The medicaid program s effect on estate planning for the elderly
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THE MEDICAID PROGRAM’S EFFECT ON ESTATE PLANNING FOR THE ELDERLY. Michael A. Fuerst BUCKLEY & ZOPF. OBJECTIVES OF MEDICAID ESTATE PLANNING. Protection of community spouse 1. adequate income, resources 2. prevent impoverishment Assure care for institutionalized spouse

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The medicaid program s effect on estate planning for the elderly

THE MEDICAID PROGRAM’S EFFECT ON ESTATE PLANNING FOR THE ELDERLY

Michael A. Fuerst

BUCKLEY & ZOPF


Objectives of medicaid estate planning
OBJECTIVES OF MEDICAID ESTATE PLANNING ELDERLY

  • Protection of community spouse

    • 1. adequate income, resources

    • 2. prevent impoverishment

  • Assure care for institutionalized spouse

  • Maximize estate for heirs


Differs from standard estate planning
DIFFERS FROM STANDARD ESTATE PLANNING ELDERLY

  • A. Standard estate planning techniques will not work

  • B. Gifts are problematic

  • C. Grantor trusts mostly ineffective

  • D. Traditional ownership concepts do not necessarily apply


Medicaid program
MEDICAID PROGRAM ELDERLY

  • Needs based health insurance program

  • Income and resource limitations

  • Only health insurance which pays for nursing home care


Medicare
Medicare ELDERLY

  • Health insurance for Social Security retirees

  • Does not cover long term care in a nursing home

  • Covers skilled/rehabilatative care in nursing home


Eligibility for medicaid
ELIGIBILITY FOR MEDICAID ELDERLY

  • $2500 assets.

  • Income below State reimbursement rate for nursing home.(approximately $4300/mo)


Spousal impoverishment rules

Spousal Impoverishment Rules ELDERLY

1.Income Rules

2.Resource Rules


Income rules
INCOME RULES ELDERLY

  • Community (healthy) spouse may protect up to $1822/mo of ill spouse’s income.

  • If high shelter (housing) expenses up to $2739.

  • None of healthy spouse’s income attributable to ill spouse.

  • Ownership- “name on the check” concept

  • If no document, 1/2 of income attributable to each spouse.


Income
Income ELDERLY

  • An immediate payment annuity is treated as income of the owner/annuitant.

  • Social Security or a pension is treated as the income of the individual who is entitled to receive it

  • Wages

  • Interest/Dividends

  • Loan


Example
Example ELDERLY

  • Ill spouse- social security and pension-$3000;

  • Healthy spouse- $750 social security

  • Healthy spouse entitled to keep at least $1072 of ill spouses income.

  • If shelter expenses are high may keep additional $917(750+1072+917=$2739)


Example1
Example ELDERLY

  • Healthy spouse- social security and pension-$3000;

  • Ill spouse- $750 social security

  • Healthy spouse entitled to keep all $3000

  • Healthy spouse entitled to an unlimited amount of income if in his/her name


Resource rules
RESOURCE RULES: ELDERLY

  • All resources are countable regardless of which spouse holds title or jointly owned.

  • The “marital pie”


Countable resources
Countable Resources ELDERLY

  • Stocks, bonds, savings and checking accounts;

  • IRA and 401K accounts

  • Annuity and insurance policies

  • Real estate-other than the principal residence


Resource assessment
Resource Assessment. ELDERLY

  • “Snapshot” of countable resources.

  • As of date of first continuous period of institutionalization.

  • Even if application for Medicaid is later.


The medicaid program s effect on estate planning for the elderly

Spousal Share ELDERLY

  • Maximum countable resources

    protected level for community

    spouse - $109,560.

  • All other resources to benefit institutionalized spouse


Spousal share
Spousal Share ELDERLY

  • One half of total countable resources to a maximum of $109,560.

  • If total assets $300,000 healthy spouse only entitled to protect $109,560, not $150,000.

  • If total assets $100,000 healthy spouse only entitled to $50,000.

  • Minimum protected amount is $21,912.

  • If total assets $40,000 healthy spouse keeps $21,912.

  • Although community spouse may use the remaining assets for his/her benefit as well.


Spousal share1
Spousal Share ELDERLY

  • Assets less than $43,824- $21,912

  • Assets between $43,824 and $219,120 -One-half

  • Assets more than $219,120 -$109,560


The family home is an excluded resource
The family home is an excluded resource ELDERLY

  • As long as it is used as the residence of the community spouse

  • Up to a maximum equity value of $500,000 for ill spouse.


Other excluded resources
Other Excluded Resources: ELDERLY

  • motor vehicle

  • furniture and personal possessions

  • prepaid funeral

  • irrevocable burial trust


Deeming of resources stops as of date of eligibility for medicaid
Deeming of Resources Stops as of Date of Eligibility for Medicaid

  • timing is crucial

  • no restrictions on what community spouse does with these resources

  • sale of home-no claim by Medicaid


Transfer of asset rules
TRANSFER OF ASSET RULES Medicaid

  • Transfers between spouses are not disqualifying.

  • Gifts/transfers for less than adequate consideration are potentially disqualifying


Transfers after february 7 2006
Transfers After February 7, 2006 Medicaid

  • “Look Back” Period:

  • 5 years from first date individual is both institutionalized and applies for Medicaid

  • applies to all gifts, including trusts.


Period of disqualification
. Period of Disqualification: Medicaid

  • Equal to the total uncompensated value of all gifted assets

  • Divided by state average nursing home cost ($8,421.11)

  • Commencing on the date of application for Medicaid for nursing home care.

  • All gifts disqualify regardless of size.


Example2
Example Medicaid

  • Gift of $84,211 to pay for college for grandchild made on Jan 1, 2010

  • Apply for Medicaid Jan 1, 2014

  • Disqualification period-10 months ($84,211 divided by $8,421/mo)

  • Disqualification period commences on date of application for Medicaid:1-1-20114


Exempt transfers
Exempt Transfers Medicaid

  • To spouse

  • To sibling who has “equity interest” and has resided in home for 1 year

  • To child who has resided in home for 2 years and provided care enabling recipient to stay out of nursing home

  • To disabled or minor child


Trusts
Trusts Medicaid

  • 3 types of trust recognized:

  • Revocable

  • Irrevocable/grantor retained interest

  • Irrevocable/no grantor retained interest


Revocable
Revocable Medicaid

  • Countable resource

  • Residence will be countable

  • Subject to lien recovery


Irrevocable retained interest
Irrevocable -Retained Interest Medicaid

  • Income only

  • Right to principal-available asset regardless of trustee’s discretion

  • Grantor’s residence considered countable asset

  • Risk of inclusion if Grantor retains incidents of ownership ( right to borrow, power of appointment, Grantor as trustee)

  • No clause or requirement in trust precludes it from being considered under Medicaid program.


Irrevocable no retained interest
Irrevocable-No Retained Interest Medicaid

  • Transfer-must cover 5 year disqualification

  • Not treated as income or asset.

  • Congress and State have tried to make the use of trusts more difficult.Rules do not apply to trusts created on or before August 10, 1993.


Estate recoveries
ESTATE RECOVERIES Medicaid

  • New Hampshire has an expanded definition of “Estate” for recovery purposes


Estate
“Estate” Medicaid

  • “Estate” includes not only probate assets but also property held by the recipient as a joint tenant, tenant in common or holder of a life estate. RSA 167;14-A

  • Property in a revocable trust is subject to recovery as well

  • Possible recovery against irrevocable “income only” trust to the extent of the life interest in the income


Estate1
“Estate” Medicaid

  • Enforceable only against the estate of the recipient/institutionalized spouse-55 or older; not against estate of surviving spouse

  • Not enforceable against estate if child under age of 21 or disabled


Life estate joint tenancy
Life Estate/Joint Tenancy Medicaid

  • Joint ownership and life estate which avoid probate, will not now avoid the lien.

  • Life estate valued as of one minute before date of death based upon actuarial tables

  • Joint tenancy valued as percentage of the total value (e.g. 50%).


Lien on home
Lien on Home Medicaid

  • Not enforceable against home of surviving spouse ( or minor or disabled child of recipient)

  • Not enforceable if:

  • sibling has resided with recipient for 1 year and has equity interest; or,

  • child has resided for 2 years and provided care to keep recipient out of nursing home


Estate recoveries annuities
Estate Recoveries- MedicaidAnnuities

  • Annuities require the State to be the primary beneficiary for Medicaid payments made to annuitant or spouse.

  • If State not named then purchase of annuity will be deemed a transfer for less than adequate consideration


Planning protection of community spouse
Planning: Protection of Community Spouse Medicaid

  • Re-title assets in healthy spouse’s name.

  • Apply for Resource Assessment as soon as possible.

  • Do not need to be eligible for Medicaid to apply for resource assessment


Planning protection of community spouse1
Planning: Protection of Community Spouse Medicaid

  • Convert countable resources to excluded resources. (payoff mortgage, make improvements to home,buy car).

  • Insure greatest amount of income in healthy spouse’s name.

  • After institutionalization spend down ill spouse’s share - for benefit of healthy spouse.(pre-pay taxes, purchase annuity).

  • After Medicaid eligibility, convert excluded resources to liquid resources.


Annuities
ANNUITIES Medicaid

  • Countable asset unless immediate annuity

  • Convert from countable asset to income

  • Convert after Resource Assessment

  • Not a transfer for less than adequate consideration

  • Annuitization for “period certain”cannot exceed life expectancy pursuant to CMS standards

  • The State must be primary beneficiary for any Medicaid provided to annuitant or spouse


Maximizing estate for heirs
Maximizing Estate for Heirs Medicaid

  • Transfers before 60 months

  • Long-term care insurance

  • Irrevocable Trusts - are they of any use?

  • Life estates

  • Change will of healthy spouse

  • All assets in name of healthy spouse


Risks of gifting
Risks of Gifting Medicaid

  • Unable to pay for care for entire 5 years

  • Gifts made to children no longer available

  • Spent by kids

  • Divorce or death of child

  • Bankruptcy of or lawsuit against child


Choice of law
Choice of Law Medicaid

  • The location of the Nursing Home controls which State’s Medicaid rules apply.

  • Legal residence is irrelevant


Viii rules of thumb
VIII. RULES OF THUMB Medicaid

  • A. Property transferred more than 60 months before institutionalization will be protected

  • B. Property transferred within 60 months of institutionalization will cause disqualification.

  • C. The rules will change


The medicaid program s effect on estate planning for the elderly
1. IS THERE A DIFFERENCE BETWEEN MEDICARE AND MEDICAID OR IS THE FEDERAL GOVERNMENT TRYING TO CONFUSE ME?


2 who is eligible for medicaid for nursing home care
2. WHO IS ELIGIBLE FOR MEDICAID FOR NURSING HOME CARE? IS THE FEDERAL GOVERNMENT TRYING TO CONFUSE ME?


The medicaid program s effect on estate planning for the elderly
3. IF A SPOUSE GOES INTO A NURSING HOME DOES THE NURSING HOME OR MEDICAID TAKE CONTROL OF OUR SAVINGS?


The medicaid program s effect on estate planning for the elderly
4. IF A SPOUSE HAS TO GO INTO A NURSING HOME DOES THE HEALTHY SPOUSE HAVE TO SPEND ALL OF HIS/HER ASSETS FOR THE CARE OF THE ILL SPOUSE?


The medicaid program s effect on estate planning for the elderly

5. IF MY ILL SPOUSE HAS TO GO INTO A NURSING HOME WILL HIS MUCH LARGER RETIREMENT INCOME HAVE TO GO WITH HIM?


6 do we have to sell our home if one of us must go into a nursing home to be eligible for medicaid
6. DO WE HAVE TO SELL OUR HOME IF ONE OF US MUST GO INTO A NURSING HOME TO BE ELIGIBLE FOR MEDICAID?


The medicaid program s effect on estate planning for the elderly

7. DOES IT MATTER IN WHOSE NAME THE ASSETS ARE TITLED WHEN DETERMING WHAT MUST BE PAID TO THE NURSING HOME.


8 when does the medicaid program determine what amount of assets must be used for nursing home care
8. WHEN DOES THE MEDICAID PROGRAM DETERMINE WHAT AMOUNT OF ASSETS MUST BE USED FOR NURSING HOME CARE?




11 can the healthy spouse sell the home
11. CAN THE HEALTHY SPOUSE SELL THE HOME?. BE REQUIRED TO PAY OFF THE LIEN?






Michael a fuerst esq buckley zopf

PO Box 1485, 233 Broad St NURSING HOME, WHAT SHOULD WE DO?

Claremont, NH 03743

603 542 5114

603 543 1570 fax

Mfuerst@buckleyzopf.com

November 2011

Michael A. Fuerst, Esq.Buckley & Zopf