June 22, 2010
Individuals who get Medicaid benefits to pay for nursing home care are allowed to keep their house as an exempt asset. However, the State is allowed to place a lien on the house to recover any Medicaid benefits paid on the individual’s behalf. Moreover, if there is no lien on the house, the State can make a claim in the individual’s probate estate after that person dies.
However, a lien may not be imposed if a spouse is living in the house, and estate recovery is allowed only after such spouse has died. For a single person in the nursing home, if the state has put a lien on the house, the law states that the “lien shall dissolve upon that individual’s discharge from the medical institution and return home.”
In some instances, family members choose to take a loved one home when that person has reached the end of life to be cared for by hospice providers in the home setting. In that instance, if a Medicaid lien was placed on the house, the law provides that such lien may not be enforced.
In light of such circumstance, a financially savvy family member who holds an appropriate power of attorney can take steps to protect the house from estate recovery by using a life estate deed.
Such planning would have the following result. First, the Medicaid lien will be ineffectual under the law. Second, the life estate deed will allow the property to pass to family members outside of probate. Property that passes outside of probate is not subject to estate recovery.
In this way, the state would be unable to obtain the house notwithstanding that it had placed a lien on the property.
Ensuring that the power of attorney has appropriate provisions to allow for this type of planning is one of the things this office does when working with a client.
Does your power of attorney fit the bill?
June 16, 2010
Do you have enough auto insurance coverage? Did you know that the minimum required amount of auto liability insurance in Maryland is woefully inadequate? Moreover, if you are in an accident caused by an uninsured or underinsured driver, you would look to your own insurer to make you whole for any losses you might suffer.
Such losses can be significant. For working age individuals, an automobile accident could result in you losing the ability to work. If that is the case, you will be dependent on an insurance recovery to provide you with the value of the wages you would lose by not being able to work and earn a living for the rest of your life.
Consequently, it is important that you review your automobile insurance bodily injury coverage. I generally recommend that working age people, and especially high earning workers, have at least $1,000,000 in coverage. And importantly, I advise that such high coverage limits apply for your uninsured motorists insurance. That way, if you are hit by an uninsured or underinsured driver, you could look to your own insurance company to make sure you are not impoverished if the accident results in an inability to work.
Also, if you are responsible for injury to a high earning individual and your insurance coverage is not sufficient to compensate that person for her lost wages, then your other assets may be at risk to pay for the injured party’s losses.
Often, one can obtain an increase in liability coverage with no premium increase if you also raise the deductible on your auto collision or comprehensive insurance coverage. Indeed, some advisers suggest that a higher deductible is desirable because, if you make a lot of small claims against your policy, the benefit of the claim will be minimal, but the resulting premium increase could be significant. With a higher deductible, $1,000 for example, you will assume the responsibility to pay for such loss, but you would get the benefit of reducing your premium. Such premium reduction may allow you to obtain higher liability coverage with no increase in overall premium.
Some insurers like GEICO advertise that they can save you money because they have less costly premiums than other insurers. However, GEICO generally will not write a policy with $1,000,000 liability coverage. Therefore, one must consider whether a cut-rate insurer is a good deal if it cannot provide you with the coverage you desire.
Also, while many people have umbrella insurance coverage, such coverage may not apply to uninsured motorist liability. If that is the case with your insurer, then you cannot rely on your umbrella insurance to cover a shortfall in liability coverage if you are hit and injured by an uninsured or underinsured driver.
It is prudent financial planning to review your automobile insurance policy to ensure that your coverage is adequate for your circumstances.
June 6, 2010
In January, 2008, I wrote an article on the Maryland Court of Special Appeals Case, Battley v. Banks (Md. App. December 20, 2007). In that case, the Court ruled that, upon the death of the disabled person (a disabled person under a guardianship is called the “ward”), the ward’s assets become the property of the personal representative of the ward’s probate estate, or if none is appointed immediately, then the guardian must hold the property to be transferred to such personal representative when appointed. Moreover, the Court ruled that the guardian may not pay himself compensation for services or pay any legal fees even after the guardianship court approves such compensation and fees. Instead, the guardian and the lawyer, once the guardianship court approves such fees, must file a claim in the ward’s probate estate to be paid by the Personal Representative of such estate.
That rule, however has been changed by the Maryland legislature, such change to be effective October 1, 2010. The new legislation changes the Annotated Code of Maryland, Estates and Trusts Section 13–214(c)(3).
After October 1, 2010, the relevant statutory provision will read as follows:
When a minor or disabled person dies, the guardian shall deliver to the appropriate probate court for safekeeping any will of the deceased person in his possession, pay from the [guardianship] estate all commissions, fees, and expenses shown on the court-approved final guardianship account, inform the personal representative or a beneficiary named in [the will] that he has done so, and retain the balance of the estate for delivery to an appointed personal representative of the decedent or other person entitled to it.
In the meantime, the strictures of Battley v. Banks shall apply.
June 1, 2010
A lawyer I know is assisting a client seeking Medical Assistance to pay for his mother’s nursing home care. Mother has less than $2,500.
Prior to entering the nursing home, the client, as agent under mother’s power of attorney, assisted his mother by paying in-home care givers using mother’s funds. Such payments totaled $200,000 over a several year period. While doing so enabled mother to continue to reside at home giving her a better quality of life, at the insistence of the caregivers, such payments were made “under the table”. In other words, no employment taxes were paid for these care costs, and the payments were not reported to the IRS.
Client applied for Medicaid, which was denied because the caseworker improperly treated the $200,000 payments as gifts causing Medicaid ineligibility. In fact, such payments were payments for services. The client, on his mother’s behalf, contested the denial and the matter was set for a hearing before an administrative law judge.
Now the client is fearful that providing a sworn statement as to the reason for the payments will expose the client or his mother to potential civil or criminal liability relating to their failure to report the care giver payments to the IRS.
So, instead of running that risk, the client will withdraw his challenge to the denial of Medicaid benefits. That is unfortunate because the payments to the care givers clearly were not gifts.
This cautionary tale is but one example of the complex matters frequently addressed by elder law attorneys as they seek to guide their clients through the maze of public benefits law.
June 1, 2010
Last month, in the Article entitled Letting the Fox Guard the Henhouse, I suggested that a married couple could use an annuity to enable the spouse at home to retain more assets than otherwise would be available to her.
Annuity Replaces Lost Income
Enabling the spouse to keep more assets is particularly important when one considers the Medicaid rule that requires that most of the income earned by the spouse in the nursing home must be paid to the nursing home as a contribution to the cost of care. Hence, whatever additional assets the couple can retain by using an annuity will serve to offset the lost income, income the couple most likely depended on to maintain the day-to-day household expenses.
Specialized Annuity
The strategy discussed in last month’s article involves the use of a specialized annuity. I have addressed the characteristics of such annuity in my article discussing the 2006 Medicaid rule changes. You can read that article by clicking -HERE-.
These Articles are Not Legal Advice
As with any article on this website, you should not consider the ideas presented here as constituting legal advice to you in particular, or advice that addresses your particular situation. For more information, click the Is This Legal Advice? tab at the top of this page.
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