A potential trap for the unwary attorney-in-fact. For those who have utilized a “power of attorney” in their estate planning without specific instructions concerning payment of nursing home expenses, this recent article is worthy of your time.
Penalty Period was Upheld for Transfers to Loved Ones
A.V. suffered from Alzheimer’s disease and was admitted to a nursing home in January 2021. Thereafter, she submitted a Medicaid application for benefits. On her application, she reported several transfers for less than fair market value during the look-back period. She transferred various amounts to her kids and grandkids for things like wedding gifts, help with a down payment on a home, and car purchases. A.V. had specific dates and amounts for each recipient and presented verification to the Medicaid office. All transfers totaled roughly $25,000.
In accordance with 42 U.S. Code § 1396p(c)(2)(C), a Medicaid applicant will not be ineligible for benefits due to transfers during the look-back period if the applicant demonstrates to the state that the transfers were made for a purpose other than to qualify for benefits.
The Administrative Law Judge found that A.V. established that she had made these gifts to her loved ones for other purposes besides trying to qualify for Medicaid benefits. However, on appeal, the Office of Legal and Regulatory Liaison of New Jersey issued an opinion that indicated they disagreed. In so doing, the liaison looked to N.J.A.C. 10:71-4.10(j), which states:
“(j)Any applicant or beneficiary may rebut the presumption that assets were transferred to establish Medicaid eligibility by presenting convincing evidence that the assets were transferred exclusively (that is, solely) for some other purpose. The applicant shall be assisted in obtaining information when necessary. However, the burden of proof shall rest with the applicant. When the applicant expresses the desire to rebut the presumption that he or she transferred assets to establish Medicaid eligibility, the procedures below shall be followed.
The applicant’s statement concerning the circumstances of the transfer shall be included in the case record. The statement shall include, but need not be limited to, the following:
- The applicant’s stated purpose for transferring the asset;
- The applicant’s attempt to dispose of the asset at fair market value;
- The applicant’s means of and plans for, supporting himself or herself after the transfer; and
- The applicant’s relationship, if any, to the person(s) to whom the asset was transferred.”
Although A.V. had specific reasons for gifting funds to loved ones, the state found that Medicaid eligibility was also a motivating factor. This is because A.V. was diagnosed with Alzheimer’s six years before the Medicaid application was submitted and so arguably she knew that she may need Medicaid benefits in the future. Also, her spouse, J.V., testified that A.V. was “gone” for several years prior, did not recognize him for years, and did not believe their house was her home. Finally, the last transfer was made only three months prior to A.V.’s admittance into the nursing home.
While a Medicaid applicant may have transferred funds to a loved one for a specific purpose, this does not automatically rebut the presumption that the transfer was made for purposes other than to qualify for Medicaid. The state can also look at the health of the applicant at the time of the transfers and the proximity of the transfers to the need for benefits. A.V. did not successfully show that her transfers were for another purpose than Medicaid qualification; thus, her penalty period was upheld.
Last Will and Testament vs. a Trust: What’s the Difference?
Last Will and Testament
The person signing the Last Will and Testament is called a Testator. A Last Will and Testament takes effect upon the Testator’s death and normally requires a court process called probate. The Last Will and Testament gives the court directions on what the Testator wants to happen during this probate process.
If a beneficiary doesn’t agree with what the Testator says in the Last Will and Testament, the case becomes contested and could result in a very long family battle. As with all court processes, the final decision will be up to the judge and the Testator’s wishes could possibly not be honored. And since probate involves a court, the case, including the Last Will and Testament document, are available for the public to see.
The document will tell the court who the Testator wants named as Executor or Personal Representative. This person will find and notify beneficiaries, notify and deal with creditors, deal with banks and financial institutions, attend court hearings, be involved with distributions and accountings, sell property as needed, and work with the estate attorney to wrap up the Testator’s affairs.
The Last Will and Testament will tell the court who the Testator wants to receive certain property, name Guardians for minor children, and state how the Testator would like their remains disposed of. The Last Will and Testament could also create a testamentary trust, Testamentary trusts are often created for minor children who are not capable of managing their inheritance.
The person who signs a trust is called the Grantor or Settlor. Unlike the Last Will and Testament, an inter vivos trust is effective during the Grantor’s lifetime. The trust will name a Trustee, who is in charge of carrying out the terms of the trust. Depending upon the purpose of the trust, the initial Trustee may be the same person who created the trust or may be another person or entity. A trust, in plainest terms, is a contract between the Grantor and the Trustee.
To “fund” the trust the Grantor transfers property of their choosing to the trust. Because the property is “owned” by the trust at the time of the Grantor’s death, that property is not subject to probate. The “trust property” is dealt with by the Trustee in accordance with the terms of the trust. As with the Last Will and Testament, the trust will also give instructions on how the Grantor wants property distributed at their death.
Trusts can be created for various reasons. As noted above, one of these will be to avoid probate and provide the Grantor and their family with privacy. Another common reason is to protect assets from the costs of long-term nursing home care.
There is a common misconception that Medicare covers long-term nursing care. Medicare will pay for 20 days of nursing care following a hospital stay of at least three days. From day 21 – 100 Medicare will only pay a portion of the daily cost, the balance is the patient’s responsibility. Fortunately, the patient’s co-pay is often covered by a Medicare Supplement Policy. Medicare’s nursing care benefits however expire completely after 100 days, and they are not subject to renewal for subsequent hospitalizations.
On day 101 an individual must have other resources to pay for their long-term nursing care. This would include long-Term Care Insurance, private pay (out of pocket), and Medicaid.
Long-Term Care Insurance only accounts for 9% of cases due to premium costs and qualification standards. (You need to be healthy when you take out the insurance).
Often times people are forced to pay out of pocket until their life savings are depleted. At an average monthly cost of $7,756.00, it doesn’t take long for a family to lose everything to the nursing home.
Medicaid, a federally funded program, is the largest payer of long-term nursing home care. Medicaid has strict qualification guidelines, however, a proper asset protection trust can insulate family assets from the reach of a nursing home or other care providers while at the same time allowing the individual to qualify for coverage that will pay for their long-term care.
If you would like to discuss any of these matters, please do not hesitate to reach out to our office for an appointment.
What is Elder Law?
Elder law is a practice area defined by the people that are served. Our clients and their families’ priorities and concerns evolve as they age, and their estate and care plans need to be adjusted accordingly.
One of the goals of elder law is to create and protect options for clients to age and live with grace on their terms. Too many people (and their lawyers) do not think of what type of care clients will need and want in the future. Rather, the focus is on what happens after they pass away.
At John B. LaRue PC, we work with our clients to lay out their blueprint for getting what they want as they get older.
Let our ELDER COUNSEL member attorneys, John LaRue and Corinne Erwin, and our staff guide you through your estate and “life” planning today. Contact us at 765.287.1717 to schedule your appointment. We look forward to servicing you and your family’s estate planning needs.
IRS Dirty Dozen
Chances are, you’ve gotten a scammer call or two….or even many more. The Internal Revenue Service (IRS) releases their “Dirty Dozen” list of scams. Check out the list in the article attached and share with your loved ones, as well!
What’s the Difference Between Medicare & Medicaid
Medicare and Medicaid are two different government programs for healthcare. It is important to understand the difference between them. Here, we will discuss how the program benefits differ, how eligibility for each program is established, and discuss some recent news pertaining to each program.
Medicare vs. Medicaid – What are the program benefits?
Medicare is a program administered by the federal government to provide healthcare to certain populations. Original Medicare is divided into Parts A and B.
Medicare Part A covers hospital care and a limited period of nursing home care, home health services, and hospice care. Medicare Part A will only cover nursing home care if –
- There was first a qualifying hospital stay of 3 days of inpatient care; and
- Nursing home care was needed relating to the hospital stay; and
- The patient entered the nursing home within a short time of the hospital stay (usually within 30 days).
Thereafter, only the first 20 days of nursing home care are paid for by Medicare Part A. Days 21 through 100 of care require a partial payment by the patient (This co-pay may be covered if you have a Medicre Supplement Policy). Any care after 100 days is not paid at all by Medicare Part A.
Medicare Part B covers traditional healthcare expenses, such as visits to a doctor, blood tests, and X-rays. In most cases, a referral is not needed to see a specialist. Original Medicare does not cover prescription drug coverage; however, you can enroll in Medicare Part D through a private insurance company with paid premiums.
Medicaid is also a program intended to provide medical benefits to certain populations. It is a joint federal-state program. While states receive federal funding and must follow specific federal rules, each state administers its own Medicaid program. Medicaid covers all types of medical care, including long-term care, such as a nursing home. However, eligibility criteria are more stringent when trying to qualify for long-term care.
Medicare vs. Medicaid– How is eligibility established?
Eligibility for Medicare is simple – if you are over age 65 and have paid Medicare tax through your employment for at least ten years, you qualify. You can get Medicare Part A at age 65 without paying any premiums if:
- You receive Railroad Retirement Board benefits; or
- You are eligible to receive Railroad Retirement Board benefits or Social Security benefits but have not yet filed for them; or
- You or your spouse had Medicare-covered government employment.
If you or your spouse don’t qualify for Medicare Part A because neither of you paid Medicare tax through your employment, you may still be able to obtain Medicare Part A via paid premiums. Eligibility for Medicare Part B is the same as for Part A but requires a paid premium. Some folks qualify for Medicare benefits even though they are under age 65, including younger people with disabilities and those with End-Stage Renal Disease.
Eligibility for Medicaid is needs-based. Meaning, income restrictions for programs which cover pregnant women, children, the disabled, and the elderly. If your income is under the amount specified for your state, then you likely qualify if you are in one of those groups.
If long-term care is needed, however, there are also asset restrictions. If an applicant’s assets exceed pre-determined limits they will not qualify for nursing home care benefits. Nursing homes will likely instruct the applicant and his/her spouse to “spend down” their assets to qualify for Medicaid. Applicants can instead retain an elder law attorney to do legal planning to protect their assets while still getting qualified for benefits. This way, money and property are preserved for their family and won’t have to be spent on nursing home care.
In addition to income and asset rules regarding nursing home Medicaid benefits eligibility, there is a look-back period. Suppose you had transferred assets during a specific time period before the Medicaid application was submitted. In that case, you will likely receive a penalty where you are not eligible for benefits for a period of time. Again, an experienced elder law attorney can best help you navigate the application process to best manage any prior transfers for your benefit.
Medicare and Medicaid– What are some recent developments?
A few months ago, the Beneficiary Enrollment Notification and Eligibility Simplification (BENES) Act was signed into law. It eliminates the long waiting period, sometimes up to 7 months, for coverage for certain enrollees. Beginning in 2023, coverage for Medicare will being in the month after the participant enrolls.
A few weeks ago, a group of Democrats reintroduced legislation in the Senate to lower the age from 65 to 50 in order to qualify for Medicare benefits. If passed, this would mean millions more Americans would become eligible for Medicare. Proponents of the legislation contend that getting folks on Medicare could save lives and provide much-needed care. They point to the fact that many people don’t have access to private insurance, and so care is delayed. That becomes both financially and physically costly down the road. Opponents, of course, point out the financial strain it would cause on the federal budget. Some also claim that this expanded healthcare might allow more folks to retire at a younger age, putting a strain on the workforce. Hospitals oppose the legislation, as Medicare reimbursement rates are much lower than what the hospital would receive from private insurance plans.
Recent news in the Medicaid world is that work requirements have become all but extinct. Former President Trump made it clear under his presidency that he supported Medicaid work requirements. Meaning, Medicaid recipients would be required to work, look for work, or participate in volunteer work each month. If the requirement wasn’t met, Medicaid coverage would be lost. There were several exceptions to the rule, such as for pregnant women, full-time students, primary caregivers to dependents, the elderly, and the disabled.
Several states submitted Medicaid waivers to implement Medicaid work requirements, and some were approved. Arkansas was the first state to implement such a work requirement policy. They had their program in place for about a year before a federal judge halted it. While litigation was pending, President Biden was elected. He has made it clear that his administration does not support Medicaid work requirements, and so those will not be implemented by states going forward.
Medicare and Medicaid are two very different programs; each provides certain benefits and has certain criteria for enrollment. Between the two, however, only Medicaid will cover long-term care expenses for more than 100 days. Getting long-term care Medicaid can be a tedious process, and legal strategies can be employed that will help you protect assets while getting needed care. If you or someone in your care needs long-term care soon, or you would like to be proactive and protect assets in advance for more asset protection, then an elder law attorney can be in your corner and help you navigate the legal strategies available to you.
Worried About the Future with COVID?
Yes, we are in difficult times. I have had many clients reach out with various concerns about estate planning; something that most of us don’t’ like to think or talk about, let alone do anything about. Yet with the loss of literally hundreds of thousands of our fellow citizens since Covid 19 hit the US the mortality issue is one that we all have come face to face with and, like it or not, a little more comfortable talking about. I found the following Kiplinger article to be very enlightening and suggest it to you for a quick read.
If you have any questions, or wish to discuss estate planning matters ranging from a simple will, to the more complex Medicaid Asset Planning Trusts that we draft to protect your family and assets and from depletion by spiraling long term nursing care costs do not hesitate to call.
FREE Eviction Program Info for Hoosiers
Researchers recently stated that as many as 313,000 Indiana households are now in danger of eviction; yet another devastating side effect of the COVID-19 pandemic.
The Indiana Supreme Court has launched a FREE program to assist Hoosiers that are concerned about eviction and struggling to pay rent, as well as to assist Hoosier landlords. The Landlord and Tenant Settlement Conference Program uses a neutral person to help. Please click on the links below for more information.
Are you experiencing financial difficulties? Too much debt? Facing foreclosure? The team at John B. LaRue is experienced and passionate about explaining your options and finding a solution.