How Does Pennsylvania Treat Joint Bank Accounts for Medicaid Eligibility?

Disclaimer: This article has been posted for general information purposes only.  You should not act upon the information in this article without first retaining legal counsel.

By Robert C. Gerhard, III, Esquire

Parents and children sometimes own bank accounts jointly with the right of survivorship, which transfers the remaining deposit to the surviving party when the other account holder passes away. There are various pitfalls of parents and children owning bank accounts jointly, especially when it comes to applying for Medicaid long-term care benefits. In some instances, it can be appropriate for a parent to add a child to a bank account as a joint owner, but from our perspective as elder law attorneys, children should probably never add their parents to their own bank accounts as joint owners. When considering joint bank accounts and Medicaid together, we encounter numerous issues.

How Medicaid Treats Joint Bank Accounts

Joint bank accounts are considered countable assets when applying for Medicaid. For example, if a parent needs nursing home care and applies for Medicaid benefits, the caseworker reviewing the application will normally presume the joint account to belong 100% to the parent. This means the funds in the joint account may need to be “spent-down” on nursing home costs or other permissible expenditures, so the child could become legally obligated to spend the entire account on his or her parent’s Medicaid benefits. 

Pennsylvania’s Multiple Party Account Statute normally treats joint accounts as being owned in proportion to the contributions to the account. Usually, the parent has added a child to one of the parent’s own bank accounts and the child has contributed none of his or her own money to the account. Titling the account jointly between a parent and a child does not normally protect 50% of the funds in the account, even if the child has made their own contributions.  

Children may experience difficulties trying to retain some of these funds while their parent applies for Medicaid and explores their options in Medicaid planning asset protection. Withdrawals from a parent’s joint bank account by a child are considered ineligible “gifts” or “transfers for less than fair consideration” during the Medicaid application process. These transfers present an additional problem in the Medicaid application process and can result in a period of ineligibility for Medicaid benefits, also commonly known as the imposition of a “transfer penalty.” 

Usually, the funds in the joint account at issue were deposited there by the parent. However, sometimes children have added a parent to an account holding the child’s funds. Unfortunately, adding a parent to a bank account can cause the child’s own money to be at risk of a Medicaid spend-down. Fortunately, if the child can prove he or she contributed to the account, then it may be possible to protect the child’s account from the Medicaid spend-down. 

However, proving contribution can be a challenge. Proof of deposits may not be available if the account was opened years ago, and it can be difficult to prove that the money in the account does not belong to a parent, especially if the funds accumulated in the account over many years. The Medicaid application can be denied for “excess resources” if the County Assistance Office is not convinced that the funds were contributed by the child and belong to the child. Note, however, that this denial can be appealed to demonstrate that the funds were in fact contributed by the child.

Guidance On Joint Bank Accounts and Medicaid Planning

Medicaid allows you to have a joint bank account with a mother or father, but because of the challenges created in the Medicaid application process, we usually recommend that a child should never add his or her parent as joint owner of the child’s own bank accounts. If a child wants an account to pass to a parent automatically upon the child’s death, the better way to do this – and the way to avoid seeing that child’s own funds subject to the parent’s Medicaid spend-down on nursing home costs  – is for the child to add his or her parent as a beneficiary on the account, not as a joint owner.  

Medicaid and joint bank accounts between a parent and child are a combination that rarely works out in the child’s favor so be sure to focus on elder law Medicaid planning. Bottom line: Normally the funds in a joint account were placed there by the parent, and even though the account is jointly owned, in the Medicaid application context, the account is normally treated as belonging 100% to the parent and subject to the spend-down.  

Feel free to contact our office if you have been denied Medicaid long-term care benefits because you are not able to prove contribution to a joint account. Each case is different. Depending on the unique facts and circumstances of your case, we may be able to help, as Gerhard & Gerhard is singularly focused on the practice of elder law.

About Gerhard & Gerhard

Robert C. Gerhard, III Esquire is the managing shareholder of Gerhard & Gerhard, P.C., an estate planning and elder law firm located in Montgomery County, Pennsylvania. Attorney Gerhard specializes in elder law, with emphasis on Medicaid Planning, Medicaid Applications, and Medicaid Appeals. He is the author of the Pennsylvania law treatise, Pennsylvania Medicaid, Long-term Care. He can be reached at (215) 885-6785 or Contact Us  with questions or comments.

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