Top Tips For A Successful Medicaid Spend Down

Finding the best long-term care, and a way to pay for that care with public benefits, is of critical importance to the elderly, the disabled and their families.  The national median cost of long term care in a private room in a skilled nursing facility is over $9,000 per month, with the average statewide median cost ranging from over $10,000 to well more than $12,000 in other states, including New Jersey, New York, and as high as $24,000 monthly for a private room in Alaska.

Many seniors do not realize that Medicare will cover limited skilled care for a short period of time, and will not be an option to pay for the care they may need for the rest of their lives.  Fortunately, Medicaid and the Veteran’s Administration Improved Pension (or the Dependency Indemnity Compensation benefit for a surviving spouse), combined with the applicant’s income, are means-tested public benefits programs that can often pay for a lifetime of long term care facility and other medical care costs.

Benefit through these programs are limited to applicants with low assets and low income.  The rules for Medicaid eligibility are quite complex and vary somewhat from state to state based on the provisions of each state’s Medicaid plan.  For instance, in my home state of New Jersey, in order for a single individual to qualify for Medicaid, that individual’s countable assets must not be even one penny over the sum of $2,000.  In general, one cannot give away one’s money and receive institutional or waiver service Medicaid benefits within five years of the date of the gift without incurring a Medicaid penalty period.  (A Medicaid penalty period is the period of time during which Medicaid benefits will not be available to pay for custodial care. The length of the penalty period corresponds to the value of the total uncompensated gifts made during the five year Medicaid look back period. The Medicaid penalty period will not begin to run until the last of the following events to occur: there is a filed Medicaid application for the applicant, the applicant is clinically eligible for Medicaid, and the application is either already in a long-term care facility or other care setting permitted under any Medicaid waiver program in his or her state, such as the home or an adult medical day care facility.)

Elder lawyers refer to the process of legally reducing assets to a level below the Medicaid threshold as “spend down and conversion.”  Where one member of a married couple will apply for Medicaid, the spend down and conversion process must be carefully timed and for best results, should be started only after the prospective Medicaid applicant has entered into a nursing home or has a filed application for a Medicaid waiver program and has already been determined clinically eligible for Medicaid.  In order to avoid a Medicaid penalty period as a result of the spend down process, all payments should be for fair market value for the Medicaid applicant or his spouse.  A typical Medicaid spend down may include the repayment of debt for the Medicaid applicant or his or her spouse (but not for another adult, which would be an uncompensated transfer), the payment of legal fees for crisis Medicaid planning and a Medicaid application, payments for other services to the Medicaid applicant and his spouse, the payment of real estate taxes and other costs of home ownership, the purchase of irrevocable prepaid burial arrangements for the Medicaid applicant and his spouse, the payment of “key money” to facilitate the admission of the Medicaid applicant to the best long-term care facility available. (This can frequently require private payment for several months of long term care).  Where the applicant owns a home, he may consider repairs and deferred maintenance to the home, especially where there is a healthy spouse who will remain at home or if the home needs repairs and maintenance to facilitate its sale.  Many seniors may also consider buying a new car, or new household furnishing or personal goods.

The purchase of a life estate in a child’s home may be a suitable spend down strategy for an elderly parent who is presently independent but may need Medicaid in the next few years, the parent wishes to reside in the child’s home and the child is amenable.  A life estate is an undivided ownership interest in the real property and gives the holder the right to reside in the home during his lifetime as well as favorable capital gains income tax consequences and responsibilities for the home’s financial upkeep.  If the parent reside in the child’s home for a period of at least one year and the value of the life estate is properly computed and both parent and child execute a deed memorializing the life estate purchase, the parent’s payment to the child for the life estate will not result in a Medicaid penalty period.

One of the most powerful spend down strategies is the purchase of a Medicaid compliant annuity. This is an annuity which meets strict criteria in the federal Medicaid statute.  The annuity can be funded with either non-qualified or qualified retirement funds. If the annuity is non-qualified, the annuity contract must provide for equal monthly payments (with no balloon payments), be irrevocable, non-assignable and the annuity term must be for a period longer than the actuarial life expectancy of the annuitant, as calculated according to actuarial life expectancy tables promulgated by the Social Security Administration or the state of residence of the Medicaid applicant. The annuity contract must name the state from which Medicaid benefits are sought as either the first remainder beneficiary to the extent of any Medicaid lien, or the state is named in the second position after the community spouse. If these requirements are satisfied, and assuming that the Medicaid applicant is otherwise eligible for Medicaid, the annuity contract cannot be treated as a countable asset and the annuity purchase cannot result in the imposition of any Medicaid penalty period.  See 42 U.S.C. 1396p(c)(1)(G); Carlini v. Velez, 947 F.Supp.2d 842 (D.N.J. 2013).

Similar rules apply for a qualified Medicaid-compliant annuity contract.

Here is an illustration of why the Medicaid compliant annuity purchase can be a powerful strategy to retitle a couple’s assets and preserve funds for the healthy spouse to remain for years in the family home.

Example.  Mary and James are ages 80 and 85, respectively. James needs nursing home care and Mary needs assisted living care. Mary’s only income is an estimated $600 monthly from her Social Security benefit. James’ income is comprised of $1,200 from Social Security, and he is not a veteran.  After their home is sold, the couple has $438,000 in liquid assets and James is ineligible for Medicaid due to the couple’s excess funds.  Without Medicaid planning, due to their home states’ maximum community spouse reserve allowance, Mary would have to spend down approximately $310,000, in order for James to become eligible for Medicaid.  Fortunately, she can spend the sum of $310,000 on a Medicaid annuity, which will enable James to become eligible for Medicaid in the following month and will provide her with sufficient monthly income to pay for her assisted living.  If the term of the annuity is for three years and for 36 equal monthly payments to Mary in the sum of over $8,600.  Mary is now able to pay for at least four years of assisted living care and can remain comfortably in the community. After the annuity term expires, Mary will likely be financially eligible for Medicaid herself.

Spend down is also important for United States military veterans and their spouses who are seeking the Veteran’s improved pension or the Dependency Indemnity Compensation for a surviving spouse or child.  In computing the applicant’s net worth for this means-tested benefit, federal law allows a deduction for unreimbursed medical expenses.

Medical expenses can include costs paid for services from health care providers, custodial care and must constitute a payment for an item or service that is medically necessary; improves the disabled individual’s functioning; or prevents, slows, or eases an individual’s functional decline.

Medical expenses may include care by a health care provider, i.e., someone who can only be an individual appropriately licensed by the state or country in which the service is provided to provide health care in that state or country.  In-home care providers are not always subject to licensure.

The definition of “health care provider” in the final rule incorporates a licensure requirement and the term may include, but is not limited to, a doctor, physician’s assistant, psychologist, chiropractor, registered nurse, licensed vocational nurse, and a physical or occupational therapist. Other categories of deductible medical expenses (to the extent not reimbursed) include medications, medical supplies, medical equipment and medical food, vitamins, and supplements if prescribed or directed by a health care provider authorized to write prescriptions, adaptive equipment, or service animals, including the cost of any veterinary care, used to assist a person with an ongoing disability; the cost of transportation for medical purposes, i.e., to and from a health care provider’s office, health insurance premiums, smoking cessation products; and institutional forms of care and in home care, including hospitals, nursing homes, medical foster homes, and inpatient treatment centers.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

 

 

Do I Need A Physician Orders for Life- Sustaining Treatment?

POLST.jpgA POLST (physician’s orders for life sustaining treatment) is a portable medical order, signed by a doctor, which contains the treatment wishes of an individual who is either seriously ill, or medically frail. The physician’s orders help the individual exert some degree of control over their end of life care.

Some individuals nearing the end of their life do not want to receive emergency medical treatment.  If the individual is residing in a long-term care facility, the current standard of care during an emergency is that the facility must call 9-1-1 in an emergency and the emergency medical personnel must to take every reasonable means to safe a life.  In an emergency, the decisions makers under a health care power of attorney may not be able to be reached immediately, and emergency medical personnel will not have time to read a legal document.  If your loved one nearing the end of life wishes not to receive emergency medical services (such as intubation, cardiopulmonary rescuscitation, antibiotics, and other treatments), a POLST should be prepared and provided to the long-term care facility.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Once A Caregiver Child, Always A Caregiver Child

caregiver child

In general, one cannot give away her assets and go on Medicaid within the next five years. If an individual who gives away assets (donor) applies for Medicaid within the sixty month period following the date of the last completed gift, the individual will usually be subject to a period of time during which Medicaid will not pay for their long-term care. The length of this period is related to the amount of the total gifts during the five year Medicaid look back period, and is referred to as a Medicaid penalty period.

An exception to the Medicaid penalty period and any Medicaid liens is the transfer of a home by an ill parent to a caregiver child.  If the child moves into the home of the parent, and provides such care to the parent for a continuous, two year period as will keep the parent from entering into a nursing home, then the parent may transfer the home to the child without any penalty period.  This authority for this exception comes from the federal Medicaid statute and is black letter federal law.

Since 2015, I have heard of several instances where a parent applying for Medicaid was awarded the caregiver child exemption while the parent was alive, and pursuant to the exemption, the home was transferred out of the parent’s name to the child.

After the parent’s death, the child is notified that the house is nevertheless subject to a Medicaid lien.

This should not be the case for several reasons. First, when the parent gives up any interest in the home by giving the home away to the caregiver child, the home is now beyond the parent’s future Medicaid estate and it cannot be subjected to a Medicaid lien.

In addition, any attempted claw back of the home into the deceased parent’s Medicaid estate, after the parent was previously determined eligible for Medicaid without any penalty imposed for the home transfer, denies the parent, the child and all subsequent third party bona fide purchasers of the home for value from the child, of due process without notice and an opportunity to be heard.  As a policy matter, these reports are very troubling because of the loss of evidence over the passage of years and because the new “policy,” which was not enacted with public rule-making, will seriously undermine the stability of real estate transactions statewide.

Options may include challenging the new notice in the Chancery Courts. For an assessment of your options, consult an experienced and knowledgeable elder law attorney.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Medicaid Planning In Incapacity: Brennan and Dale’s Excellent Adventures

Medicaid Planning In Incapacity

Medicaid is a joint federal and state program that provides funding for medical and long-term care to individuals with very low income and assets. Generally, a single individual cannot qualify for Medicaid unless her assets are less than $2,000 and she has gross monthly income below the sum of $2,313 (or if she does not, she uses a Miller Trust or a Qualified Income Trust correctly).  Where only one member of a married couple is applying for Medicaid, the healthy spouse may be able to retain up to the sum of $126,420 in 2019. Greater savings may be feasible with Medicaid planning.

Certain strategies can help you legally avoid unnecessary tax liability, avoid Medicaid liens and protect your assets, while facilitating eligibility for Medicaid and other means-tested public benefits.  Asset protection planning can preserve funds to pay for the “extras” that Medicaid cannot pay for, ensuring your loved one a measure of dignity and comfort. It can also protect the family home and even preserve a legacy for the children.

Planning strategies can include deeds, outright gifts, gifts in trust, and the purchase of Medicaid compliant annuities.  If the individual is able to enter into a legal and binding contract, execute a legal document and make decisions, public benefits planning can be done by the individual.  If this is no longer possible, the next option would be to plan through an existing general durable power of attorney.

But what if there is no power of attorney, or the existing power of attorney cannot be used?  Suppose step-brothers Brennan and Dale cannot get along but their parents, Nancy and Robert, named them as their decision-makers on their respective general durable powers of attorney, and the documents require Brennan and Dale to act jointly?  If Nancy and Robert are now incapacitated, using the power of attorney is not a viable option.  Nor will it be, if both Brennan and Dale refuse to serve and there is no other agent.  In this situation, Nancy and Robert could still benefit from Medicaid and tax planning through a guardianship.

The courts of New Jersey and many other states recognize that as incapacitated individuals, people like Nancy and Robert still have the right to restructure their finances through lawful tax and Medicaid planning as if they were able to act independently.  Once certain factors are established, a court is authorized to approve tax and Medicaid planning in the best interests of the incapacitated individual.  In these situations, asset protection planning may be accomplished through a guardianship.

An experienced and knowledgeable elder law attorney can help you determine whether your loved one needs tax or asset protection planning, and if so, when that planning can be authorized and carried out through a guardianship.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Can I Keep My Small Business and Still Go on Medicaid?

small business.jpg

Medicaid, the largest payment source for nursing home care in the United States, is a government health insurance program for low-income, low asset individuals. In New Jersey, a single individual generally cannot become financially eligible for Medicaid during any month in which her assets exceed the sum of $2,000 by even one cent on the first date of that month.  The $2,000 limited for Medicaid eligibility is referred to as the resource eligibility limit.

Certain assets are disregard in determining whether an individual is in excess of the Medicaid eligibility resource limit. The income producing property exemption may protect certain business property, including the land and buildings from which the small business is operated (and the machines, tools, trucks and equipment and even cash held in bank and investment accounts) where that business property is income producing property essential to self-support.  See 42 U.S.C. § 1382b(a)(3).

Suppose Kylie is age 65, has had a stroke, and now needs Medicaid to pay for her long-term care.  If Kylie owned and operated a profitable business selling her own line of cosmetics for several years before her entry into skilled care, the business, its inventory and the business’s operating accounts may be excluded from consideration in determining whether Kylie is eligible for Medicaid.

If you’re faced with a similar situation, it is important to seek counsel from a seasoned elder law attorney to ensure that you find the best care, and that you will qualify for Medicaid in order to pay for that care with public benefits. This can help you and your family protect the family home and your life savings, as well as ensure the best care is given to you or a loved on.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Is My Memory Loss Normal Aging or Something More?

Sad senior woman after quarrel

Garden variety memory lapses, like misplacing car keys, are normal, but where do you draw the line? A good rule of thumb is that if you notice that your loved one has repeated episodes of memory loss, and/or troubling personality changes or difficulty performing everyday tasks, like driving or financial management, it could be time for a crisis elder care plan. Here are some red flags to watch for:

  • Asking the same questions over and over again;
  • Repeating the same stories;
  • Difficulty paying bills, balancing the check book or reading a bank or credit card statement;
  • Difficulty adding and subtracting;
  • Late notices and missed payments, unopened mail accumulating;
  • Paying the same bill multiple times in the same month;
  • Difficulty performing everyday tasks (getting lost and being unable to find your way home, forgetting how to operate a home appliance);
  • Decline in personal hygiene (not bathing or brushing teeth, wearing the same clothing day after day);
  • Inappropriate attire, behavior, statements and/or language;
  • Confusion or word-finding difficulty (ex. asking where the “bread-thingy” is instead of where the toaster is;
  • Inability to retain new information; and/or
  • Irritability or foul language, behavior consistent with depression, apathy, anxiety, agitation, delusions and hallucinations, wandering, aggression

If you notice one or more of these signs, it may be a good idea to contact an elder lawyer without delay. An elder lawyer can help you find the best care and a way to pay for that care with public benefits, while protecting your life savings and the family home.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Support for New Jersey’s Unpaid Caregivers

Support for New Jersey’s Unpaid Caregivers

Caregiving, done well, can be the ultimate act of service and potentially a game-changer, enabling an elderly or functionally disabled individual to remain at home surrounded by their family, friends and happy memories.

However noble and important, caregiving often imposes a heavy financial, physical and emotional toll on unpaid caregivers, who statistically face a higher incidence of missed time from work, loss of employment, and of developing adverse emotional conditions such as anxiety, depression, and burn out, adverse health conditions and even physical injury.

The value of self-care on the part of the caregiver is essential. At a minimum, caregivers should take regular breaks, get physical exercise, maintain good nutrition and get plenty of rest, which is often easier said than done. With the number of elderly and disabled individuals reliant on care from unpaid caregivers projected to double by 2020, unpaid caregivers will face unprecedented challenges.

The state of New Jersey has taken up the challenge of supporting caregivers with recently enacted Public Law 2018, c166. Passed by the New Jersey legislature and signed by Acting Governor Sheila Oliver on December 28, 2018, the new law establishes the New Jersey Caregiver Task Force. The purpose of the task force is to evaluate existing supports for New Jersey caregivers and to develop recommendations for the improvement and expansion of caregiver support services within our state. The task force will take testimony from caregivers regarding the care duties performed, the sufficiency of caregiver training programs, the costs which caregivers face and their own personal caregiving experiences.  The task force will prepare a report with recommendations for new laws and regulatory or program changes to improve, expand and supplement existing caregiver support programs and systems within the state.

New Jersey’s new focus on caregivers is not unprecedented. In 2017, the state of Hawaii passed the Kapuna Care Act, which established the Kapuna Caregivers Assistance program to provide family caregivers who work with resources to help pay for care services for elderly individuals over age sixty residing in the community and requiring assistance with at least two activities of daily living or having substantial cognitive impairment.  Under the Hawaiian model, cash payments are available to help working caregivers defray some care-related costs.

At the federal level, the RAISE Family Caregivers Act was signed into law on January 8, 2018, and directs the Department of Health and Human Services to develop, maintain and update a National Family Caregiving Strategy and to convene a Family Caregiving Advisory Council. The Act defines family caregivers as adult family members or other individual having a “… significant relationship with” and providing “a broad range of assistance to an individual with a chronic or other health condition, disability or functional limitation.” The bill is designed to specify recommended actions which can be undertaken by federal, state, and local governments, communities, health care providers, and long term services and supports to assist family caregivers.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.