Author Archives: Ben Schock

9 Common Medicaid Mistakes

Medicaid is a complicated, ever-changing area of law, and any mistakes made can come with hefty costs. So, what are the top 9 mistakes people make when dealing with Medicaid and how can you avoid making them yourself?

  1. Relying on Bad Advice

Now, no doubt your friends or family mean well when they offer (often, unsolicited) advice, but they are not experts in Medicaid law. You wouldn’t call your mother to ask her advice about an investment decision when you have a financial advisor available, so do not succumb to the advice of people who are not qualified to interpret the laws relating to Medicaid or to provide legal advice in that area. Talk to our team for a free consultation and get good advice today.

  1. Working with the Wrong Attorney

Attorneys can be specialized in specific areas or may have a general practice, similar to doctors. The thing is, if you have a specific problem with your foot, you would seek out a specialized foot doctor. With legal issues, you should apply the same logic. Do not rely on a general attorney who has a passing knowledge of Medicaid or long-term care planning. Work with an attorney who specializes in Medicaid law. A specialized attorney will be current on any legal changes relating to Medicaid and can give you expert advice.

SSR Law Medicaid Planning Attorneys

Find an attorney who specializes in Medicaid law

  1. Believing it is Too Late

Just because you are behind the curve with planning does not mean you should avoid it entirely. It is never too late to start planning. The longer you wait, however, the more you lose. So take action as soon as you can.

  1. Thinking a Living Trust Protects Assets from Medicaid

If you have a living trust, that is great. But it typically does not provide protection from Medicaid. Having an attorney review your documents and assets can help you understand the guidelines and identify the services you may qualify for.

  1. Thinking Your Existing Annuity Protects Assets from Medicaid

Most annuities today fail to offer the same protections they did prior to 2006. Talk to a professional to see if this applies to you.

  1. Trying to Hide Assets
SSR Law Firm Asset Protection Medicaid Planning

Make sure to disclose your assets.

Since there are asset limits/qualification requirements for Medicaid, families might try to “forget” or hide their assets. However, failing to disclose assets to get Medicaid coverage is a crime. You do not want to risk legal action that results in punitive fines for your failure to disclose assets in addition to repaying the cost of the benefits you used.

  1. Giving Away Assets without a Plan

Do not just hand over all of your assets or gift them away without a plan. If you want to transfer assets so that you will qualify for Medicaid coverage, speak with a qualified attorney about proper estate planning to avoid tax or Medicaid problems. Never transfer assets without fully reviewing the potential consequences of the decision. Only a qualified Michigan Elder Law attorney can help you time your transfers correctly.

  1. Ignoring Congressional Safe Harbors

Do not jeopardize your eligibility by ignoring Congressional safe harbors; this goes hand in hand with the mistake mentioned above. Certain transfers are allowed, such as transferring to disabled children, siblings, etc., but you need to meet Congressional requirements. Qualified attorneys can help make sure you do.

  1. Failing to Protect Spouses or Nursing Home Residents

Make no mistake, Congress wants to protect the spouses of anyone in a nursing home, but you have to make sure you do so properly and in a timely fashion.

For more information on Medicaid in Michigan and how to avoid making these mistakes yourself, contact SSR Law Firm. Our Michigan Elder Law Attorneys offer a variety of services, and we can help you find the perfect solution

Medicaid Planning With Annuities

In Michigan, many people hear the phrase “medicaid friendly” associated with their annuities. But what does this mean?

Annuities

For starters, annuities are legally binding written contracts that you form with an insurance company. Said contracts stipulate that insurance companies will receive regular payments for a set number of years, or for the duration of your time as the contract holder. In exchange for giving the insurance company money, you receive the payments back later in the form of income. This essentially works as a way to get income and defer income taxes.

With Michigan based medicaid attorneys you can get answers to your specific legal questions, especially if you are considering an annuity, or you are wanting advice on Medicaid regulations.

Medicaid

That being said, for Michigan residents as a whole, the Medicaid regulations do not have any form of “medicaid friendly” annuity for their nursing home program or their Choice Waiver home based program. Those same regulations do stipulate how annuities are to be structured so that you, as a senior, can qualify for Medicaid. This makes the annuity Medicaid compliant.

With the current state regulations, annuities are either an asset or they are an income stream. If you can, based on the terms of your contract, liquidate your annuity in exchange for a lump sum payment from your income company, then the annuity is considered an asset and it counts toward the asset limit for Medicaid of $2,000.

However, if you as the senior only have the right to receive your annuity as an income payment, it is considered an income stream. There are, however, some extra strings attached. It is only an income stream if:

  1. It is irrevocable, meaning you have given up your right to cancel it.
  2. The contract was issued by an insurance company licensed to operate within the United States, and by an agent licensed to operate in the State of Michigan.
  3. The annuity payment is only for the benefit of the individual applying for Medicaid, or their spouse.
  4. The annuity is actuarially sound, meaning the money paid to your insurance company was paid back to you within your life expectancy.
  5. The payments are in equal amounts.

Clearly, annuities are never really Medicaid friendly. They are either income or they go toward the asset limit. However, each case is different. But, with a medicaid attorney based in the metro Detroit area, you can get solutions specific to your situation and determine how to better plan for Medicaid with annuities.

Determining where your existing contract falls, or preparing ahead of time to make sure a future contract falls within proper limits for income or assets, requires professional assistance.

Call to Action

If you need legal help with a medicaid compliant annuity Michigan attorneys can help. We know the ins and outs of the law, changes therein, and the importance of maintaining proper compliance before it is too late. If you have any questions about Medicaid planning with annuities, call us to arrange your free consultation.

Medicaid Planning with Annuities

Can You Be Disqualified from Medicaid Coverage?

As Elder Law attorneys, one of the most common questions we receive from our clients about Medicaid is if (and how) you can be disqualified from receiving Medicaid coverage. The short answer is yes, you can be disqualified from Medicaid coverage based on factors such as assets, savings and more.

At SSR Law Office, we believe that adequate healthcare is not just a right—it is a necessity. Our commitment to helping our clients plan and qualify for adequate Medicaid coverage to ensure that every patient has the healthcare that they deserve when they need it most.

What Disqualifies My Spouse or Me from Medicaid Coverage?

The most common reasons for Medicaid disqualification have to do with personal finances. These reasons may include a person’s income, too many assets held by an individual or married couple, or too much “gift giving” in the five years prior to one’s Medicaid application.

While Medicaid eligibility is calculated differently for individuals than it is for married couples, the reasons for disqualification are generally the same for both parties:

Perhaps your income needs to be “spent down” in order to qualify for long-term Medicaid coverage, or you possess savings and assets which exceed the general allowance of $2,000 per person. In any case, being disqualified for Medicaid can come at a high stress—and high cost—for those who count on receiving coverage for life-saving care and treatments.

Is My Application Automatically Disqualified if My Assets Exceed the Allowances?

Medicaid allows potentially eligible individuals to apply for coverage proactively, even if their assets or income currently exceeds the value allotted per person, through what is known as “spending down.” For example, if an individual’s income is higher than what typically qualifies for Medicaid, they may still apply for nursing home Medicaid benefits so long as their excess income is used for treatment-related costs.

In this case, an applicant’s spendable assets must be used to fund healthcare and long-term care costs directly until they qualify for Medicaid coverage, at which point Medicaid will start covering without delay. Because of this, Medicaid pre-planning is highly recommended to ensure you will have coverage as soon as you need it most—and when you don’t have the time to wait.

Is It True I Have to Have Nothing to Qualify for Medicaid?

While there are misconceptions that a person must have absolutely nothing to qualify for Medicaid, this is not true at all; in fact, an individual or couple have certain assets excluded from consideration of their Medicaid eligibility. These include:

  • Small amounts of cash or savings (not to exceed $2,000 per person)*;
  • A house (not to exceed $572,000 in value);
  • One car;
  • Funeral and burial funds: (Either An irrevocable prepaid funeral contract not exceeding $11,393 and/or one revocable account not exceeding $1,500 in value)

* In Michigan, a non-qualifying community spouse can keep half of their partner’s assets (up to $123,600) without disqualifying their partner from Medicaid coverage, also known as a Community Spouse Resource Allowance (CSRA). They may also keep at least $24,720 for themselves as their spouse receives care under Medicaid.

What is the “Look Back” Period I’ve Heard About?

When determining Medicaid eligibility, Michigan “looks back” at an individual’s assets over the prior five years to determine if assets were liquidated, transferred, or otherwise “gifted away” to friends and relatives in order to qualify for Medicaid. Unsanctioned “gifts” can serious affect your Medicaid eligibility, and may outright temporarily disqualify you from Medicaid coverage if they are found to exceed a certain amount.

In Michigan, the average cost of nursing home care in 2018 is $8,261. No matter how small of a gift is given, any asset that could have been used during a spend down that was instead transferred to another individual will count as a penalty towards ineligibility. Another way of putting this is that if you were found to have given away $82,610 in assets during the five years prior to your application, you would be disqualified from Medicaid coverage for 10 months (8,261 x 10 = 82,610) after the point you would have normally qualified for coverage.

Exceptions to this “gift transfer” penalties include:

  • A spouse (or a transfer to anyone else as long as it is for the spouse’s benefit)
  • A blind or disabled child
  • A trust for the benefit of a blind or disabled child
  • A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).

Contact an Experienced Medicaid Planning Attorney

As beneficial as it is to have healthcare, preventing yourself from being disqualified from Medicaid coverage can seem like an incredibly daunting task, even if you already have a financial plan in motion. Schock Solaiman Ramdayal, PLLC has the experience and the expertise needed to help you and your spouse avoid the financial ruin associated with the high cost of long-term care, and we are dedicated to helping you receive the healthcare that you deserve.

Contact us today for any assistance you and your spouse may need in understanding Medicaid eligibility, implementing a Medicaid plan, and starting the application process.

The VA Passes New Changes to the Aid and Attendance Benefits. Does This Affect Your Pension Eligibility?

The U.S Department of Veterans Affairs (VA) announced its final rule on September 18, 2018 of its intention to amend regulations surrounding veterans’ eligibility for VA pension and other needs-based benefit programs, effective on October 18, 2018.

The final ruling contains critical information for veterans in our community, and may make accessing veterans benefits even more challenging than it already is. We have highlighted the major changes outlined by the VA to help ensure that veterans and their families remain eligible to continue receiving these much needed benefits.

New Rules for Veterans Benefits

Effective October 18, 2018:

  • The VA will continue to independently advise whether an individual veteran is required to consume some part of their estate, for the purpose of personal maintenance, prior to receiving pension. Pension can later be discontinued if it is later reasonable for an individual to fund their own personal care through consuming part of their estate (38 U.S.C § 1522, 1543);
  • The VA will now impose a “look-back period” of three years that penalizes a veteran or surviving spouse from receiving pension benefits if it is found that a voluntary transfer of assets has been made for less than fair market value in the form of “gift giving,” purchase of financial instrument or investment, or placed into a non-exempt trust in an attempt to reduce net worth that exceeded $123,600;
    1. If assets are found to be incapable of being liquidated (e.g. some annuities and trusts), the penalty period may not be incurred for transfers unless an individual’s net worth would have exceeded the allowance of $123,600 if the transfer had not occurred.
  • Pension penalties (periods of non-coverage) shall be calculated by dividing the amount of total transferred covered assets by the most current monthly pension rate for an A&A veteran plus one dependent ($2,169 in 2017), rounded to the nearest whole number. The result is the number of months that an individual will be ineligible for pension coverage;
  • There shall be no penalty for transfer of covered assets prior to October 18, 2018;
  • Net worth now includes all countable assets plus annual gross income. The maximum value of assets an individual veteran can now possess and still be eligible for benefits is capped at $123,600 for 2018, the same as the current Community Spouse Resource Allowance (CRSA). This amount will be adjusted annually for inflation;
  • Residence exemptions for VA purpose is now limited to lot sizes of two acres or less. Residential lots which exceed two acres may still be excluded from an individual veteran’s net worth if the additional property is deemed unmarketable by an independent third party; otherwise, any additional property over the two acre limit will be included as an asset;
  • “Ambulating within the home or living area” is now classified as an Activity of Daily Living (ADL);
  • “Custodial Care” is now defined as regular:
    1. Assistance with two or more ADLs; or
    2. Supervision of an individual with a physical, mental, developmental or cognitive disorder requiring special care or assistance to protect the individual from everyday hazards or dangers.
  • “Assisted Living, adult day care, and similar facilities” is now defined as “Care facilities other than nursing homes,” and focuses on the health, custodial, or A&A care that an individual receives within the facility, as well as their need to be in that facility (and any medical expenses incurred), rather than the facility name itself.

Contact an Experienced Veterans’ Benefits Lawyer

Because these major changes in how the VA handles pension distribution are imminent, it is now more important than ever to ensure that your pension eligibility is not negatively affected by these changes. Fortunately, because the VA will not “look-back” to transfers made before the October 18, 2018 date, there may still be time to distribute your assets as necessary to maintain eligibility.

Whether you have questions about your pension eligibility or are curious to learn more about financial planning for your veterans’ benefits in general, SSR Law Office is proud to help those who have served our country in the past. If you believe your pension eligibility may be negatively affected by these changes, contact us immediately to discuss your options and ensure that you remain covered under the newly proposed changes.

Medicaid Planning for Married Couples

For married Michigan couples whose combined incomes fall slightly above or below the Federal Poverty Line (FPL), Medicaid planning can help ensure that a proper “healthcare safety net” is put in place should medical assistance ever be required. This not only offers you access to potentially life-saving medical treatment, but also can provide the peace of mind of knowing that your spouse (and your future family) can possibly have access this plan as well.

It is no secret that in the state of Michigan, the costs of healthcare can skyrocket as we continue to grow older. Between long-term care and treatments—such as nursing homes—to unexpected medical emergencies, having a plan in place that ensures you and your spouse are able to receive adequate medical care can quite literally be the difference between life and death.

Living in a nursing home, for example, can easily cost nearly $10,000 a month, accounting for life-saving treatment, transportation and round-the-clock care for each patient. The terror that such a high cost can incur might be enough to shy individuals away from getting the care that they need, and can drive married couples to sacrifice all of their financial assets in order to pay for the costs.

At SSR Law Office, we believe that healthcare is not just a right—it is a necessity. Because of this, we are committed to helping married couples plan and qualify for adequate Medicaid coverage to ensure that every couple has the healthcare that they deserve.

Can we maintain our assets under Medicaid coverages?

A common misconception is that couples must have nothing in order to qualify for Medicaid benefits. This is not true at all—while Medicaid coverage is only extended to those whole meet the strict financial eligibility requirements, a married couple is entitled to hold assets while also receiving Medicaid coverage, just as any individual is.

For qualifying couples in Michigan, their combined income must be no higher than 133 percent of the FPL—for two people, this means that their annual income must be $16,460 or lower. While a couple’s most important assets are protected under Medicaid, additional assets may also face similar restrictions that must be met in order to maintain Medicaid coverage, and may include:

  • Cash
  • Home: If you and your spouse’s home is valued at less at $572,000 or less, it is excluded as an asset. If it exceeds this value, you may be expected to liquidate your home;
  • Cars: One car can be excluded as an asset on your application;
  • Funeral and Burial Funds: An irrevocable prepaid funeral contract will be excluded as an asset as long as its value does not exceed $11,393. In addition to this, an individual may hold one revocable account as long as it is designated for funerary purposes and does not exceed $1,500.

The assets named above is not an exhaustive list; depending on the assets owned, a married couple may have to substantially liquidate or transfer their assets in order to qualify. However, doing this without proper planning can incur unintentional penalties, and ultimately affect individual or joint eligibility for Medicaid. Because of this, we urge you to use caution and plan carefully if attempting to transfer assets to family members.

What if I qualify for Medicaid, but my spouse does not?

If you or your spouse wish to apply for Medicaid while the other is not eligible for coverage, the non-qualifying spouse (known as a Community Spouse) may be able to retain additional assets without disqualifying their partner from Medicaid coverage. Community spouses are entitled to keep a portion of the couple’s assets as their own to protect themselves from spousal impoverishment.

In Michigan, a community spouse can keep half of the assets up to $123,600 without disqualifying their partner from Medicaid coverage, also known as a Community Spouse Resource Allowance (CSRA). In addition to a maximum value of assets, a community spouse will keep at least $24,720 for themselves as their spouse receives care under Medicaid.

What do I need to qualify for a Couple’s Medicaid Plan?

Aside from meeting the strict financial eligibility requirements for Medicaid coverage, a number of documents may be needed in order to prove yours and your spouse’s eligibility—these may include housing deeds, existing estate planning documents, and current account statements. Fortunately, we have created a comprehensive Medicaid Application Checklist for couples seeking to file a Medicaid application, and includes all the various forms of documentation needed to qualify for Medicaid coverage.

Qualifying and applying for Medicaid can be a complex endeavor, which is why we strongly suggest enlisting the help of qualified professionals in choosing what is best for you and your spouse’s unique situation and ensuring that the plan is carefully crafted and executed. Although Medicaid planning is not an investment strategy in itself, resources you devote to securing professional advice and assistance are an investment in your peace of mind when it comes to knowing that your plan will be safe, legal and serve all of your medical purposes.

Contact an Experienced Medicaid Planning Lawyer

As beneficial as it is to have healthcare, securing your individual Medicaid coverage can seem like an incredibly daunting task, even if you already have a financial plan in motion. Schock Solaiman Ramdayal, PLLC has the experience and the expertise needed to help you and your spouse avoid the financial ruin associated with the high cost of long-term care, and we are dedicated to helping you receive the healthcare that you deserve. Contact us today for any assistance you and your spouse may need in understanding Medicaid eligibility, implementing a Medicaid plan, and starting the application process.

The MI Choice Waiver: An Option for Elderly Patients under Medicaid

For the nearly 2.3 million low-income children, pregnant women, adults, seniors and people with disabilities who benefit from Medicaid coverage across the state of Michigan, access to this affordable and long-term healthcare is not just a “good thing to have”—it is almost a necessity at this point.

For individuals who cannot afford or are otherwise ineligible for the similar Medicare program, Medicaid offers a way for any low-income individual or family to receive the financial assistance necessary to receive medical and long-term care from healthcare providers. Because each state has different eligibility requirements, different coverage options exist for the residents in each state, and in Michigan, most Medicaid recipients are usually only required to pay a small co-pay charge for necessary treatment.

Why Would a Medicaid Waiver be Necessary?

Even with Medicaid’s reduced-cost coverage, however, long-term coverage can still become extremely expensive; if, for example, a patient requires a nursing home or a round-the-clock caretaker, then that person’s treatment costs may exceed the normal allowances under a typical Medicaid plan and not be covered. In Michigan alone, the monthly costs of nursing home care can reach upwards of $10,000 per month.

This could potentially result in devastating financial hardship, or the impossible choice of abstaining from treatment in order to not saddle loads of medical debt onto one’s self or their families. Fortunately, in Michigan, options exist for those who require long-term care and healthcare services, such as nursing home patients or individuals with development/intellectual disabilities.

One such service meant to further alleviate medical costs for low-income individuals and their families comes in the form of its several waiver programs, such as the MI Choice Waiver, designed specifically for those who qualify to receive long-term care without fear of expending their Medicaid coverage.

These waiver programs allow patients the “choice” to have their long-term medical costs (such as living in a nursing home, or living at home with a caretaker representative) to be covered under their Medicaid plan.  This, in turns, allows qualifying patients (usually, seniors or individuals with developmental disability) to enjoy a quality of life and care that they might otherwise be financially barred from.

What does the MI Choice Waiver Cover?

Under the MI Choice Waiver, your Medicaid coverage would extend to long-term treatments that can be performed either in your own home, or within a nursing home/assisted living facility. These include:

  • Community transition services
  • Community living supports
  • Nursing services (preventative nursing)
  • Respite services
  • Adult day health (adult day care)
  • Environmental modifications
  • Non-medical transportation
  • Medical supplies and equipment not covered under the Medicaid State Plan
  • Chore services
  • Personal emergency response systems
  • Private duty nursing
  • Counseling
  • Home delivered meals
  • Training in a variety of independent living skills
  • Supports coordination
  • Fiscal intermediary
  • Goods and services

How can I Qualify for the MI Choice Medicaid Waiver?

In order to see if you or a loved one is eligible for Medicaid coverage related to long-term healthcare costs, contacting your Local Area Agency on Aging (AAA) is usually the first step in determining how your Medicaid plan can be expanded to include these services.

While a Local AAA can explain the strict eligibility requirements for extended Medicaid coverage, they unfortunately cannot offer assistance in helping families comply with or meet these requirements. Fortunately, the attorneys of SSR Law Office are confidently versed in Medicaid Planning, and can help you best determine what type of coverage is right for you and your family.

If you require any assistance or have any questions about applying, receiving or qualifying for a Medicaid Waiver in Michigan, our team is happy to help. Contact us today for a free consultation, and let us help you receive the Medicaid coverage you and your family deserve.

MICHIGAN MAKES HUGE CHANGES TO MEDICAID PLANNING FOR MARRIED COUPLES – THE END OF THE SBO TRUST

MI Medicaid Changes

On August 20, 2014, the Department of Human Services (DHS) made a massive, unexpected change to Medicaid planning for married couples in the state of Michigan by changing the way they analyze assets put into the Solely for the Benefit Trust.

For past 18 years, DHS has allowed the spouse of a nursing home resident, commonly known as the “community spouse,” to place assets into a special “solely for the benefit” trust (SBO Trust). The SBO Trust is a unique irrevocable trust that was used to hold excess marital assets solely for the benefit of the community spouse. Assets which would normally be looked at as “countable” and prevent the nursing home applicant from qualifying for Medicaid were considered “unavailable” when transferred into the SBO Trust, thus allowing the applicant to immediately qualify for Medicaid while retaining the bulk of the assets for the community spouse. Additionally, martial assets that were transferred to this SBO Trust were not considered a divestment and, therefore, did not create a penalty period as an outright gift of assets would.

There were restrictions as to when the assets in the SBO Trust could be accessed but, generally, would be distributed one time each year to the community spouse. The trust essentially converted excess “countable assets” into an income stream for the community spouse. If the community spouse passed away, any remaining trust assets would pass to the beneficiaries of the trust, which was spelled out by the community spouse, and not to the state.

The SBO Trust was the best Medicaid planning tool available to a married couple. With the average cost of nursing home care around $8,000.00 per month, a couple’s life savings can easily be depleted over a short period of time leaving the community spouse destitute for the remainder of their life. The SBO Trust was a way that Medicaid planners were able to ensure that the spouse of a nursing home resident was able to live securely on the savings they worked so hard to accumulate throughout their lives.

How Has Medicaid Planning Changed?

As of August 2014, without any prior notice, DHS has begun denying eligibility in cases where the community spouse has placed assets into a SBO Trust. DHS has emphasized that this is not a change in the law or policy, but a change in the way they are applying the existing policy, or, in other words, they have been applying it wrong for the last 18 years.

Although the Medicaid policy specifically allows assets to be placed into a SBO Trust without creating a divestment penalty as an outright gift would, DHS is now saying the new interpretation of the policy will allow them to include the assets in the SBO Trust as a “countable asset,” even though the assets are not readily available to the community spouse or nursing home spouse. DHS relies on the policy which states:

Count as the person’s countable assets the value of the countable assets in the trust principal if there is any condition under which the principle could be paid to or on behalf of the person from an irrevocable trust.

DHS is now interpreting the word “person” as either the nursing home spouse or the community spouse, even though the remainder of the policy clearly distinguishes when they are referring to the community spouse. Additionally, the terms of the SBO Trust do not allow any payments to be made to the nursing home spouse. Even though the trust pays directly to the community spouse, and no income of the community spouse is supposed to be deemed available to the nursing home spouse, DHS has begun counting these assets.

So, What Does This Mean?

What is on the horizon for Medicaid planning for married couples?
Although this is a huge change and will definitely make this more difficult for a married couple to qualify for Medicaid, there are still options; however, it will mean in order to qualify for Medicaid and save 100% of the estate for the surviving spouse, people will have to plan earlier.

For many years, we have been doing Medicaid pre-planning for clients by using what is called an Irrevocable Trust. The Irrevocable Trust and can be a highly effective asset preservation strategy. It allows you, the “settlor,” to create the trust and to name one or more persons – other than yourself or your spouse – to manage the trust. You may even appoint a “trust protector” who will have the right to change the trustee at any time if the trustee is not handling the assets to your satisfaction, or for any other reason. The principal generally stays in the trust until your death, at which point the trust assets pass directly to your heirs, without the expense and delays of probate. After the assets have sat in this trust for a period of 5 years, they will be 100% protected from a nursing home. Because of the 5 year requirement, it is important to begin planning as soon as possible. In the past, this technique was used more frequently with single people that were not able to take advantage of the SBO Trust, which was only available to married couples. After DHS’s new interpretation of the policy, this has become the best planning option for a married couple as well.

If, however, a married couple has not planned 5 years in advance, we start what is called a “crisis medical plan.” This means we are trying to protect as much of the estate as we can for the community spouse. Other planning options include: protective orders, commercial annuities and promissory notes. Each of these options have challenges and considerations which will need to be considered, and a plan will need to be specifically tailored to each family’s unique situation.

Veterans Benefits and Irrevocable Trusts

Planning ahead with irrevocable trusts for Veterans Benefits eligibility has many of the same benefits as in Medicaid planning. However, the most prominent difference and benefit to using an irrevocable trust to hold assets to achieve Veterans Benefits eligibility is the “look back” period. As we discussed above, in order for the assets in the irrevocable trust to be protected from a nursing home, they must be in the trust for a minimum of 5 years. For VA Aid & Attendance benefits, current VA rules do not impose a waiting period before you can access the benefit because you have transferred assets into an irrevocable trust. That being said, there have been talks about a law that would impose a 3 year look back for VA planning. It looks like at some point this law will pass; therefore, preplanning will be particularly beneficial to veterans and their surviving spouses that may need to take advantage of the extra income from VA in the next few years to pay for the high costs of long term care.

Asset Protection Planning, whether in the context of VA benefits or Medicaid benefits, can be very beneficial to families. SSR Law Offices is here to educate you about what choices you have no matter where you are in the process. Remember, it is never too early to start planning!

 

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6 Costly Mistakes to Avoid When Your Spouse Enters Nursing Home

Nursing Home

What you do not know could cost you everything you worked so hard for…

The average cost of care in a nursing home is currently $8,282 per month, which is continually increasing. With the high cost of long-term care, it is no surprise that most families find themselves exhausting their funds within one year of a prolonged nursing home stay.

Contrary to popular belief, couples do not have to spend-down their assets in order for the spouse in the nursing home to qualify for Medicaid benefits. In fact, federal and state Medicaid laws provide a number of protections for a Medicaid applicant’s spouse (known as the “Community Spouse”). Unfortunately, too few people know of these protections and too many couples fail to take advantage of them. By not taking advantage of these protections, a couple can lose tens of thousands, or even hundreds of thousands of dollars unnecessarily, often placing the spouse still at home in danger of impoverishment.

Cost of a Nursing Home

Costly Mistake #1:  Purchasing exempt assets before date of admission.

One major protection for the Community Spouse is called the “Community Spouse Resource Allowance” or CSRA for short. To understand the CSRA, you need to know that the State categorizes assets as either “countable” or “exempt.”

For example, a couple’s home, one vehicle, pre-paid funeral contracts (which meet certain criteria), burial space, household goods and furnishings, and a number of other items are considered “exempt” assets. Other assets, such as the couple’s checking and savings accounts, certificates of deposit, mutual funds, savings bonds, life insurance, and so forth, are typically considered “countable.”

Of these countable assets, a Community Spouse may keep one-half, up to the current maximum of $119,220, as the CSRA. For example, if a couple’s countable assets total $180,000, the Community Spouse would be allowed to keep $90,000 as the CSRA.

The most important thing to understand about the CSRA is how this amount is calculated.  All of a couple’s countable assets are totaled as of the date of admission to a nursing or other medical facility (such as the first date in a hospital before going to a nursing home). Where people sometimes go wrong is by purchasing exempt assets before the date of admission, in anticipation of applying for Medicaid. By doing this, the newly purchased exempt assets will no longer be included in the CSRA calculation, which will significantly lower the protected amount the Community Spouse is allowed keep.

For example, a couple with $180,000 in countable assets buys two burial spaces (which are exempt assets) for $30,000 two days before the husband enters a nursing home. This purchase reduces their countable assets to $150,000, which would mean the CSRA would be $75,000. Had the couple waited a few more days to make the purchase, the CSRA would have been $90,000. Jumping the gun cost the couple $15,000 in guaranteed asset protection.

Solution: To avoid this mistake, do not purchase any needed exempt assets until after date of admission to a qualifying facility.

Property Deed Trust

Costly Mistake #2:  Not transferring your home to your Trust.

As we discussed, a couple’s home is considered an exempt asset for Medicaid. However, if the home is titled in the couple’s Trust, it is then considered to be a countable asset. An easy way to increase the CSRA, often times to the maximum amount allowed, is to transfer the home to the Trust before one spouse goes to the nursing home (or hospital prior to the nursing home). Once the CSRA has been calculated, the home will simply be transferred back to the couple (or Community Spouse) to make the home exempt.

For example, a couple with $100,000 in countable assets would have a CSRA of $50,000. However if they transferred their $150,000 home to their Trust before one spouse entered the nursing home (or hospital prior to the nursing home), their countable assets would instead be $250,000. The Community Spouse would then be allowed to keep the maximum amount of $119,220 as the CSRA. Once the home is transferred back to the couple (or to the Community Spouse), it would then be an exempt asset, making the couple’s total countable assets $100,000. As the total countable assets are below the CSRA of $119,220, the spouse in the nursing home is immediately eligible for Medicaid and the couple has protected all $100,000 of their countable assets.

Solution: A well-executed Estate Plan can help you qualify for Medicaid benefits with a minimum amount of stress, while protecting the maximum amount of assets for your spouse.

Spending Assets Over Time

Costly Mistake #3:  Spending down the remaining assets over the allowable amount.

One of the most common misconceptions we hear is that in order for the spouse in the nursing home to qualify for Medicaid benefits, a couple must spend-down all of their countable assets above the CSRA. However, there are many strategies to also protect the remaining funds for the at home spouse, including establishing a Medicaid exempt annuity. It is important to understand that this annuity must meet several criteria in order to be considered an exempt asset.

For example, a couple with $180,000 in countable assets has a CSRA of $90,000. The remaining $90,000 can be protected by transferring it into a Medicaid exempt annuity, which will now be considered an exempt asset. The $90,000 in the annuity will then be paid back to the Community Spouse over a set period of time. With this type of planning, the spouse in the nursing home is eligible for Medicaid and the couple has protected all $180,000 of their countable assets.

Solution: A couple should never simply spend-down their assets without investigating the many strategies available to protect their assets and qualify for Medicaid benefits.

Gifting Money

Costly Mistake #4:  Giving away money or transferring ownership of your assets.

Most people believe that they can gift $14,000 per year without penalty.  This amount is actually based on a federal gift tax law and has nothing to do with Medicaid laws. Currently, for every $8,282 a person gives away within five years of applying for Medicaid benefits, they will be disqualified for Medicaid eligibility for one month.  This is also broken down by day (currently, for every $276 given away, they will be disqualified for one day). Ultimately, the gift will result in a penalty period, during which time Medicaid will not pay for the nursing home costs. This penalty period will not begin until after the individual is receiving long term care, is asset eligible, and submits an application for Medicaid benefits.

For example, if a gift of $14,000 is made within five years of applying for Medicaid benefits, it will cause a penalty period of approximately 1 month and 20 days, during which time Medicaid will not pay for the cost of care. This means that the couple will have to pay out of pocket for the nursing home care during this time, which on average would equal approximately $13,800.

Solution: A couple should never give their assets away or transfer assets out of their names as it will result in an ineligibility period for Medicaid.

Missed opportunity for exempt transfer

Costly Mistake #5:  Missing opportunities for exempt transfers.

While simply giving away assets can result in a penalty period, the law does provide certain exceptions for transferring assets without penalty. One exception is gifting money or transferring the ownership of assets to a Medicaid applicant’s blind or disabled child, regardless of the child’s age or marital status. It is important to note that these gifts or transfers could have negative consequences to the disabled child if he or she is also receiving government benefits which is based on their assets.

Additionally, the home can be transferred to a child, regardless of age or marital status, who has lived in the home for at least two years prior to the owner entering a nursing facility, if that child has provided care that has kept the owner from being institutionalized sooner.  Of course, these transfers must meet several criteria in order to be considered exempt transfers.

Solution:  Get expert advice about exempt transfers that may apply in your circumstances before you spend-down assets to qualify for Medicaid.

Insufficient Power of Attorney

Costly Mistake #6:  Having an insufficient power of attorney.

Once Medicaid benefits have been approved, the couple has one year to transfer all assets owned by the spouse in the nursing home to the Community Spouse. At the end of this year, the spouse in the nursing home must have less than $2,000 in his or her name. If the spouse in the nursing home is unable to make these transfers themselves or does not have a power of attorney, then court approval will be needed to make the necessary transfers to maintain Medicaid eligibility.

If the spouse in the nursing home does have a power of attorney, does it have the needed provisions? Before you say, as many people do, “My power of attorney must have everything I need – it goes on for pages and pages,” look more closely. Does it contain gifting provisions? Does it allow you to transfer ownership?  Does it give you authority to deal with certain types of assets, such as stocks, IRAs, or life insurance? If these and other important provisions are not included in the document, you may still end up needing court approval to transfer the assets to the Community Spouse.

Solution: A well-prepared power of attorney will ensure your agent has the ability to do the things necessary for you to qualify for Medicaid, even if you lose the ability to make your own decisions.

Medicaid RulesPaying for long-term care in a nursing facility has become complicated, and the system grows increasingly complex. Government benefits can help, but you have to know how and when to qualify. As you can see, there are many different strategies available to protect a married couple’s assets. Proceeding without the right advice could cost you and your family dearly, or lead to the eventual impoverishment of the Community Spouse.

The experienced Elder Law attorneys at SSR Law Office can help evaluate your circumstances and discuss how you can protect your assets from the high cost of nursing home care.

 

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