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.

 

 

ABLE Savings Registry – The Gift that Keeps on Giving

ABLE Program in New JerseyABLE accounts are special, tax qualified disability savings vehicles for seriously disabled individuals, who had a qualifying disability incurred prior to age 26.  As long as the rules of the ABLE program are complied with, a seriously disabled individual can receive up to $15,000 (in 2019) in funds in an ABLE account without the funds being counted against him in determining the individual’s eligibility for public benefits, including Medicaid and Supplemental Security Income.

Favorable income tax provisions apply to protect the income earned on funds contributed to an ABLE account, as long as the contribution is not distributed out of the account, or if the contributions are distributed out of the ABLE account, any income is not subject to federal income tax to the extent that it is spent during the same calendar year for qualified disability related expenses.

Qualified disability expenses are expenses which relate to the account beneficiary’s blindness or disability and enhance his or her enjoyment of life as a result of the disability. Qualified disability expenses can encompass basic living expenses, transportation, education, assistive technology, legal expenses, medical care and education and training.

Here is a digital-age tip for parents, grandparents and gift-giving relatives of young adults who are eligible for an ABLE account and want to attend college. There is a new, web platform www.giftofcollege.com which can help make saving for college (while continuing to qualify for means-tested public benefits) easier than ever.  The new platform enables a disabled individual eligible to link their ABLE account to an online profile. Invitations to contribute funds can also be sent electronically.

For more disability savings strategies and resources, consult with an experienced special needs and disability lawyer.

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 Your Emotional Support Dog a Bone of Contention?

emotional support dog

Dogs can bring us companionship, a sense of purpose and enhanced health. Fortunately, courts (and landlords) are increasingly recognizing that an emotional support dog may be a reasonable accommodation of a disability under federal laws such as the Fair Housing Act. Castillo Condo Ass’n. v. U.S. Dep’t. of Hous. & Urban Dev., 821 F.3d 92, 96 (1st Cir. 2016); HUD No. 13-060 (April 30, 2013); McFadden v. Meeker Housing Auth. Civ. No. 16-cv-2304-WJM-GPG (D. Colo. February 15, 2019).

This law prohibits discrimination in the terms and conditions of housing rented to a disabled person where her disability substantially limits one or more major life activities and the landlord denies a request for a reasonable accommodation necessary to allow the disabled individual an equal opportunity to use and enjoy the dwelling. 42 U.S.C. 3604(f)(3)(B).

Major life activities are defined as basic functions such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning and working and presumably, studying in an academic environment.  Discrimination in the terms and conditions rented housing on the basis of a handicap is prohibited when there is a refusal to make a reasonable accommodation in the rules, policies or practices or serves when the accommodations may be necessary to allow the person an equal opportunity to use and enjoy the dwelling. For instance, in the case of a college student diagnosed with severe anxiety and depression, if the disability interferes with the student’s activities, for example, by interfering with sleeping patterns, which interferes with the student’s abilities to study effectively, attend early morning classes, and to socialize, and the soothing presences of an emotional support animal will greatly alleviate the anxiety, stress and depression, making it possible for the student to regularly sleep through the night, attend classes, and socialize with her peers, the presence of an emotional support animal may be a reasonable accommodation for this student.

An emotional support dog may be a reasonable accommodation for an individual whose disability. However, the disabled individual should be careful to comply with the landlord’s legitimate safety and hygiene related policies, including walking the dog in designated areas and compliance with pooper scooper requirements. Woodside Village v. Hertzmar, 8 Conn. Super. Ct. 801 (Conn Super Ct 1993).  For more information on reasonable accommodations under federal law, contact an experienced dog-loving, disability lawyer.

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.

When Are My Federal Benefits Protected?

electronic money.jpgSenior citizens and disabled persons are particularly susceptible to debt and money issues. For those living on a fixed income, losing part or all of the federal government benefit on which the recipient depends on food and shelter and everyday living expenses can be devastating.

If an individual owes certain types of federal debt, (for example, unpaid taxes, interest and penalties due to the Internal Revenue Service, an overpayment by the Social Security Administration, student loan debt and debt from Base Exchanges on military installations), federal benefits can be reduced to repay these obligations.  Fortunately, there are protections in place under federal law for important government benefits.

For example, the first $9,000 in Supplemental Security Income (SSI) benefits paid to an individual each year is protected from any offset. Veteran’s benefits generally cannot be offset, except to recoup an over payment from Veterans’ benefits. Federal student loan payments, other payments by the Department of Education, the Black Lung Act, and “tier two” Railroad Retirement benefits, are also protected.

Under an interim Treasury Rule, the most recent two months of electronic deposits from federal benefit payment for SSI, federal Civil Service Retirement Benefits, Veteran’s Benefits, and payments by the Railroad Retirement Board, Treasury Department, and the Office of Personnel Management, are protected against garnishment. Once the federal benefit is deposited electronically into the account, it cannot be taken by the government for a period of at least two months. During this time, the electronically deposited funds must available to the account holder.

Only funds electronically deposited into the account are protected under this rule.  If money is deposited via a check, money order or inter-account transfer, such funds are not protected by this rule and can be subjected to garnishment.

One solution is to use a Direct Express prepaid debit card.  Funds can be electronically deposited to the card. The funds on the card are available to the cardholder, and cannot be garnished. However, the cards are highly regulated and tend to have high fees.

State law may offer additional consumer protections. Other protections may be available under the federal Consumer Credit Protection Act (CCPA), Chapter 7 or 13 bankruptcy petitions, the Fair Debt Collection Practices Act, and state statutes of limitations.  Consultation with a bankruptcy, consumer protection and/or an elder law attorney is recommended before debt or garnishment becomes an issue.

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.

 

 

Financial Support for an Adult Disabled Child

Financial Support for an Adult Disabled ChildEven with child support payments from the non-custodial parent, raising a special needs child on a single parent’s income can be very challenging. N.J.S.A. 2A:17-56.67, a relatively new New Jersey emancipation law, requires termination of child support at age 19 unless otherwise provided in a court order or a judgment. As a practical matter, this means that the parents of adult disabled children who have prior court orders mandating continued child support after age nineteen, must either submit a written request for the continuation of the child support obligation prior to the nineteenth birthday of the child in question, or, if the child’s nineteenth birthday has already passed, the custodial parent must petition the Probate Court, rather than the Family Court, for continued financial support of the adult disabled child, even though the support obligation is already provided for in the court order.

The new law, enacted in 2015, further provides that the obligation to pay child support must terminate by operation of law when the child (who may be a special needs child) reaches the age of twenty-three. The custodial parent of an adult special needs child then bears the burden of seeking a court order for financial maintenance or reimbursement, as authorized by law.

The custodial parent is frequently the economically disadvantaged parent and the new law and the proposed new court rule will likely disproportionately impact these families. Among other things, the custodial parent must learn to navigate an entirely different set of legal rules and will no longer have the enforcement mechanism of the Probation Department.

Recently, I worked together with other elder and family law attorneys to advocate for the disability community on these issues. The Elder and Disability Law Section of the New Jersey State Bar Association presented this letter to the New Jersey State Bar Association, with the goal of making the process of obtaining continued financial support for an adult disabled child after the age of 23 as easy and cost-effective a process as possible.

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.