In order to deduct assisted living costs for income tax purposes, an individual needs to obtain a written statement from her doctor which states that:

1. The client is a chronically ill individual

2. The client is unable to perform without assistance at least two of the following activities of daily living: eating, toileting, transferring, bathing, dressing, and continence, OR she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment, and

3. The client’s care requirements include maintenance and personal care services, i.e. care which has as its primary purpose the providing of a chronically ill individual with needed assistance with her disabilities, and

4. That the physician prescribes that such care be provided by her current assisted living facility or a similar facility

Also, before filing the tax return, the tax return preparer will need (in addition to the total costs at the assisted living center) a breakout (normally done as a percentage and provided by the assisted living center) of what percent of the total cost is for “assisted living care” verses food or lodging.

See IRS Publication 502

The Medicaid rules state that both outright gifts to a disabled child, and gifts to a trust for the sole benefit of a disabled child are exempt transfers — that is, transfers that do not cause Medicaid ineligibility for the parent who makes the gift.

In order to ensure that a gift in trust is for the sole benefit of the disabled child (including a disabled adult child), Maryland requires that such trust allow for distributions to or for the benefit of such child, and no other person, during such child’s lifetime, and requires further that the State of Maryland be named as a beneficiary of the trust after the child’s death to repay the State for any Medicaid benefits the State has provided to such child during his or her lifetime.

This sole benefit requirement applies only to gifts in trust. Unfortunately, the Maryland Medical Assistance Program manual, which is the guidebook used by Medicaid caseworkers to evaluate Medicaid applications, is written in such a way as to suggest that the sole benefit requirement also applies to outright gifts. The official Medicaid regulations, on the other hand, do not support this position.

William M. Gatesman was involved recently in a matter in which a parent who had given funds to his disabled adult child was denied Medicaid eligibility for nursing home care. The Medicaid caseworker concluded that such outright gifts could not be exempt transfers because there was no way the child who received the funds could ensure that they would be used only for his benefit. The caseworker insisted that only funds that were held in a trust that provided for payback to the State to cover any Medicaid benefits the child might receive would be allowed. All other gifts to such disabled child, including the cash transfers, were treated as gifts causing Medicaid ineligibility.

All efforts to educate the caseworker were ineffectual, and we filed an appeal. While the appeal was pending, we initiated discussions with the Medicaid policy makers at the State level. Fortunately, on the eve of the hearing date, the policy makers responded by agreeing that outright gifts are not subject to the sole benefit requirement applicable to transfers in trust. Based upon that determination, we got the local Medicaid caseworker to reverse her adverse determination an hour before the appeal hearing was scheduled to start.

Sometimes, when the State misapplies the Medicaid rules, knowing which government official to talk to helps pave the way to a satisfactory resolution of the problem.

For others, such experience is a struggle of monumental proportions. Such is the case for Sandra Tsing Loh who relates her experiences managing her aging father’s care in the article/book review entitled Daddy Issues in the March, 2012, issue of the Atlantic magazine.

Loh writes: “I rant to myself: He is taking everything! He is taking all the money. He’s taken years of my life (sitting in doctor’s offices, in pharmacies, in waiting rooms). With his horrid, selfish, grotesque behavior, he’s chewed through every shred of my sentimental affection for him. He’s taken the serenity I fought for — and won — in 1,000 hours of therapy centered on my family. In fact, he’s destroyed my belief in “family” as a thing that buoys one up. . . . In short, on top of everything else he has taken from me, he has taken away my entire sense of self, because at age almost-50, it appears that I too have become a squalling baby!!!”

Despite this rant, Loh’s experience, like Carol Allen’s, appears to have enabled Loh to learn something about herself. Quoting the late singer Amy Winehouse, Loh concludes her article thus: “I can no longer think of my dad as my ‘father.’ But I recognize in him something as familiar to me as my self. To the end, stubborn, babyish, life-loving, he doesn’t want to go the rehab, no, no, no.”

You may click here to see Sandra Tsing Loh’s article in a new browser tab.

You’ve heard the old adage, “the third time is a charm”. So it was in this case, too. However, while the third Medicaid application was successful and Medicaid was granted, it was granted with a 6 month penalty period, or period of Medicaid ineligibility as a consequence of mother having made gifts to family members in the years prior to entering the nursing home.

By the time Medicaid started to pay, there was well over $100,000 in outstanding charges at the nursing home, and mother had no money to pay it. Mr. GoodSon is retired with only his house and barely adequate retirement savings. Nevertheless, the nursing home sued both mother and Mr. GoodSon. However, it is GoodSon who is at risk of losing everything — mother already is destitute.

To make matters worse, Mr. GoodSon did not seek my assistance until a few days before the court was to enter summary judgment — in other words, the nursing home was about to get a judgment against mother and Mr. GoodSon for the outstanding debt because Mr. GoodSon had been pursuing his legal defense without a lawyer.

We quickly ascertained that GoodSon had a number of defenses to the lawsuit, and we were able to defeat summary judgment notwithstanding the short time I had to do so. We next educated the lawyer for the nursing home about the reasons his client could not collect the entire outstanding balance from Mr. GoodSon. Indeed, Medicaid and nursing home collection law is highly complex. Having done so, we were able to persuade the nursing home to settle the matter for a fraction of the outstanding balance.

Fortunately for Mr. GoodSon, he sought out competent legal assistance not a moment too soon. Had he not done so, he could have suffered financial devastation.

While Mr. GoodSon and his mother are an extreme case, many people find themselves paying tens of thousands of dollars more than they have to by attempting to navigate the complex matter of paying for nursing home care without proper guidance.

Don’t let yourself fall into the trap that caught Mr. GoodSon — seek out competent counsel as soon as possible if you or a loved one will require nursing home care.

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-

Carol writes: “You hear of people ‘losing someone they love to Alzheimer’s’. And certainly they are going, going, going, never to return. But it gives us, the caregivers, the time needed to shift our attention from the outer expression of life to its inner reality. . . . There is a whole human being in front of us still desiring the same thing we all desire: to be loved for who we are right now. This is a wonderful opportunity to pour out our love and express it in ways that we never expressed it before.”

To read all of Carol’s Reflections of a Non-Expert Caregiver, click here.

Unfortunately, while such people need intensive physical care, they often do not suffer from dementia and are decades younger than most other nursing home residents. Consequently, a nursing home would not to be the most appropriate care environment from a socialization point of view.

The good news is that in Maryland and other states, the Medicaid program sometimes will waive the requirement that one reside in a nursing home to obtain Medicaid benefits for long term care costs. These programs are known as Medicaid Waiver programs. However, there is a vast waiting list for the Medicaid Waiver program in Maryland, and it can take three or four years before one’s name rises to the top of the list.

Fortunately, there is a shortcut to the top of the Medicaid waiver waiting list. If an individual is receiving long term care in a nursing home and applies for and is awarded Medicaid, for which there is no waiting list, then, once Medicaid is established, such person could transfer to assisted living, or even return home and receive home care, and have the Medicaid dollars follow him out.

In other words, the Medicaid eligible nursing home resident can move to another care environment and immediately qualify for the Medicaid Waiver program, bypassing the waiting list altogether.

Thus, relatively young people who suffer from advanced debilitating disease may be able to obtain Medicaid dollars to cover the care costs in an appropriate care setting. However, such person may first have to undergo a less appropriate nursing home stay in order to secure such benefits.

The Gatesman Law Office assists clients in obtaining public benefits to cover essential and prohibitively expensive health care coverage which otherwise would be unavailable.