“Well, even if Medicaid planning is not illegal, it’s gotta be immoral or unethical. So I just won’t do it.” If you remember from my article from last month, this was a lunch guest who had a strong opinion about “hiding” assets or “pretending to be broke”. As I pointed out last month, proper Medicaid planning is legal. And as I made that point to my guest, she responded that it must then be immoral or unethical. Let me weigh in on that conversation.
There are two issues to consider when Medicaid planning. The first one is what the client thinks. The second one is what the attorney’s ethical obligation is when providing Medicaid planning services. Let’s handle the second issue first.
Under the attorneys’ rules of professional conduct (our ethical rules) we have an obligation to “zealously represent” our clients. We also cannot advise clients to act in a manner that is illegal or will perpetrate a fraud on the court. So, what does this all mean? If a client wants to pursue planning that is not illegal, we have an ethical obligation to assist, even if we disagree with the client concerning whether that activity is immoral or generally unethical. We can discuss the situation and even express our opinion if we want. However, if the activity – here Medicaid planning – is legal, we have an obligation to assist the client.
Attorneys have this obligation in the first place, because it is simply not our place to decide. We need to handle the question of what is legal, not the question of what is moral or ethical. Each client has that responsibility. Second, since Medicaid planning is legal, we need to make sure it’s done right.
Okay, so that leave’s the question of why or how someone might think Medicaid planning is ethical. More specifically, how could anyone think that “hiding assets” or “pretending to be broke” could be ethical? Let me share what I explained to my lunch guest.
Let’s take Jim and John, twin brothers who got married about the same time and worked at the same place their whole working lives. Let’s assume that they make the same amount of money their whole careers and paid the same amount of taxes. Imagine that Jim who was frugal. He and his wife counted every penny and saved for their retirement and for their “old age”. John and his wife were not good at saving money and spent whatever they made about the same time they made it.
At age 70, just a few years after retiring, they both have a stroke. Both will need ongoing nursing care. Because John and his wife did a poor job of saving money and now have only the house, a car and Social Security income, Medicaid will pay for John’s care. Jim applies for Medicaid and is denied because he and his wife have too many assets and have too much income. If Jim “spends down” all of his assets, eventually he’ll be Medicaid eligible. Jim and his wife feel they are being penalized because they were responsible with money their whole lives while John spent more than they did, but their tax money is paying for John’s care.
In my practice, I see a similar situation all the time. Is it ethical for Jim to take steps to qualify for Medicaid sooner? Didn’t he pay as much in taxes as his brother? Aren’t we rewarding John for being less responsible with money while we’re punishing Jim for being responsible? These are incredibly difficult questions and Jim is in a difficult position. I don’t think it’s a fair situation to Jim and his wife. But it happens daily.
If Jim comes to me to help him obtain Medicaid benefits, I will help him using only legally approved techniques and absolutely understand why he wants to do the planning.
By the way, after I explained this to my lunch guest, she agreed with me and saw all of this planning in a new light. Until we change the system, we need to level the playing field and help clients work through the system.
At Idaho Estate Planning, we understand the challenges faced by elder Americans and their families. We have resources throughout the Treasure Valley, experts in the field of Elder Care & Planning. We have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident.