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Helping Someone With Dementia Sell the Home

On By Jane Fearn-Zimmer, Esq.In Dementia, Elder Law, Estate Planning, Guardianship, Long-term care, MedicaidLeave a comment

Selling the home through guadrianship

Sometimes, a home must be sold, but the homeowner is no longer able to sign a listing or sale agreement due to cognitive impairment, confusion, advanced dementia or severe and persistent addiction issues (i.e., Wernicke-Korsakoff syndrome), or new onset dementia after recovering from COVID-19.  covid-19-pneumonia-increases-risk-of-dementia-study-says  Others may be temporarily incapacitated due to cardiac issues, surgery, or severe illness.  These conditions can prevent an adult from being temporarily or permanently able to make important financial, medical or legal decisions.  Adults who can no longer make decisions may be incapacitated.  And in real estate bubble with many residential properties reaching their peak value, it’s critical to act fast to accept the best home sale offer.

Unfortunately, incapacitated adults are unable to enter into a binding contract, such as an agreement to list or sell the home. When this happens, one option may be to use a general durable power of attorney or a real estate power of attorney to sell the home.  But that can only be successful where there is already a valid general durable power of attorney or real estate power of attorney in place.  If there is a power of attorney, and the homeowner is able to make decisions, the home cannot be sold through a power of attorney without the homeowner’s consent to the sale.  Giving a power of attorney to a trusted adult child or friend is like giving them an extra set of keys to the car. You can always take back the keys when you wish.

More to the point, a power of attorney is an important legal document by which the principal (i.e., the person signing the power of attorney) gives authority to an agent to carry out the affairs of the principal.  The catch-22 is that in order to make a power of attorney, the principal must have legal capacity.  Unfortunately, there are many incapacitated persons who never bothered to obtain a power of attorney before they lost capacity.   Another risk is that there may be a valid power of attorney, but the agent named may be deceased, very ill, or no longer available to serve.  Once again, there is no one with legal authority to sign the home sale agreement and the house cannot be sold even if there is a buyer.

The solution is to seek a court order for authority to sell the home.  This involves filing a lawsuit in the Superior Court for a judgment of incapacitation and award of guardianship.  The guardianship process is not a simple one. There are several different types of guardianships and the correct type must be selected.  Various court rules, required information and forms must be complied with.

The guardianship process requires doctor’s reports and an investigation into the finances and health of the alleged incapacitated person. As part of the process, the Superior Court judge appoints an independent attorney to investigate these matters and to write a report.  This attorney is referred to as the court-appointed attorney.  Often, that attorney’s report carries great weight with the court.  Testimony by the doctors may be waived, or if the guardianship is disputed, there may be an adversarial hearing.  If the evidence, any testimony and the court-appointed attorney’s report indicates that the alleged incapacitated person cannot make any significant decisions as to his person or property, then a plenary guardianship may be awarded.

But this is only the first step in obtaining court-authority to sell the home of the incapacitated person, who may urgently need the anticipated net home sale proceeds to pay for long-term care.  The next step is to file a motion with the court to sell the home through the guardianship.  The court can potentially award the requested order.  Only when such an order is in place, can the home be legally sold.

Not surprisingly, this process requires additional legal work and documentation.  The guardian must show that the proposed sale is fair and reasonable and in the “best interests” of the incapacitated person. In deciding whether this standard is satisfied, the judge may consider whether the incapacitated person will ever be able to return to the home to live there independently or with the assistance of paid caregivers, provided there are sufficient funds.  The fair market value and the tax-assessed value of the home will also be considered, as will the outcome of any prior attempts to sell the property, the cost of continued homeownership, and whether the anticipated net house sale proceeds are needed to pay for long-term care. In many cases, the home must be sold as a condition of Medicaid eligibility for the former homeowner in a nursing home.

This process takes time.   In limited cases where the safety of the alleged incapacitated person is endangered, or a very good purchase offer may be lost without swift court approval, the guardianship process can be expedited in New Jersey.

The bottom line, is that when capacity is in issue, selling the home a general durable power of attorney or a real estate power of attorney is much more efficient than through a guardianship. However, selling the home through a guardianship can be done in the difficult cases where there is no legal authority in place to sell the home.

Questions, or if you need help clearing title to sell a home through a guardianship? Let Jane know.

Medicare Open Season – Important Deadlines

On By Jane Fearn-Zimmer, Esq.In Disability Law, Elder Law, medicareLeave a comment

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The Medicare Open Enrollment window for 2020 runs from October 15, 2019 until December 7, 2019. Individuals who prefer not to have responsibility for out of pocket costs might consider enrolling in a Medicare Part F plan, which covers most deductibles and out of pocket costs. It is critical to enroll in such a plan during the upcoming open season window, because Part F plans are being phased out and will no longer be available to Medicare enrollees who are not enrolled in such a plan, or have not elected to enroll, as of December 31, 2019.

Medicare Part C enrollment will also be phased out for individuals who have not enrolled in a Medicare Part C plan as of December 31, 2019. Medicare Supplemental Plans C are private plans that deliver Medicare Part A and B services through a private insurance company.

The bottom line is that seniors and disabled individuals who will be eligible for Medicare A prior to January 1, 2020 and who prefer Medicare Part C or F coverage will need to sign up for these plans during the upcoming open enrollment period.

Questions? Let Jane know.

Jane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. 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.

New PACE Program Regulations: Six Important Changes You Need to Know

On By Jane Fearn-Zimmer, Esq.In Elder Law, Medicaid, medicareLeave a comment

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On June 3rd, the Centers for Medicare and Medicaid Services released a final rule that updates the program requirements for the PACE program (Program for All-Inclusive Care for the Elderly), a cost-effective program that helps keep frail, elderly individuals over the age of 55 in the home using Medicare or Medicaid dollars.  PACE organizations, also referred to as Living Independence for the Elderly (LIFE) organizations, are government or nonprofit entities delivering comprehensive care and services via an interdisciplinary team (IDT) to elderly and frail individuals ages 55 and over who are clinically assessed as needing nursing home care.

The new rule reflects 21st century service-delivery practices, communications and technology.

Here are six of the most impactful changes:

  1. Thirty (30) day deadline to complete the interdisciplinary plan of care. In rare circumstances, it may not be possible to make a timely assessment and care plan. In such cases, the PACE organization must document the specific circumstances why the initial assessment cannot be completed within the thirty-day period, and must detail the steps taken to provide immediate care as needed and to complete the assessment process and the plan-of-care as soon as feasible.
  2. Care delivery by non-physician primary care providers. Primary care and care management may now be provided by a nurse practitioner, physician assistant or a community physician duly licensed in accordance with state law, without having to obtain a waiver.
  3. Interactive remote technologies may be used to perform unscheduled reassessments. Video conferencing, live instant messaging, chat software and other media may be used by IDT members to perform an unscheduled reassessment in response to a request for a change in PACE services, where clinically appropriate and necessary to improve or maintain the patient’s overall health status. In order for the remote technology to be used, the patient or her representative must consent to its use.  In-person follow up may be warranted. Using remote technologies to perform reassessments may not be appropriate for medically complex patients.
  4. Mandatory attendance of the semi-annual reassessment meeting by the primary care provider, a registered nurse, and a Master’s-level social worker, with team members from other disciplines participating as needed in the professional judgment of the primary care provider, the registered nurse, and the Master’s-level social worker.
  5. Disenrollment for “disruptive behavior” on the part of either the participant or caregiver. In order to justify involuntary disenrollment, the disruptive behavior must jeopardize the patient’s health or safety or the safety of others. For instance, if a PACE participant who is able to make her own medical decisions repeatedly refuses to follow her plan of care, or if her caregiver exhibits threatening behavior which jeopardizes the participant’s health or safety, or the safety of the caregiver or others, involuntary disenrollment may be an option, after the PACE organization has ruled out alternative arrangements.
  6. PACE organizations offering qualified prescription drug coverage must comply with Medicare Part D prescription drug program requirements.

There are other major changes to the PACE program rules that may not directly impact the elderly and disabled.

Jane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. 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.

Top Tips For A Successful Medicaid Spend Down

On By Jane Fearn-Zimmer, Esq.In Elder Law, Medicaid & GiftsLeave a comment

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 an Elder and Disability Law, Taxation, and Trusts and Estates attorney. 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

On By Jane Fearn-Zimmer, Esq.In Disability Law, UncategorizedLeave a comment

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 an Elder and Disability Law, Taxation, and Trusts and Estates attorney. 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.