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 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.
May 17, 2010
I recently met with a woman whose husband requires nursing home care. The couple owns a house and has $200,000 in the bank. Upon learning that the woman had come to see me, the nursing home representative offered to help her apply for Medicaid and filed a Medicaid application on her behalf.
Why Did the Nursing Home File a Medicaid Application?
I found it odd that the nursing home would file a Medicaid application when it knew full well that Medicaid would not be granted unless something was done with the cash in the bank. Then it dawned on me: is it possible the nursing home filed such application to further its own interests?
The Medicaid Application Will Be Denied.
In this case, the Medicaid rules allow the couple to keep only $100,000 in the bank. Because they had $200,000, Medicaid would not begin to pay for husband’s nursing home care until the couple had spent the other $100,000, and the Medicaid application filed by the nursing home would be denied because the couple has too much money. With such denial would come a notice stating that the couple had to spend $100,000 and then reapply for Medicaid before the State could begin to pay for the nursing home costs.
Was the Nursing Home Pursuing It’s Own Interests?
I wondered, after hearing that the nursing home filed the Medicaid application, if the nursing home’s purpose was to get such a Medicaid denial notice in order to show such notice to the wife and tell her she needed to continue paying the nursing home until she spent $100,000 on nursing home costs.
A More Beneficial Alternative.
The other alternative that I had discussed with the wife was that she could use that excess $100,000 to purchase an annuity to provide her with additional income, thereby allowing her husband to qualify for Medicaid immediately.
Two Possible Courses of Action.
In other words, there are two courses of action available to the couple. One alternative is to pay to the nursing home $100,000 of the $200,000 in the bank and then apply for Medicaid. At that point, there is only $100,000 to cover the retirement needs of the wife living at home (husband’s needs will be covered because Medicaid will pay the nursing home costs.)
The other alternative is for the wife to use $100,000 to purchase an annuity that will return the full amount to her over a three to five year period. Those funds, together with the $100,000 remaining in the bank accounts, $200,000 in total, would be available to cover the retirement needs of the wife living at home. As in the first alternative, husband’s needs will be covered because Medicaid will pay the nursing home costs.
Which Would You Prefer?
Most people would prefer to keep $200,000 for their retirement years as opposed to keeping only $100,000. Because the Medicaid rules allow one to do so, why wouldn’t the nursing home, which offered to “help” the couple get Medicaid benefits, assist the wife to keep the full amount? Unfortunately, because Medicaid reimburses nursing homes at a slightly lower rate than a private pay resident, nursing homes prefer to have families pay privately for as long as possible and not take advantage of cost saving strategies like the one discussed above in which the wife got to keep $200,000 instead of $100,000.
However, it is a lot easier to live comfortably in retirement when you have $200,000 in savings than when you have only $100,000.
So, whenever a nursing home suggests that it will assist in applying for Medicaid benefits, one has to wonder: is this a case of the fox guarding the hen house?
March 27, 2010
It has been awhile since I last wrote an article on the Maryland Elder Law website. I have been focusing my energy on revising the appearance of the site. My efforts are now complete with the addition of my photograph on the main page. While the old version of the website contained a photograph, I struggled to add the photo to the new version. I do all of my own website modifications, learning as I go. While I know a thing or two about estate planning, elder law, and photography, website development is a relatively new endeavor and I continue to learn as I go in the creation and revision of this and my affiliated websites.
One of the challenges of website development is designing a site that looks the same on each of the various web browsers in use today, Internet Explorer, Firefox, Opera, Safari, and others. If you find that the website looks awry, please click the Contact Us link above and send me a message to let me know what looks funny about the site.
Now that the redevelopment process is complete, I am free to write more articles on legal topics of interest to our readers.
Stay Tuned.
January 17, 2010
Mother has a stroke and moves in with you to live in the in-law suite in your home. Mother pays you each month to cover her share of the utilities and to pay for the separate phone line installed in her room, which line is included on your own personal telephone account.
Some time later, Mother needs long term care in a nursing home. Unfortunately, she has only $1,000 in the bank and has been subsisting month to month on her income. So you help your mother to apply for Medicaid benefits to cover her nursing home costs.
The Medicaid caseworker accepts your application and does nothing for several months. The nursing home, knowing that you have applied for Medicaid, requires that your mother only pay her income to the nursing home per month, which she must do in order to get Medicaid. However, such payment is substantially less than the $8,500 per month the nursing would cost without Medicaid.
Five months after filing the Medicaid application, which is a typical application processing period, the caseworker informs you that mother’s contributions to the household expenses and the telephone bill will be treated as gifts to you, causing your mother to be ineligible for Medicaid. In response, the nursing home sends you a bill for $40,000 for five months of care and will start billing $8,500 per month for future months.
“That’s outrageous,” you exclaim, “my mother simply paid for the cost of heating and cooling her living space and for her private telephone line! Those were not gifts to me!”
Outrageous as that may seem, it is true that the Medicaid rules penalize that type of cost sharing unless it is supported by a contract between you and your mother.
For this reason, any time a senior family member is contemplating entering into a financial transaction or co-living arrangement with another family member, it is wise to seek competent legal counsel. Indeed, seemingly commonsense actions could have far reaching adverse consequences if nursing home care ever becomes a necessity.
The Gatesman Law Office stands ready to assist your family in doing appropriate planning to ensure that such surprises do not occur in your life or the lives of your parents.
October 28, 2009
The “Secret Handshake” refers to that gesture known only by the select few who are allowed access to an exclusive club. I use that as the title to this post because the State of Maryland has adopted policies that make it hard for people who do not have “inside information” to make good informed decisions regarding their financial planning should nursing home care loom on the horizon.
Read the rest…
July 1, 2009
Some lawyers belong to an association that provides them with form legal documents. One such form is the “Loving Trust”. Within such document, there is an indication that the term “Loving Trust” is a certified trademark. The trademark does not belong to the lawyer who “prepared” your trust. Rather, it belongs to the company that provides the trust form to the lawyer.
Loving Trusts can be problematical. A typical Loving Trust has provisions relating to “community property.” Community Property is a special class of marital property with respect to which spouses have certain statutorily defined rights — but such is the case only in so-called “community property states” such as California. Maryland is not a community property state, and a trust by a Maryland resident that has community property provisions at best is confusing and at worst could cause unintended consequences.
But there is a more serious problem with the Loving Trust. The Loving Trust is a joint trust created by a husband and wife. Only the husband and wife may modify or revoke the trust. The trust may not be modified or revoked by the agent under a power of attorney for either husband or wife. Moreover, once one spouse dies, the trust may not be revoked.
This is a problem because trusts can cause one to be ineligible for Medicaid. If the trust is revocable, and the trust beneficiary requires nursing home care, then the trust can be revoked and the problem resolved. If one is the beneficiary of a Loving Trust, however, and the spouse has died, then such trust may not be subject to revocation. As a consequence, such trust may cause Medicaid ineligibility, or may prevent the surviving spouse from preserving assets.
And for estate planning purposes, because estate tax law has been fluctuating in recent years, it does not make sense to draft a trust that will become irrevocable and unmodifiable after one’s spouse dies. Such trust cannot be changed to respond to changes in the estate tax law. As a consequence, using a Loving Trust may result in the payment of estate taxes that otherwise could have been avoided.
Beware the Loving Trust.
June 26, 2009
In Maryland, one is ineligible to receive Medical Assistance, or Medicaid, for long term care in a nursing home if one gives property away, or transfers property for less than full value. Since 2006, this period of ineligibility does not begin to run until the gift giver resides in a nursing home and is out of money.
The period of ineligibility is determined by dividing the amount of the gift (or the aggregate amount of all gifts) by the penalty divisor. The penalty divisor has been $4,300 for many years. For Medicaid applications filed on or after June 1, 2009, the penalty divisor will be $6,800. Using the new divisor, a gift of $68,000 will cause a Medicaid ineligibility period of 10 months, six months less than the penalty that would have been imposed using the old divisor.
Please contact the Gatesman Law Office to learn more about how this change may affect you.
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