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TEXAS LAW PERMITS GUARDIANS TO MAKE GIFTS FOR MEDICAID PURPOSES

Effective September 1, 2011, Texas Probate Code Section 865 was amended to allow a guardianship court, upon application to approve gifts on behalf of the ward for the following purposes, in addition to tax-motivated gifts: “… or to transfer a portion of the ward’s estate a necessary to qualify the ward for governmental benefits and only to the extent allowed by applicable state or federal laws, including rules, regarding those benefits…”
Under the Medicaid rules when one spouse is in a nursing home and other spouse lives at home or in an assisted living facility or some other place other than a nursing home (the “community spouse”) , there is a requirement that all of the countable resources (other than $2000) be transferred from the institutionalized spouse to the community spouse within 1 year. This law change will obviously permit this. The law change also permits, with the approval of the court, transfers to the Medicaid applicant’s child with a disability or to a “sole benefit trust” for any person under age 65 (which are exceptions to the transfer penalty rules) – although some judges may reject that as not being “in the best interest of the ward“. However, the biggest question mark is whether judges will permit various gifting strategies often used by elder law attorneys to accelerate Medicaid to shift the burden of the cost of care. Elder law attorneys have just begun to test the courts on this issue.
In any event, it will be necessary for the guardian to file an application for approval of the court. In support of the application the guardian would rely on the “substituted judgment” rule. The doctrine is based on the principle that a court will not refuse to act if it is probable that the incompetent would have taken the same action had he or she been normal.

For more information on guardians permissions or Medicaid rules, please call our Dallas office (214)720-0102.

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