Category: Medicaid

The Medicare open enrollment period ends this year earlier than prior year open enrollment periods, December 7 instead of December 31.

The open enrollment period to make changes to your Medicare coverage, or to add coverage such as Medicare Part D drug coverage ends December 7, 2011. Now is the time to act if you desire to make changes to your coverage.

To learn more, you may log onto the online Medicare Open Enrollment Center by clicking -Here-

As noted in other articles I have written, Maryland changed its Power of Attorney law effective October, 2010. If an individual uses one of the form Powers of Attorney in the statute, or a power of attorney that is in substantially the same form, and a bank refuses to accept it, then the individual can have the refusing party pay her legal fees if she goes to court to force that party to accept the Power of Attorney.

Because the form documents are not sufficiently comprehensive, lawyers, including William M. Gatesman and Michael G. Day & Associates, with whom Mr. Gatesman is associated, have created Powers of Attorney that are sufficiently comprehensive and which also are “substantially in the same form” as the statutory document. These Powers of Attorney are designed to be comprehensive enough to meet the client’s needs and to also qualify for the attorney’s fees remedy provided for in the new law.

Perhaps to keep everyone on their toes, but in fact to remedy a significant omission in the statutory form, Maryland’s legislature has amended the new Power of Attorney law in recent months. This amendment changes the “Banks and other financial institutions” section of the Personal Financial Power of Attorney form in the statute, which now reads, in pertinent part, as follows:

Banks and other financial institutions – With respect to this subject, I authorize my agent to: continue, modify, transact all business in connection with, and terminate an account or other banking arrangement made by or on behalf of the principal; establish, modify, transact all business in connection with, and terminate an account or other banking arrangement . . . .

Therefore, in order to have a Power of Attorney for which one may rely on the legal fees remedy in the statute after the effective date of the recent amendment, the Power of Attorney should have the language quoted above in the “Banks and other financial institutions” section of the Power of Attorney.

Please contact us for a complimentary review of your existing Power of Attorney.

Mother, who received Medicaid for day care during her lifetime, died. While her will states that the house should remain available for any child of hers who cannot afford a place to live, the creditors in a probate estate take priority. The Maryland Medicaid program was the sole creditor, filing a claim in the estate for $65,000 to cover the Medicaid benefits paid for mother’s benefit during her lifetime. Hence, the Medicaid claim took precedence over retaining the house for any of mother’s heirs.

Nevertheless, the personal representative of the estate did not want to pay the claim because one of mother’s daughters, who is not disabled, but is an underemployed single mother making $5,000 per year, cannot afford another place to live. So the personal representative of the estate denied the claim, and Medicaid filed a petition in the Orphan’s Court to have the claim allowed.

Maryland regulations allow the state, in its discretion, to elect not to pursue a claim in cases where a dependent child of a Medicaid recipient is living in the home. However, the state is required to forego the claim only if such child is disabled, and such was not the case in this instance.

Based on the facts, it appeared that the claim would be affirmed. Nevertheless, William M. Gatesman persuaded the Orphan’s Court that the Medicaid department should have given the personal representative an opportunity to appeal. Because it had not, the court reviewed the statutory criteria upon which the state could have forgiven the repayment obligation and concluded that the circumstances warrant letting mother’s adult child live in the house. On that basis, the Orphan’s Court denied the claim.

While the state could have appealed the Orphan’s Court decision and might have argued that no such appeal right existed, it did not do so. Consequently, we were successful in eliminating the $65,000 payment obligation for mother’s estate.

While it is more typical for lawyers to assist clients in asset preservation strategies before death, this case illustrates an unusual circumstance in which intervention by legal counsel resulted in a substantial savings to the client when, at first blush, all appeared lost.

Maryland’s new General and Limited Power of Attorney Act changed the law of Maryland relating to powers of attorney effective October 1, 2010. Up to that point, there was a presumption that any power of attorney executed in Maryland was durable unless it stated otherwise.

A durable power of attorney is a power of attorney that grants authority to an agent and such agent’s authority continues even when the principal becomes incapacitated and unable to manage her affairs. If a power of attorney is not durable, the agent’s authority ceases upon the disability of the principal.

Unfortunately, the new power of attorney law eliminated the presumption of durability for those certain specialized types of powers of attorney that were not governed by the new law. However, many believe that the legislature did not intend to eliminate the presumption of durability for such specialized powers of attorney.

Maryland House Bill 247 is the legislature’s attempt to fix this problem. Hence, if House Bill 247 is passed by the Maryland Legislature and signed by the Governor, then there once again will be a presumption of durability for all powers of attorney executed in Maryland unless the document itself provides otherwise.

You may read House Bill 247, which provides other amendments to the new power of attorney law as well, by clicking HERE.

It is not unusual for parents to lend money to their adult children in times of need. Often the funds are simply given to the younger family member with the understanding that the recipient will return the funds when his or her situation improves.

For seniors, lending money in this way could be a recipe for disaster. If a parent loans money to a child, or to any other person, without documenting such loan with a promissory note, such loan may foreclose the opportunity for such parent to obtain Medical Assistance if future nursing home care should be required.

Even if the loan is memorialized with a promissory note, Medicaid ineligibility still may arise. This is because the Medicaid rules impose strict requirements on the structure of a loan and on the form of a promissory note in order for the note holder to obtain Medical Assistance.

An example of how this might affect a married couple is instructive. Jenny, a single mother with two small children, suffered a reduction in hours at work and needed help with her house payment. Jenny’s parents, Bob and Mary, helped Jenny by loaning her $10,000 to tide things over until she could find another job. Two years later, while Jenny is now able to make her mortgage payments, she has not been able to save enough money to repay the loan.

Bob and Mary have fallen on lean times themselves. They own a house and $20,000 in the bank. Bob has a stroke and now must reside in a nursing home for the remainder of his life. Under the Medicaid rules, Bob and Mary can keep about $20,000. They also can make home improvements and can prepay their burial costs. If you count the loan to Jenny as one of their assets, Bob and Mary have $30,000 in assets, $10,000 of which they can use to improve their house or prepay their burials. Or Mary can use an annuity to save the entire amount. After making such payments, Bob would meet the financial eligibility requirements for Medicaid so that his nursing home costs could be paid by the state.

As long as the loan to Jenny is properly documented, Medicaid would be allowed. If it is not, however, then the $10,000 transferred to Jenny two years ago will be treated as a gift causing Bob to be ineligible to receive Medicaid benefits for one and a half months. The tragedy of the situation is that Bob and Mary will be required in that instance to spend about $12,000 of their saved funds to pay the nursing home for that one and a half month period thereby substantially depleting their meager savings.

The way to avoid such dire consequences is to structure the loan so that it complies with the Medicaid rules. Such loan must be “actuarially sound”. While that word as used in the Medicaid rules is somewhat nebulous, it presently is applied so as to require that the term of the loan must allow for full repayment within the life expectancy of the lender. Life expectancy is determined by using standardized life expectancy tables set forth in the Medicaid rules.

In addition, such loan must provide for equal, regular, periodic payments, and there must be no deferral of payments. Also, the promissory note must specifically state that the loan is not cancellable at death. Unfortunately, most promissory notes prepared by lawyers and most preprinted promissory note forms do not prohibit cancellation at death. Indeed, under general commercial law, a valid promissory note, even if it does not expressly prohibit cancellation at death, would nevertheless survive the death of the borrower. In other words, there would not be an automatic cancellation of the note. This legal principle, however, is not sufficient to salvage a promissory note in the eyes of the Medicaid rule makers who will look to see whether the promissory note specifically prohibits cancellation.

As is the case in many areas of life, when seniors enter into financial arrangements with family members or others, great care must be taken to ensure that such arrangements do not have unintended adverse consequences or prevent future eligibility for public benefit programs.

I received a nice letter from a client recently. It reads as follows:

Dear Mr. Gatesman,

You may recall that we met during the blizzard in February. My main question at that time was how to get my mother into a nursing home on Medicaid without losing her house.

During our meeting, you pointed out that my mother should be eligible for a Veteran’s Administration Aid & Attendance pension. The whole time I was completing the application and assembling all the supporting documents, I assumed that the application would be automatically denied and we would have to launch a lengthy appeals process.

You can imagine my shock when our application was accepted within about 3 weeks of receipt! It was received by the VA on May 21, and they sent my mother a notice dated June 17, that arrived on what would have been my parents 69th wedding anniversary, June 22.  The notice says she will receive $1056 per month as of June 1.

I did not know that this pension even existed before consulting you.

Thank you again!

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?

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.