The Importance of Planning Early
“Planning is bringing the future into the present so that you can do something about it now.”  Alan Lakein, American author and Time Management Expert We plan to go on vacation. We plan to have dinner with friends. But when it comes to planning for how we will be taken care of as we advance in age, many of us prefer not to think about it, believing it will somehow all work out. Unfortunately, when it comes to long term care planning, including finding the appropriate care and figuring out how to pay for it, those who fail to plan are clearly the ones who risk losing the most.Consider the two scenarios below that contrast the different outcomes of planning early and choosing the “wait and see” approach for long term care. The Facts Hank is 72 and Ellen is 69. They have been retired for several years and have started traveling a few times a year to visit their children and grandchildren who live in nearby states. During a recent visit, their oldest child asked them whether they had made any plans in the event one of them suddenly got sick. Hank and Ellen had not thought much about this since both of them were in good health. However, they agreed to seek some advice upon returning home to see what their options were. Hank and Ellen own a home that they have lived in since their marriage 45 years ago, and they have checking, savings and CD accounts that total $325,000. They both worked most of their adult lives, carefully watching their expenses and never spending money on extravagant items they didn’t feel they needed. Scenario #1 – Hank and Ellen planning ahead. Hank and Ellen spoke with an elder law attorney, as they knew they should update their will and their powers of attorney. While there, they were surprised to learn that they could actually plan now to avoid running out of money in the future should they need long term care either at home or in a facility. With the help of their elder law attorney, they placed $200,000 and their home into an irrevocable trust, and named their children as beneficiaries of the trust. If needed, their children would be able to take a distribution from the irrevocable trust rather than using their own money for Hank and Ellen’s needs. The remaining $125,000 would be kept in a revocable trust that Hank and Ellen would use for their living and travel expenses. Ellen would apply for a long term care insurance policy to provide further protection for them should her health fail (Hank had applied previously but was denied). The $200,000 placed into the irrevocable trust would not be counted against them after 5 years, should either of them need long term care and the assistance of state benefits to pay for it. Unfortunately, six years later Hank had a severe stroke and ended up in a nursing home unable to use his right side arm or leg. Ellen tried caring for him at home but was simply unable to. Ellen went back to see the elder law attorney for help. Because they had planned ahead and had set up an irrevocable trust, Ellen was able to keep all of the remaining cash assets in their revocable trust, and Hank was able to qualify immediately for state Medicaid benefits. The irrevocable trust (which had now grown to $215,000) remained in place but did not count against Hank since more than 5 years had passed and neither Hank nor Ellen had any direct access to the trust assets. Ellen was incredibly relieved to know that she did not have to worry about paying for Hank’s care and could instead focus on visiting him and providing as much support as possible to him. Although Ellen was not able to obtain long term care insurance, she has piece of mind knowing their children continue to manage the irrevocable trust and are ready to help both Ellen and Hank as needed. Scenario #2 – Hank and Ellen without planning ahead. Let’s assume Hank and Ellen did not plan ahead. When Hank had a stroke at age 78, the couple had $300,000 in checking, savings and CDs. Under the Medicaid regulations in place at the time, Ellen was able to keep $110,00 of the assets, but most of the remaining assets had to be used for Hank’s care, leaving only $90,000 that was transferred to the children (or to an irrevocable trust) and thus protected from Medicaid. While their home would be protected since Ellen was still living there, if she were to become ill the home could be subject to a lien by Medicaid. It took nearly two years to get Hank qualified for Medicaid, and the process was incredibly stressful for Ellen and her children. Furthermore, no planning has been done for Ellen and if her health fails, their remaining assets are at risk. What If Hank Was Not Married? Let’s assume Hank was not married, but had the same assets. If Hank planned early, all of the assets he put into an irrevocable trust (including his home) would be protected. Any assets left outside the trust could be transferred or turned into an income stream to pay for his care, should his health fail and he would need to qualify for Medicaid. Just as above, the Medicaid application process would go smoothly and quickly. In addition, an enhanced power of attorney would avoid the need for a guardianship in the event Hank was unable to make the transfers or sign the Medicaid application himself. If Hank did not plan ahead, more than half of his liquid assets may have had to be used in order to protect Hank’s home, depending on the Medicaid rules in effect at the time. This would leave only $50,000 to transfer to the children (or to an irrevocable trust). And, if Hank did not have capacity to make any transfers or to establish an irrevocable trust, a guardianship proceeding would have to be initiated before any transfers could be made. Furthermore, the guardianship court would have to grant permission for such transfers to be made. Conclusion The scenarios above have highlighted the importance of seniors and their loved ones planning early for the possibility of needing long term care. There are not only financial benefits to doing so, but also numerous non-financial benefits, including reduced stress on the family and peace of mind knowing that the family’s needs are taken care of regardless of any health care crisis that may occur. The Powers Law Firm, P.C. helps families plan for their long term care needs, whether it is years in advance or after a health care crisis has occurred. We would be honored to work with you or the seniors and families you assist. As always, nothing contained in my posts should be taken as legal advice as I have not been retained to represent you. Only if we have both signed a written engagement agreement will you be represented and entitled to rely on my advice. |
Medicaid Planning Needs to be Updated – New Recovery Regulations Harsh
When someone dies having received Medicaid New York asks that their estate assets be used to repay the program for costs spent. Until earlier this year the only estate recovery was against probate assets, those assets in individual name that required the full probate process through a local Surrogate's Court. With the budget law signed this past April, estate recovery has been expanded to include all assets that pass under a will OR BY INTESTACY and ANY REAL AND PERSONAL PROPERTY IN WHICH THE DECEDENT HAS ANY LEGAL TITLE OR INTEREST AT THE TIME OF DEATH.
Major changes are at hand. New emergency regulations were just published in the last two weeks, effective back to September 8, 2011, and an administrative directive was just issued by the Department of Health last week, the state agency that oversees the New York State Medicaid program. Everyone who has engaged in any kind of asset protection planning, those who have even thought about protecting assets and those who are currently on Medicaid (or their agents) should be meeting with skilled elder law attorneys to review those plans and determine what, if anything, needs to happen now. No longer will non-probate assets escape State recovery efforts; joint accounts, life estate interests in deeds (VERY common tool used by unsophisticated attorneys in the past), and annuities are all on the table now. And surviving spouses will simply receive deferred recovery until they pass away. The new regulations and directive leave much open to interpretation and are not to be treated lightly.
We will provide a Long Term Care Assurance Session for all of our clients on one of our VIP Membership Plans, but given the serious nature of these changes in the law we urge other Rochester area families to contact us for a no-obligation Long Term Care Assurance Session. Options for planning still exist, but you need to see an actual elder law attorney, not the general practitioner down the street who dabbles in whatever comes through the door. Please contact our Client Services Director at (585) 244-2170 to schedule your own Assurance Session.
Happy Anniversary DRA – Why Seniors Need Medicaid Attorneys
Jim Ziegler, Jr., one of my favorite elder law attorneys, authored a great article about the anniversary of the Deficit Reduction Act of 2005, now affectionately known as the "DRA." Read it here!
New York State offers Medicaid Spenddown Info online
In a very exciting move New York State recently provided a new web page that explains in very good detail what happens with surplus income for the Medicaid program, often known as a "spenddown." This program is for certain people whose monthly income exceeds the income threshold for a Medicaid recipient, but who have medical expenses on an ongoing basis that could be covered through the Medicaid program. By using their medical expenses to offset their excess income they can qualify for community Medicaid or a number of waiver programs available to individuals outside a nursing home setting. New York Medicaid applicants and recipients can learn a lot in this one-stop shop.
Applicants and recipients need to know that they only need to incur a medical expense equal to or greater than their spenddown amount. The expense does NOT need to be paid prior to submission to the Medicaid caseworker. However, Medicaid will only pay qualified providers of care – debts owed for care provided your neighbor, church friend or the kid down the street do NOT count for Medicaid reimbursement. Also, home care expenses incurred through a licensed home care agency instead of a certified home health agency ("CHHA") will not be reimbursed either, unless there is a special contract between the agency and the particular County, so check your agency's licensing BEFORE incurring care expenses. (Monroe County has 3 CHHAs – Visiting Nurse Service, Lifetime Care and HCR.) There are many companion agencies out there providing wonderful services, but they cannot bill the Medicaid program.
Education and implementation are two different things…so please contact us if you are interested in exploring this possible Medicaid option in the Rochester area or if you are seeking options for meeting your spenddown such as using a pooled supplemental needs trust.
Medicaid Asset Protection is NOT Advice on Cheating the Government!
A well-recognized fellow National Academy of Elder Law Attorneys ("NAELA") member will be on the John Stossel show on Fox tonight (check you local listings). (Yes, this competes in some areas with the Cornell basketball game – go Big Red.) If you cannot watch the interview, though, read here how K. Gabriel Heiser counters John Stossel's hostile remarks that Medicaid asset protection planning amounts to efforts to cheat the government.
Medicaid Figures Stay the Same for 2010
New York State issued has issued the base numbers to be used for Medicaid qualification for 2010 and they will not increase. An applicant can keep $13,800 in resources and for nursing home Medicaid the community spouse resource allowance ("CSRA") will still fall between $74,820 and $109,560. This is because the Medicaid allowances are tied to the cost of living increases generally given for Social Security income. Social Security payments will not increase for 2010, so Medicaid is not increasing its allowances for individuals or couples. The monthly allowance for community spouse income will likewise remain $2,739.
Even though Medicaid is not changing the numbers that apply to consumers do not think for one moment that medical expenses and long term care pricing will stay stagnant. In speaking with nursing home representatives in Rochester where I practice the fees keep rising for all of the associated expenses of running a home. The assisted living communities are also facing increasing needs and demands from their residents. All costs continue to escalate and the need to engage in long term planning is as important as ever. Contact me or use the handy calendar tool posted to the left to set up your consultation with me. There's no time like the present!
New $250 Stimulus Payment Exempt for New York State Medicaid Recipients
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (ARRA) of 2009 “Stimulus Bill” Public Law 111-5, which provides a one time payment of $250 to each recipient of Social Security, Supplemental Security Income, Railroad Retirement Benefits and Veterans Disability Compensation or Pension Benefits.
For purposes of determining eligibility under any federal program or under any state or local program financed in whole or in-part with federal funds, the ARRA of 2009 “Stimulus Bill” mandates that these payments are not countable as income and are not a countable resource for the month of receipt and the following nine months.
What this means in plain English is that a Medicaid recipient in New York will not need to count the receipt of the $250 as income or as a resource in the month it arrives (May 2009 for many) or in the following nine months. If the individual is on Medicaid with a spend-down, the $250 receipt will not need to be included in the spend-down in the month it arrives. If the individual is in a nursing home receiving Medicaid assistance the payment does not need to be paid over to the nursing home because it is not part of income or resources. The funds should likely be spent for the recipient during the following nine months, however, as depending on the individual's exact situation the $250 could cause them to be "over-resourced" when they are recertified for their Medicaid program after the end of the ten-month "grace period." To determine whether this could happen the recipient should review their situation with the attorney who helped them qualify for benefits or another elder law attorney.
Not All Long Term Care Insurance Salepeople are Long Term Care Advisors
So why do you want a GOOD person reviewing long term care insurance with you? See the email I received from a financial advisor below. I think she forwarded it on because she knew her clients were not getting the best advice from her inhouse "expert." (This is not the advisor’s email, but rather an email from a so-called long term care insurance “expert” reviewing the advisor’s clients’ circumstances. My comments are in RED.)
If her husband can’t get a LTC policy, and has no life insurance and can’t get that either, and [they] need to pay for his care out of pocket, at that point you would want to consult a very good elder law attorney. The consultation should be NOW before a crisis hits. Options narrow when Medicaid planning involves nothing but a reaction to a tragic event.
Usually but not always, a healthy spouse can more easily provide care for the unhealthy spouse at home, provided healthy [spouse] is smart enough not to try to do it all themselves, don’t become as sick as the uninsurable; caregiving 24/7 wears a person down. The translation here is that home services should be hired; the reality is that often the person needing services refuses to allow “outsiders” to come into the home. Options should be explored, or at least discussed, before the need arises. If a diagnosis of a degenerative condition has been received (i.e. Parkinson’s) there is significant planning that can be done, often with specialized care available. In this example, one of our local home care agencies (HCR) even has a special program for Parkinson’s.
Life insurance can be utilized to “pay back” the estate once the unhealthy spouse who needed care dies. In the Medicaid context the cash value of life insurance owned by either spouse is included in the calculation of resources. Clients are often forced to take loans against the cash or even cash in policies.
If Mrs. N. is the one who needs care, the NYS Partnership protects not only her assets but all those belonging to her husband, even if he doesn’t have a policy. That’s because Medicaid as it exists today lumps together all assets belonging to husband and wife, so it doesn’t matter whose name the asset is in, no point in moving everything from him to her, in other words. This is just wrong. While the partnership policies can protect all assets if structured appropriately, assets must still be transferred out of the applying spouse’s name. And there is a limit on the non-applying spouse’s assets if she is the “community spouse.”
NY presently has what’s called “spousal refusal” meaning a spouse somehow gets her spouse into a nursing facility (no way around laying out some money here) and then after a couple of months of paying out of pocket, refuses to pay anymore. This is a gross misstatement of the law and how it works. “Spousal refusal” refers to a non-applying spouse refusing to make his or her assets and income available to the applying spouse, as required under New York law (spouses must support each other and cover each other’s medical expenses). The refusal takes place at the time of the Medicaid application, not at the time of a nursing home admission. Nursing home admissions frequently arise in the context of rehabilitation services following a hospital admission, which can result in Medicare covering the initial costs of the nursing home stay. It is not automatic that there will be a couple of months of out of pocket expenses paid by a couple.
And then there’s always divorce, but you can’t divorce an incompetent person, plus the courts are going to divide assets anyway – equitable distribution, they won’t allow one spouse to have everything just to avoid paying the other spouse’s nursing home bill. Divorces CAN be carried out through a guardianship if one spouse is incompetent and there are a number of judges who are sympathetic to Medicaid planning. That being said, divorce is usually the last choice. In more than a decade of Medicaid work none of my couples have ever been forced to divorce – yet.
There’s always a Medicaid trust, again, requires a very good elder law attorney, there’s a 5-year look-back, always an option, and one spouse having LTCI, especially with the daily benefit she’s applying for, would be really helpful if a trust is the choice. Finally – I agree with the need for a skilled elder law attorney. Options should be explored early and reviewed every couple of years. If an irrevocable trust is used (incidentally the only kind of trust that is useful for Medicaid planning) the terms must be strictly followed and only suitable investments included – NO ANNUITIES INSIDE A TRUST EVER. But that’s for another discussion about the dangers of annuities…to be continued.
So what is the lesson to be learned from this? You need to arm yourself with knowledge and only use trusted advisors like Susan Suben, from Long Term Care Associates, who only focuses on long term care insurance and teaches it to other long term care professionals. If you are meeting with a long term care insurance person get multiple quotes and ask them what they know about the interplay of long term care insurance with Medicaid. Better yet, sit down with a reputable elder law attorney AND your long term care insurance person. Those who know what they are doing welcome the opportunity to meet your elder law attorney and elder law attorneys are happy to involve your financial team in your planning – as long as your advisors are not recommending annuities.
TAX TIME MOVES FOR EVERY DAY
Tax season is upon us and a number of you may be scrambling to pull together records for your
tax preparers. The Internal Revenue
Service recommends that everyone keeps the following records:
- Bills
- Credit
card and other receipts - Invoices
- Mileage
logs - Cancelled,
imaged checks or other proofs of payments - Any
other records to support deductions or credits you may claim (in New York you
will want to make certain to have a detailed bill if you paid nursing home
expenses because the 6% assessment can be claimed on your state return – 2008 Claim Form Attachment)
What if you are over 65? 
You should be keeping records, contrary to the popular fiction that “less is
more.” Do not think of these records as
clutter, but as necessary history. In
addition, if there is any chance that you may need to file for Medicaid
assistance for long term care, and let’s face it, there is a chance for most
seniors, you will also want to gather the following documents in addition to
the IRS- recommended paperwork:
- Account
statements for all types of assets owned (checking, savings, IRA, brokerage, mutual
funds, annuities, life insurance) - 1099
statements for all stock ownership held outside of a brokerage account - Proof
of all income sources (Social Security annual letter, letter from pension
payor(s)) - Title
to vehicles - Deed
for any real estate - Past
tax returns (federal and state, including all 1099s) from 2005 forward - Cash
value statement for all life insurance - Statement
showing value of any prepaid burial arrangement
If you do not have everything in
the list currently on hand, start collecting now. The reporting requirements officially go to
five (5) years for all assets on February 8, 2011, but between now and then a
caseworker reviewing an application will review documents back to November 1,
2005. (You can potentially be eligible
for Medicaid retroactively three months prior to your application date, so use
November 1, 2005 as your beginning date.)
For a more detailed list of
everything required to be produced at a Medicaid application, please contact me.
SIDE NOTE: If you are in or
around Rochester, New York, and are looking for a new accountant and tax
preparer I highly recommend Richard Gray or Christopher Gamble.
New York State Releases 2008 Medicaid Numbers
Welcome to 2008. The pertinent Medicaid figures are out now.
The "community spouse" of a Medicaid applicant can keep between $74,820 and $104,400 as his Community Spouse Resource Allowance ("CSRA"). The community spouse is also entitled to a minimum monthly maintenance needs allowance of $2,610.
Unfortunately, the Medicaid applicant is still only entitled to a personal needs allowance each month of $50, the same small amount that has been in effect for two decades.
