Do I Have To Pay For My Parent’s Care?

Adult children often ask, do I have to pay for my parent’s care?  That depends. If you have taken control of your parent’s assets and income, absent a provision in a durable power of attorney allowing you to gift your parent’s funds to yourself, you are generally required to use your parent’s money to pay for their care.  But what if your parent’s funds are already spent down and beyond your reach? A recent published New York case considered this question and took an interesting and pro-child approach to the subject. 

In Wedgewood Care Center, Inc., Etc. v. Kravitz, 2021 N.Y. Slip Op. 04731 (N.Y. App.Div., 2nd Dept., August 18, 2021), the New York Supreme Court Appellate Division overturned an award for a for profit nursing home, which sued the son of its former resident. The nursing home wanted to hold the son liable for his mother’s unpaid nursing home bill for the sum of approximately $49,000.  An irrevocable burial trust was funded with some of the mother’s funds.  The nursing home argued (among other points) that the resident’s son, who was named as her agent under her durable power of attorney, violated his mother’s nursing home admissions agreement by failing to use all of his mother’s money to pay for her care and by not getting his mother approved for Medicaid benefits quickly enough. 

In the trial court, the resident’s son argued that he could not be held liable for the cost of his mother’s care, as this would violate the federal Nursing Home Reform Act.  The nursing home focused on the admissions agreement, which required the son pay his mother’s nursing home bills from the assets and income of his mother within his control if he could do so without incurring any personal financial liability. The trial judge ruled for the nursing home. 

On appeal, the appellate court concluded that the funds in the irrevocable burial trust were not available to the son to pay for his mother’s care because the son was unable to withdraw this money and apply the funds to pay for his mother’s care.  With respect to the timeliness of the Medicaid award for the mother, the appeals court noted that the nursing home failed to identify any specific document that the son should have provided to the Medicaid office but failed to do so. The matter was remanded for further proceedings and should not be interpreted as a “get out of jail free” card for adult children who do not cooperate fully in the parent’s Medicaid application process.  

The bottom line is that a seasoned elder law attorney can help you understand and carry out your duties to assist in your parent’s Medicaid spend down and application and that your obligations may be more complicated than they seem at first blush. When in doubt, it is a good idea to consult an elder law attorney to explain the rights, duties and obligations incumbent upon you and your parent under a long-term care admissions agreement, the federal Nursing Home Reform Act and state law. 

Back to School: Medicaid & 529 Plans

Most people assume that they will not ever need skilled nursing care, but statistics show that that is not the case.  Medicare may be available to pay for a limited period of care under limited circumstances, but if an individual does not have long-term care insurance, care in a skilled nursing facility care can cost more than $12,000 per month in New Jersey. That is an awful lot of money to pay out-of-pocket, so more often than not, the client or his or her responsible caregiver turn to the Managed Long Term Services and Supports (MLTSS) Medicaid program as a source of funding, combined with the elderly resident’s income, for long-term care. 

MLTSS Medicaid is a joint federal/state means-tested welfare program. In New Jersey, for single individuals, the countable asset limit is $2,000. Countable assets are available resources, i.e., resources that are available to pay for your car.  In other words, if you have an asset that can be liquidated within 30 days, you can’t simply chose to do nothing to take the cash out of the assets and simply go on Medicaid, expecting Medicaid to pay for your care.  In New Jersey, this general rule applies to an individual’s (or a spouse’s) accessible retirement accounts as well as any educational savings accounts, including IRC 529 accounts, that can be converted to cash within a relatively short period of time. 

It can be a shock to family members to learn that the funds on deposit in a IRC 529 educational savings plan account may have to be returned to the contributor and spend down for the contributor’s long-term care or may be subject to a Medicaid penalty period, which is a period of time during which payment for long –term care is unavailable due to assets given away for less than fair market value during the Medicaid five year lookback period.  A seasoned elder lawyer can provide solutions. Depending on the circumstances, this might include purchasing a Medicaid friendly annuity to offset any Medicaid penalty period from the transfer of assets into a 529 plan or planning years in advance with an educational trust.

QuestionsLet Jane know

Don’t File For Medicaid Too Soon!

Most people assume that they will age in place at home and never need long-term care, but statistics show that that is not the case.  Medicare may be available to pay for a limited period of care under limited circumstances, but if an individual does not have long-term care insurance, nursing home care can cost more than $12,000 per month in New Jersey.  And that is only the average monthly cost of care; many facilities charge a higher rate.  That translates to at least $144,000, which is an awful lot of money to pay out-of-pocket.  That is why many seniors who can no longer remain at home turn to Medicaid, which is a joint federal and state public benefits program, to help fund their care in a nursing home or an assisted living facility.

As part of the process of transitioning from hospital care to long-term care, you will probably be asked whether you have filed a Medicaid application. This is a routine part of the long-term care admissions process.  It is very important to avoid filing for Medicaid before it is needed, for at least two reasons. 

You cannot give away your assets and go directly on Medicaid.  Generally, any gifts made during the lookback period and not fully repaid, will be penalized. while there are a few exceptions, most uncompensated gifts made during the five year Medicaid lookback period will likely result in a Medicaid penalty period, which is the denial of payment through Medicaid for care in a nursing home or an assisted living facility for a period of time corresponding to the total of all the gifts made during the five year Medicaid lookback period.  However, Medicaid generally cannot take into account gifts made before the lookback period began. So if there is going to be gifting in large amounts, it is best for the gifts to be made before the beginning of the Medicaid lookback period. 

How do you know when the five year Medicaid lookback period is?  Actually, the term “five year” Medicaid lookback can be misleading.  Filing the first Medicaid application triggers the Medicaid lookback, which is a period of time running retroactively from the date of filing of the first Medicaid application.  For example, if Eric Early files a Medicaid application on June 1, 2021, and this is his first Medicaid application, then the lookback period will be from June 1, 2016 to June 1, 2021 (five years) and potentially continuing into the future. 

However, there are circumstances when the Medicaid lookback period can extend beyond five years.  In Eric’s case, if he withdraws his first Medicaid application and does not file another Medicaid application until January 1, 2022, the lookback period for his second Medicaid application will still run from June 1, 2016 through to June 1, 2021, but will continue thereafter until the date of filing of the second Medicaid application on January 1, 2022.  So if Eric (or his wife, if he is married) made large gifts in 2016, those gifts will be considered on his 2022 Medicaid application and will probably result in a gifting penalty which Eric could have avoided had he simply waited to file the Medicaid application.

If Eric is married, the first Medicaid application sets the “snapshot.” Medicaid looks at the assets of the husband, the wife and the assets in their joint names, totals the assets and that total is the snapshot.  The amount of the snapshot limits the amount the healthy spouse can keep.  You only get one Medicaid snapshot, so it is very important to get the highest snapshot possible.  Here is an example showing what can happen if you don’t do proper planning before filing a Medicaid application.  

For instance, if Jim was hospitalized in 2017, and the hospital social worker filed a Medicaid application for Jim thinking Jim might have to go into a nursing home, but it turns out that Jim was actually able to return to the home after all.  Jim’s Medicaid snapshot is permanently set in 2017.  His snapshot is set in stone and it is never going to change.  Suppose in 2017, Jim and his wife own a home and a joint checking account with $100,000 in 2017, the home is exempt, but the checking account is not. Jim’s snapshot is $100,000 based on the checking account balance. Jim can keep no more than $2,000 and his wife can keep $50,000 without additional planning or legal advocacy and representation. 

Suppose Jim never completed his Medicaid application in 2017 and his wife cares for him at home for another year and in 2018, re-files for Medicaid for Jim.  In 2018, she also sells the house which was jointly owned with Jim, for the sum of $150,000. If the deed to the house was left in Jim’s name, in 2018, Jim will be disqualified for Medicaid due to being over the $2,000 Medicaid resource limit, because he is entitled to half the house sale proceeds. Now Jim has to spend down an additional $75,000 that could have been saved, had the 2017 Medicaid application not been filed and had Jim and his wife consulted with an elder care attorney.  If you have questions about a Medicaid application, please feel free to contact me to discuss your unique situation.  

Questions? Let Jane know.

Getting a Spousal Waiver for Medicaid Isn’t as Easy as You May Think in New Jersey 

This blog post is intended to help educate your family regarding the limited instances in which a spousal waiver may be available and help guide you through the tedious process of obtaining one in a suitable case. 

The Managed Long Term Services and Supports (MLTSS) Medicaid Program offers valuable benefits, which can provide for long term services and supports in the home, in an assisted living setting or in a nursing home.  However, federal Medicaid law and policy requires the states to evaluate all of the resources available to the Medicaid applicant during the five years immediately preceding the date of filing of the Medicaid application.  This requirement can make it very difficult to obtain a MLTSS approval, particularly if the Medicaid applicant has been separated from a spouse, has a obtained a divorce from bed and board, or has been divorced in the past five years.

Medicaid law and policy provides for Medicaid eligibility as a last resort, requiring the applicant to spend down any excess resources available over the $2,000 countable asset limit.  Under New Jersey common law, spouses can be held liable for necessary expenses (i.e., the cost of medical care) of their spouse and if their assets are in excess of the maximum community spouse reserve allowance (currently set at $130,380), even if the Medicaid applicant has less than $2,000, his or her Medicaid eligibility can be jeopardized by the funds in the name of the healthy spouse. 

Consequently, in determining eligibility for Medicaid, the County Welfare Office (CWO) will ask an applicant’s marital status, and will consider the applicant and his or her spouse legally married until the entry of a final judgment of divorce.  If the CWO determines that you are still married (which can happen even if you have been separated for years or have a divorce from bed and board), it will typically take a “what’s your’s is mine” approach in determining Medicaid eligibility.  This policy is typically enforced by requiring the Medicaid application to provide the spouse or former spouse’s social security number, if the Medicaid applicant has been married at any point during the five year Medicaid lookback period.  The social security number may be used to conduct an asset search, which will probably enable the CWO to identify and consider the current assets of the healthy current or former spouse.   This verification process places the Medicaid applicant in a Catch-22, because banking privacy laws block access to the healthy spouse’s statements, and the healthy spouse is unlikely to spend down assets under his or her sole control for the care of the sick former partner. 

What is spousal refusal? In some other states, especially New York, the strategy of “spousal refusal” is commonly used.  Under this strategy, the healthy spouse refuses to pay the nursing home bills of the spouse applying for Medicaid.  In response, the CWO in “spousal refusal” states evaluates Medicaid eligibility on the basis of the sick spouse’s own assets and income.  This result is referred to as a spousal waiver

New Jersey’s Strict Policy Regarding Spousal Waivers.  For years, the Garden State had a policy against awarding spousal waivers, in all but the most extreme cases, such was where spouses had lived separate and apart for many years.   As a result, spouse waivers were a rarity, making it best to obtain a final judgment of divorce and then wait more than five years to file a Medicaid application. 

How I was able to obtain spousal waiver for one of my recent clients:

In a nut shell, New Jersey was refusing to recognize federal law which provided for spousal refusal. Other states, including NY, do recognize spousal refusal. A little over a year prior to this case, another attorney’s application for a spousal waiver was denied by the New Jersey Department of Human Services, which prompted the case to be taken to the appellate division and the policy against spousal refusal/spousal waivers was overturned. Par for the course, New Jersey was very reluctant to grant the applications.

In my case, the spouses were still married.  The sick spouse was well-educated, extremely bright and conversant. However, their marriage was so difficult that the healthy spouse obtained a domestic violence restraining order against the other spouse, who nine years later became my client.  From that date forward, the two spouses lived separate and apart.  Eventually, one of the spouses needed long term care, and the spousal waiver was obtained largely on the basis of the restraining order.  It was critical to obtain all of that documentation.  Having the spousal waiver meant that the sick spouse was able to get the skilled nursing care needed, without the cooperation of the healthy spouse in the Medicaid application process.

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.

Master Your Finances Radio Show Appearance

Special thanks to Kurt Baker, host of the radio show “Master Your Finances,” for inviting me on his show to discuss how recent legal, economic and social changes, including the COVID-19 pandemic, can impact the finances of the elderly and disabled and their families, what you can do to protect your life savings. The segment aired on Sunday, September 13, 2020 at 9:00 AM on 107.7 FM TheBronc and is now available on demand on the Master Your Finances website.

Other topics we discussed during the segment on practical financial issues include:

  • How the SECURE Act really impacts your retirement plan and why it is very important to update estate planning for your tax-qualified retirement accounts (i.e., individual retirement accounts, 401(k)’s, 403(b)’s, 457(b)’s) 
  • Why life insurance and long term care policies are important investments in your family’s future
  • Estate planning strategies you might not have thought of, including a ROTH IRA conversion
  • How to ensure that your estate plan accomplishes what you intended 
  • Tips and traps for retirement income planning, including how the new individual retirement rollover rules affect your bottom line 
  • Health insurance tips and traps (and how to avoid them) in the event of a job loss
  • How to protect your home and your life savings while getting your loved one the best long-term care
  • How to navigate the changes to the long term care and Medicaid application process landscapes brought about by the COVID-19 pandemic
  • How the COVID-19 pandemic is exacerbating the mental health crisis and the important steps you can take to protect yourself and your finances if you are faced with an involuntary commitment

For more information on the “Master Your Finances” radio show, click here.

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.