Choupette’s Legacy – Why Estate Planning Matters

Choupette royalIt is speculated that Choupette Lagerfeld, the pampered Parisian pet of the iconic late German fashion designer, Karl Lagerfeld, may have a stake in Lagerfeld’s vast fortune.

Choupette Lagerfeld moves in the circles of the rich and famous. Ironically, her most universal legacy could be to demonstrate why estate planning matters for everyone, wealthy or not.

Choupette’s situation makes clear that a clever estate plan can transform the impossible into the possible.  With an estate plan opting into German law (which, on information and belief, may allow the use of pet trusts), even a cat living in France (the law of which apparently prohibits an animal from inheriting) can become an heir.

If Karl Lagerfeld died without any estate plan, and if Choupette had not already amassed a fortune of her own through social media and advertising, she could descend rapidly into a downward spiral from riches to rags by taking nothing from her master’s estate.

An estate plan enables anyone with property (whether a fortune or a modest estate), to literally reach back from the grave, provide for loved ones (including pets) and retain some residual control over those left behind.

An estate plan can protect an unmarried, unrelated cohabitant by allowing her to remain in your home after your death, with any inheritance tax liability paid from life insurance or liquid funds in your residuary estate.

An estate plan can protect an inheritance for a special needs child without disqualifying the child from Medicaid or Supplemental Security Income.

An estate plan can ensure that the life savings you worked hard to accumulate (and your personal affairs) will be kept private by avoiding probate with a revocable trust.

An estate plan incorporating an irrevocable trust or lifetime gifting can help reduce inheritance taxes legally.

An estate plan (using a trust) can protect your life savings or your life insurance proceeds from being blown by little Johnny on a Maserati, upon reaching age 18. An estate plan can even bring hope to beleaguered parents and grandparents everywhere.  Suppose your heart’s sole desire is for little Susie or Johnny to take medication/ finish college/ remove the tattoos/get a haircut and get a real job. Having all your post-mortem dreams ultimately come true could be as simple as leaving a conditional bequest in your last will and testament or trust. However, conditional gifts are very rarely written into wills or trusts due to the heartache and hard feelings caused.

Choupette’s legacy teaches us that even if your estate is limited, the possibilities are not.  For best results, consult an experienced and knowledgeable tax and estate planning attorney, who can help you effectuate your testamentary intentions.

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.

Medicaid Estate Recovery and the Home

Jane Fearn-Zimmer explains Medicaid Estate Recovery and the Home

MLTSS Medicaid pays for long term care for individuals with low income (below $2,313 gross monthly in 2019) and low assets.

Post-mortem (after death) Medicaid liens protect the fiscal integrity of the MLTSS Medicaid program by attaching to property held by a Medicaid enrollee at death. In most cases, such Medicaid liens are imposed upon property held by a former Medicaid enrollee to recoup the cost of care and services provided to the enrollee after reaching the age of 55. After the death of the Medicaid beneficiary, the Medicaid estate recovery program collects on the Medicaid liens, with the lien proceeds being paid to the government.

In most cases, Medicaid liens attach only to property in which the Medicaid enrollee held an interest at the moment immediately before death. If the Medicaid enrollee retained no interest just before death, there is nothing subject to a Medicaid lien.

An important planning strategy is to remove the name of the future MLTSS Medicaid recipient from the title to valuable property, such as a home. If the future Medicaid recipient is married, often this property can be transferred to the healthy spouse without any Medicaid penalty period, even during the five year Medicaid look back period.

If the future Medicaid enrollee’s name is not removed from the property at the correct time, a Medicaid lien on real property can cloud title, accelerate a mortgage, and potentially place the property in foreclosure.  Even if the mortgage is not accelerated, the Medicaid lien must be paid before the real property can be sold, given away or refinanced.  Consequently, that is one reason why you should only trust your Medicaid application to an experienced Medicaid attorney, who can determine the best strategy to avoid a Medicaid lien.

Every case is different.  Irrevocable trusts will be suitable for some clients; others may be able to transfer the home without incurring a Medicaid penalty period, where there is a blind or disabled child, a sibling with an equity interest in the home, or, less frequently, to a caregiver child.  There are also some limited exceptions to Medicaid estate recovery.

The good news is that an experienced and knowledgeable elder law attorney can explain how to protect your home and your life savings, even if your loved one is already in long-term care.

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.

Returning From a Nursing Home to the Home

Senior woman sitting on the wheelchair aloneWhat are the options available to a long-term care resident who wants to return home? Consider using the Home and Community Based Services (HCBS) centered planning rules to help the resident transition back into the community. The care plan can be written in a manner to facilitate the resident’s discharge to the community.  If the individual experiences delay on the part of the Managed Care Organization (MCO) in updating the planning, the individual has a right to a service plan at her request and then annually, or upon a change in condition. Should the individual encounter delays by the MCO’s or if the individuals requested by the resident fail or decline to attend important meetings, one solution may be to involve an Omsbudsman and/or the Managed Long Term Services and Supports (MLTSS) offices, which can enforce a service plan. Generally, the initial meeting should be used to generate a list of action items, including the identification of the Medicare cutoff date and the filing of a MLTSS Medicaid application, obtaining therapies to strengthen the individual for her return to the community. A second meeting may be necessary to draft the plan. Any plan adopted must differentiate between paid and unpaid services to the individual. For instance, if a grandchild is not willing to provide free care and services on a Saturday evening, this should be stated in the plan.

Under the HCBS person-centered planning rules, the MCO must hold a care conference at the time and place selected by the resident.  A care conference is a meeting held by social worker, nurse and other long term care professionals to discuss the best care plan for the resident. The care needs and preferences of the resident are discussed and a written plan of care is documented. The care plan must reflect the goals and objectives for care. For instance, if the resident who is unable to move without assistance, needs to be provided with an air mattress and needs to be turned every two hours to prevent bedsores, this should be stated in the care plan. The cultural affinities of the resident may also be stated in the care plan.

The resident is entitled to have a representative in the care planning process. This can, but does not need to be, his or her financial power of attorney. The resident should not wait for the providers to initiate the process. The MCO must provide the resident with enough information so that he or she can make an informed decision.  If the resident is being discharged back into the community, and will require care 24/7, the post-discharge plan of care must provide whether any unpaid services is going to be performed on a volunteer versus paid basis. The MCO cannot require family members or friends who are not willing to commit to providing free care on a continuing basis to provide the care without compensation.  If various therapies will be needed to strengthen the individual so that she may return to the community, a physician’s order for skilled therapy should be incorporated into the care plan.

The written service plan prepared and implemented through the MCO must spell out how the individual will transition from care in a facility to care in the community and should identify specific goals and services. What funding is available to facilitate an individual’s transition back to the community?  Under the post-eligibility treatment of income rules found at 42 C.F.R. § 435.72, the individual may keep all of her income up to a limit of $2,005.00 per month for up to six months, which can be used to pay rent for an apartment in the community.

The discharge service plan should be prepared taking into consideration the unique abilities and preferences of the disabled and whatever decision –making capacity the soon-to-be discharged resident has retained.  Where the resident is unable to make and implement care-related decisions independently, one possibility is to empower the resident by involving him or her in a collaborative, or supportive decision making (SDM), process.  In this model, the resident awaiting discharge helps define the post-charge plan of care through the assistance of “supporters,” who can help the resident plan the he or she will receive in the community. The SDM decision-making model works best when the “supporters” remain available and cooperative in assisting with the implementation of the decision selected by the disabled or incompetent individual. SDM can be incorporated into the in the discharge planning process for an individual with limited or diminishing capacity. If this is not feasible, where there is not already a power of attorney, alternatives may include obtaining a limited guardianship order (as opposed to a plenary guardianship order) and using the limited guardianship process to define and constrain the authority of the facility’s representative in the discharge process, so that the discharge plan optimally furthers the best interests of the resident returning to the community. Finally, the resident department from a nursing home has a right to seek a Fair Hearing upon transfer or discharge and the service plan itself should incorporate appeal/Fair Hearing rights incorporate within the plan.

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.

 

 

What is a Medicaid Penalty Period?

medicaid money.jpg

Medicaid is a joint federal and state program that provides funding for long-term care in a nursing home, an assisted living facility, an adult medical day care program or at home. As a means-tested public benefit program, there are strict asset and income requirements. A single individual who wishes to qualify for Medicaid can have no more than $2,000 in countable assets in his or her name and if both members of a married couple seek Medicaid, they can have no more than $3,000 in assets in either or both of their names. There are somewhat higher limits, where one member of a married or a civil union couple will remain in the community independently and the other member will apply for Medicaid.

Generally speaking, an individual cannot give away his or her money and immediately qualify for Medicaid without being subject to a Medicaid penalty period. What does that mean? A penalty period is a period of time during which Medicaid will not pay for the care of the applicant, as a consequence of gifting during the five years immediately prior to the date of filing of the Medicaid application.

“Gifting” for Medicaid may not always be obvious.  Unverified withdrawals from a joint bank account by a child for cash payments of the parent’s expenses may be penalized as gifts. This happened in E.S. v. D.M.A.H.S. and Bergen County Board of Social Services, (Final Agency Decision, N.J. OAL Docket No. HMA 9477-2014, December 11, 2014).

What can you do if you are preparing to file a Medicaid application and the applicant has already given away more than $1,000 during the past five years?  Having the right documentation in hand is very important. Collect and keep financial statements, receipts, notes in checkbook registers and calendars to substantiate cash transactions.  If cash was paid for utility bills, medications, or for groceries, do you have a receipt or a prescription log from a pharmacy? Was a store loyalty card used? If there was gambling, are there statements available from the casino, to substantiate the amounts and dates of the losses?

Documenting that the uncompensated transfers were made exclusively for a purpose other than expediting Medicaid eligibility can also be an option. This can work when the client was living actively in the community at the time of the transfer. See Estate of M.M. v. DMAHS and Union County Division of Social Services, (Final Agency Decision, NJ OAL Docket No. HMA 13911-08, May 27, 2009) (reversing the imposition of any Medicaid transfer penalty for the transfer of $25,000 to a daughter by the Medicaid applicant, when she was living independently at home prior to traumatic onset of disability).

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.