FTC Warns LTC Institutions: Stimulus Checks Are Not Available Resources So Keep Your Hands Off!

Last week, this blog addressed issues arising from stimulus checks issued to the recently deceased. This week, stimulus checks are again a topic, as some nursing homes and assisted living facilities are requesting or requiring their residents to pay the proceeds to the facility. 

The request or requirement is not lawful.  Accordingly, the Federal Trade Commission cautioned operators of "nursing homes and assisted living residences" that they cannot lawfully require residents on Medicaid to "sign over" their pandemic-inspired stimulus checks to pay down their care bills. These long-term care institutions might misunderstand the Medicaid rules, assume they are like other monies or assets, deem them available resources and require or request that the payment be made to the institution.  That's a mistake, and the law does not consider the payments "available resources:"

According to the CARES Act, those economic impact payments are considered tax credits and tax credits don’t count as “resources” for federal benefits programs like Medicaid. That means that nursing homes and assisted living facilities can’t take that money from residents simply because the resident is on Medicaid. Need some quick cites? Take a look at page 3 of the Congressional Research Services’ COVID-19 and Direct Payments to Individuals: Summary of the 2020 Recovery Rebates/Economic Impact Payments in the CARES Act and 26 U.S.C. § 6409 of the Internal Revenue Code.

Plus the FTC notes this "isn’t just an arcane hypothetical someone has dreamed up. The Iowa Attorney General’s Office and other State AGs have received boots-on the-ground reports this is happening."

Family members of Medicaid-program LTC clients should also be on the lookout.  FTC advises anyone with concerns about inappropriate actions on stimulus checks to contact their state attorney general's office and report the concern to the FTC.  In addition, contact counsel, so counsel can demand prompt repayment.  

Stimulus Checks for the Deceased

Several clients have called our office inquiring what to do with stimulus checks for their deceased loved ones. Many of these checks were delivered even thought the IRS knew the person was deceased.  Indeed they often have designated "DEC'D," after their name.

I wish I had a clear answer, but the answer is that no one knows.  So consider the following:

• Spousal Checks with a Surviving Spouse: Deposit. I am recommending that the spouse deposits the check.  
• Spousal Checks with Neither Surviving: It Depends. (I haven't been asked about this and don't even know that such a creature exists). Is the check already deposited?  Follow the guidance below depending on whether it is or isn't already deposited.   
• You Already Deposited the Check: Plan ahead. I am advising clients that have already deposited the money that they should expect to some day be required to pay it back, but that is based only upon a single statement by the Secretary of the Treasury.  
• You Haven't Deposited the Check: Safekeeping. If they haven't deposited the checks, I have suggested that clients keep it in a safe place so that it might later be returned.  I am not advising destruction of the checks, as apparently some have.  Why?  If there is fraud or misapplication of the funds, without proof that they did not negotiate the check, they may later be responsible for it. Of course, some would ask, isn't the safest place for the money a bank?  Understand that I don't feel I can suggest that you deposit the check if you haven't already.

To understand the complexity, consider the following, a reprint of an article entitled, "Heirs may have to return stimulus money sent to the deceased, but how and when?"

A lot of people who received stimulus payments for their dead parents or spouses are more confused than ever.

 There's new word that they have to return the money. But so far, there's been no official guidance on how to go about it. 

U.S. Treasury Secretary Steve Mnuchin who is quoted in the Wall Street Journal as saying heirs should be returning money that was sent in the name of someone who died. But so far, no one will elaborate.

"I couldn't find any guidance anywhere on what I was supposed to do with this check," said Debbie Carter of Olympia. She recently received a $1,200 stimulus check in the mail for her 79-year-old mother Ann Tate who died nearly a year ago. The check even has the abbreviation 'DECD', for deceased next to Ann Tate's name.Payments to the deceased have been a concern since the stimulus checks started going out. The government is not saying how many dead people received money but consumers are reporting them from across the country.

"I understand that they were trying to be helpful and wanted to get the money out the people as soon as they can to help them," Carter said. "But I think they made more of a mess out of it. We're not the only people, from what I've seen on the internet that have received these checks. And for the Treasury Department to have to go back through and find out who they sent these checks out to and try and get them back- I can't even believe what kind of a mess that's gonna be." 

Despite published reports that the government wants heirs to return economic impact payments sent to the deceased, as of late Wednesday there was no official comment and no information addressing the issue on either the U.S. Treasury or IRS websites.

Carter said her mother, who was an accountant, would consider it a waste.

"I can hear her in my head going, 'I can't believe they did this,'" Carter said.

Carter said she feels for people who really need the money and may have already spent it. She said she and her brothers understand the money is not theirs so they will not cash it. 

"Honestly, I was thinking about holding on to it and keeping it as a historical artifact," Carter said. "Because it's void after one year, so, I'm not taking the money out." 

 People are getting conflicting information from tax professionals about their rights to the money.  

Some people say they were told that if the person was living Jan. 2 their survivors could keep the cash. But in a transcript of a April 17 White House briefing President Trump was asked about checks to dead people. He said, "we'll get that back." 

Bottom line: If you still have stimulus money sent to someone who died, hang on to it if you can, and keep checking the IRS and Treasury websites for guidance on what to do. 

KOMO News reached out this morning to both agencies but neither has replied as of this publication. We'll let you know as soon as we hear anything.