Articles Tagged with Irrevocable Trust Medicaid Planning

While Medicaid planning is a term often tossed around, not many people know exactly what the process entails. In general, Medicaid planning is any assistance provided to an individual in advance of their Medicaid application. These tasks widely vary depending on the needs of the person, but may include anything from collecting documents to restructuring assets. Medicaid eligibility is complicated and even a simple mistake in the application may result in being denied benefits. Because of this, people will often consult a Houston Medicaid planning attorney to help them with the process and ensure their family’s assets are maintained while their loved one receives the long-term care they need.

Reviewing Medicaid Eligibility

It is important for an individual to determine their Medicaid eligibility in order to have a full grasp of the potential benefits that they could receive. The consequences of being denied Medicaid benefits can be detrimental not only for the individual, but also for their family. The American Council on Aging provides a free eligibility status checker to determine eligibility.

Hands in agreementThe Huffington Post published an interesting article on the ethical and legal issues posed by two related legal practice areas, “Some Legal Issues at the Intersection of Elder Law and Estate Planning.” There are legal and ethical issues that arise when determining courses of action in both areas.

One is whether to dispose of assets through pre-need planning to qualify for means-tested government programs such as Medicaid that might pay, for example, the cost of long term nursing home care. This is very complicated, and you should work with a qualified elder law attorney.

If you want to maximize eligibility for means-tested governmental benefits, a common income reduction technique is to create a Qualified Income Trust (QIT), also called a “Miller Trust.” There are also other types of "special needs trusts" that can be created without reducing government benefits. Again, this is a highly complex area that requires help from an elder law attorney.

Bigstock-Elder-Couple-With-Bills-3557267In all states, federal Medicaid law provides special protections for the spouses of Medicaid applicants. But states decide how much the non-institutionalized spouse may keep, within a range. Connecticut's allowance — $23,844 — is the lowest. And legislators are calling for an increase.

If this legislation succeeds in reducing the amount of money assigned to the institutionalized spouse, he or she would become eligible for Medicaid assistance more quickly.

The CT Post report, in an article titled “Legislature asked to raise asset level for Medicaid spouses,”says that the bill would affect couples with assets of about $24,000 to $100,000. Right now, when a person tries to qualify for Medicaid, couples will split their assets evenly, and the nursing-home-bound spouse must spend down his or her portion to $1,600. This means if a couple has $60,000, each spouse is attributed $30,000, and the one heading to the care facility must get his or her share down to $1,600. [Note: These numbers can and do vary state by state.] This is typically accomplished by paying for initial nursing home care. Under the state’s new proposal, the community spouse would be able to keep $50,000 in assets.

MP900407501Lillian Palermo tried to prepare for the worst possibilities of aging. An insurance executive with a Ph.D. in psychology and a love of ballroom dancing, she arranged for her power of attorney and health care proxy to go to her husband, Dino, eight years her junior, if she became incapacitated. And in her 80s, she ended up in a nursing home as dementia, falls and surgical complications took their toll. He sings her favorite songs, feeds her home-cooked Italian food, and pays a private aide to be there when he cannot. But one day last summer, after her husband disputed nursing home bills that had suddenly doubled Mrs. Palermo's copays, and complained about inexperienced employees who dropped his wife on the floor, Mr. Palermo was shocked to find a six-page legal document waiting on her bed. It was a guardianship petition filed by the nursing home, Mary Manning Walsh, asking the court to give a stranger full legal power over Mrs. Palermo, now 90, and complete control of her money.

A New York Times article titled "To Collect Debts, Nursing Homes Are Seizing Control Over Patients" states that few people are aware that a nursing home can do this. Guardianship cases are usually confidential, but the Palermo's situation isn't uncommon.

More than 12 percent of guardianship cases are brought by nursing homes. Many of these may have been brought as a means of bill collection, which was never intended when the New York legislature enacted the guardianship statute. Some courts have ruled that this legal tactic by nursing homes is an abuse of the law, but these petitions—even if unsuccessful—make families spend time and money in costly legal ordeals.

Concerned elderOne attorney calls it the "Get out of Dodge plan"—the best way to keep your assets intact before applying for Medicaid to cover nursing home costs. New Jersey is one of the most restrictive states when it comes to permitting residents to preserve assets for their benefit while Medicaid pays for nursing home care. In the Garden State, there are steps that should be taken before applying for Medicaid, the government insurance program for people of all ages who are too poor to afford health care including long-stay nursing home care. Nursing homes can cost $120,000 a year in New Jersey, sometimes more.

Even though Medicaid is a federal program that's regulated by each state, the way in which the money is distributed can vary. Restrictive states are siding with protecting public money over letting individuals and their spouses keep assets, the Asbury Park Press article titled "Protecting assets: Three things to know before Medicaid" explains. So your retirement strategy can be quite different based upon your state of residence. Not everyone can Get Out of Dodge, meaning not everyone can move into a second home in Florida.

But do-it-yourself planning may not be the way to go. Elder law and Medicaid planning is constantly changing, and your assets can easily be wiped out by nursing home costs without careful planning. For example, when a husband places his wife in a nursing home, their home may be excluded from assets that must be spent for nursing home care before Medicaid pays for it. So the husband is still able to live there. However, if the husband dies before the wife enters the nursing home, it gets complicated: the house could be lost to the nursing home for the cost of her care.

MP900422340 (1)Here are some "Get's" that will help you prepare for the Medicaid application process.

Get going five years before you think you need to. Medicaid has a five-year look back to all your parents' financial dealings. Which means transactions conducted during that time may be counted in determining their program eligibility. With this requirement, it’s good to have your parents' banks' names and numbers accessible. Regulators are looking at two things: if you're hiding any money and if you've given any away.

Also, if one or both of your parents still live in the family home and you’d like to keep it, you should try to transfer ownership or set up a trust at least five years before they apply for Medicaid. Although there are some exceptions, typically if you don’t address this issue, you will be forced to sell the home.

Women swimmingAlthough their names are confusingly alike, Medicaid and Medicare are quite different programs.

What is the difference between Medicare and Medicaid? There are strict income and asset guidelines that must be satisfied to be eligible for Medicaid coverage. While Medicare is solely a federal program, Medicaid is a joint state-federal program. Each state operates its own Medicaid system, but it must adhere to federal guidelines to receive federal funds. Federal money pays for half the state’s Medicaid costs, and the state pays the rest.

Long-Term Care Planning

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