Michigan Estate Planning Blog

When Should I Start Doing Estate and Tax Planning?

 

Estate planning creates a legal framework to manage assets in the event of incapacity or upon death and should include tax planning to protect income and inheritances. A recent article from The Street, “Don’t Be a Grasshopper: The Importance of Proactive Tax and Estate Planning,” references Aesop’s fable of the Ant and the Grasshopper. The ants are always hard at work, preparing for winter, while the grasshoppers play all summer and starve when winter comes.

Fundamentals for estate plans include having an experienced attorney create a last will and testament to convey your wishes for asset distribution. This is also done through the creation (and funding) of trusts, which take assets out of your personal ownership and place them in a separate legal entity. One of the many benefits of trusts is that assets are distributed directly to beneficiaries, without needing to go through probate.

Other estate planning documents include a Power of Attorney, which designates another person of your choice to handle financial and legal decisions on your behalf if you are incapacitated. The Power of Attorney ends upon your death, so it is only used while you are living. Similarly, a Medical Power of Attorney, sometimes known as a Healthcare Proxy, is used to give another person, also of your choosing, the power to be involved with your medical care, speak with your health insurance provider and be part of your health care decision making.

Which estate and tax planning strategies you need will depend in large part upon the size of your estate. If you own a home, a car and investment accounts, a will is needed to distribute your assets and different types of trusts may be needed. If the family includes a disabled family member, you should speak with an estate planning attorney about Special Needs Trusts. If long term care is a concern, a Medicaid Asset Protection Trust may be helpful to protect the well spouse and family.

Proactive planning can be a little more complex for those with significant wealth. Strategies like a Dynasty Trust or Irrevocable Trust may be needed for those whose estates reach estate tax exemption thresholds, which are likely to shrink considerably in the future.

When possible, communicate your wishes with the family so there are no surprises after your passing. Decide how transparent you can be with your children and grandchildren. In some families, this is accomplished with a series of family meetings. For others, holding a meeting in the estate planning attorney’s office with the attorney present to answer questions can be more productive.

Regardless of your estate size and family dynamic, taking the time to create or update an estate plan is a kindness to your loved ones. They’ll know you made an effort to prepare so they can celebrate your life and hold their memories close without the distraction of family fights or protracted court proceedings.

Reference: The Street (September 3, 2024) “Don’t Be a Grasshopper: The Importance of Proactive Tax and Estate Planning”

How Special Needs Trusts are Used to Protect Loved Ones

 

To qualify for Supplemental Security Income (SSI) and Medicaid, you have to own less than $2,000 in assets. These two programs are intended to pay for basic living expenses and primary medical services, according to a recent article from Barron’s, “Kids With Special Needs Deserve Benefits. A Trust Protects Them.”

A Special Needs Trust (SNT) is used to pay for other expenses. This can be anything from the cost of having a cell phone to traveling for the individual and a companion. An estate planning attorney should create the trust in tandem with the family’s overall estate plan.

There are two types of SNTs to consider for high-income families, and a third, explained below, is useful for families of moderate means. The main difference between the first two SNTs is how the money left in the trust is distributed after the death of the disabled person.

In a third-party supplemental trust, the special needs family member doesn’t have access to the money at any time. The trustee designates a beneficiary if any assets are left in the trust upon the death of the disabled person.

A first-party supplemental trust is used for money received outright, such as from an improperly planned inheritance or an award from a lawsuit. Assets in these trusts can be used during the individual’s lifetime, but upon their death, Medicaid can take back benefits paid over the person’s lifetime before any remaining assets are distributed to beneficiaries.

Parents planning for their child’s well-being after their own deaths typically choose a family member who is close to the disabled person as their trustee. This is good thinking, with some limitations. The person who is the trustee needs to be financially savvy. Remember, the person with special needs may never receive money directly. If they do, their benefits are at risk.

Trustees need to know the details of SNTs so they don’t mishandle funds. For instance, funds in the trust should not be used for anything already paid for by SSI, like housing.

An alternative to privately created and managed trusts is a Pooled Trust. These are run by nonprofit organizations, which offer services like trustees for smaller accounts.

When it comes to retirement, parents need to address their retirement assets to enjoy their retirement years. They can fund SNTs by taking out life insurance policies. Life insurance policies make sense also because funds in trusts should be liquid. For younger parents in particular, term life might be a good option.

A warning for parents with SNTs who are tempted to leave all of their assets to their child with special needs: this is not necessary and could be problematic. Don’t forgo taking care of siblings, or resentment may lead to a family member resenting the family member with special needs.

Reference: Barron’s (July 27, 2024) “Kids With Special Needs Deserve Benefits. A Trust Protects Them.”

What are the Essentials of Estate Planning?

 

Once you’re familiar with the basics, estate planning isn’t quite as daunting as it may seem at first, says a recent article from The Atlanta Journal-Constitution, “Estate planning 101: A guide to management.” Estate planning includes the necessary planning to protect you while living and distributing assets after you have passed.

Your estate plan depends on many factors, including the size of your family, whether you’re married, widowed, or single and the amount of your assets, including your home, investment accounts, real estate, retirement accounts and digital assets.

One important thing to know: estate planning is not just for wealthy people. If you think you don’t have enough assets for an estate plan, you’re wrong: any adult needs an estate plan to protect themselves and their loved ones.

Consider your last will and testament as a gift to your loved ones. A will is a legal document containing instructions for distributing your property to heirs upon death. What constitutes a valid will varies from state to state, so you’ll want to work with a local estate planning attorney to create a will.

If you die without a will, your estate is considered “intestate,” and your property will be distributed according to the laws of your state and the probate court. Your family won’t have any say in whoreceives assets. They could go to a distant relative you’ve never even met. With a will, you get to decide (within the bounds of law, of course) what you want to happen with your assets.

Trusts are used to have further control over assets in an estate. Wills become part of the public record once filed in probate court. However, the contents of a trust remain private. The trust can be used to hold assets while you are living, and certain types of trust only become effective upon your death. Another benefit of a trust is that it can allow a trustee to manage assets in the trust if you become incapacitated.

Special Needs Trusts are created for people with developmental disabilities to provide support in addition to government benefits. Medicaid Asset Protection Trusts take assets out of a person’s estate, often as part of planning for long-term care costs. An estate planning attorney can recommend the type of trust best for your unique situation.

A power of attorney is a document used while you are living to give another person the ability to manage your affairs in case of incapacity. Everyone should have a POA for their financial and legal affairs and a Medical or Health Care Power of Attorney, so a trusted person can help with medical decisions and be involved in decision-making for medical care.

An executor is a person you name in your will who is in charge of your estate and estate management after you have died. You can name one or two people to be executors of your estate. However, be sure that they work well together to avoid any stalemates.

An experienced estate planning attorney can make this a relatively straightforward process, giving you the peace of mind of knowing you have taken the necessary steps to protect yourself and your loved ones.

Reference: The Atlanta Journal-Constitution (Aug. 1, 2024) “Estate planning 101: A guide to management”

Should All of My Assets Be in a Trust?

 

By now, you may have heard about the “great wealth transfer,” which refers to Americans inheriting as much as $72 trillion over the next twenty years. Do you have a plan in place for your family? A recent article, “Is a Living Trust Really the Best Way to Pass an Inheritance to Your Family?” from The Motley Fool, explains how this estate planning tool works.

How does wealth pass to heirs? One way is a Last Will and Testament. However, a Living Trust may be better. The Living Trust is the creation of a legal entity, the trust, which allows the person creating it—the grantor—to control the trust and the assets in it during their lifetime. When the grantor passes, the secondary trustee takes over, managing assets in the trust and distributing them according to the language in the trust.

A living trust isn’t for everyone. There are definite advantages. However, there are also some disadvantages you’ll want to understand before deciding if this is for you.

Living Trusts allow the grantor to maintain control of the trust and the assets within the trust. The grantor can change their mind about any aspect of the trust at any time. They can change beneficiaries, remove assets or even close the trust.

The Living Trust takes assets out of your probate estate, meaning the assets in the trust are distributed to beneficiaries with no court involvement. Probate is a lengthy, expensive and public process. It can take months or years to complete, and the will becomes part of the public record. Anyone who wants to, from nosy relatives to scammers, can read the will.

Those with significant wealth use trusts to keep their private business private. People with estranged family members use trusts to maintain privacy and prevent feuds.

However, there are some downsides to consider. There is some work and costs associated with trusts. Placing assets into a trust requires retitling those assets, such as real estate or investment accounts.

You should speak with an estate planning attorney, especially if your goal in creating a trust is to qualify for Medicaid. This is a different type of trust requiring the help of an experienced estate planning attorney.

A trust isn’t an instant tax shelter. An estate planning attorney should be consulted to create the proper legal entities if your main goal is to take assets out of your estate to avoid federal, state, or inheritance taxes.

Trusts aren’t do-it-yourself projects. To do this right, you’ll want the help of an experienced estate planning attorney. They’ll help you define your goals and then create a plan to achieve them.

Reference: The Motley Fool (July 5, 2024) “Is a Living Trust Really the Best Way to Pass an Inheritance to Your Family?”

Do You Need a Medicaid Asset Protection Trust?

 

 

The numbers are clear: 70% of Americans expect to need long-term care at some point in their retirement. Many people aren’t aware of the importance of long-term care until they are uninsurable because of health conditions or can’t afford the premiums. How can you plan?

Depending upon where you live and the type of care needed, long-term care costs anywhere from $50,000 to $100,000 per year. With an average stay of two to five years, it’s a hefty financial burden without long-term care insurance, a MAPT, and good planning.

Creating a Medicaid Asset Protection Trust requires the help of an experienced estate planning attorney to be sure you obtain all of the benefits of such a trust. Long-term care costs are one of the biggest financial worries for retirees, as noted in a recent article, “This Trust Can Protect Your Assets From Long-Term Care Costs,” from Kiplinger.

The Medicaid Asset Protection Trust (MAPT) moves money out of your estate into a trust, so it becomes uncountable for Medicaid means-testing purposes. It has to be created and funded at least five years before the applicant can be deemed eligible for Medicaid funding, known as the “Medicaid look-back.”

The trust needs to be set up by an experienced estate planning attorney because there are many fine points to consider. The MAPT won’t serve its intended purpose if it's not set up correctly.

The MAPT must be an irrevocable trust, meaning the grantor (who set up the trust) no longer has access to those assets. This can be a little unnerving. You’ll also want to speak with your estate planning attorney about your plans for the near and distant future. How will you access funds if you’re putting funds into the trust? Who will be able to access them?

This trust will also benefit families with assets closer to the old estate tax levels. In 2024, the gift and estate tax exemptions are still very high—$13.61 million. However, if the law sunsets without Congress acting, the estate tax could revert to around $5 million or lower if the federal government decides more wealth needs to be taxed. Assets in a trust are not part of the taxable estate, so having a trust also protects assets from federal and state estate taxes.

Trusts are also powerful means of controlling asset distribution. Your MAPT could distribute a set amount of money to a beneficiary throughout their lifetime, or a minor grandchild could be given a certain amount after they’ve completed four years of college or achieved a particular goal.

Consult an estate planning attorney to learn how MAPTs work, if they’re right for you, and how to get started.

Reference: Kiplinger (July 11, 2024) “This Trust Can Protect Your Assets From Long-Term Care Costs”

Can You Protect Property and Qualify for Long-Term Care with Medicaid?

 

Long-term care costs keep many seniors and their adult children up at night, with good reason. However, with the right long-term care and asset protection plan, you can protect your home and other assets so you can pay for any supplemental needs and protect a well spouse. A recent article from The National Law Review, “Protecting and Preserving Property When Paying for Long-Term Care” provides details.

Your primary residence remains an exempt asset if you plan to return home. An exempt asset is the term used to describe any asset not countable by Medicaid when considering your eligibility. The property is also exempt if your spouse, minor child, or disabled child lives in the home.

If you have a child who has lived at home with you for at least two years and has provided care that allowed you to remain home, as opposed to being in a nursing home, the property may be transferred to the child, who is then considered a “caregiver child.”

Another permitted transfer of the primary home is to a disabled child. This transfer is allowed by Medicaid and doesn’t lead to any penalty period for Medicaid. Check with your estate planning attorney to ensure that this asset's transfer doesn’t conflict with any Special Needs planning or make the child ineligible for any means-tested government benefits.

Medicaid has a five-year look-back period, when any transfers of any property, as noted above, are not allowed and result in your being ineligible for Medicaid benefits. Many people think Medicaid won’t find out about moving assets, including retitling homes or accounts. However, this is not a good idea in this age of data connectivity.

A Medicaid Asset Protection Trust is commonly used if created five years before applying for Medicaid benefits. The family home, investment accounts and other assets are retitled to be transferred into the trust. The assets within the trust are protected and exempt from Medicaid. This allows the well spouse to continue to live in their home and enjoy using the assets saved for retirement or plan for these assets to be passed to the next generation.

Suppose the need for Medicaid benefits arises and no planning has been done. In that case, some home sale proceeds can be protected by using Medicaid Compliant Annuities and creating supplemental needs trusts. An estate planning attorney will review your situation and determine the best options for each situation.

Reference: The National Law Review (June 20, 2024) “Protecting and Preserving Property When Paying for Long-Term Care”

How to Plan for Beneficiaries with Disabilities

 

When creating an estate plan, it’s important to consider all of the possibilities—including disability, says a recent article, “Beneficiaries with disabilities will impact plans,” from The News-Enterprise. A well-prepared estate plan can protect all heirs.

Disability planning typically includes two types of protections: first, to protect the disabled individual’s inheritance from the loss of government benefits. This includes Medicaid, SSI, food stamps, Section 8 housing and other means-tested assistance programs.

Good planning protects continuity of care. Most disabled individuals who qualify for government benefits live in supportive housing communities and/or are helped by caregivers. Losing access to these support systems could become overwhelming to a disabled person.

If the inherited assets are used in place of these programs because of poor planning, upon their depletion, the disabled individual would have to start the process of applying for government assistance all over again. The possibility of being assigned to the same programs and receiving the exact same support is unlikely. A long wait time for services could also become problematic.

Second, an estate plan that considers a disabled individual must protect them from vulnerabilities and exploitation. Financial scams and outright thefts are not limited to the able-bodied. A disabled person known to have access to an inheritance becomes a target for scammers. The estate plan needs to ensure a responsible and savvy individual serving as the trustee is looking out for their best interests.

Testamentary documents are most helpful in estate planning for people with disabilities. The most common mistakes made are completely disinheriting the beneficiary or putting funds under the control of a caregiver. Disinheritance is common, as most people don’t understand there are ways to prevent the loss of services while keeping inherited assets available for the individual.

Giving funds to a caregiver is almost always a recipe for disaster. The caregiver may not follow the directions or become a victim of scammers, leaving the disabled heir without the benefit of their inheritance.

One answer is a third-party trust. This is created by one person—the grantor—for the benefit of another person—the beneficiary. It is funded with assets that never belonged to the beneficiary, so any funds in the trust aren’t subject to a payback provision to the state when the beneficiary dies. Third-party trusts are an excellent tool for estate planning and can also pass funds along to contingent beneficiaries when the original beneficiary passes.

An experienced estate planning attorney will know the nuances of planning for disabled individuals. Your estate plan deserves to be created by a professional to protect those you love.

Reference: The News-Enterprise (April 27, 2024) “Beneficiaries with disabilities will impact plans”

 

Caregiving and Estate Planning Provides Peace of Mind for All Generations

 

If your goal is to keep the farm, ranch, or small business in the family, planning, including estate planning and caregiving, is the number one strategy to making it happen. Families may dissolve the farm or business without advance planning to pay for long-term care expenses. A recent article from AgWeek, “Caregiving plans can provide peace of mind for farming and ranching families,” explains what needs to be done.

Part of the issue is that most ranchers and business owners won’t qualify for Medicaid because they own a significant asset. Having to sell off something they’ve worked their entire lives to build is often a result of no planning.

If you have a long-term care insurance policy, it needs to be carefully reviewed to determine what conditions need to be met for benefits to be paid. For example, most policies have a “waiting period,” so you’ll need to plan how to pay for caregiving during the months before the policy kicks in.

There’s also confusion about the difference between Medicare and Medicaid. Medicare is health insurance for medical expenses, while Medicaid is usually used for long-term care and caregiving needs. However, Medicaid is a needs-based program. An estate planning attorney can help the family determine what needs to happen in advance, whether the goal is to protect the farm, ranch, or small business while helping the aging parent become eligible for Medicaid.

Estate planning includes planning for incapacity, which can occur at any time but is more likely as we age. Suppose the individual hasn’t completed a power of attorney, healthcare power of attorney, and other medical directives. In that case, the family will need to go to court to obtain conservatorship or guardianship to take over the person’s financial matters and make healthcare decisions on their behalf. An estate planning attorney can help the family prepare the documents and create a plan.

Having an estate plan in place is also another means of protecting the family’s assets from elder abuse. Everything needs to be documented, and records need to be well-organized so every family member knows where documents are, where assets are and the plan for the inevitable events of aging.

Meeting with an estate planning attorney to create the last will and testament, power of attorney and all other planning documents can minimize the stress and costs involved. Without planning, everything becomes far more complicated, costly and stressful for all concerned.

Reference: AgWeek (May 14, 2024) “Caregiving plans can provide peace of mind for farming and ranching families”

How to Protect Your Spouse when Diagnosis Is Dementia

 

Few illnesses are as terrifying as dementia, for which there is no cure. If estate planning is in place, it may need to be adjusted to address new, more imminent issues. Reviewing the family situation from a legal and financial aspect is critical, and there is no time for delay, explains a recent article from Morningstar, “’I don’t want my wife to lose everything’: I’ve been diagnosed with dementia –I suddenly could not spell or write legibly.”

There are a number of steps to be taken to smooth the path ahead. First is to update your will and create a financial power of attorney. Don’t try to do this without the help of an experienced estate planning attorney.

This may also be the time to reassess your investment portfolio based on your new financial plan and risk tolerance.

An Advanced Healthcare Directive will inform doctors what actions you want them to take when you cannot make those decisions for yourself. You may want to list your wife as your healthcare proxy to carry out these decisions, but be mindful of the pressures put on a marriage when serious healthcare issues occur. Your spouse will need emotional support as well, and you’ll want to have a successor to your spouse for both the healthcare and POA documents.

Share your situation with trusted family and friends to create a team–a community of people who can provide support, part of which will be updating beneficiaries. Now would also be the time to record instructions for access to devices, documents, and even daily habits.

Long-term care insurance will help with expenses and should serve as an example for anyone reading this article. Policies should be purchased early in life when they are relatively affordable to help alleviate the financial burden of nursing home costs.

An estate planning attorney and financial advisor will help you take an accounting for assets, expenses, and projected long-term care costs. You’ll want a team approach to provide as much guidance as possible.

When to put your long-term care policies into payout status is a difficult decision. You’ll need to time this with a Medicaid plan, which your elder law estate planning attorney will be able to help with.

Now may also be the time to create a trust and divest assets to make it through the five-year Medicaid look-back, using your long-term care policy in the next five years.

There are exceptions to the five-year look-back rule for Medicaid eligibility. They include paying off debts, buying medical devices, or making home improvements to improve accessibility. However, eligibility depends upon income and other assets.

Some states, including Florida and New York, have rules exempting homes from assets calculated by Medicaid under certain circumstances. California eliminated an asset limit this year, making a person’s home automatically safe from Medicaid while they are living, but this does not mean it’s exempt from the Medicaid Estate Recovery Program.

Working with a team of professionals, including an estate planning attorney, and having the support of family and trusted friends will be important as time goes by and the disease progresses.

Reference: Morningstar (Feb. 25, 2024) “’I don’t want my wife to lose everything’: I’ve been diagnosed with dementia –I suddenly could not spell or write legibly”

Prevent Difficulties in Probate with Advance Planning

If you think gathering your papers, passwords, logins, account information and estate planning documents is a challenging task, consider your heirs trying to do it after you’ve passed and while they are grieving your loss. By preparing all the information they’ll need, you’ll make their inheritance process as easy as possible, says a recent article from Next Avenue, “6 Ways To Save Your Heirs from a Painful Probate.”

A List of Passwords for Hardware, Online Accounts and More Our cellphones, tablets, computers, online accounts and other technology all hold important information. If your executor tries to access information and accounts, they’ll need more than your passwords. If you have accounts with two-factor authentication, for instance, they’ll need to be able to access your email and/or cellphone to access other digital assets. The list should include things like social media usernames and passwords. The information must be kept somewhere safe where a spouse or executor can find it. Some tech platforms allow you to name a legacy contact with the right to access accounts after you pass. A password manager system might be helpful. However, this may add another layer of frustration for non-technical people.

List All Assets and Accounts with Contact Information. Whether you use a spreadsheet or a notebook, this is crucial information. Make sure to include investment accounts, checking and savings accounts, 401(k)s, IRAs, pension accounts, brokerage accounts, etc. Provide contact information for your estate planning attorney, accountant and financial advisor.

The information must be well organized because it will be a lot of data. Your executor will also need the accounts for running your household, paying utilities, mortgage, cable, etc. The same goes for health insurance, Medicare or Medicaid information, life insurance policies, car insurance and deeds to your home and car.

Tell the Executor and/or Heirs Where Your Information is Located. One estate planning attorney reports receiving a few monthly calls from grieving heirs who have no idea where the estate planning documents are, who takes care of the financial accounts, or how to access these accounts. Sometimes, the calls come from people who aren’t even clients but are hoping there might be some special resource known to estate planning attorneys to provide this information. There is no such thing.

Plan for the Unexpected A significant part of estate planning is planning for financial and healthcare decisions while you are still living. A living will details whether or not you want to be kept alive by heroic or artificial means, and a power of attorney authorizes someone to make decisions on your behalf. Without a POA, the person may recover from their medical emergency to find a financial mess of late bills, missed insurance premiums, or a host of issues that could have been dealt with on their behalf. Without healthcare surrogate documents and discussions of your wishes in difficult health situations, the family will need to make difficult healthcare decisions in highly stressful situations.

If the proper documents are not in place, the family must go to court to have someone named a guardian, who can then make health care decisions for you. The same process will be needed to have someone manage your financial affairs, called conservatorship. These are expensive and invasive court processes that can easily be avoided.

Talk with your estate planning attorney and family members to plan for the future. You’ll all feel better knowing that you’ll all be prepared when difficulties arise.

Reference: Next Avenue (Jan. 9, 2024) “6 Ways To Save Your Heirs from a Painful Probate”

What Should I Know about Lady Bird Deeds?

 

Enhanced life estate deeds, also called Lady Bird deeds, can be a great tool to transfer ownership of real property at death. This type of deed got its nickname when President Lyndon B. Johnson used one to convey property to his wife, Lady Bird.

Florida Today’s recent article entitled, “Real estate transfers: Is a 'Lady Bird deed' right for me?” explains that Lady Bird deeds are a type of life estate deed designed to automatically transfer property ownership upon the death of the original owner to another individual. However, they don’t require the original owner to give up use, control, or ownership of the property while alive.

The beneficial receiver of the property upon death doesn’t get any immediate rights or ownership interests in the property. Their consent isn’t needed to sell, convey, or change the use of the property while the original owner is alive. The Lady Bird deed is rendered obsolete if the original owner sells or conveys the property in their lifetime. However, if the original owner passes away, the property subject to the Lady Bird deed is automatically conveyed to the beneficial recipient without needing to pass through probate.

With a traditional Life Estate deed, the original owner must give up control when adding a beneficial recipient. This means the original owner is prohibited from selling, conveying, or encumbering the property without explicit consent from the beneficial recipient. The original owner also can’t change or end a traditional Life Estate deed without consent from the beneficial recipient.

Here are the benefits of a Lady Bird deed:

Properties can be conveyed at death without having to pass through probate.

The original owner remains in full control of the property while they’re alive.

Recording a Lady Bird deed doesn’t impact the current owner’s homestead protection and exemptions.

Any property subject to a Lady Bird deed doesn’t violate Medicaid’s five-year look-back period and isn’t subject to gifting taxes or penalties, since the beneficial owner doesn’t immediately possess any ownership rights.

Here are the downsides of a Lady Bird deed:

Doesn’t protect non-homestead properties from any judgment liens issued against the original owner during their lifetime.

A Lady Bird deed can be an effective tool to transfer property outside of probate. However, as in any real estate transaction or estate planning endeavor, it is necessary to have a knowledgeable estate planning attorney to discuss your desired outcome and best course of action for your specific situation.

Reference: Florida Today (June 9, 2023) “Real estate transfers: Is a 'Lady Bird deed' right for me?”

 

What are Benefits of Creating a Life Estate?

Quicken Loans’ recent article, “What Is A Life Estate And What Property Rights Does It Confer?” discusses the benefits of a life estate.

A life estate is an interest in real property that entitles the life estate owner (sometimes called the “life tenant”) to the right to occupy, possess, or otherwise use the property for the lifetime of one or more individuals (usually the lifetime of the person or persons who hold the life estate interest). A life estate owner has the right to possess and use the property for the duration of the life estate. A “remainderman” has an ownership interest in the real property. However, they have no right to possess or use it until the life estate terminates, typically when the life tenant dies.

The Property Avoids Probate. Property held in a life estate isn’t required to go through probate but rather transfers ownership to the remainderman. This also eliminates the complications of stating your intentions for your property in a will.

The Property is no Longer Part of the Estate. Once your state’s Medicaid look-back period is over, a property transferred through a life estate won’t count against your eligibility for the program.

It Keeps Elders in Their Homes. Even though a life estate effectively transfers property ownership to the remainderman, the life tenant has guaranteed residency, if desired, for the rest of their life.

While life estates are helpful tools, they do have several drawbacks:

The Property is still Vulnerable to the Debts of the Heirs. Because the life estate transfers property rights to a designated heir, the heir’s creditors may have the right to seize the inherited assets to cover any outstanding debts, contradicting the life tenant’s wishes to pass their assets on directly to the heir.

The Heirs’ Rights to the Property Vest at Creation. Once you create a life estate, the property rights vest in the heir(s) and can’t be revoked without the heir’s consent.

The Property Can’t Be Sold or Mortgaged. If a life tenant wants to significantly alter the property, convert it into a rental, or even decide to sell, they must have the remainderman’s permission.

Life estates help elderly homeowners set up a straightforward, legal directive for an heir to inherit property without probate. Life estates also let the owner control the property in most respects. If created in a timely manner, a life estate can even help its creator qualify for Medicaid assistance. However, life estates do have some disadvantages. Ask an experienced estate planning attorney if this is a good move for your situation.

Reference: Quicken Loans (Aug. 9, 2022) “What Is A Life Estate And What Property Rights Does It Confer?”

Do You Need a Revocable or an Irrevocable Trust?

 

It’s not always obvious which type of trust is the best for an individual, says a recent article titled “Which is Best for Me: A Revocable or Irrevocable Trust?” from Westchester & Fairfield County Business Journals.

In a revocable living trust (RLT), the creator of the trust, known as the “grantor,” benefits from the trust and can be the sole Trustee. While living, the grantor/trustee has full control of the real estate property, bank accounts or investments placed in the trust. The grantor can also amend, modify and revoke the trust.

The goal of a revocable trust is mainly to avoid probate at death. Probate is the process of admitting your last will and testament in the court in the county where you lived to have your last will deemed legally valid. This is also when the court appoints the executor named in your last will. The executor then has access to the estate’s assets to pay bills and distribute funds to beneficiaries as named in the last will.

Probate can take six months to several years to complete, depending upon the complexity of the estate and the jurisdiction. Once the estate is probated, your estate is part of the public record.

A revocable living trust and the transfer of assets into the trust can accomplish everything a last will can. However, distribution of assets at the time of death remains private and the court is not involved. Distribution of assets takes place according to the instructions in the trust.

By comparison, irrevocable trusts are not easily revoked or changed. Most irrevocable trusts are used as a planning tool to transfer assets for the benefit of another person without making an outright gift, or for purposes of Medicaid or estate tax planning. An Irrevocable Medicaid Asset Protection Trust is used to allow an individual to protect their life savings and home from the cost of long-term care, while allowing the trust’s creator to continue to live in their home and benefit from income generated by assets transferred into the irrevocable trust.

The transfer of assets to a Medicaid Asset Protection trust starts a five-year penalty period for Nursing Home Medicaid and a two-and-a-half-year penalty period for Home Care Medicaid for applications filed after March 1, 2024. After the penalty (or “look back”) periods expire, the funds held by the trust are protected and are not considered countable assets for Medicaid.

An irrevocable trust can also be used to transfer assets for the benefit of a loved one, friend, child, or grandchild. Assets are not controlled by the beneficiaries but can be used by the trustee for the beneficiary’s health, education, maintenance and support.

Trusts are used to reduce the size of the taxable estate, to plan for the well-being of loved ones, and to protect the individual and couple if long-term care is needed. Speak with an estate planning attorney about which trust is best for your unique situation.

Reference: Westchester & Fairfield County Business Journals (Jan. 26, 2023) “Which is Best for Me: A Revocable or Irrevocable Trust?”

What is a Life Estate?

 

A life estate is a type of property ownership that divides the control and ownership of a property. The person who creates the life estate for their home and assets is known as the “life tenant.” While a tenant retains control of the property, he or she shares ownership during their lifetime with the remainderman (the estate's heir).

Quicken Loans’ recent article entitled “What Is A Life Estate And What Property Rights Does It Confer?” explains that while the life tenant lives, they’re in control of the property in all respects, except they can’t sell or encumber the property without the consent of the remaindermen. After the life tenant passes away, the remainderman inherits the property and avoids probate. This is a popular estate planning tool that automatically transfers ownership at the life tenant's death to their heirs.

The life estate deed shows the terms of the life estate. Upon the death of the life tenant, the heir must only provide the death certificate to the county clerk to assume total ownership of the property.
Medicaid can play an essential role in many older adults’ lives, giving them the financial support needed for nursing facilities, home health care and more. However, the government considers your assets when calculating Medicaid eligibility. As a result, owning a home – or selling it and keeping the proceeds – could impact those benefits. When determining your eligibility for Medicaid, most states will use a five-year look-back period. This means they will total up all the assets you’ve held, sold, or transferred over the last five years. If the value of these assets passes above a certain threshold, you’ll likely be ineligible for Medicaid assistance.

However, a life estate can help elderly property owners avoid selling their home to pay for nursing home expenses. If your life estate deed was established more than five years before you first apply for benefits, the homeownership transfer would not count against you for Medicaid eligibility purposes.

To ensure you’re correctly navigating qualifying for Medicaid, it’s smart to discuss your situation with an attorney specializing in Medicaid issues.

Reference: Quicken Loans (Aug. 9, 2022) “What Is A Life Estate And What Property Rights Does It Confer?”

Planning for Late-In-Life Care

Planning for the health and proper care of an aging parent is no easy undertaking. That is a given. As a parent moves toward healthcare and assisted living there are myriad questions and issues to consider. These run the gamut from financial to medical and, yes, the emotional. By way of a primer, consider reading (and sharing) a recent Forbes article titled “The Basics: Assisted Living For Your Parent.” Some of the most important issues in planning for late- or end-of-life care include understanding the various kinds of facilities and treatments available. There is, for example, a decided difference between nursing home care and an assisted living situation. Even within assisted living communities there are many different kinds of facilities, from the large to the small and the homey to the clinical. In the end, you must know what to look for and what is appropriate for the elderly loved one in need of care. The key, if possible, is to include your loved in the evaluation process. Ensure that they are included in the discussions and options. Otherwise, expect resistance to change because the transition to care away from home is by nature very disruptive on many levels. Once you know the kind of care needed and your loved one is on board, then comes the question of how to pay for it and how to understand Medicaid, Medicare, and the programs that can help fill the gaps. Needless to say, this can be a complex process. Be sure to read and share the original article to help you and your loved one make a transition that is right for their circumstances.

Reference: Forbes (March 13, 2014) “The Basics: Assisted Living For Your Parent”

For more information, see www.jerryreiflawyer.com

A Medicaid Primer 101

What is your Medicaid IQ? Most Americans have heard of Medicaid, since it has been part of the national political debate for some time. A political discussion is one thing, but what does Medicaid mean to your elderly loved ones? If you have elderly parents, it is high time to learn about Medicaid and how it works. Fortunately, a recent Forbes article is a good place to start. The article is aptly titled “Medicaid And Your Parents: The Basics.” Essentially, Medicaid is a program run jointly by the federal government and each respective state government. Think of it as government insurance for, among other things, late-in-life medical care like home care or nursing home care when the one needing care has too limited financial resources. Medicaid is “means-tested.” Consequently, having too great an income or too much in assets will disqualify a Medicaid applicant and create a legal hurdle to receiving benefits. In addition, having “assets” is not the same as having the money to pay for care. For those with assets exceeding the Medicaid limits, “giving” assets away will only disqualify them from Medicaid assistance if the transfers violate the “look back” period designed to keep them from gaming the system. Of course, an elderly individual might have had innocent intentions when they made a disqualifying gift a few years ago and the need for Medicaid was unforeseen. Regardless, such transfers are a red flag when it comes to Medicaid qualification. Each state is subtly different in its approach, but these are very real rules and they require careful thought and timing. Otherwise, it is easy to run afoul of the rules now and be disqualified from care later. You owe it to your elderly loved ones to start planning for a worst case scenario without delay.

Reference: Forbes (February 11, 2014) “Medicaid And Your Parents: The Basics”

For more information, see www.jerryreiflawyer.com

Will Your IRA Affect Your Medicaid Eligibility?

For many of us and the older loved ones for whom we may care, receiving needed medical care in old age will mean ensuring an easy transition into Medicaid. The problem, however, is that there are some strict financial rules governing eligibility to receive Medicaid benefits. Consequently, it is often all-too-easy to run afoul of them. Here is an important question to ask: “Can an IRA Affect Medicaid Eligibility?” ElderLawAnswers posed and answered this question, noting that the greatest asset many of us will own throughout our lives and well into old age will be our IRA or other retirement account. That said, just because you have the account doesn’t mean it can or will pay for the needed care. No, in the end you might need Medicaid. However, the mere existence of the IRA may cause you some trouble getting into the program. So, can an IRA affect Medicaid eligibility? The short answer is that “it depends.” It depends upon whether or not the IRA is in “payout status” (i.e., are taking minimum required distributions?). This might actually work differently than you’d expect. If your IRA is in payout status, then you might be in the clear. Medicaid allows you to have some income for personal use, after all. As a result, the payout from an IRA might be so small as to not cross the Medicaid income threshold and larger amounts will simply go to the nursing home until reduced to the small personal expense amount. If your IRA is not in payout status, however, then the IRA is non-exempt and can be held against you, potentially to full value. What to do with the IRA depends upon state law and the possibility of transfer versus cashing-out. Either option may not be pretty or productive. With proper planning beforehand you can help ensure that your assets won’t accidentally trigger a problem. IRAs can be tricky. Much of what you should do will depend upon your needs and your assets, with more than a little hanging on state law. Interpreting the relevant laws can mean a world of difference, so seek competent Elder Law counsel in structuring a plan.

Reference: ElderLawAnswers (March 28, 2014) “Can an IRA Affect Medicaid Eligibility?”

For more information, seee www.jerryreiflawyer.com

Will Your IRA Affect Your Medicaid Eligibility?

For many of us and the older loved ones for whom we may care, receiving needed medical care in old age will mean ensuring an easy transition into Medicaid. The problem, however, is that there are some strict financial rules governing eligibility to receive Medicaid benefits. Consequently, it is often all-too-easy to run afoul of them. Here is an important question to ask: “Can an IRA Affect Medicaid Eligibility?” ElderLawAnswers posed and answered this question, noting that the greatest asset many of us will own throughout our lives and well into old age will be our IRA or other retirement account. That said, just because you have the account doesn’t mean it can or will pay for the needed care. No, in the end you might need Medicaid. However, the mere existence of the IRA may cause you some trouble getting into the program. So, can an IRA affect Medicaid eligibility? The short answer is that “it depends.” It depends upon whether or not the IRA is in “payout status” (i.e., are taking minimum required distributions?). This might actually work differently than you’d expect. If your IRA is in payout status, then you might be in the clear. Medicaid allows you to have some income for personal use, after all. As a result, the payout from an IRA might be so small as to not cross the Medicaid income threshold and larger amounts will simply go to the nursing home until reduced to the small personal expense amount. If your IRA is not in payout status, however, then the IRA is non-exempt and can be held against you, potentially to full value. What to do with the IRA depends upon state law and the possibility of transfer versus cashing-out. Either option may not be pretty or productive. With proper planning beforehand you can help ensure that your assets won’t accidentally trigger a problem. IRAs can be tricky. Much of what you should do will depend upon your needs and your assets, with more than a little hanging on state law. Interpreting the relevant laws can mean a world of difference, so seek competent Elder Law counsel in structuring a plan.

Reference: ElderLawAnswers (March 28, 2014) “Can an IRA Affect Medicaid Eligibility?”

For m ore information, see www.jerryreiflawyer.com

Medicaid – It Gives … And Now Takes Back Saginaw, Michigan

Medicaid is an important social safety net for those who truly need it. Nevertheless, it is not without its drawbacks and should be understood before using it. For example, “Medicaid Asset Recovery” is one drawback many are just now discovering as the program is expanding under Obamacare. So, what is “Medicaid Asset Recovery”? In layman’s terms: after you pass away the government can recoup the benefits you received from Medicaid by taking from your remaining assets, which usually means your house. The Washington Post recently touched upon the new anxiety about the Medicaid Estate Recovery program in an article titled “Little-known aspect of Medicaid now causing people to avoid coverage.” Bottom line: Medicaid Asset Recovery is an important reality for families to understand. Now, asset recovery has been a part of the Medicaid program for quite some time. It has been the means by which the government recoups costs for expensive Medicaid coverage for long-term care, at least when there was no surviving spouse or minor child involved. However, the law has expanded so states can recoup losses for any Medicaid benefits provided after age 55. Since it is “Medicaid” (a shared Federal-State program), states vary in their use and tolerance of the asset recovery procedure. Nevertheless, as a family member caring for an elderly loved one it does present a potential dilemma between receiving Medicaid benefits and keeping the house. If the house is actually a “home” with sentimental value to the family, or even if it is a valuable property worth bequeathing, then there are many factors to consider and maybe even more alternatives to explore. In the end, however, the care of an elderly loved one is never less important than their house or some of their other assets. On the other hand, this is a prime example of when your family should consult with an elder law attorney sooner to plan for the best financial and legal solution for your family later on.

Reference: The Washington Post (January 23, 2014) “Little-known aspect of Medicaid now causing people to avoid coverage”

For more information, see www.jerryreiflawyer.com

Medicaid – It Gives … And Now Takes Back Mid-Michigan

Medicaid is an important social safety net for those who truly need it. Nevertheless, it is not without its drawbacks and should be understood before using it. For example, “Medicaid Asset Recovery” is one drawback many are just now discovering as the program is expanding under Obamacare. So, what is “Medicaid Asset Recovery”? In layman’s terms: after you pass away the government can recoup the benefits you received from Medicaid by taking from your remaining assets, which usually means your house. The Washington Post recently touched upon the new anxiety about the Medicaid Estate Recovery program in an article titled “Little-known aspect of Medicaid now causing people to avoid coverage.” Bottom line: Medicaid Asset Recovery is an important reality for families to understand. Now, asset recovery has been a part of the Medicaid program for quite some time. It has been the means by which the government recoups costs for expensive Medicaid coverage for long-term care, at least when there was no surviving spouse or minor child involved. However, the law has expanded so states can recoup losses for any Medicaid benefits provided after age 55. Since it is “Medicaid” (a shared Federal-State program), states vary in their use and tolerance of the asset recovery procedure. Nevertheless, as a family member caring for an elderly loved one it does present a potential dilemma between receiving Medicaid benefits and keeping the house. If the house is actually a “home” with sentimental value to the family, or even if it is a valuable property worth bequeathing, then there are many factors to consider and maybe even more alternatives to explore. In the end, however, the care of an elderly loved one is never less important than their house or some of their other assets. On the other hand, this is a prime example of when your family should consult with an elder law attorney sooner to plan for the best financial and legal solution for your family later on.

Reference: The Washington Post (January 23, 2014) “Little-known aspect of Medicaid now causing people to avoid coverage”

For more information, see www.jerryreiflawyer.com

Of Family Gifts And Medicaid Lookback Rules Mid-Michigan

Medicaid has some very well-intentioned rules to stop people from taking advantage of the system. Many people set out intending to “beat the system.” It is called fraud. Unfortunately, sometimes the rules intended to stop outright fraud can get in the way of everyday families who want to play by the rules. The most common problem families run into is the so-called “lookback” period. You can easily run afoul of the 20/20 hindsight of Medicaid and thereby threaten the care your elderly loved one needs. This common conundrum of the lookback period was recently updated in a Q&A and supporting guide produced by ElderLawAnswers. In fact, the common question that sparked the post is the same as the title: “Should I Return Money My Mom Gave Me So She Isn't Penalized by Medicaid?” The lookback period, as some know all-too-well, is the period that Medicaid looks back through the finances and tax records of an applicant to ensure that they did not give away their assets to pass muster with the means-testing of the program. Of course, there are plenty of legitimate scenarios in which an individual would want to give away money or assets only to need Medicaid a few years thereafter. So, what happens when the tripwire is tripped and your loved one is Medicaid ineligible due to a previous gift made during the lookback period? This may vary from situation to situation (and state to state), but there are ways of undoing the gift and becoming Medicaid eligible. However, there are some potentially strange tax consequences. Then again, the heir who received the gift can always pay for the care until the loved one is eligible for benefits again. Right? In either event, the best solution would be to not create the problem in the first place. For information on the lookback and other eligibility problems to Medicaid, consult the master post on the subject (see “Medicaid's Asset Transfer Rules”). As always this is yet another example of situations that require the expertise of competent counsel before making a financial or legal move now (the gift) that can have serious financial or legal consequences later.

Reference: ElderLawAnswers (mod. January 3, 2014) “Should I Return Money My Mom Gave Me So She Isn't Penalized by Medicaid?”

ElderLawAnswers (mod. September 13, 2013) “Medicaid's Asset Transfer Rules”

For more information, www.jerryreiflawyer.com

Of Family Gifts And Medicaid Lookback Rules Saginaw, Michigan

Medicaid has some very well-intentioned rules to stop people from taking advantage of the system. Many people set out intending to “beat the system.” It is called fraud. Unfortunately, sometimes the rules intended to stop outright fraud can get in the way of everyday families who want to play by the rules. The most common problem families run into is the so-called “lookback” period. You can easily run afoul of the 20/20 hindsight of Medicaid and thereby threaten the care your elderly loved one needs. This common conundrum of the lookback period was recently updated in a Q&A and supporting guide produced by ElderLawAnswers. In fact, the common question that sparked the post is the same as the title: “Should I Return Money My Mom Gave Me So She Isn't Penalized by Medicaid?” The lookback period, as some know all-too-well, is the period that Medicaid looks back through the finances and tax records of an applicant to ensure that they did not give away their assets to pass muster with the means-testing of the program. Of course, there are plenty of legitimate scenarios in which an individual would want to give away money or assets only to need Medicaid a few years thereafter. So, what happens when the tripwire is tripped and your loved one is Medicaid ineligible due to a previous gift made during the lookback period? This may vary from situation to situation (and state to state), but there are ways of undoing the gift and becoming Medicaid eligible. However, there are some potentially strange tax consequences. Then again, the heir who received the gift can always pay for the care until the loved one is eligible for benefits again. Right? In either event, the best solution would be to not create the problem in the first place. For information on the lookback and other eligibility problems to Medicaid, consult the master post on the subject (see “Medicaid's Asset Transfer Rules”). As always this is yet another example of situations that require the expertise of competent counsel before making a financial or legal move now (the gift) that can have serious financial or legal consequences later.

Reference: ElderLawAnswers (mod. January 3, 2014) “Should I Return Money My Mom Gave Me So She Isn't Penalized by Medicaid?”

ElderLawAnswers (mod. September 13, 2013) “Medicaid's Asset Transfer Rules”

For more information, see www.jerryreiflawyer.com

Is A Prenup Right For You? Saginaw, MI

Prenuptial agreements – prenups – are a study in contrasts. On the one hand, you are pledging to love and care for your future spouse for life, for better or for worse, while on the other hand you are jotting out a kind of contingency plan. Face it: a prenup is not a romance enhancer. Still, especially with blending families, a prenup can be a prudent tool to maintain peace and domestic tranquility between the respective sides of the to-be-formed family. Love may be blind, but it is best to enter the marriage with both eyes open. Not surprisingly, the use of prenups is on the rise. For an interesting perspective on the prenup, consider a recently published article from Reuters called “Three things to consider before you ask for a pre-nup.” What exactly should you consider? Well for starters, every prenup represents the coming together of two very different and complex financial lives, two lives of separate assets and separate liabilities. Things can get complicated quickly. A prenup, however, offers both a way of seeing difficulties and of resolving them far in advance. Another interesting take-away from the article is that future inheritances ought to be addressed in the prenup, not just your current income and assets. How and when an inheritance may be received can be extremely important, especially when the inheritance may include important family assets, even ownership in a family business. Consequently, those planning for such “family assets” in their estates today already may be asking of their children to include these assets in the prenuptial agreement negotiations simply to protect the family. There is much to consider when it comes to planning a prenup, in addition to a wedding itself. If you are needing a little more encouragement, then a Forbes article titled “Why I Decided To Get A Prenup -- And So Should You” may help address some of your concerns.

Reference: Reuters (November 27, 2013) “Three things to consider before you ask for a pre-nup”

For more information. see www.jerryreiflawyer.com

 

Planning A Special Inheritance For A Special Beneficiary Mid-Michigan

We plan our estates to ensure our loved ones will be okay after we are gone. If a loved one has mental or physical special needs, then your estate planning needs some special planning itself. So what more should you do to ensure the happiness and wellbeing of your child with special needs? Special planning is, of course, very much tied to the needs of your child with special needs and to the needs of the rest of your family. As you might imagine, such planning entails important tools, rules and guides. To get started, consider a recent article in The Slott Report titled “3 Tips When Planning for a Special Needs Child.” One of the keys to special needs planning is understanding how public assistance aid works and its sources. Generally, the two major sources are Supplemental Security Income (SSI) and Medicaid. Both programs are “needs-based.” In other words, eligibility to receive benefits is all about qualifying financially, preserving that qualification, and ensuring a painless transition (read: not getting caught in bureaucracy). Tip #1: Consider implementing the all-important Supplemental Needs Trust. Properly drafted and funded, this is a special trust designed to offer security and care, without endangering needs-based program benefits. Tip #2: Plan ahead and plan carefully! These public assistance benefits may not be enough or offer as much security as you would want to ensure. In fact, you might want to find a way to leave more behind. Life insurance is an excellent option. Tip #3: What’s the final tip? You need to plan for yourself, too, and for your entire estate. As important as your loved one with special needs is, you have to ensure that the rest of your plans work together, too. For example, make sure to plan for threats to your own financial security, like high long-term care costs in old age. Without proper planning now, all could be lost later. In the end, if there is no security for you, then there may be no future security for your loved ones. The original article has a bit more to chew on, with some helpful pointers to get you moving in the right direction.

Reference: The Slott Report (November 20, 2013) “3 Tips When Planning for a Special Needs Child”

For more information, see www.jerryreiflawyer.com

Medicaid Dilemma – Sell Or Keep Your Home? Mid- Michigan

The move to a nursing home is a big step. It is a major life transition for all family members. Your loved one will no longer be living in their own comfortable and familiar home. In addition, there is the issue regarding whether to retain or keep the home given the unpleasant knowledge that the home may ultimately pay for nursing home care either way.

This dilemma was the focus of a recent Q&A in ElderLawAnswers via the question, “Is It Better to Sell a Medicaid Recipient's Home Now or Wait Until Her Death?”

Essentially, by receiving Medicaid you make certain agreements as to costs and, in the case of nursing home care, the deal often hinges on that most valuable of all assets an elderly person is likely to own: their home. True, it is possible to liquidate and sell the house just to pay for the nursing home care. Although this often reduces or eliminates the costs for maintaining and insuring an empty house, this also means giving up Medicaid benefits until the sale proceeds have been expended for care.

On the other hand, Medicaid will remember your choice whether you sell the home and private pay until spend down or if you to continue receiving benefits in lieu of such sale. If a family member attempts to sell the house after the Medicaid recipient loved one passes, then Medicaid has a lien on the sale proceeds (limited to the amount Medicaid paid for the care of the Medicaid recipient). Either way, the home is subject to pay for nursing home care or to reimburse Medicaid for the cost of care.

The answer to the question posed to ElderLawAnswers hinges on more than a few factors. That said, in most cases Medicaid payments will be less than private pay, sometimes a great deal less. Consequently, the resulting lien may be less of a burden than selling the house outright!

Is there something else at work, however? Notably, is the family home worth keeping in the family? These are situations that require some delicacy.

Reference: ElderLawAnswers (updated October 17, 2013) “Is It Better to Sell a Medicaid Recipient's Home Now or Wait Until Her Death?”

For more information, see www.jerryreiflawyer.com

 

Planning A Special Inheritance For A Special Beneficiary Saginaw, MI

We plan our estates to ensure our loved ones will be okay after we are gone. If a loved one has mental or physical special needs, then your estate planning needs some special planning itself. So what more should you do to ensure the happiness and wellbeing of your child with special needs? Special planning is, of course, very much tied to the needs of your child with special needs and to the needs of the rest of your family. As you might imagine, such planning entails important tools, rules and guides. To get started, consider a recent article in The Slott Report titled “3 Tips When Planning for a Special Needs Child.” One of the keys to special needs planning is understanding how public assistance aid works and its sources. Generally, the two major sources are Supplemental Security Income (SSI) and Medicaid. Both programs are “needs-based.” In other words, eligibility to receive benefits is all about qualifying financially, preserving that qualification, and ensuring a painless transition (read: not getting caught in bureaucracy). Tip #1: Consider implementing the all-important Supplemental Needs Trust. Properly drafted and funded, this is a special trust designed to offer security and care, without endangering needs-based program benefits. Tip #2: Plan ahead and plan carefully! These public assistance benefits may not be enough or offer as much security as you would want to ensure. In fact, you might want to find a way to leave more behind. Life insurance is an excellent option. Tip #3: What’s the final tip? You need to plan for yourself, too, and for your entire estate. As important as your loved one with special needs is, you have to ensure that the rest of your plans work together, too. For example, make sure to plan for threats to your own financial security, like high long-term care costs in old age. Without proper planning now, all could be lost later. In the end, if there is no security for you, then there may be no future security for your loved ones. The original article has a bit more to chew on, with some helpful pointers to get you moving in the right direction.

Reference: The Slott Report (November 20, 2013) “3 Tips When Planning for a Special Needs Child”

For more information, see www.jerryreiflawyer.com

Medicaid Dilemma – Sell Or Keep Your Home? Saginaw, MI

The move to a nursing home is a big step. It is a major life transition for all family members. Your loved one will no longer be living in their own comfortable and familiar home. In addition, there is the issue regarding whether to retain or keep the home given the unpleasant knowledge that the home may ultimately pay for nursing home care either way. This dilemma was the focus of a recent Q&A in ElderLawAnswers via the question, “Is It Better to Sell a Medicaid Recipient's Home Now or Wait Until Her Death?” Essentially, by receiving Medicaid you make certain agreements as to costs and, in the case of nursing home care, the deal often hinges on that most valuable of all assets an elderly person is likely to own: their home. True, it is possible to liquidate and sell the house just to pay for the nursing home care. Although this often reduces or eliminates the costs for maintaining and insuring an empty house, this also means giving up Medicaid benefits until the sale proceeds have been expended for care. On the other hand, Medicaid will remember your choice whether you sell the home and private pay until spend down or if you to continue receiving benefits in lieu of such sale. If a family member attempts to sell the house after the Medicaid recipient loved one passes, then Medicaid has a lien on the sale proceeds (limited to the amount Medicaid paid for the care of the Medicaid recipient). Either way, the home is subject to pay for nursing home care or to reimburse Medicaid for the cost of care. The answer to the question posed to ElderLawAnswers hinges on more than a few factors. That said, in most cases Medicaid payments will be less than private pay, sometimes a great deal less. Consequently, the resulting lien may be less of a burden than selling the house outright! Is there something else at work, however? Notably, is the family home worth keeping in the family? These are situations that require some delicacy.

Reference: ElderLawAnswers (updated October 17, 2013) “Is It Better to Sell a Medicaid Recipient's Home Now or Wait Until Her Death?”

For more information, see www.jerryreiflawyer.com

 

Medicaid Eligibility When The “Community Spouse” Dies First Mid-Michigan

When one member of an elderly couple moves to a nursing home, even as a Medicaid beneficiary, proper estate planning must be done for both spouses. Failure to plan for the “community spouse” can have unintended consequences. It is not uncommon. One spouse, the institutional spouse, is in a nursing home and is qualified to receive Medicaid benefits to pay for their care. The other spouse, the community spouse, remains at home. Typically, the institutional spouse dies first, but not always. The issues arising when the community spouse dies first was the subject of a recent article in ElderLawAnswer.com titled “Staying Eligible for Medicaid after the Death of a Spouse.” When one spouse passes away, especially the one not receiving benefits, it affects the surviving spouse in many financial ways that can jeopardize the very benefits keeping them in the nursing home and receiving the care they need.

Reference: ElderLawAnswer.com (October 2013) “Staying Eligible for Medicaid after the Death of a Spouse”

For more information, see www.jerryreiflawyer.com

 

 

Medicaid Eligibility When The “Community Spouse” Dies First Saginaw, MI

When one member of an elderly couple moves to a nursing home, even as a Medicaid beneficiary, proper estate planning must be done for both spouses. Failure to plan for the “community spouse” can have unintended consequences. It is not uncommon. One spouse, the institutional spouse, is in a nursing home and is qualified to receive Medicaid benefits to pay for their care. The other spouse, the community spouse, remains at home. Typically, the institutional spouse dies first, but not always. The issues arising when the community spouse dies first was the subject of a recent article in ElderLawAnswer.com titled “Staying Eligible for Medicaid after the Death of a Spouse.” When one spouse passes away, especially the one not receiving benefits, it affects the surviving spouse in many financial ways that can jeopardize the very benefits keeping them in the nursing home and receiving the care they need.

Reference: ElderLawAnswer.com (October 2013) “Staying Eligible for Medicaid after the Death of a Spouse”

For more information, see www.jerryreiflawyer.com

 

 

When It Is Time To Return Home From The Nursing Home Mid-Michigan

When an elderly loved one falls, or is otherwise injured, it can spark a few rough transitions: car from home to hospital for care, and from hospital to nursing home to recover. However, one of the most difficult transitions can be returning home from the nursing home, even after your elderly loved one no longer needs to be there. Every state is different, but most states sponsor a special Medicaid program paid for by federal dollars that allows a senior to transition all the way back home to receive their care there. The program is called Money Follows the Person. For a firsthand account, read a recent Kaiser Health News article titled “Moving People Home After Nursing Home Stay Is Complicated.” It is the story of Dorothy Holmes who was able to return to her home with the help of Massachusetts Medicaid. Although the Holmes story and the details of the program highlighted are specific to Massachusetts, some 45 states have adopted similar such programs. The common key is that the programs identify Medicaid patients who are and have been in nursing homes for at least 90 days, but simply no longer need to be there. Consequently, these programs help them transition home and continue the Medicaid payments for their care. Not only is there a strong legal reason and ethical motive behind helping people return home, but it makes good sense in terms of dollars and cents, too. It is less expensive to provide home care than it is institutional care. Therefore, the program is a win-win for all involved. If you have a loved one in this position, then it is worth exploring your options. Transitioning home from a nursing home can be tricky, especially since you do not want to lose the nursing home benefits just because you do not need to be in a nursing home setting. This program, if available, may find your loved one on its own or it might be something to proactively contact directly. For that matter, too, it is worth noting that there may be other options for many patients. In many instances it is merely a matter of finding and figuring them out.

Reference: The Kaiser Health News (August 16, 2013) “Moving People Home After Nursing Home Stay Is Complicated”

For more information, see www.jerryreiflawyer.com

 

 

 

When It Is Time To Return Home From The Nursing Home

When an elderly loved one falls, or is otherwise injured, it can spark a few rough transitions: car from home to hospital for care, and from hospital to nursing home to recover. However, one of the most difficult transitions can be returning home from the nursing home, even after your elderly loved one no longer needs to be there. Every state is different, but most states sponsor a special Medicaid program paid for by federal dollars that allows a senior to transition all the way back home to receive their care there. The program is called Money Follows the Person. For a firsthand account, read a recent Kaiser Health News article titled “Moving People Home After Nursing Home Stay Is Complicated.” It is the story of Dorothy Holmes who was able to return to her home with the help of Massachusetts Medicaid. Although the Holmes story and the details of the program highlighted are specific to Massachusetts, some 45 states have adopted similar such programs. The common key is that the programs identify Medicaid patients who are and have been in nursing homes for at least 90 days, but simply no longer need to be there. Consequently, these programs help them transition home and continue the Medicaid payments for their care. Not only is there a strong legal reason and ethical motive behind helping people return home, but it makes good sense in terms of dollars and cents, too. It is less expensive to provide home care than it is institutional care. Therefore, the program is a win-win for all involved. If you have a loved one in this position, then it is worth exploring your options. Transitioning home from a nursing home can be tricky, especially since you do not want to lose the nursing home benefits just because you do not need to be in a nursing home setting. This program, if available, may find your loved one on its own or it might be something to proactively contact directly. For that matter, too, it is worth noting that there may be other options for many patients. In many instances it is merely a matter of finding and figuring them out.

Reference: The Kaiser Health News (August 16, 2013) “Moving People Home After Nursing Home Stay Is Complicated”

For more information, see www.jerryreiflawyer.com

 

 

Promissory Notes and Medicaid Qualification Saginaw, MI

Medicaid can mean a world of difference when it comes to ensuring proper care for your elderly loved ones, especially when they are running out of assets. When their major remaining “countable” asset is an illiquid asset, what are their options short of depleting it or risking a fraudulent transfer? As you may well know, Medicaid is the source of nursing home care for many indigent Americans. Still others are caught in a netherworld of being above the minimum asset threshold for qualification, but having too few assets to realistically pay for their care. It’s a sticky situation. A promissory note may be one alternative to explore, as noted in a recent article at ElderLawAnswers.com titled “How Can Promissory Notes Be Used in Medicaid Planning?” The focus of the article is a recent federal case out of Oklahoma, but the basics apply generally. Essentially, an elderly woman transferred her farm and accounts to her son in exchange for a promissory note. A note is a legally binding contract to repay as fixed sum and so it clears the Medicaid hurdle in question. In this instance, this approach indeed saved the farm and the elderly woman received her nursing home care through Medicaid. Nevertheless, a promissory note is not a full-proof plan. For one, many states reject the idea and refuse to recognize promissory notes. For another, the plan can only work because promissory notes are legally binding contracts, and so if the note cannot be repaid there are potential tax burdens that may be triggered. The article also points out there are several tools, like the promissory note, that can prove useful when seeking legitimate Medicaid qualification. This especially is true if you plan well in advance. Danger! The Medicaid qualification rules vary from state to state. This is not a self-help project, as you may find yourself (and your elderly loved one) in a tricky financial and legal purgatory if you make any missteps.

Reference: ElderLawAnswers (May 15, 2013) “How Can Promissory Notes Be Used in Medicaid Planning?”

For more information, see www.jerryreiflawyer.com

 

Joint Tenancy Transfers Matter For Medicaid Eligibility

American law contains a principle that runs like a thread through very fabric of our jurisprudence – one is “innocent until proven guilty.” In other words, the law begins with the premise that one accused of wrongful conduct or motives, whether in a civil or a criminal context, is first given the benefit of the doubt until established otherwise by competent evidence to the contrary. Nonetheless, sometimes the tax courts, in their zeal to root out cheats, end up reversing that principle and end up turning on those vulnerable people who act only in the best of intentions: sometimes the elderly are “guilty until proven innocent” when it comes to the courts and Medicare disqualification. Consider the case of Mallery v. Shah (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 513277, Mar. 1, 2012), as written about here in a recent post over at ElderLawAnswers. Here’s the deal: Paula Mallery wanted to be sure she had safely left her estate to her friend, Ron Stanton, and a moderate estate at that, without her family interceding and dragging the matter into the probate court following her death. Her reasons are her own (but you can appreciate anyone wanting to avoid a public bloodbath). It was something she thought about, even sought counsel for, and ultimately effected by adding Mr. Stanton as joint-tenant on her home and bank accounts. Mr. Stanton withdrew $141,410.12 between 2007 and 2008. Then, in 2009, when Ms. Mallery fell, required nursing home care, and ended up applying to Medicaid to pay for it. No, no, no. That was Medicaid’s response. Why? Medicaid maintained that Ms. Mallery had effectively made “uncompensated transfers” and was therefore subject to a 19 month penalty period (and more than a year and a half of such care is expensive!). To assume the absolute best of Ms. Mallory and her motivations – because it wouldn’t change the decision either way – she simply intended to pass her property quietly to Mr. Stanton, but ended up getting dragged into court. She appealed the decision and was ultimately rejected on the grounds that she never disproved the allegation her planning moves were motivated with an eye toward Medicaid qualification. It’s yet another harsh lesson in unintended consequences and the trials of qualifying for Medicare. In the end, planning for your assets after death must always also be about planning for those assets, and your medical care, throughout the remainder of your life.

Reference: ElderLawAnswers.com (March 5, 2012) “Estate Planning Move to Avoid Probate Earns Medicaid Applicant Penalty Period”

Medicaid Misunderstandings Costly

When an elderly person is ready for the nursing home, some families are entirely understanding, in agreement, and financially able. As a result, the transition happens smoothly. Unfortunately, for a far larger number of families and elderly persons, some trip to the hospital will happen in between and may even immediately precipitate the transition to nursing home care. If that’s the case, then there are important hospital and Medicare policies of which you should be forewarned. Enter “observation care” which can make for a big bill upfront and even far bigger ones down the line. According to a recent article in the Wall Street Journal, and their sources at the Medicare Rights Foundation, the number of “observation hours” has been steadily growing for years. Tragically, such observation hours count as “outpatient services,” even if the service lasts for several days (as it sometimes does with the elderly) and Medicare pays for inpatient and outpatients services in entirely different ways. As you likely know, Medicare Part A pays for inpatient bills, so those are usually taken care of, but Medicare part B is what takes care of outpatient services. And those services can add up to a far greater cost. It’s often vital to know the distinction between the two types of services from the hospital, and yet it’s also fairly difficult. Medicare advises to simply ask, but then there are certain documents such as the “Important Message from Medicare” which accompanies inpatient care, but not outpatient. Still, the hospital can switch with little to no notice. It’s actually even more important than the size of the immediate bill. Medicare will only pay for nursing home expenses if the person was admitted inpatient at a hospital for at least three days, excluding the discharge day. For so many families that’s the sole reason why it takes a hospital visit to arrange for the transition to nursing home care in the first place, but if you are put under observation or other so-called “outpatient” care, and without your notice, it can literally mean thousands of dollars out-of-pocket down the line. Bottom line: It all hinges on hospital practice and Medicare definitions.

Reference: The Wall Street Journal (February 5, 2012) “Check Hospital Tab”

Married Couples and Long-Term Care Logistics

Marriage is a unique economic and legal institution. Indeed, when it works out, marriage also means a happy lifetime of living with another. Of course, because life lasts longer and health wanes differently between persons, those unique economic and legal parts to marriage can translate into difficult times later in life. Against the backdrop of the in sickness portion of the vows, one difficulty that arises was addressed recently in a Wall Street Journal article titled Long-Term Care and Couples: Who Pays?. That difficulty is the phenomenon of the “well spouse,” the “ill spouse,” and Medicaid. Practically speaking, if one spouse becomes chronically sick and needs long-term care, will the other spouse be driven into poverty? Marital assets, whether owned by the husband or the wife, are part of the equation when it comes to determining Medicaid eligibility. Medicaid is the joint federal/state government program to provide means-tested health care assistance to those who qualify. With both federal and state coffers bleeding red ink (with a few state exceptions), Medicaid money is tight, especially in terms of long-term care coverage -- whether married or single. As the Wall Street Journal article notes, however, some states are treating the “well spouses” more generously than others regarding how much wealth they may retain while the “sick spouses” are receiving taxpayer support through Medicaid. I recommend reading the original article. Also, consider purchasing long-term care insurance so Medicaid does not become part of your future. In any event, a consultation with a qualified Elder Law Attorney would be prudent to evaluate your options.

Reference: The Wall Street Journal (April 2, 2012) “Long-Term Care and Couples: Who Pays?”

Joint Tenancy Transfers Matter For Medicaid Eligibility

American law contains a principle that runs like a thread through very fabric of our jurisprudence – one is “innocent until proven guilty.” In other words, the law begins with the premise that one accused of wrongful conduct or motives, whether in a civil or a criminal context, is first given the benefit of the doubt until established otherwise by competent evidence to the contrary. Nonetheless, sometimes the tax courts, in their zeal to root out cheats, end up reversing that principle and end up turning on those vulnerable people who act only in the best of intentions: sometimes the elderly are “guilty until proven innocent” when it comes to the courts and Medicare disqualification. Consider the case of Mallery v. Shah (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 513277, Mar. 1, 2012), as written about here in a recent post over at ElderLawAnswers. Here’s the deal: Paula Mallery wanted to be sure she had safely left her estate to her friend, Ron Stanton, and a moderate estate at that, without her family interceding and dragging the matter into the probate court following her death. Her reasons are her own (but you can appreciate anyone wanting to avoid a public bloodbath). It was something she thought about, even sought counsel for, and ultimately effected by adding Mr. Stanton as joint-tenant on her home and bank accounts. Mr. Stanton withdrew $141,410.12 between 2007 and 2008. Then, in 2009, when Ms. Mallery fell, required nursing home care, and ended up applying to Medicaid to pay for it. No, no, no. That was Medicaid’s response. Why? Medicaid maintained that Ms. Mallery had effectively made “uncompensated transfers” and was therefore subject to a 19 month penalty period (and more than a year and a half of such care is expensive!). To assume the absolute best of Ms. Mallory and her motivations – because it wouldn’t change the decision either way – she simply intended to pass her property quietly to Mr. Stanton, but ended up getting dragged into court. She appealed the decision and was ultimately rejected on the grounds that she never disproved the allegation her planning moves were motivated with an eye toward Medicaid qualification. It’s yet another harsh lesson in unintended consequences and the trials of qualifying for Medicare. In the end, planning for your assets after death must always also be about planning for those assets, and your medical care, throughout the remainder of your life.

Reference: ElderLawAnswers.com (March 5, 2012) “Estate Planning Move to Avoid Probate Earns Medicaid Applicant Penalty Period”

 

Joint Tenancy Transfers Matter For Medicaid Eligibility

American law contains a principle that runs like a thread through very fabric of our jurisprudence – one is “innocent until proven guilty.” In other words, the law begins with the premise that one accused of wrongful conduct or motives, whether in a civil or a criminal context, is first given the benefit of the doubt until established otherwise by competent evidence to the contrary. Nonetheless, sometimes the tax courts, in their zeal to root out cheats, end up reversing that principle and end up turning on those vulnerable people who act only in the best of intentions: sometimes the elderly are “guilty until proven innocent” when it comes to the courts and Medicare disqualification. Consider the case of Mallery v. Shah (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 513277, Mar. 1, 2012), as written about here in a recent post over at ElderLawAnswers. Here’s the deal: Paula Mallery wanted to be sure she had safely left her estate to her friend, Ron Stanton, and a moderate estate at that, without her family interceding and dragging the matter into the probate court following her death. Her reasons are her own (but you can appreciate anyone wanting to avoid a public bloodbath). It was something she thought about, even sought counsel for, and ultimately effected by adding Mr. Stanton as joint-tenant on her home and bank accounts. Mr. Stanton withdrew $141,410.12 between 2007 and 2008. Then, in 2009, when Ms. Mallery fell, required nursing home care, and ended up applying to Medicaid to pay for it. No, no, no. That was Medicaid’s response. Why? Medicaid maintained that Ms. Mallery had effectively made “uncompensated transfers” and was therefore subject to a 19 month penalty period (and more than a year and a half of such care is expensive!). To assume the absolute best of Ms. Mallory and her motivations – because it wouldn’t change the decision either way – she simply intended to pass her property quietly to Mr. Stanton, but ended up getting dragged into court. She appealed the decision and was ultimately rejected on the grounds that she never disproved the allegation her planning moves were motivated with an eye toward Medicaid qualification. It’s yet another harsh lesson in unintended consequences and the trials of qualifying for Medicare. In the end, planning for your assets after death must always also be about planning for those assets, and your medical care, throughout the remainder of your life.

Reference: ElderLawAnswers.com (March 5, 2012) “Estate Planning Move to Avoid Probate Earns Medicaid Applicant Penalty Period”

Medigap Policies Catch (Unfavorable) Attention of Congress

Are you (or a loved one) a Medicare beneficiary? If yes, then likely you already know that it doesn’t always cover all the costs in a time of crisis. That’s why there are Medigap policies. Unfortunately, Medigap policies might just be the next thing to get Congress’s unwanted attentions according to a recent article through the Kaiser Health News. A Medigap policy is actually a private, supplemental form of insurance to cover medical bills Medicare doesn’t cover. Medigap is especially important in a crisis, since it can kick in for hospital visits that otherwise would go uncovered. Accordingly, this can prevent a financial crisis on top of a medical one. If nothing else, a good Medigap policy offers a bit more peace of mind. The problem some are citing against Medigap policies, from a budget perspective, is that they offer too much peace of mind and allow beneficiaries to seek medical care even when it’s not absolutely necessary. As a result, this puts a strain on Medicare itself. So, does the argument bear any weight? It’s hard to say, and it’s certainly hard to quantify. In addition, it’s difficult to make sense of the social safety net (Medicare) – or a private supplement to it (Medigap) – that doesn’t offer some peace of mind. Whatever may come from it, if it touches you (or your loved ones), its worth keeping up with potential Congressional scrutiny. The original article offers the recent history of Medigap policies and the attitude of Congress regarding them.

Reference: The Kaiser Health News (November 21, 2011) “Officials Looking to Cut Federal Spending Eye Medigap Policies”

Special Needs Planning – A Changing Landscape

Estate planning is never easy, if only because it means thinking about protecting your loved ones when you’re no longer around. It’s bad enough making plans to protect self-sufficient heirs who take care of themselves and an inheritance. However, it can be a real challenge when planning for heirs with special needs for a variety of personal and legal reasons. Unfortunately, as The Wall Street Journal Online recently pointed out, with the economy and politics as they are, there are new concerns to bear in mind as you plan. Both the State and federal budgets are strapped for cash and the burden is falling on Medicare and Medicaid. It’s up to the Congressional Special Committee to consider the future of Medicare now, but many Medicaid programs already are feeling the squeeze with tighter income restrictions for benefits and services. Of course, much of the disabled population (12% of the overall population) relies on state and federal services for those services that they couldn’t afford in the private market. To plan for an heir with special needs, then, means planning to provide for them without risking their main sources of care. Now, more than ever, that means a “special needs trust,” tailored to provide the inheritance as a safety net without endangering the continuation of benefits. [Sidebar: Sometimes an older parent can make this move kill two birds with one stone. How? They create the trust now for themselves and a loved one with special needs so that both qualify for government benefits, once the “look back” period has past for eligibility disqualification. As budgets get tighter, expect greater governmental scrutiny of such moves.] The other major issue, and a related one, is housing. Many Americans with special needs live in group housing programs. These programs are, in turn, subsidized by government agencies, but are increasingly unable to meet demand and are cash-strapped. For one, the same political/economic pressure is keeping those agencies from expanding. At the same time, there simply are more prospective residents due to lengthening life expectancies. The US would have had to expand its residential-services capacity by 28% to meet the demand as of two years ago. Clearly, housing has been an issue and it will only get worse. Amidst all of this uncertainty, you still need to plan where your loved one will live. This might mean another form of trust. For example, a “Qualified Personal Residence Trust” (QPRT) would provide that you live in your home until your death, but that your family member with special needs would live there (without disqualifying ownership). Great care would need to be given in the preparation of such an arrangement. Also, it may be possible to provide a home to shelter several persons with special needs. For example, say several families pool resources, or even to leave a home to a non-profit that can convert the home into a new group home. The options are limited by your creativity. Ultimately, the best plan will depend on your own unique family circumstances, as well as the current state and federal laws governing benefits and services. Unfortunately, according to a recent study by Arc, an advocacy group, only one-third of affected actually has plans to control what happens when the caregiver grows old and after they are gone. Bottom line: Remember to engage qualified legal counsel to help you navigate the regulatory minefields.

Reference: The Wall Street Journal Online (September 3, 2011) “Taking Care of Disabled Heirs”

More Medicaid Asset Transfer Travails

Oftentimes, Medicaid and Medicare can be entirely necessary programs. They also can be pretty tricky to navigate, especially if you, or a loved one, fall just above the income limits. That said, Medicare and Medicaid don’t like it when they feel you are “gaming” the system. Elder Law Answers highlights yet another case in which an elderly person was denied benefits because of improper planning. The case in question is Hedlund v. Wisconsin Dept. of Health Services (Wis. Ct. App., No. 2010AP3070, Oct. 13, 2011). Lucille Hedlund was a Medicaid applicant who was denied benefits because she also was a beneficiary to an irrevocable trust that qualifies as an available asset, bringing her above the income threshold. It didn’t matter that the trust has been set up 17 years ago, especially because of the circumstances. Mrs. Hedlund transferred all of her assets to her children in June 1991, with the exception of a checking account. And, on the very same day, her children put those very same assets into an irrevocable trust and named her as beneficiary. While this was pretty sneaky, it was not enough to give Medicaid the slip. Medicaid ruled that there was reason to infer that Mrs. Hedlund had directed her children to create and fund the irrevocable trust because the plan was effected on the same day. Note: It didn’t even matter that the assets weren’t hers at the time the trust was created, since they were still “available assets” in the eyes of the court … some 17 years later when Mrs. Hedlund entered a nursing home in 2008. Applications for Medicare and Medicaid are important and should not be taken lightly. If you, or a loved one, need to make plans for long-term care, then you need to seek competent legal counsel before you apply.

Reference: Elder Law Answers (October 14, 2011) “Irrevocable Trust Set Up by Medicaid Applicant’s Children is Available Asset”

No “CLASS” Today (Or Tomorrow)

After much speculation, the Department of Health and Human Services (HHS) has pulled the plug on the CLASS part of the health law. As a recent Reuters article points out, this brings to the fore the question of long-term care insurance, both as it impacts the United States in general and each of us in particular, as potential patients in need of such care. The CLASS act was the first attempt at establishing a public option for long-term care insurance and that put it between the proverbial rock and a hard place. The late Senator Kennedy championed the cause. Politics aside, what torpedoed the CLASS act? Money. According to HHS, the program would prove too costly to achieve its goal. Why? Too few healthy people would elect to pay the required premiums. But what now? The Center for Retirement Research at Boston College notes that about one-third of the Americans turning 65 this year will need at least three months of nursing home care sometime during their lives. Presumably, however, many of these same Americans will need such care even longer (and future generations can’t be expected to fare much better). So, how we deal with long-term care as a country is yet to be seen. Regardless, since you or a loved one will likely need long-term care, the question remains: How will you pay for it? An increasing number of forward-thinking people are turning to private long-term care insurance, but as many as 59% have yet to get their own private long-term care insurance policy or plan to get it (according to a 2010 survey). Is private long-term care insurance right for you or a loved one? For many who wait too long pondering this question, their default option is the more complicated question of Medicare and Medicaid. Undoubtedly, Medicaid (the means-tested shared federal-state program) is the largest source of long-term care financing. However, last time I checked, the federal government was not exactly flush with cash and many states are operating in the red. In the end, whatever you decide to do when it comes to paying for long-term care, the best time to make plans is yesterday. Whatever you do, be sure to seek appropriate legal counsel.

Reference: Reuters (October 17, 2011) “What’s next for long-term care after CLASS act folds?”

Special Needs Planning – A Changing Landscape

Estate planning is never easy, if only because it means thinking about protecting your loved ones when you’re no longer around. It’s bad enough making plans to protect self-sufficient heirs who take care of themselves and an inheritance. However, it can be a real challenge when planning for heirs with special needs for a variety of personal and legal reasons. Unfortunately, as The Wall Street Journal Online recently pointed out, with the economy and politics as they are, there are new concerns to bear in mind as you plan. Both the State and federal budgets are strapped for cash and the burden is falling on Medicare and Medicaid. It’s up to the Congressional Special Committee to consider the future of Medicare now, but many Medicaid programs already are feeling the squeeze with tighter income restrictions for benefits and services. Of course, much of the disabled population (12% of the overall population) relies on state and federal services for those services that they couldn’t afford in the private market. To plan for an heir with special needs, then, means planning to provide for them without risking their main sources of care. Now, more than ever, that means a “special needs trust,” tailored to provide the inheritance as a safety net without endangering the continuation of benefits. [Sidebar: Sometimes an older parent can make this move kill two birds with one stone. How? They create the trust now for themselves and a loved one with special needs so that both qualify for government benefits, once the “look back” period has past for eligibility disqualification. As budgets get tighter, expect greater governmental scrutiny of such moves.] The other major issue, and a related one, is housing. Many Americans with special needs live in group housing programs. These programs are, in turn, subsidized by government agencies, but are increasingly unable to meet demand and are cash-strapped. For one, the same political/economic pressure is keeping those agencies from expanding. At the same time, there simply are more prospective residents due to lengthening life expectancies. The US would have had to expand its residential-services capacity by 28% to meet the demand as of two years ago. Clearly, housing has been an issue and it will only get worse. Amidst all of this uncertainty, you still need to plan where your loved one will live. This might mean another form of trust. For example, a “Qualified Personal Residence Trust” (QPRT) would provide that you live in your home until your death, but that your family member with special needs would live there (without disqualifying ownership). Great care would need to be given in the preparation of such an arrangement. Also, it may be possible to provide a home to shelter several persons with special needs. For example, say several families pool resources, or even to leave a home to a non-profit that can convert the home into a new group home. The options are limited by your creativity. Ultimately, the best plan will depend on your own unique family circumstances, as well as the current state and federal laws governing benefits and services. Unfortunately, according to a recent study by Arc, an advocacy group, only one-third of affected actually has plans to control what happens when the caregiver grows old and after they are gone. Bottom line: Remember to engage qualified legal counsel to help you navigate the regulatory minefields.

Reference: The Wall Street Journal Online (September 3, 2011) “Taking Care of Disabled Heirs”

Medicare Advantage Maze

Did you know Medicare’s annual election period is just around the corner, October 15 through December 7, to be precise? Now is the time to evaluate your options. Should you stick with your current plan, or is it time to make a change? Would you be better off using Medicare classic or is a Medicare Advantage Plan the e-ticket? This is not planning that you should take lightly, especially when it comes to Medicare Advantage plans. According to a recent article on MarketWatch many seniors simply end up paying too much. Why? Because they either didn’t take the time to evaluate their options, or they didn’t understand the consequences of their decision. About 1 in 4 of all Medicare recipients is signed up through a Medicare Advantage plan – about 11.7 million Americans – and for good reason. Under the right circumstances a Medicare Advantage plan can be much cheaper than pairing Medicare classic with Medigap and prescription drug plans. You just have to choose wisely. Plans vary in many ways, some great and some small, and, without realizing it, you could choose a plan that makes your prescriptions cost several times what another plan would offer. The MarketWatch article’s most telling example is that “people in one Georgia zip code who take 70 mg tablets of osteoporosis drug Fosamax once daily may have annual expenses ranging from $2,661 to $9,032 — depending on which Medicare Advantage plan they pick.” I can understand and appreciate that it’s easy to get confused. You can easily suffer option overload, especially for the 25% of the nation that has 30 or more plan options. To narrow things down, keep a few things in mind. First, how important is your doctor to you? Advantage plans don’t let you choose your doctor. Why? They work as managed-care policies, either health maintenance organizations (HMOs) or preferred provider organizations (PPOs), and specify the networks. So, if you like your own doctor, then you might consider only those plans where your doctor is within the plan network. Realize, however, that keeping your own doctor may come at a price. When it comes to cost, the second and most important detail after choice of doctor, you want to keep updated and run the numbers every year. Plans can change every year by tweaking co-payments here or altering premiums there, not to mention the fact that you might find yourself taking new prescriptions year to year. You need to examine all the changes and actual prices for your prescriptions to get a true picture of your true costs. By the way, when comparing costs, the Medicare website can be helpful with its plan finder tool. Atlernatively, you also can consult experts like those at the Medicare Rights Center or a local organization.

Reference: MarketWatch (September 2, 2011) “Got Medicare? You May Be Paying Too Much”

ELDER LAW

After four years or so the housing market is still idling at terribly low levels, but even if we’re all feeling it, it’s our nation’s seniors that seem to be uniquely hurt. The problem has been growing over those years, and I’ve written about it here, but the Kaiser Health News recently put out an article taking stock of the situation and new reactions from assisted-living and nursing home facilities. With housing prices and market demand so low, seniors simply can’t get up and enter into a facility, even if they need it. For many seniors, the plan had always been to use the equity in their home as the investment to keep them afloat in retirement but the value in those homes simply dropped in 2008. Even if you can forget how much the house was worth in 2007, before the crash, it’s simply not easy to sell a house these days and they tend to just sit on the market for years, or fetch too little money to make the sale possible. It’s causing seniors to wait that much longer before they can enter into a facility, and that’s time on top of however long it took them to finally make the decision to give up the home in the first place. It isn’t good for finances, and it is especially bad for health. The facilities themselves aren’t happy with the trend and some are working to help ease the transition. In certain facilities across the parts of the country that were hit hardest by the housing bubble the occupancy rate has dropped as much as 10%, with nursing homes and continuing care facilities hit the hardest and assisted-living only slightly better. In response, some of those facilities have begun incentive programs from simple real estate education classes to more fluid contracts that allow the entrance costs of the facility (usually something like the cost of a home itself) to be paid whenever the house is sold. One management company, Brookdale Senior Living, has even begun offering to buy seniors’ houses at pre-determined prices if they do not sell within a set amount of time on the market. For you or a loved one it means that there are a number of possibilities to plan for. Those that can’t quite get out of their homes might consider bringing the care to them through in-home care services or perhaps living with loved ones. Still, if a facility is necessary then there may be options out there, depending on the facility and your part of the country, and it might be possible to work with the administration; chances are you’re not the only one with the problem and they may offer a solution.

Reference:  Kaiser Health News (August 21, 2011) “Housing Bust Derails Some Seniors’ Assisted-Living Care”

Understanding “Medicare” Programs

It’s no secret that Medicare is a difficult system to understand. Unfortunately, it’s a fact of life for our nation’s seniors. As a result, Medicare is something we have to work to understand. For many of us, though, there is at least one more resource available to many of us, according to a recent article by SmartMoney. The problem with so many Medicare informational resources is that you have to read through tomes of legalese, sift through graphs and charts, and, in the end, you still haven’t figured out the answer to your question. Good news: A new program called “Seniors Out Speaking,” or SOS, is a peer-advice program through which volunteer seniors teach other senior about Medicare. It’s a program of the Medicare Rights Center, and it’s currently operating (or starting up) in New York, Kansas, Maryland and New Jersey, Alabama, Florida, Maine and Wisconsin. Although SOS currently doesn’t exist everywhere, the Center hopes to expand its support. The Center believes the program can be easily replicated in communities across the country. As a result, a generation hitting retirement all at once will be able to help each other through it. Think baby boomers. If SOS exists in your area, it might be worth looking into as a listener or as a teacher. There also may be similar programs in your community. On the other hand, you may want to start a program in your own community. More information on Medicare itself can be found on the Medicare Rights Center website. Also, it might be worth looking into your local community events calendar to see if there are any seminars or programs in your area.

Reference: SmartMoney (August 29, 2011) “Medicare, Now Less Complicated”

Elder Law – Promissory Notes May Not Be So Promising

As some of you may know, the guidelines surrounding eligibility for Medicare or Medicaid can be fairly rigid. They exist to ensure people aren’t gaming the program, but sometimes even who aren’t gaming the program (and have legitimate need) can unintentionally run afoul of the rules. For another example of what not to do, ElderLawAnswers recently analyzed the case of Jackson v. Director of Office of Medicaid (Mass. App. Ct., No. 10P706, July 19, 2011). When Raymond Duclos was entering a nursing home, his wife was making transfers to their children: $176,000 to their daughter, Susan; $11,787.83 to their son, Raymond, Jr.; and $3,000 to their other son, Michael. No good story about Medicare/Medicaid eligibility begins with the word, “transfer.” Why? Because of the look-back period for determining eligibility. In the case of the Duclos family, as opposed to these direct transfers being made without any value exchanged in return, each transfer was made in exchange for promissory notes. In fact, the largest note was an immediate annuity. Nevertheless, in the end this was considered a distinction without a difference. The state (Massachusetts) denied the claim and the appeals court upheld the state’s decision. The court’s basis: Those promissory notes weren’t “actuarially sound.” For one thing, there was no proof of Mrs. Duclos life expectancy at the time she transferred the assets and the smaller promissory notes from the sons did not prohibit cancellation at the death of the lender. This “cancellation” made the transaction appear as if there was little intention of actually fulfilling the notes. Furthermore, the larger note from the daughter was turned into an annuity, but it did not name the state as a “remainder” beneficiary. Each transfer, then, was a disqualifying one.

Reference: ElderLawAnswers.com (August 1, 2011) “Transfers to Children of Medicaid Applicant in Exchange for Promissory Notes Not Actuarially Sound”

Be Sure Your Life Insurance Is “Life Insurance”

Not all life insurance is the same, and that’s not just an old sales trick to up-sell a client. In the eyes of Medicare and Medicaid, not all life insurance actually is “life insurance” – and that can be a reason to deny benefits. Consider the case of Lind v. Maxwell-Jolly (Cal. Ct. App., No. C061912, July 28, 2012) (unpublished), as discussed here on ElderLawAnswers.com, where an endowment life insurance contract became an impediment to Medicaid benefits. Mary Lind, a nursing home resident, applied for Medicaid benefits and then purchased a "Single Premium Pure Endowment Life Insurance Contract" for $92,000. Here’s how the contract works: If she were still alive at the contract maturity date five years hence, then Ms. Lind would be repaid her premiums plus dividends. Of course, the state and two appeals courts weren’t buying it. Since the contract specifies that it will repay Ms. Lind in her lifetime, it is not life insurance. Further, the contact didn’t even specify the amounts to be paid out to beneficiaries upon her death. Accordingly, the court held that the contract is more akin to a legal trust and, therefore, the funds invested in it are available funds precluding her from Medicaid. Clearly, then, not all “life insurance” is life insurance. As in all things financial, and legal, look before you leap.

Reference: ElderLawAnswers.com (August 1, 2011) “Endowment Life Insurance Contract Is Available Asset for Medicaid Availability Purposes”

Debt Deal: Not (Really) A Done Deal

I suppose it goes without saying that the past few weeks have been a rather tumultuous time, and especially so for America’s seniors. It’s quickly proving to be a vital time to take stock of the situation and prepare. Luckily, the news is awash with important reminders and advice about what’s at stake. First, the debt deal was finally passed. As I mentioned last week, it’s already been called a mixed bag by AARP, but the bad may outweigh the good and there are specific changes to watch with interest. Robert Powell of MarketWatch has put together another resource detailing what you ought to know with a special emphasis on budget cuts on programs (both the $1 trillion already going into affect and future cuts to Medicare), along with interest rates and taxes. Immediately following on the heels of the debt deal, however, the S&P downgraded the U.S. and forced a rather volatile “market correction.” As SmartMoney points out in this article, it’s like 2008 all over again, because it’s the baby-boomers who have the most to lose and must taken action to engage strategies to protect their nest egg if market forces continue to threaten it. And, finally, there’s looking to the future… the future of rehashing the past few months and the debt debate. The deal that was reached calls for the commission of a super committee to make more suggestions for cutting the debt. That means Medicare and Social Security might not remain safe, since the debate isn’t actually over. Indeed, if the committee’s suggestions are not implemented, then immediate spending cuts to Medicare will go into affect by Christmas. Reuter’s, for one, thinks there’s reason enough to be wary of the super committee altogether, especially if you’re concerned about retirement. In fact, they’ve found eight reasons to worry.

Reference: MarketWatch (August 4, 2011) “How the Debt Deal Will Affect Retirees”

                  SmartMoney (August 8, 2011) “The 2011 Correction: Another Bad Turn for Boomers.”

                  Reuters Money (August 5, 2011) “8 ways the super committee is not super for retirement”

ELDER LAW / MEDICAID ELIGIBILITY

Here’s another important reminder on how much of a stickler Medicare and Medicaid can be when it comes to denying benefits: the Matter of Komanoff Ctr. for Geriatric & Rehabilitative Medicine v Daines (N.Y. Sup. Ct., App. Div., 2nd Dept., No. 2010-05776, June 28, 2011) (here summarized on ElderLawAnswers.com.) It’s the case of Bernadette Jordan and how she entered a nursing home and filed for Medicaid only to find that the State ruled her ineligible for a period of 14.31 months. Apparently, Mrs. Jordan had transferred funds from a revocable trust to her daughter, to repay expenses that her daughter had shouldered in getting her to the nursing home. States are skeptical of such transfers, and often examine them carefully. In this case they found that the transfers were made at less than fair market value for purposes of Medicaid eligibility, and so denied Mrs. Jordan Medicaid benefits. On Mrs. Jordan’s behalf, her nursing home called a hearing and later appealed. After all, the expenses the daughter paid were documented and done with the assumption that they would be repaid with assets from the trust. The State still denied benefits. The problem was that there was no written document at the time of the expenditure that specified the agreement to repay the daughter’s expenditures. The moral of the story is documentation. By documenting your interactions and intentions you can provide hard proof and avoid getting caught on a technicality. In Mrs. Jordan’s case, 14.31 months is a long time to wait for nursing home benefits. Reference: Elderlawanswers (July 5, 2011) “Transfer to Daughter Without Written Agreement Triggers Medicaid Penalty”

ELDER LAW / MEDICAID & LONG-TERM CARE

It’s no secret that state (and federal) budgets are severely stressed. While lawmakers look for revenue and cost-cutting measures, Medicaid services are coming under scrutiny. Managed care plans are becoming increasingly popular as one way to cut Medicaid costs. Currently six states require the elderly and disabled who need long-term care to enroll in a managed care plan. At least 10 other states are reportedly considering the same, according to a recent article from The Kaiser Health News. Traditionally, states pay Medicaid providers directly for individual services. Under managed care, states pay health insurers a fixed monthly fee for each Medicaid patient. The lump sum is used for all the patient’s costs, including physician and nursing home care. Managed care companies say they can help states save money by keeping Medicaid patients who need long-term care at home whenever possible. Tennessee pays its Medicaid health plans an average of $4,400 per member per month. AARP and some other advocates caution that managed care plans could make it harder for patients to get the services they need. The nursing home industry, which currently gets about two-thirds of its revenues from Medicaid, is complaining as well. But state officials around the country say they have little choice but to make more aggressive use of managed care, especially for long-term care patients who account for more than two-thirds of all Medicaid spending.