Updated October 12, 2018
Member: National Academy of Elder Law Attorneys
Elder Law, Trust and Estate and Tax Sections of the New York State Bar Association
"Protecting The Assets of Seniors and Their Families for Forty Years"
I have spent 40 years helping seniors and their families protect their home and life savings by showing them how they can plan to qualify for Medicaid and actually qualifying them for Medicaid in the event of a medical emergency.
This document is intended to answer seventeen of the most frequently asked questions I am asked when I meet with families
1. Q. WILL MEDICARE PAY FOR ALL OF MY NURSING HOME COSTS?
A. No. Medicare might provide payment for the first 20 days and part of the next 80 days of care in a nursing home, which usually results in a contribution by you of about $167.50 per day for the 80 days. This amounts to a personal private pay liability of about $13,400 for the 80 day period. http://www.medicare.gov/coverage/skilled-nursing-facility-care.html
You should know now if your health insurance will pay all or any part of the approximately $167.50 per day copay. If not, you should consider applying for Medicaid to pick up the costs of the copay. If for any reason Medicare terminates your Medicare coverage, your medical insurance will probably not pay any part of your rehabilitation or skilled nursing care, leaving you to private pay the whole bill, usually $250 - $300+ per day, even though your insurance was paying all of the
There are strict Medicare conditions you must meet or private pay 100% of your own skilled nursing costs from day one:
1. You must be hospitalized for medically necessary inpatient hospital care for at least three consecutive calendar days, not counting the day of discharge. Caution: Being admitted for "observation" vs for "treatment" does not count toward the 3 days.
see http://www.kevinmd.com/blog/2014/02/observation-status-hospital-inpatient.html and
see http://www.foxnews.com/politics/2014/02/06/frustrating-medicare-catch-who-in-patient-at-hospital-and-who-under-observation/ and
see http://newoldage.blogs.nytimes.com/2014/01/10/fighting-observation-status/?_php=true&_type=blogs&_r=0 and
see http://www.medicareadvocacy.org/medicare-info/observation-status/ and
see Notice of Observation Services (A7257-A/S3926-A): This law requires hospitals to provide patients placed into observation services with oral and written notice within 24 hours of such
2. You must be admitted to a nursing home within 30 days of being discharged from the hospital.
3. The skilled nursing and/or skilled rehabilitative services are those furnished pursuant to physician's orders which: (a) require the skills of professional personnel such as a nurse or therapist
"Skilled" nursing care is really like extended hospital care, which is very different from "custodial care". Custodial care is that level of care which is merely assistance with what are known as the Activities of Daily Living (ADL's). This type of personal care, such as assistance with eating, bathing, dressing, toileting, transferring in and out of bed and supervision of medications usually do not require the assistance of professionally trained and licensed personnel. The Medicare program does not cover custodial care. Medicare does not provide protection for expenses of long-term health care such as:
A. The only government program that will pay for long-term care is Medicaid which is a jointly financed federal and state medical welfare program for the poor. If you qualify, Medicaid can cover nursing home costs, hospital care, home care, doctor bills
3. Q. HOW CAN I PROTECT MY ASSETS FROM BEING WIPED OUT TO PAY FOR NURSING HOME COSTS?
A. The strategy most frequently used to protect and save the senior's assets is called the "impoverishment" strategy. Over a period of time, the senior gradually transfers (either outright or in Trust) and protects all or nearly all of his or her assets for the purpose of qualifying for the Medicaid Program. The "impoverishment" strategy or what is sometimes called "planned poverty" aims to: reduce the senior's assets below the minimum amount for Medicaid and
1. qualify him or her for Medicaid, thus
2. prevent the senior's assets from being used up to pay for uninsured health care expenses or nursing home costs, to
3. allow assets to be transferred to the children or other family members either during the senior's life or on the senior's death and
4. allow a healthy spouse to support themselves from assets that would otherwise be used to pay for their spouses nursing home costs.
The key to this planning is to make sure the senior can maintain exactly the same standard of living they have always
4. Q. IF MY SPOUSE IS GOING INTO A NURSING HOME, CAN HE OR SHE TRANSFER ALL OF HIS OR HER ASSETS TO ME AND
A. No. To determine the eligibility of the spouse who is going into the nursing home to receive Medicaid, all of the non-exempt assets held by the husband or wife are added together and then the total divided equally between the spouses. To the extent the healthy spouse's half exceeds $74,820, in New York State, the Community Spouse Resource Allowance, (CSRA), the excess is attributed to the spouse going into the nursing home, thereby disqualifying the spouse going into the nursing home from receiving Medicaid. See the 2018 Resource and Income limits
1. The spouse outside of the nursing home can retain $74,820 in New York State, the CSRA, in otherwise non-exclude able assets, plus homestead, plus personal property, plus a burial reserve, plus an automobile and set up certain burial space agreements for children, their spouses. brothers, sisters
2. While the Community Spouse Resource Allowance (CSRA) can be as high as $123,600 for seniors with a large
It is important to understand that under New York law:
1. A spouse is charged with legal responsibility for the other spouse's nursing home costs. This means that the income and resources of the healthy spouse referred to as the "community spouse" are considered as available to the Medicaid applicant spouse who is going into a nursing home and will be considered in determining if that spouse qualifies for Medicaid, and
2. If the
3. If the healthy spouse's monthly income is more than $3,090 per month, the local Social Services Department will normally require 25% of the excess income to be spent on the nursing home costs of the spouse in the nursing home.
4. If the total income of both spouses does not exceed $3,090 per month, all of the total income can go to the healthy spouse, even if their spouse is in a nursing home.
5. The healthy spouse can refuse to support the spouse in the nursing home, but then the Department of Social Services has the right to sue the healthy spouse to recover money it pays for the nursing home costs of the spouse in the nursing home. Doing what is called a "spousal refusal" may make sense in certain situations because the Medicaid rate is less than the private pay rate.
5. Q. HOW MUCH INCOME CAN I MAKE AND QUALIFY FOR MEDICAID
A. Any person over 64 whose net income is less than $842 per month, plus an unearned credit income credit of $20 per month ($1,233 for a couple) per month plus an unearned income credit of $20 per month, has satisfied the income means test for SSI related Medicaid. A single individual residing in a nursing home is permitted only $50 per month as a personal needs allowance, plus assets of $15,150 ($22,200 for a couple) plus a burial reserve. You can set up a trust with a funeral director to prepay funeral expenses and the money in the trust will not be counted as a resource for Medicaid as long as any money not spent on the funeral is turned over to the Medicaid upon the senior's death. Caution, at the current time, only the cost of the vault, burial container, opening and closing of the grave, plot, stone
6. Q. CAN I TRANSFER MY ASSETS TO MY CHILDREN OR OTHER FAMILY MEMBERS JUST BEFORE I GO INTO A NURSING HOME?
A. LAW IN EFFECT AFTER FEBRUARY 8, 2006. There is a new law in effect after February 8th, 2006 that will change previous law drastically. The bottom line is that under the new law there is a
Under the new law, the penalty period doesn't start to run the first day of the month after the month of the transfer, it starts to run much later, in essence, the penalty period starts to run on the date you are both: 1. in the nursing home and 2. would otherwise qualify for Medicaid, if you hadn't made the transfers. So any transfers within 5 years of applying for Medicaid result in a penalty period preventing you from qualifying for Medicaid, calculated by taking the amount you transferred within 5 years and dividing it by $9,722 (in central NY). ********* UNDER THE NEW LAW ASSETS YOU TRANSFER 5 YEARS BEFORE YOU GET SICK CAN RESULT IN DISQUALIFICATION FOR MEDICAID!!! Under certain limited circumstances, some recent fair hearing decisions allow gifts within the 5
Under the Medicaid transfer rules, certain resources and transfers are exempt. A home is exempt if transferred to one of the following:
1. a spouse,
2. a minor (under 21
3. a brother or sister with an equity interest in the home who resided in the home one year before institutionalization,
4. a son or daughter who resided in the
Certain other transfers of any resource are also exempt. For
7. Q. DOES IT MAKE A DIFFERENCE WHEN I APPLY FOR MEDICAID?
8. Q. WHAT CAN BE DONE IF THE SENIOR IS ALREADY IN A NURSING HOME?
A. If the senior is already in a nursing home or about to go into one, he or she can retain enough assets to pay for sixty months care, transfer the balance and not apply for Medicaid until sixty months after the date on which the last asset transfers are completed. If the assets total less than the cost of 60 months of care, no transfers will help you. However use of a gift and promissory note between a senior and a family member, usually a child, can avoid the harsh new
9. Q. HOW CAN I AVOID THE NEW FIVE YEAR RULE ON GIFT TRANSFERS AFTER FEBRUARY 8, 2006?
Most children help their mom and dad in numerous ways as they age by performing the services of a Geriatric Care Manager. It is very common for a child to handle their parents' finances if the parents become unable to handle their own finances by becoming their parents' Power of Attorney. These duties often include paying bills, reviewing mail, dealing with the parents' banker, lawyer, tax return preparer and financial planner. In addition, most children manage their parents' health care as their Health Care Proxy by taking their parents to the doctors, communicating with the doctors, hospitals, social workers and home health care aides. Many times the children arrange for
These valuable services are usually provided free of charge because of the love and affection we have for our parents. That presumption can
Please note that the New York State Department of Health has issued a ruling that it will give credit for amounts paid to children for certain services rendered under a service agreement entered into prior to entry into a nursing home, which means these payments will be allowed and not treated as a gift transfer, thus escaping the 5 year rule. http://www.health.ny.gov/health_care/medicaid/publications/docs/gis/07ma019.pdf
I have won favorable fair hearing decisions using this technique, which has protected a substantial amount of money and avoided the
Another technique used in an emergency, where little or no planning has been done, is the use of a gift and a promissory note, where a parent makes a gift transfer of money to a child and then loans the child money that will be repaid to the parent over a short period of time. Without going into detail, the bottom line is that if done properly, about 1/2 of the
The key is planning and with proper
10. Q. WHY SHOULD I USE A TRUST TO PROTECT MY ASSETS?
A. Assets are usually transferred to children or other family members either outright or in trusts. A trust is more desirable than an outright transfer to a child for many nontax and tax
a) You may have a bad relationship now or in the future with:
1. your child or
2. your son-in-law or daughter-in-law
b) Your child may:
1. get divorced or pass away. Note: If your child gets divorced or passes away, your assets may end up going to your son-in-law or daughter-in-law and not your grandchildren.
2. have creditors or go bankrupt resulting in liens being placed against your house or other assets transferred to your child.
3. invest your assets unwisely
4. spend all of your assets during your life
5. spend all of your assets as soon as you die.
6. get sick and run up large uncovered medical bills
A trust can avoid all of the problems created by the above situations
c) If you transfer your home to your children and then sell your home in the future during your lifetime, your children will pay what is often a substantial capital gains tax on the difference between what you paid for your house when you bought it and what you sold the house for. You can reduce this tax somewhat, if you can prove you made certain capital repairs to the house like a new roof, new heating system, structural repairs, etc., but my experience is that quite often your children will not be able to produce the
However: If you place your home into an irrevocable trust that is a "grantor trust" for federal income tax purposes, in addition to protecting your house from nursing home costs and avoiding probate, Section 121 of the Internal Revenue Code will apply and you can have your home sold completely tax free during your lifetime, avoiding the capital gains tax that would have been paid by your children if you had transferred the house to your children, instead of to a trust for the benefit of your children. :)
Your lawyer must have a thorough working knowledge of
I had lunch this week with a CPA who told me that a lawyer drew a trust that left the children stuck with a $200,000 capital gains tax that could have been totally avoided and when the CPA told the lawyer this, the lawyer told the CPA: "well I don't know anything about taxes!" :(
Your lawyer needs to know the federal and state, estate, gift
11. Q. IF I SET UP A TRUST SHOULD I HAVE ACCESS TO PRINCIPAL?
A. No. The Trustee should not be given
12. Q. HOW CAN I PROTECT MY HOUSE?
A. Transfer of residence - if the Medicaid applicant is married, he or she may retain a principal residence in which a spouse resides. The house is exempt property. However, if the applicant does not have a spouse or the spouse dies and other requirements are not met (which generally won't be met), the house is not exempt property and is subject to nursing home costs and will preclude Medicaid qualification. The Department of Social Services can file a lien against your personal residence.
A transfer of the residence to the children or to an irrevocable trust for the children, with the parent reserving a life
A transfer of the house to the children as opposed to a trust for the children is not advisable for the
13. Q. SHOULD I ALLOW THE NURSING HOME TO FILE A MEDICAID APPLICATION FOR ME?
A. The answer to this question is almost always no. I routinely meet with clients who say that they have met with the nursing home and the nursing home has specifically advised them that they do not need a lawyer, that they must file for Medicaid immediately and that they don't need to worry, the nursing home will take care of everything and file a Medicaid application for them.
In my opinion that this is a formula for disaster in many cases. First of all, when anyone tells you that you don't need a lawyer to protect your legal rights, your antenna should go up. Clearly, filing a Medicaid application and protecting your assets from being wiped out by nursing home costs and uncovered medical expenses involves many legal issues, analysis
In my opinion, I humbly submit that nursing homes that give the above advice to nursing home residents and their families, are clearly doing them a disservice. You must understand that there is a clear conflict of interest between the nursing home and its residents. The nursing home is concerned about its own financial well-being. In
The documentation required to be submitted to Medicaid is quite extensive. If you fail to provide any single piece of that information to Medicaid or if the nursing home fails to provide that information on your behalf, you can expect a denial which results in a personal liability on the part of the nursing home resident to private pay the nursing home bill. I have seen several instances where nursing homes have filed an application for Medicaid which was subsequently denied and then the nursing home simply tells the family you must pay the bill now out of your own assets. You might say what if my mom or dad has no assets and there is nothing to protect, should I let the nursing home
I was recently retained by a daughter whose mother had absolutely no assets. She was told by the nursing home that they would file the nursing home application and gave her a list of documents that she needed to provide to the nursing home to apply for Medicaid. She explained to the nursing home that her mother was totally unable to communicate with her due to her mom’s Alzheimer's. There was no power of attorney and the daughter was not legally authorized by the mother to obtain any documents and mom could not execute a power of attorney. The bottom line is that the daughter came to me because the nursing home sent her a $60,000 bill after the mother passed away and was telling the daughter that she needed to pay that bill. The nursing home also threatened to sue the daughter, her sister and her sister's husband.
Getting a nursing home to help you file a Medicaid application makes about as much sense as getting your tax advice from the Internal Revenue Service. When you file a Medicaid application, if it is granted, it goes retroactive back to 90 days prior to the date of filing the application. If the nursing home filed an application for you and fails to submit the appropriate documents or you don't qualify in the first place and Medicaid takes a long time to deny the application, you will have a private pay liability from the date of entry into the nursing home forward. Even if you do get legal assistance after the denial and the application is filed immediately after the denial, it will only go back 90 days prior to the date of the filing of the second application, leaving a potential private pay gap for which the nursing home resident is personally liable to pay.
It makes sense to get some legal advice from a qualified professional when you need a Medicaid application filed. I have seen several examples where nursing homes
The bottom line is that protecting your assets from uncovered medical expenses and nursing home costs requires the skill of qualified professional who is knowledgeable in this area of law and is your advocate looking out for your best interests, not the nursing homes. In my opinion, the nursing home does not meet those requirements.
14. Q. IS MY ANNUITY AND IRA PROTECTED FROM MEDICAID?
For an example, see this Pennsylvania case: Presbyterian Medical Center v Budd decided 8 29, 2003 http://caselaw.findlaw.com/pa-superior-court/1013360.html
16. Q. WHAT ARE THE MOST IMPORTANT FINANCIAL STATEMENTS MUST I PROVIDE TO MEDICAID WHEN I APPLY?
A. The documentation that must be provided to Medicaid when an application is submitted is simply voluminous and failure to provide even one page of one financial statement on one account in the past 60 months can result in a denial of your Medicaid application, resulting in a denial of Medicaid benefits and you private paying for all nursing home costs. Failure to provide and explain each and every check, cash withdrawal, deposit and expenditure over $1,000 over that past 60 months can result in the imposition of a penalty period delaying Medicaid eligibility, resulting in a private pay liability on your part. I cannot stress enough the importance of keeping all of your financial statements on all of your assets, including but limited not to bank accounts, CDs, stocks, mutual funds, brokerage accounts, IRAS, annuities, life insurance policies, 401ks, 403b's, deferred comp plans, 457 plans, profit sharing plans, savings bonds, 529 plans, etc. If you are missing even one page from any of these statements over the past 60 months, your application can be denied. :( If you fail to explain one check, one cash withdrawal, one deposit over $1,000 in the past 60 months, your application can be denied or your eligibility delayed and a penalty period imposed, resulting in your being liable to private pay your nursing home costs. :) KEEP ALL OF YOUR RECORDS AND STATEMENTS ON EVERY ACCOUNT AND ASSET YOU HAVE FOR 5 YEARS!!!! DONT THROW THEM AWAY! GETTING THEM FROM YOUR BANK OR BROKER OR INSURANCE COMPANY, ETC., MAY TAKE MONTHS, WHICH CAN RESULT IN DENIAL OR DELAY OF YOUR APPLICATION, COSTING YOU BETWEEN $8,500 TO $10,000 PER MONTH AT CURRENT RATES. :(
Please feel free to give me a call at (315) 733-0417 to schedule an appointment.
Warmest personal regards
PLEASE NOTE THAT THIS DOCUMENT IS NOT MEANT TO GIVE LEGAL ADVICE, BUT ONLY TO ANSWER CERTAIN FREQUENTLY ASKED QUESTIONS CONCERNING HOW TO PROTECT ASSETS FROM BEING WIPED OUT TO PAY FOR NURSING HOME COSTS. YOU ARE STRONGLY URGED TO CONSULT WITH AN ATTORNEY WHO IS COMPETENT IN THE AREA OF ELDER LAW, TAX AND ESTATE PLANNING PRIOR TO TAKING ANY STEPS TO PROTECT ASSETS SO THAT YOU WILL UNDERSTAND ALL OF THE RAMIFICATIONS OF YOUR ACTIONS, INCLUDING BUT NOT LIMITED TO ESTATE TAX, GIFT TAX, INCOME TAX, FINANCIAL AND ESTATE PLANNING CONSIDERATIONS.
CAUTION: WARNING AND DISCLAIMER
THE MATERIALS AND DISCUSSIONS PRESENTED IN THIS COURSE ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY AND ARE NOT INTENDED TO CREATE AN
PRIOR TO DOING ANY ESTATE PLANNING OR ATTEMPTING TO IMPLEMENT ANY OF THE STRATEGIES OR TECHNIQUES COVERED AND DISCUSSED IN THIS COURSE, YOU ARE STRONGLY CAUTIONED TO SEEK THE ADVICE OF YOUR OWN COMPETENT ELDER LAW ATTORNEY ADMITTED TO PRACTICE LAW IN THE STATE OF NEW YORK, WHOSE PRACTICE IS CONCENTRATED IN THE AREA OF ELDER LAW.
CLASS OUTLINE FOR ADVANCED MEDICAID PLANNING
WHEN YOU HAVE LESS THAN 5 YEARS BEFORE
CLASS 1. A. USE OF THE SERVICE AGREEMENT (CAREGIVER AGREEMENT)
B. USE OF THE REVERSE MORTGAGE TO PROTECT AS MUCH OF THE EQUITY OF THE HOUSE AS POSSIBLE
CLASS 2. A. PURCHASE OF LIFE ESTATE IF SENIOR MOVES IN W/CHILD
B. COMMUNITY MEDICAID TO GET YOU THROUGH THE FIVE
C. USE OF A POOLED INCOME FUND SHELTER INCOME TO QUALIFY FOR COMMUNITY MEDICAID
WHEN NURSING HOME PLACEMENT IS IMMINENT
CLASS 3. A. TRANSFERS TO SPOUSE AND SPEND DOWN OF ASSETS
B. USE OF GIFT AND PROMISSORY NOTE TECHNIQUE
C. BURIAL SPACE AGREEMENTS
D. TRANSFER OF RESIDENCE TO
E. TRANSFER OF ASSETS OTHER THAN HOUSE TO SNT
F. TRANSFER OF HOUSE TO SPECIAL NEEDS CHILD
CLASS 4. A. PROTECTING IRAS AND ANNUITIES
DR. I WANT YOU TO DELIVER MY BABY BUT:
<> I KNOW YOU’RE A FOOT DOCTOR AND DON’T
SPECIALIZE IN DELIVERING BABIES, BUT I DON’T MIND
THAT, AFTER ALL DELIVERING A BABY CAN’T BE THAT
DIFFICULT, MY WIFE IS GOING TO DO MOST OF THE
<> I WANT YOU TO KEEP IT SIMPLE. I WANT THE SIMPLEST
AND CHEAPEST DELIVERY POSSIBLE.
<> I DON’T WANT YOU TO CONSIDER WHAT PROBLEMS
YOU MIGHT RUN INTO DURING THE DELIVERY.
<> I FEEL LUCKY,
<> I WAS GOING TO DOWNLOAD HOW TO DELIVER
BABY FROM THE INTERNET AND I STILL MAY SO WHAT
DO YOU SAY?
75 BUCKS AND WE HAVE A DEAL. J
<> THAT WOULD HAVE BEEN A MISTAKE ON MY PART.
WOULD YOU SAY TO YOUR LAWYER
I WANT YOU TO DO MY WILL AND I DON’T WANT ANY OF THAT FANCY OR COMPLICATED ESTATE PLANNING STUFF. DON’T NEED IT, DON’T UNDERSTAND IT, DON’T WANT TO.
I KNOW YOU MAINLY DO DIVORCES OR CRIMINAL LAW OR TRAFFIC TICKETS OR DWIS OR NEGLIGENCE OR MEDICAL MALPRACTICE OR FAMILY COURT OR REAL ESTATE OR A LITTLE BIT OF EVERYTHING AND DON’T SPECIALIZE IN ESTATE PLANNING, WHATEVER THAT IS OR MEDICAID PLANNING, BUT I DON’T MIND THAT.
AFTER ALL DOING AN ESTATE PLAN CAN’T BE THAT DIFFICULT.
I WANT YOU TO KEEP IT SIMPLE. I DON’T WANT ANYTHING COMPLICATED.
I WANT THE SIMPLEST AND CHEAPEST PLAN POSSIBLE.
I DON’T WANT YOU TO CONSIDER WHAT PROBLEMS OR EXPENSES MY SPOUSE OR KIDS MIGHT RUN INTO IF I GET SICK OR HOW I CAN AVOID THOSE PROBLEMS OR EXPENSES. I REALLY DON’T CARE.
I DON’T CARE HOW MUCH MY SPOUSE OR KIDS LOSE TO NURSING HOME COSTS OR UNPAID MEDICAL
I FEEL LUCKY,
I WAS GOING TO DOWNLOAD HOW TO PLAN MY OWN ESTATE FROM THE INTERNET AND I STILL MAY DO THAT SO WHAT DO YOU SAY?
75 BUCKS AND WE HAVE A DEAL. J
IF THAT IS WHAT YOU TELL YOUR LAWYER, THAT MIGHT BE A MISTAKE ON YOUR PART.
FACTS ABOUT ALZHEIMER’S DISEASE
<> Approximately 5.2 million Americans have Alzheimer's disease.
<> In Central New York there are approximately 45,200 people
with Alzheimer's disease
<> An estimated 16 million Americans will have Alzheimer's
<> One in 8 persons over 65 and nearly one half of those over 85
have Alzheimer's disease.
<> A person can live up to 20 years from onset of symptoms of
<> Alzheimer’s disease eventually renders a person totally
<> Approximately one out of two seniors over 65 spends some
Time in a nursing home, which can cost approximately $8,500
- $11,500 a month.
<> One in three seniors dies with Alzheimer's or other dementia.
THESE STATISTICS DON’T INCLUDE:
- FALL DOWNS CAUSING BROKEN OR
- LOU GEHRIGS DISEASE
- PARKINSON’S DISEASE
- HEART AND LUNG DISEASES
- OTHER DISEASES THAT MAKE IT UNSAFE
FOR A SENIOR TO LIVE ALONE
TRANSFERS FOR MEDICAID PURPOSES
CREATES A PENALTY PERIOD
When a Medicaid
During this penalty period, the Medicaid
In central NY amount of transfer divided by $9,722 a month
$50,000 transfer/9,722 = 5.14 month penalty period
THE FIRST PLANNING TECHNIQUES WE WILL DEAL WITH ARE
SOME PLANNING TECHNIQUES THAT CAN BE USED:
WHEN A SENIOR HAS LESS THAN 5 YEARS BEFORE A ENTERING
A NURSING HOME
YOU NEVER KNOW FOR CERTAIN HOW LONG THE SENIOR HAS BEFORE ENTERING A NURSING HOME
IF THE SENIOR IS HEALTHY AND YOU THINK YOU MAY HAVE 5 YEARS OR MORE
UNDER CURRENT LAW, YOU CAN TRANSFER ASSETS TO PROTECT THEM.
AFTER 5 YEARS, IF DONE RIGHT, THE ASSETS ARE PROTECTED.
THIS CLASS WILL DEAL WITH PLANNING WHEN A SENIOR HAS
LESS THAN 5 YEARS BEFORE A ENTERING A NURSING HOME
OR WHEN THE SENIOR IS ABOUT TO ENTER A NURSING HOME VERY SOON
USE OF SERVICE AGREEMENT (CAREGIVER AGREEMENT)
1. WRITTEN AGREEMENT BETWEEN A PARENT AND CHILD/CHILDREN
WHICH MEETS CERTAIN LEGAL REQUIREMENTS
2. FOR FAMILY MEMBERS,
OR FINANCIAL MANAGEMENT SERVICES TO PARENTS FOR
COMPENSATION. COMPENSATION IS TAXABLE TO CAREGIVER.
CONSIDER IRA TO SHELTER TAXABLE INCOME.
3. USED TO REDUCE THE PARENT’S ASSETS TO QUALIFY FOR MEDICAID
CURRENTLY $15,150 FOR A SINGLE PARENT
4. TO COMPENSATING CHILDREN FOR SERVICES TO PARENT EVEN IF THE
SERVICES WERE PROVIDED FREE OF CHARGE IN THE PAST
5. THE ISSUE IS WHETHER THE PARENT WILL RECEIVE FAIR MARKET
VALUE FOR THE MONEY THEY PAY TO THE CHILDREN.
6. IF NOT, THEN A GIFT TRANSFER CREATES A PENALTY PERIOD
REQUIREMENTS FOR A SERVICE AGREEMENT
1. THE CONTRACT MUST BE IN WRITING AND MUST PROVIDE FOR THE RETURN OF PREPAID MONEY IF CAREGIVER BECOMES UNABLE TO FULFILL THE AGREEMENT OR PARENT DIES.
2. SERVICES CAN’T BE PROVIDED ON AN “AS NEEDED “ BASIS
3. SERVICES CAN’T BE RENDERED IF PARENT IS IN A NURSING HOME
4. THER MUST BE CREDIBLE
AND HOURS OF SERVICES PROVIDED. NO LOG, THEN A GIFT
5. WAGES ARE MEASURED BY US DEPARTMENT OF LABOR STATISTICS
CURRENTLY ABOUT $14 PER HOUR. WAGES ARE TAXABLE,
PLANNING TIP: CHILD SHOULD CONSIDER USING AN IRA TO OFFSET INCOME TAX ON WAGES PAID TO CHILD.
BUREAU OF LABOR STATISTICS OUTLOOK HANDBOOK
WHAT PERSONAL CARE AIDES DO
<> Care for and assist clients with cognitive impairments,
<> Provide companionship bt talking to, playing games with or going for walks
<> Help clients with tasks related to hygiene, such as bathing, brushing teeth, and
going to the bathroom
<> Help transfer clients from a bed to a wheelchair or vice versa
<> Complete housekeeping tasks, such as changing bed linens, washing dishes,
and cleaning living areas
<> Help prepare and plan meals
<> Organize a client’s schedule and plan appointments
<> Arrange transportation to doctors’ offices or to the store
<> Help clients pay bills or manage money
<> Shop for personal items and groceries
BUREAU OF LABOR STATISTICS OUTLOOK HANDBOOK
WHAT HOME HEALTH AIDES DO: DUTIES:
HOME HEALTH AIDES TYPICALLY DO THE FOLLOWING:
<> Help clients in their daily personal tasks, such as bathing or dressing
< Provide basic health-related services according to a client’s needs, such
as checking vital signs or administering prescribed medication at scheduled times
<> Do light housekeeping, such as laundry, washing dishes, and vacuuming in a client’s home
<> Organize a client’s schedule and plan appointments
<> Arrange transportation to doctors’ offices or for other kinds of outings
<> Shop for groceries and prepare meals to a client’s dietary specifications
<> Provide companionship
SENIOR OWNS THEIR OWN HOME
NO ESTATE PLANNING HAS BEEN DONE TO PROTECT HOME
SENIOR HAS VERY LITTLE CASH SAVINGS
SENIOR HAS VERY LITTLE PENSION AND SS INCOME THEY LIVE ON
SENIOR MAY GO INTO A NURSING HOME WITHIN 5 YEARS
AND NOW WANTS TO PROTECT THE HOME
IF THEY TRANSFER THE HOME NOW, IT CREATES A
PENALTY PERIOD AND RESULTS IN
ON THE HOME IF SENIOR GOES INTO THE NURSING HOME
WITHIN 5 YEARS
SENIOR WANTS TO PROTECT AS MUCH OF THE VALUE OF
THE HOME FROM NURSING HOME COSTS AS POSSIBLE
HOME EQUITY LOAN WON’T WORK BECAUSE SENIOR CAN’T
MAKE CURRENT MORTGAGE PAYMENTS BECAUSE
SENIOR’S INCOME IS NEEDED FOR LIVING EXPENSES
SENIOR NEEDS CASH TO DO MEDICAID PLANNING TO PROTECT SOME OF THE EQUITY IN THE
HOME BUT HAS NONE
USE OF A REVERSE MORTGAGE
How Does a Reverse Mortgage Work
A reverse mortgage, like a traditional mortgage, is a loan made by a lender to a homeowner using the home as security or collateral.
With a traditional mortgage, the bank may lend up to 90% of the property’s value to the homeowner and the bank expects the homeowner will use their income to pay down the debt over time.
The way a reverse mortgage works is the lender loans less and expects the reverse mortgage loan balance will grow over time because the homeowner is not making monthly mortgage payments.
A reverse mortgage loan generally does not require repayment until the last homeowner has passed away or moved out of the property. Consequently, life expectancy is a huge part of the lender’s Calculation of how much to lend. A
SENIOR SHOULD APPLY FOR REVERSE MORTGAGE NOW
IF SENIOR WAITS UNTIL THEY ENTER NURSING HOME THEY CAN’T GET A REVERSE MORTGAGE BECAUSE BANK IS AFRAID OF MEDICAL EXPENSES, NURSING HOME COSTS AND MEDICAID LIEN GETTING PRIORITY OVER THEIR MORTGAGE
SENIOR DOESN’T HAVE TO DRAW DOWN THE MORTGAGE PROCEEDS FROM THE MORTGAGE UNLESS AND UNTIL THEY ENTER A NURSING HOME
JUST PRIOR TO ENTERING A NURSING HOME, THE MAXIMUM
THEN THE MORTGAGE PROCEEDS ARE USED TO PAY SENIOR’S FUNERAL EXPENSES, BURIAL SPACE AGREEMENTS FOR THE CHILDREN AND SPOUSES AND THE BALANCE IS LOANED TO A CHILD IN A GIFT AND PROMISSORY LOAN TRANSACTION.
PURCHASE OF A LIFE ESTATE
PROBLEM: CLIENT HAS NO HOME, HOME MAY HAVE BEEN SOLD
OR HOME WAS TRANSFERRED MORE THAN 5 YEARS AGO
SENIOR MAY LIVE IN AN APARTMENT
SENIOR HAS MORE THAN $15,150 IN ASSETS
AFTER FUNERAL EXPENSES, BURIAL SPACE
SENIOR BUYS THE RIGHT TO LIVE IN A CHILD OR GRANDCHILD’S HOME FOR THE BALANCE OF THEIR LIFE
SENIOR MUST RESIDE IN THAT HOME FOR AT LEAST ONE YEAR AFTER DATE OF PURCHASE, OTHERWISE BE SUBJECT TO A PENALTY PERIOD
PURCHASE PRICE MUST BE ACTUARIALLY CALCULATED BASED ON THE LIFE EXPECTANCY OF THE SENIOR AND THIS DEPENDS ON HOW OLD THE SENIOR IS. THE YOUNGER THE SENIOR IS THE MORE THAT CAN BE PROTECTED, THE OLDER THE SENIOR IS THEN LESS CAN BE PROTECTED
YOUR LAWYER MUST RUN THE NUMBERS !!!
YOU MUST HAVE AN APPRAISAL!!!
EXAMPLE OF THE PURCHASE OF A LIFE ESTATE:
MOM IS 75 YEARS OLD
MOM GOES TO LIVE WITH DAUGHTER
DAUGHTER’S HOUSE IS WORTH $200,000
VALUE OF MOM’S LIFE ESTATE IS WORTH $38,154
BASED ON AN IRC 7520 INTEREST RATE OF 2%
AN ACTUARIAL FACTOR OF .19077 FROM TABLE S
.19077 X $200,000 = $38,154, WHICH CAN BE PROTECTED 1 YEAR
AFTER THE PURCHASE OF THE LIFE ESTATE WITHOUT
A PENALTY PERIOD AND THUS AVOIDS THE 5 YEAR RULE
A POWER OF ATTORNEY WHICH CONTAINS SPECIFIC MEDICAID
AND ASSET PROTECTION LANGUAGE IS CRITICAL TO ENABLE USE OF ASSET
MAY NOT BE ABLE TO SIGN DOCUMENTS THAT ARE USED
TO IMPLEMENT ASSET PROTECTION STRATEGIES AND TECHNIQUES
ARTICLE 81 GUARDIANSHIP PROCEEDING
<> IF THERE IS NO POWER OF ATTORNEY OR NO ASSET PROTECTION
<> YOUR FAMILY MUST HIRE AN ATTORNEY TO PETITION A
COURT TO APPOINT SOMEONE TO BE YOUR LEGAL GUARDIAN
AND HANDLE YOUR FINANCIAL AFFAIRS
<> COURT APPOINTS A SECOND ATTORNEY TO REPRESENT YOU
<> COURT APPOINT A THIRD ATTORNEY AS A COURT
EVALUATOR TO ADVISE THE JUDGE IF YOU REALLY NEED A GUARDIAN
<> COURT CAN APPOINT A FOURTH ATTORNEY TO BE YOUR
GUARDIAN AND HANDLE YOUR FINANCIAL AFFAIRS AND
NOT YOUR SPOUSE OR CHILDREN. L
<> YOU PAY FOR ALL FOUR ATTORNEYS
I HAVE SEEN THE 3 ATTORNEYS FEES AMOUNT TO OVER
DURABLE POWER OF ATTORNEY WITH A STATUTORY GIFT RIDER:
FINANCIAL AFFAIRS IF YOU BECOME ILL
- PAYMENT OF BILLS
- INVESTMENT OF ASSETS
<> AVOIDS LEGAL GUARDIANSHIP
<> GIVES POWER TO DO:
- MEDICAID & ASSET PROTECTION PLANING
- INCOME AND ESTATE TAX PLANNING
- PROBATE AVOIDANCE PLANNING
<> MY POWERS OF ATTORNEY ARE 31 PAGES LONG
<> MY POWERS OF ATTORNEY ARE 31 PAGES LONG
SENIOR TRANSFERRED HOUSE AND SAVINGS LESS THAN FIVE YEARS AGO
SENIOR HAS DEMENTIA OR OTHER HEALTH PROBLEM S & CAN NO LONGER LIVE ALONE
SENIOR WANTS TO STAY IN THEIR OWN HOME
SENIOR HAS MOUNTING MEDICAL BILLS IN EXCESS OF THEIR INCOME
SENIOR CAN’T AFFORD THE COST OF HOME HEALTH CARE AIDES
CHILDREN CAN HELP OUT SOME BUT CAN’T PROVIDE THE CARE SENIOR NEEDS
SOLUTION: COMMUNITY MEDICAID
WHEN SENIOR STAYS IN THE COMMUNITY (THEIR HOME) AND
NOT IN A NURSING HOME
DOCTORS, DENTISTS, PRESCRIPTIONS
HOME CARE SERVICES
PERSONAL CARE SERVICES, NURSING,
PHYSICAL OR OCCUPATIONAL THERAPY, HOME HEALTH CARE AIDES, etc.
IF SINGLE $842 PER MONTH
IF MARRIED $1233
WITH $20 PER MONTH DISREGARD ---NOTE IF YOU HAVE EXCESS INCOME, YOU CAN USE A
POOLED INCOME TRUST TO SHELTER THAT EXCESS INCOME
IF SINGLE $15,150
IF MARRIED $ 22,200
LOOK BACK PERIOD: NONE J
PENALTY PERIOD: NONE J
RESOURCES INCLUDE ALL PROPERTY:
IRAS/401 (k)S/403 B’S/457 PLANS- MORE ABOUT THESE LATER
COLLECTIONS/VALUABLES: COINS, STAMPS, CARS, ETC.
PERSONAL EFFECTS ARE EXEMPT
ONE AUTO IS EXEMPT
BURIAL SPACE AGREEMENTS FOR FAMILY MEMBERS ARE
EXEMPT/CHILDREN/CHILDRE’S SPOUSES, ETC.
MORE ABOUT THESE LATER
PROBLEM: SENIOR IS GOING INTO NURSING HOME NOW
SENIOR HAS $100,000 OF EXCESS RESOURCES
NURSING HOME COSTS $10,000 A MONTH
THE $100,000 WILL BE LOST IN 10 MONTHS
SOLUTION: SENIOR USES A GIFT AND A PROMISSORY NOTE
1. THE NOTE MUST IN WRITING
2. THE REPAYMENT TERM MUST ACTUARILY SOUND
LESS THAN THE PARENT’S LIFE EXPECTANCY
3. PAYMENTS ARE IN EQUAL AMOUNTS DURING LOAN
TERM WITH NO DEFERRAL OR BALLOON
4. NO CANCELLATION OF LOAN BALANCE ON DEATH
EXAMPLE OF THE USE OF A GIFT AND PROMISSORY NOTE
PROBLEM: - SINGLE SENIOR HAS $100,000 OF EXCESS RESOURCES
- NURSING HOME COSTS $10,000 A MONTH
- THE $100,000 WILL BE LOST IN 10 MONTHS
- SENIOR HAS SOCIAL SECURITY OF $1,000 A MONTH
- SENIOR HAS A PENSION OF $1,000 A MONTH
1. SENIOR GIFTS $55,512 TO CHILD
THIS CREATES A PENALTY PERIOD EQUAL TO
$55,512/$9,252 = 6 MONTH PENALTY PERIOD
2. SENIOR LOANS CHILD $44,488
THE $44,488 LOAN IS REPAID OVER 6 MONTHS @ 6%
THE LOAN PAYMENT IS $7,544.96 PER MONTH
3. SS $1,000 PLUS PENSION $1,000 PLUS NOTE PAYMENT=
$9,544.96 PER MONTH WHICH IS LESS THAN THE
$10,000 NURSING HOME BILL WITH BALANCE OF $455.04
THE SIX MONTH PENALTY PERIOD
5. MEDICAID KICKS IN MONTH 7 AND THE GIFT OF $55,512 LESS
$2,730.24 ($455.04 X 6) OR $52,782 IS COMPLETELY PROTECTED J
PROBLEM: A MARRIED SENIOR IS GOING INTO NURSING HOME NOW
SENIOR HAS A HOME AND JOINT SAVINGS OF $100,000
NURSING HOME COSTS $10,000 A MONTH
SENIOR CAN ONLY HAVE $14,850
THERE ARE EXCESS ASSETS AND LIENS WILL BE
PLACED AGAINST THE HOUSE
SOLUTION: TRANSFERS TO SPOUSE ARE EXEMPT TRANSFERS AND
WON’T CREATE A
SENIOR TRANSFERS HOUSE TO SPOUSE
SENIOR CAN KEEP $14,850 AND TRANSFER BALANCE OF SAVINGS TO SPOUSE.
SPOUSE CAN HAVE $74,820 IN ASSETS NOT COUNTING THE HOUSE
OF ASSETS BY SPOUSE OF MARRIED MEDICAID APPLICANT
PROBLEM: SPOUSE HAS ASSETS IN EXCESS OF 74,820
SOLUTION: SPOUSE SPENDS DOWN:
1. NEW CAR
2. REMODELS KITCHEN, BATHROOM
3. NEW FURNACE, CENTRAL AIR
4. NEW ROOF
5. PAVES AND REPAIRS THE DRIVEWAY
6. NEW WINDOWS
7. REPAIR PORCH
8. NEW FURNITURE, APPLIANCES, COMPUTER,
9. BE CREATIVE J
USE OF BURIAL SPACE AGREEMENTS IN CRISIS PLANNING
TO AVOID THE 5 YEAR RULE
GIS 11 OHIP/ADM-4
A MEDICAID APPLICANT CAN SET UP A BURIAL SPACE AGREEMENT ONE MONTH BEFORE THE
1. Irrevocable Pre-Need Agreement - A contract in which payment is made in advance of need to a funeral director, funeral firm, undertaker, cemetery, or
Burial Space Items - Burial plots, gravesites, crypts, vaults, mausoleums, caskets, urns, or other repositories customarily and traditionally used for the remains of deceased persons. Arrangements for opening and closing of the grave, burial containers (e.g., for caskets), headstones and headstone engraving are also considered burial space items.
3. You can’t pay for:
Non-Burial Space Items - Items such as topical disinfection, custodial care, dressing/casketing, cosmetology, supervision for visitation and/or funeral service, hearse, death notices, flowers
4. Family Members Include:
The senior’s spouse, minor and adult children (including adoptive children and step-children), brothers, sisters, parents, adoptive parents and the spouses of those individuals as long as the marriage is in effect.
5. The senior must be the purchaser, not the child!!!
6. The Senior can’t give the money to the child to set the up the agreement. This won’t work if the purchaser is the child.
HOW THE USE OF BURIAL SPACE AGREEMENTS WORK:
SENIOR HAS FOUR CHILDREN
THREE OF THE CHILDREN ARE MARRIED
HE HAS QUOTES FOR THE FOLLOWING:
BURIAL CONTAINER $1,000
OPENING AND CLOSING OF THE GRAVE $1,000
STONE $1, 000
<> 7 BENEFICIARIES X $7,000 = $49,000 CAN BE PROTECED
THE MONTH BEFORE YOU ARE ELIGIBLE FOR MEDICAID.
<> THERE IS NO LIMIT ON THE AMOUNT OF THE ITEMS BUT THEY
SHOULD BE REASONABLE.
<> PLANNING TIP: PAY FOR THESE BY WITHDRAWING A BANK
CHECK TO THE FUNERAL HOME TO MAKE SURE THE CHECK
CLEARS PRIOR TO THE FIRST OF THE MONTH!!!
<> WHATEVER IS NOT SPENT GOES TO COUNTY
Exceptions: The transfer of exempt assets, other than a homestead, does not affect senior’s eligibility for Medicaid.
1. A Medicaid applicant or the spouse may transfer the homestead, without penalty, to his/her Spouse
2. To a Child under the age of 21
3. Certified blind/disabled child of any age;
5. An adult child who resided in the applicant’s home for at
least 2 years, immediately prior to the applicant’s most recent institutionalization and who provided care to the applicant which permitted the applicant to reside at home rather than in a medical facility. It is presumed that the child “provided care” unless there is evidence to the contrary.
PLANNING TIP: A HOUSE MUST GO DIRECTLY TO THE CHILD.
TRANSFER OF ASSETS OTHER THAN A HOUSE
TO A DISABLED CHILD
6. To a trust established solely for the benefit of
A HOUSE MUST BE TRANSFERRED DIRECTLY TO A
PLANNING TIP: IF THE SNT IS SET UP 5 YEARS PRIOR TO A SENIOR GOING INTO A NURSING HOME, THEN THE BALANCE IN THE TRUST ON THE DEATH OF THE SPECIAL NEEDS CHILD CAN GO TO OTHER CHILDREN AND NOT THE CHILD’S ESTATE, AVOIDING A MEDICAID LIEN
MEDICAID TREATMENT OF IRAS AND RETIREMENT ACCOUNTS
TAX DEFERRED PLANS THAT PROVIDE INCOME TO SENIORS:
PROFIT SHARING PLANS
MOST DEFERRED COMPENSATION PLANS
MISC. OTHER TAX DEFERRED RETIREMENT ACCOUNTS
IF A SENIOR OWNS A RETIREMENT ACCOUNT AND IS ABLE TO MAKE A WITHDRAWAL FROM THAT ACCOUNT, THE ACCOUNT WILL BE CONSIDERED AN “AVAILABLE RESOURCE.” THE COUNTABLE AMOUNT IS THE VALUE OF THE ACCOUNT NET OF ANY EARLY WITHDRAWAL PENALTY.
NOTE: INCOME TAXES DUE UPON THE DISTRIBUTION DO NOT REDUCE THE AMOUNT THAT IS COUNTABLE AS AN AVAILABLE RESOURCE. L
PROTECTING IRAS AND RETIREMENT ACCOUNTS
CONVERTING THE IRA /RETIREMENT ACCOUNT FROM AN AVAILABLE RESOURCE INTO AN INCOME STREAM
IF THE SENIOR OWNS AN IRA OR A RETIREMENT ACCOUNT AND HAS ELECTED TO RECEIVE PERIODIC PAYMENTS, (OFTEN CALLED “ANNUITZING” OR REFERRED TO AS PLACING IT INTO DISTRIBUTION STATUS,) THE IRA OR RETIREMENT ACCOUNT WON’T BE COUNTED AS AN AVAILABLE RESOURCE FOR THE MEDICAID ASSET ELIGIBILITY TEST, BUT THE PAYMENTS WILL BE CONSIDERED AS INCOME FOR THE MEDICAID INCOME
EXAMPLE OF HOW TO PROTECT AN IRA OR RETIREMENT ACCOUNT
SENIOR HAS AN IRA VALUED AT $75,000
SENIOR IS A
HIS LIFE EXPECTANCY IS 12.44 YEARS OR 149.28 MONTHS
HIS MONTHLY PAYMENT IS $75,000/149 = $503.36
ON HIS DEATH THE BALANCE OF THE 149 PAYMENTS GOES TO KIDS
IF HE WAS MARRIED AND HIS WIFE HAD INCOME UNDER $2,477.14 ($2,980.50 – 503.36) HIS WIFE GETS TO KEEP THE $503.36 AND IT IS ENTIRELY PROTECTED FROM MEDICAID. J
THE SAME RULES APPLIES TO NON QUALIFIED ANNUITIES PURCHASED BEFORE FEBRUARY 8TH, 2006.
NOTE: AS OF JULY 15TH, 2014, MARRIED MEDICAID APPLICANTS IN ONEIDA COUNTY GET TO USE THE IRS TABLES IN DETERMINING THE AMOUNT OF THE IRA/RETIREMENT MONTHLY PAYMENT WHICH CAN RESULT IN A LOWER PAYMENT EQUAL TO THE RMD FOR IRS PURPOSES.
Check out my Home Page below for some more useful estate planning information.
PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME
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