Caregiving Without Legal Guidance: How Common Advice Nearly Cost This Family Everything
Feb 04, 2026
This article about caregiving by attorney Nicole Wipp is not intended to be legal advice. It is for information purposes only. For advice specific to your situation, contact us today at (248)278-1511.
This is a TRUE STORY, used with permission by the client. Names are not used to protect their identity.
Being a caregiver for an aging parent is emotionally exhausting, financially stressful, and full of pressure to “figure it out” quickly. When care needs escalate, and money becomes tight, families often turn to advice from friends, social workers, financial professionals…or even lawyers who don’t practice elder law.
This case shows how dangerous that can be.
The daughter in this situation wasn’t reckless. She wasn’t trying to cheat the system. She was trying to care for her mother. Unfortunately, the guidance she relied on led her straight into a Medicaid crisis that, in most cases, would have caused lasting harm.
This family got lucky. Most don’t.
Why the Daughter Reached Out
The daughter contacted our firm because she was trying to obtain Medicaid benefits to cover her mother’s in-home care. She had already been warned that Medicaid intended to impose a penalty due to transfers of money and property.
She came to us through a referral from another client after several decisions had already been made.
She Made Common Mistakes. Will You?
As we investigated the situation and confirmed details with Medicaid and the agency administering the MI Choice Waiver, we saw a pattern we immediately recognized.
These were not unusual mistakes. They are the ones we see every day when caregivers act without elder law guidance and rely on advice that sounds reasonable, but is legally wrong.
What Medicaid (Or The VA) Means by “Gifts” and “Divestment”
Before explaining what went wrong, it’s important to understand how Medicaid and/or the Veterans Administration (VA) looks at transfers of money and property.
From the government’s perspective, a gift is any transfer of money or assets for less than fair market value. It does not matter whether the transfer was made out of love, necessity, or good intentions. If the government does not see equal value received in return, it is a gift.
A divestment is simply the government’s term for a gift or transfer that violates its eligibility rules. When a divestment occurs, they impose a penalty period during which it will not pay for care, even if the person is otherwise financially eligible.
This is where many caregivers are blindsided: intent does not matter. Only the transaction does.
Mistake #1: Turning an Exempt Asset (The House) Into a Problem
The mother transferred her home entirely to her daughter.
Under Medicaid rules, a primary residence is often considered an exempt asset, meaning it does not count against eligibility as long as it is owned properly. Many caregivers are told that transferring the home “protects” it. In reality, that advice frequently does the opposite.
By transferring the home outright, the mother took an exempt asset and turned it into a disqualifying gift. Medicaid treated this as a divestment of approximately $49,000.
This is one of the most common—and most damaging—mistakes we see, and it is often based on advice from non-lawyers or professionals who do not understand Medicaid planning.
Mistake #2: “Spending Down” With Informal Family Payments
The family also paid approximately $17,000 to a grandson, labeling the payments as “rent.”
Here’s the problem: the grandson did not own the home. There was no lease. There was no legal agreement. From Medicaid’s perspective, this was simply money given away. This is not allowed under any circumstances.
Caregivers are frequently told they need to “spend down” assets, but they are not told how to do that legally. Without proper guidance, families create transactions that feel logical but fail every legal test.
Unless money is exchanged under a legitimate, Medicaid-compliant agreement—such as a properly structured care contract—payments to family members are treated as gifts.
Mistake #3: No Financial Power of Attorney
The daughter did not have a financial power of attorney for her mother. There was a medical power of attorney, but no authority to manage finances or enter into legal agreements.
This eliminated many lawful planning options. Even if the family had wanted to fix things the right way earlier, they no longer had the legal authority to do so once the mother lost capacity.
This is a critical point for caregivers: you cannot plan retroactively once authority is gone.
The One Reason This Didn’t End Badly
The only reason this case didn’t result in a Medicaid penalty was timing and an unusually favorable fact pattern.
Medicaid had not yet issued a final decision, and the penalty period had not started. That window allowed corrective action.
Even more unusually, the home had been jointly owned by the mother and daughter long before the transfer. That fact made it possible to reverse course.
How We Were Able to Fix It
We developed a plan to deed the home back into joint ownership, restoring the structure that existed before the improper transfer. We also worked directly with the agency on behalf of the family to ensure that they understood how this legally fixed the problem.
Because of the property’s value, restoring half of the home to the mother more than cured the alleged divestment. That over-correction addressed both the home transfer and the $17,000 in improper payments.
As a result, we expect no Medicaid penalty and immediate eligibility for benefits.
This outcome was not the result of the family's good planning. It was the result of luck AND getting the right help.
Why This Wouldn’t Work for Most Caregivers
Most families do not have these facts working in their favor.
In a typical scenario, a parent owns a home in their own name and transfers it to a child based on well-meaning but incorrect advice. Once that happens—especially without a properly drafted power of attorney—there may be no way to undo the damage, avoid probate, or protect against Medicaid estate recovery.
That’s when caregivers learn, too late, that the rules they relied on were wrong.
The Real Lesson for Caregivers
Caregiving already carries enormous responsibility. When families are forced to navigate Medicaid eligibility, asset rules, and legal authority without proper guidance, mistakes are almost inevitable.
The takeaway from this case is not that everything worked out. It’s that it almost didn’t.
- Advice from non-lawyers can be dangerous
- Advice from lawyers who don’t practice elder law can be just as dangerous
- Generic estate planning documents often make Medicaid planning impossible
Why Elder Law–Focused Planning Matters
A properly drafted, elder-law-specific power of attorney could have prevented nearly every issue in this case. It would have allowed legitimate care agreements, lawful spending, and planning that benefited the mother—rather than putting her care at risk.
Caregivers should not have to rely on luck.
Getting the right legal advice early can mean the difference between stability and crisis—for both you and the person you are trying to protect.