number of investment vehicles. A bank statement review will show whether or not there is a countable asset generating this income.
Another example may be a situation where the income is recurring, but with longer intervals, such as the case with crop rents from farm income. Often this income is paid annually when the crop comes in. A case worker will look at this to see whether the applicant still has a legal interest in the underlying farm land or ownership in an entity to which the farm has been transferred. If so, this may be a countable asset.
7. Large, Non-Recurring Deposits.
An example of this may be an inheritance, tax refund or legal settlement. It is important to identify this as a single-shot of income, not to recur, so the case worker won’t think that this comes in on a recurring basis.
These are the “Big 7” snakes in the grass (or bank statements) that can bite you. These are not the only 7 – there are more. The best practice is to take all of your parents’ (or spouse’s) bank statements for every account to your Elder Law Attorney for a review before filing the Medicaid application.
In Part 3 of this series, we will be sharing one of our checklists that we use when doing bank statement reviews.
The information provided on this blog is intended as general information only for a broad audience. It is not intended as legal advice and should not be acted upon as such. If any reader has questions or concerns about any matter mentioned herein, he/she should contact an Elder Law Attorney or other appropriate professional. If any reader has questions or suggestions about a future topic area that he/she would like to see discussed, please contact the author at firstname.lastname@example.org.