Dark Side of Medicaid Means You Need Estate Planning

Dark Side of Medicaid Means You Need Estate Planning:  A woman in Massachusetts, age 62, is living in her family’s home on borrowed time. Her late father did all the right things: saving to buy a home and then buying a life-insurance policy to satisfy the mortgage on his passing, with the expectation that he had secured the family’s future. However, as reported in the article “Medicaid’s Dark Secret” in The Atlantic, after the father died and the mother needed to live in a nursing home as a consequence of Alzheimer’s, the legacy began to unravel.

Just weeks after her mother entered the nursing home, her daughter received a notice that MassHealth, the state’s Medicaid program, had placed a lien on the house. She called MassHealth; her mother had been a longtime employee of Boston Public Schools and there were alternatives. She wanted her mother taken off Medicaid. The person she spoke to at MassHealth said not to worry. If her mother came out of the nursing home, the lien would be removed, and her mother could continue to receive benefits from Medicaid.

The daughter and her husband moved to Massachusetts, took their mother out of the nursing home and cared for her full-time. They also fixed up the dilapidated house. To do so, they cashed in all of their savings bonds, about $100,000. They refinished the house and paid off the two mortgages their mother had on the house.

Her husband then began to show signs of dementia. Now, the daughter spent her days and nights caring for both her mother and her husband.

After her mother died, she received a letter from the Massachusetts Office of Health and Human Services, which oversees MassHealth, notifying her that the state was seeking reimbursement from the estate for $198,660. She had six months to pay the debt in full, and after that time, she would be accruing interest at 12%. The state could legally force her to sell the house and take its care of proceeds to settle the debt. Her husband had entered the final stages of Alzheimer’s.

Despite all her calls to officials, none of whom would help, and her own research that found that there were in fact exceptions for adult child caregivers, the state rejected all of her requests for help. She had no assets, little income, and no hope.

State recovery for Medicaid expenditures became mandatory, as part of a deficit reduction law signed by President Bill Clinton. Many states resisted instituting the process, even going to court to defend their citizens. The federal government took a position that federal funds for Medicaid would be cut if the states did not comply. However, other states took a harder line, some even allowing pre-death liens, taking interest on past-due debts or limiting the number of hardship waivers. The law gave the states the option to expand recovery efforts, including medical expenses, and many did, collecting for every doctor’s visit, drug, and surgery covered by Medicaid.

Few people are aware of estate recovery. It’s disclosed in the Medicaid enrollment forms but buried in the fine print. It’s hard for a non-lawyer to know what it means. When it makes headlines, people are shocked and dismayed. During the rollout of the Obama administration’s Medicaid expansion, more people became aware of the fine print. At least three states passed legislation to scale back recovery policies after public outcry.

The Medicaid Recovery program is a strong reason for families to meet with an elder law attorney and make a plan. Assets can be placed in irrevocable trusts, or deeds can be transferred to family members. There are many strategies to protect families from estate recovery. This issue should be on the front burner of anyone who owns a home, or other assets, who may need to apply for Medicaid at some point in the future. Avoiding probate is one part of estate planning, avoiding Medicaid recovery is another.

Since the laws are state-specific, consult an elder law attorney in your state.

Reference: The Atlantic (October 2019) “Medicaid’s Dark Secret”

 

Can You Protect Your Home If You Need Medicaid?

Can You Protect Your Home If You Need Medicaid? Anyone who owns a home, whether a magnificent mansion or a modest ranch, worries about the possibility of losing the home because of long-term care. How can they keep the home for their spouse or even for their family, if they need to apply to Medicaid for long-term nursing care costs?

The problem, reports The Mercury in a recent article “Protecting your house and Medicaid” is often the strategies that people come up with on their own. They usually don’t work.

The first thought of someone who is confronted with the need to qualify for Medicaid is to immediately transfer ownership of the family home to another person. The idea is to take the home out of their countable assets. But unless the person who receives the house is an adult child, that transfer only leads to problems.

Medicaid’s basic premise is that if you can afford to pay for your own care, you should. Transfer of a home, let’s say one with a value of $400,000, means that a $400,000 gift has been given to someone. There is a five-year lookback period. Any assets given away or transferred in that five-year period means that you had the asset under your control. Medicaid will not pay for your care in that case.

There are some exceptions to the gifting rules, but this is not something to be navigated without the help of an experienced elder law estate planning attorney. Here are the exceptions:

Your spouse. It’s understood that your spouse needs a place to live, and a transfer of the home to your spouse does not result in penalties under Medicaid rules. This usually means transfer from title as joint tenants with rights of survivorship or tenants by the entireties to the healthier wife or husband. It is also understood that a transfer to your spouse at home is not a disqualifying transfer. This is a common practice and part of Medicaid planning.

A disabled child. A parent may transfer a house to their disabled child on the theory that it is needed for self-support. It is not necessary for a child to lose a home, because a parent will be on Medicaid. This is a common mistake, and completely avoidable. Talk with an elder law attorney to learn more.

If a child is a caretaker. An adult child who moves in with the parents for a period of at least two years to care for them so they could stay at home and avoid going to a nursing home, or if the child has lived with their parents for longer than that and they need this care at home, under federal law the home can be transferred to the child without penalty and the parent can go to a nursing home and receive care under Medicaid. This is another very common mistake that causes adult children to be left without a home.

For a person who is single or a widow or widower who will never move home after moving into a Medicaid certified nursing home, the house may be sold, and planning can be done with the proceeds of the sale. Paying bills to maintain a vacant home for no reason and having the government take the home as a creditor through the estate recovery program does not make sense. An elder lawyer estate planning attorney can help navigate this complex and often overwhelming process.

It is our goal to provide our clients with the highest level of legal services in the areas of Last Will and Testaments, Living Trust, Irrevocable Trusts, Estate Planning, Asset Protection, and complete Business Planning. If you or someone you know needs information on Florida estate planning, please contact us today at 239-418-0169 to schedule your free consultation.

Reference: The Mercury (July 31, 2019) “Protecting your house and Medicaid”

 

Next Steps When the Diagnosis is Alzheimer’s

Next Steps When the Diagnosis is Alzheimer’s: We hope to enjoy out golden years, relaxing after decades of working and raising children. However, as we age, the likelihood of experiencing health issue increase. That includes Alzheimer’s disease and other forms of dementia.

Learning that a loved one has Alzheimer’s or other diseases that require a great deal of health care is devastating to the individual and their families. The progressive nature of these diseases means that while the person doesn’t need intensive health care yet, eventually they will. According to an article from Newsmax, “5 Insurance Steps After Alzheimer’s Strikes Loved One,” the planning for care needs to start immediately.

Alzheimer’s Disease International predicts that 44 million individuals worldwide have Alzheimer’s or a similar form of dementia, and 25% of those living with it never receive a diagnosis. Healthcare, including assisted living, memory care and in-home care is expensive. Health insurance is an important component of managing the ongoing expenses of living with Alzheimer’s.

Look at your existing policies. There are different types of coverage, depending on the policy type and company. Review current insurance policies to determine if the level of coverage is acceptable and how much will be required to be paid out-of-pocket. See if there’s existing coverage for long-term care, hospital care, doctors’ fees, prescriptions and home health care.

Maintain those policies. The Patient Protection and Affordable Care Act does offer some protections for those diagnosed with early onset Alzheimer’s. They can now access government subsidies to help them purchase health insurance and the Affordable Care Act prohibits pre-existing condition exclusions and cancellation, because the policyholder is considered high cost.

Look into long-term care insurance. This is a way to protect the patient and the family financially, when the day arrives when long-term care is necessary. When diagnosed with Alzheimer’s, a person isn’t eligible for long-term care insurance.

In addition to verifying and reviewing insurance coverage, there are some additional tasks that every family should address in the early stages of a diagnosis.

Sign an advance directive. This document allows patients to voice how they want their healthcare and decisions handled, before they are no longer capable of making decisions for themselves. In addition, they should have a living will that states their wishes for medical treatment, a designated power of attorney to can make financial decision, and a DNR (Do Not Resuscitate) order, if that is their wish.

Get estate planning done. Time is of the essence, as the estate plan must be completed while the person still has the mental capacity to understand what they are doing. Three documents are necessary: a last will and testament, a power of attorney so that an agent be named can handle finances and a health care power of attorney for health care decisions. An estate planning attorney will be able to work with the family to make any necessary legal preparations.

Reference: Newsmax (June 28, 2019) “5 Insurance Steps After Alzheimer’s Strikes Loved One”

 

 

How the Blended Family Benefits from an Estate Plan

How the Blended Family Benefits from an Estate Plan: With about half of all marriages ending in divorce, second marriages and blended families have become the new normal in many communities. Estate planning for a blended family requires three-dimensional thinking for all concerned.

An article from The University Herald, “The Challenges and Complexities of Estate Planning for Blended Families, ” clarifies some of the major issues that blended families face. When creating or updating an estate plan, the parents need to set emotions aside and focus on their overall goals.

Estate plans should be reviewed and updated, whenever there’s a major life event, like a divorce, marriage or the birth or adoption of a child. If you don’t do this, it can lead to disastrous consequences after your death, like giving all your assets to an ex-spouse.

If you have children from previous marriages, make sure they inherit the assets you desire after your death. When new spouses are named as sole beneficiaries on retirement accounts, life insurance policies, and other accounts, they aren’t legally required to share any assets with the children.

Take time to review and update your estate plan. It will save you and your family a lot of stress in the future.

Your estate planning attorney can help you with this process.

You may need more than a simple will to protect your biological children’s ability to inherit. If you draft a will that leaves everything to your new spouse, he or she can cut out the children from your previous marriage altogether. Ask your attorney about a trust for those children. There are many options.

You can create a trust that will leave assets to your new spouse during his or her lifetime, and then pass those assets to your children, upon your spouse’s death. This is known as an AB trust. There is also a trust known as an ABC trust. Various assets are allocated to each trust, and while this type of trust can be a little complicated, the trusts will ensure that wishes are met, and everyone inherits as you want.

Be sure that you select your trustee wisely. It’s not uncommon to have tension between your spouse and your children. The trustee may need to serve as a referee between them, so name a person who will carry out your wishes as intended and who respects both your children and your spouse.

Another option is to simply leave assets to your biological children upon your death. The only problem here, is if your spouse is depending upon you to provide a means of support after you have passed.

An estate planning attorney who routinely works with blended families will be able to help you work through the myriad issues that must be addressed in an estate plan. Think of it as a road map for the new life that you are building together.

Reference: University Herald (June 29, 2019) “The Challenges and Complexities of Estate Planning for Blended Families”

 

 

Planning for the Impact of Medicaid

Planning for the Impact of Medicaid: One of the most complicated and fear-inducing aspects of Medicaid is the financial eligibility. The rules for the cost of long-term care are complicated and can be difficult to understand. This is especially true when the Medicaid applicant is married, as reported in the Delco Times in the article “Medicaid–Protecting Assets for a Spouse.”

While each state is different, the State of Florida mandates that to be eligible for Medicaid long-term care, the applicant may not have more than $2,000 in countable assets in their name, and a gross monthly income of not more than $2,313. That’s the 2019 asset and income limits.

There are Federal laws that mandate certain protections for a spouse, so they do not become impoverished when their spouse enters a nursing home and applies for Medicaid. This is where advance planning with an experienced elder law attorney is needed. The spouse of a Medicaid recipient living in a nursing home, who is referred to as the Community Spouse, is permitted to keep as much as $126,420, known as the “Community Spouse Resource Allowance,” without putting the Medicaid eligibility of the applicant spouse who needs long-term care at risk. The rest of the applicant spouse’s assets must be spent down. The community spouse’s assets will either have to be spent down or “planned for”. A seasoned elder law attorney is essential in this regard.

Countable assets for Medicaid include all belongings. However, there are a few exceptions. These are personal possessions, including jewelry, clothing and furniture, one car, the applicant’s principal residence (if the equity in the home does not exceed $585,500 in 2019) and certain retirement accounts under certain circumstances.

Unless an asset is specifically excluded, it is countable.

There are also Federal rules regarding how much the spouse is permitted to earn. This varies by state. In Florida as of 2019, the community spouse’s income is unlimited.

The rules regarding requests for additional income are also very complicated, so an elder law attorney’s help will be needed to ensure that the spouse’s income aligns with their state’s requirements.

These are complicated matters, and not easily navigated. Talk with an experienced elder law attorney to help plan in advance, if possible. There are many different strategies that can be implemented to help preserve & protect your assets and they are best handled with experienced professional help.

Reference: Delco Times (June 26, 2019) “Medicaid–Protecting Assets for a Spouse” and edited for Florida reference. 

Think of Estate Planning as Stewardship for the Future

Despite our love of planning, the one thing we often do not plan for, is the one thing that we can be certain of. Our own passing is not something pleasant, but it is definite. Estate planning is seen as an unpleasant or even dreaded task, says The Message in the article “Estate planning is stewardship.” However, think of estate planning as a message to the future and stewardship of your life’s work.

Some people think that if they make plans for their estate, their lives will end. They acknowledge that this doesn’t make sense, but still they feel that way. Others take a more cavalier approach and say that “someone else will have to deal with that mess when I’m gone.”

However, we should plan for the future, if only to ensure that our children and grandchildren, if we have them, or friends and loved ones, have an easier time of it when we pass away.

A thought-out estate plan is a gift to those we love.

Start by considering the people who are most important to you. This should include anyone in your care during your lifetime, and for whom you wish to provide care after your death. That may be your children, spouse, grandchildren, parents, nieces and nephews, as well as those you wish to take care of with either a monetary gift or a personal item that has meaning for you.

This is also the time to consider whether you’d like to leave some of your assets to a house of worship or other charity that has meaning to you. It might be an animal shelter, community center, or any place that you have a connection to. Charitable giving can also be a part of your legacy.

Your assets need to be listed in a careful inventory. It is important to include bank and investment accounts, your home, a second home or any rental property, cars, boats, jewelry, firearms and anything of significance. You may want to speak with your heirs to learn whether there are any of your personal possessions that have great meaning to them and figure out to whom you want to leave these items. Some of these items have more sentimental than market value, but they are equally important to address in an estate plan.

There are other assets to address: life insurance policies, annuities, IRAs and other retirement plans, along with pension accounts. Note that these assets likely have a beneficiary designation and they are not distributed by your will. Whoever the beneficiary is listed on these documents will receive these assets upon your death, regardless of what your will says.

If you have not reviewed these beneficiary designations in more than three years, it would be wise to review them. The IRA that you opened at your first job some thirty years ago may have designated someone you may not even know now! Once you pass, there will be no way to change any of these beneficiaries.

Work with an experienced estate planning attorney to create your last will and testament. For most people, a simple will can be used to transfer assets to heirs.

Many people express concern about the cost of estate planning. Remember that there are important and long-lasting decisions included in your estate plan, so it is worth the time, energy and money to make sure these plans are created properly.

Compare the cost of an estate plan to the cost of buying tires for a car. Tires are a cost of owning a car, but it’s better to get a good set of tires and pay the price up front, than it is to buy an inexpensive set and find out they don’t hold the road in a bad situation. It’s a good analogy for estate planning.

Reference: The Message (June 14, 2019) “Estate planning is stewardship.”

 

Talking About Financial Planning with Aging Parents

Talking About Financial Planning with Aging Parents: Unless you are raised in a family that talks about money, values and planning, starting a conversation with elderly parents about the same topics can be a little awkward. However, it is necessary.

In a perfect world, we’d all have our estate plans created when we started working, updated when we married, updated again when our kids were born and had them revised a few times between the day we retired and when we died. In reality, a recent report by Merrill Lynch and Age Wave says that only half of Americans have a will by age 50.

More than 50% said their lack of proper planning could leave a problem for their families.

CNBC’s recent article, “How to have ‘the (money) talk’ with your parents,” explains that, according to the study, just 18% of those 55 and older have the estate planning recommended essentials: a will, a health-care directive and a power of attorney.

To start, get a general feel for your aging parents’ financial standing.

This should include where they bank, and whether there’s enough savings to cover their retirement and long-term care. If they don’t have enough saved, they’ll lean on you for support.

Next, start a list of the legal documents they do have, such as a power of attorney, a document that designates an agent to make financial decisions on their behalf and a health-care directive that states who has the authority to make health decisions for them.

You should include information on bank accounts and other assets. It is also important to list their passwords to online accounts and Social Security numbers.

Next, your parents should create an estate plan, if they don’t already have one. When you put a plan in place for how financial accounts, real estate and other assets will be distributed, it helps the family during what’s already a difficult time. Having an estate plan in place keeps the courts from determining where these assets go.

While you’re at it, talk to your own children about your financial picture.

Many people think they don’t need to yet have the talk. However, the perfect time to have the conversation, is when you are healthy.

Here’s an encouraging fact: young adults who discuss money with their parents are more likely to have their own finances under control. They are also more likely to have a budget, an emergency fund, to put 10% or more of their income toward savings and have a retirement account. That’s all according to a separate parents, children and money survey from T. Rowe Price.

For many families, having a conversation during a family meeting at their estate planning attorney’s office while working on their estate plan, is a good way to start a dialogue. Working with a professional who has the family’s best interest in mind, with two or even three generations in the room, can prevent many stressful problems for the family in the future.

Reference: CNBC (June 30, 2019) “How to have ‘the (money) talk’ with your parents”

 

 

How To Avoid Senior Financial Abuse

How To Avoid Senior Financial Abuse:  Medical research has demonstrated a clear link between accelerated cognitive aging to financial vulnerability, even without any kind of dementia. In other words, as described in the article “Be prepared to avoid financial exploitation” from SBJ, we may feel fine and we may be fine, but our cognitive abilities change as we age.

One of the first signs of cognitive decline is diminished financial capacity, or the progressive loss of a person’s ability to manage banking and investment decisions. If you have an aging parent, you may have seen them struggle with tasks that were previously easy for them to do, like balancing a checkbook or tracking investments.

It’s estimated that for every 44 cases of senior financial abuse, only one is reported to authorities.  In a 2010 study by a nonprofit, one in five adults 65 and older have been a victim of financial fraud or manipulation.

There are several actions that can be taken to mitigate the risk of financial fraud and exploitation. However, the first one is planning before signs of cognitive impairment are seen. Here’s how:

Financial preparation. First, designate a trusted emergency contact for all financial accounts to receive information, if the institution suspects exploitation. Have an estate planning attorney create a durable power of attorney to appoint a trusted individual to act on your behalf. “Durable” means that it will remain in effect, even if you become incapacitated.

Prepare a will to dispose of assets after your death.

Don’t discuss your will or any financial matters with people who are new in your life. That includes caregivers, the new neighbor down the street or people who call claiming some distant connection.

Monitor your credit report and stay up to date with the latest in scams. Seniors are now being targeted by thieves presenting themselves as calling from the Social Security Administration and threatening to cut off benefits. The SSA does not call to threaten individuals, and it never asks for payment in gift cards.

Plan how to transition your financial accounts. That may mean having a professional manage your finances, but make sure they are a licensed fiduciary, so that your interests must come first. Your estate planning attorney may know of these services.

Not all financial institutions have addressed the issue of safeguarding customers from financial fraud and exploitation. Find out what your bank, financial advisor and investment companies are doing. Do they monitor accounts for unusual transactions? What tools are available to account holders to detect suspicious activity?

Speak with your estate planning attorney about making sure all  your legal documents are properly prepared for any cognitive decline, to protect yourself and your family.

Reference: SBJ (June 10, 2019) “Be prepared to avoid financial exploitation”

 

These Money Mistakes Add Up Fast

It’s not how much you earn, but how much you keep that makes the difference in lifestyle and retirement. Keep more of your hard-earned money, by making fewer money mistakes.

Some of the most common money mistakes cost thousands of dollars. All you need to do is pay attention to avoid them, says Motley Fool in the article, “5 Money Mistakes You Probably Don’t Even Realize You’re Making.” See if any of these sound familiar and take control of your financial health today.

No clue to recurring charges. Unless you regularly review your credit card bills, you can easily miss monthly charges that you don’t need, like not cancelling a gym membership. Some automatic monthly charges increase over time, which you won’t notice unless you’re checking those bills.

Working too long at a job. You may believe that you’ve done well to have stayed at your current job for long time. However, in order to maximize your income, you might want to think about moving to a better paying job. The human resource management company ADP studied data on 24 million workers, and found that workers get their biggest increases in salaries, when they’ve been at a job for more than two years, but not more than five years.

Failing to request a raise. It is true that job-hopping isn’t for everyone. However, you can earn more in your current position, by asking for a raise. A recent PayScale survey found that among those who asked for a raise at work, about 70% received some sort of increase. However, only 37% ever asked for a raise.

Failing to regularly review your insurance. Insurance isn’t something to set and forget, if you want to keep your costs down. Take some time every year to contact a variety of insurers to review your coverage for each kind of insurance and to get new quotes. Shopping around for better rates regularly, can potentially save you hundreds of dollars per year. Another way to save on insurance is to bundle your policies with one carrier.

Failing to have an estate plan. Everyone needs to have a will prepared, a power of attorney for finances, a health care power of attorney and a living will. People procrastinate and then life happens. Their spouses or children are left to go to court for the ability to manage finances, or the wrong heirs receive an inheritance. Make an appointment with an estate planning attorney to create the estate plan that is right for you and your family. Don’t neglect to check your beneficiary designations on retirement and investment accounts, as well as on any life insurance policies you own.

Reference: Motley Fool (June 12, 2019) “5 Money Mistakes You Probably Don’t Even Realize You’re Making”

Elder Law: Long-Term Care Costs

There are many misunderstandings about long-term or nursing home care and how to plan from a financial and legal standpoint. The article “Five myths about nursing home costs and estate planning” from The Sentinel seeks to clarify the facts and dispel the myths. Some of the truths may be a little hard to hear, but they are important to know.

Myth One: Before any benefits can be received for nursing home care, a married couple must have spent at least half of their assets and everything but $120,000. If the person receiving nursing home care is single, they must spend almost all assets on the cost of care, before they qualify for aid.

Fact: Nursing homes have no legal duty to advise anyone before or after they are admitted about this myth.

Several opportunities to spend money on items other than a nursing home, include home improvements, debt retirement, a new car and funeral prepayment. An elder law attorney will know how to use a Medicaid-compliant annuity to preserve assets, without spending them on the cost of care, depending on state law.

There are people who say that an attorney should not help a client take advantage of legally permitted methods to save their money. If they don’t like the laws, let them lobby to change them. Experienced elder law and estate planning attorneys help middle-class clients preserve their life savings, much like millionaires use CPAs to minimize annual federal income taxes.

Myth Two: The nursing home will take our family’s home, if we cannot pay for the cost of care.

Fact: Nursing homes do not want and will not take your home. They just want to be paid. If you can’t afford to pay, the state will use Medicaid money to pay, as long as the family meets the eligibility requirements. The state may eventually attach a collection lien against the estate of the last surviving homeowner to recover funds that the state has used for care.

A good elder law attorney will know how to help the family meet those requirements, so that the adult children are not sued by the nursing home for filial responsibility collection rights, if applicable under state law. The attorney will also know what exceptions and legal loopholes can be used to preserve the family home and avoid estate recovery liens.

Myth Three. We’ve promised our parents that they’ll never go to a nursing home.

Fact: There is a good chance that an aging parent, because of dementia or the various frailties of aging, will need to go to a nursing home at some point, because the care that is provided is better than what the family can do at home.

What our loved ones really want is to know that they won’t be cast off and abandoned, and that they will get the best care possible. When home care is provided by a spouse over an extended period of time, often both spouses end up needing care.

Myth Four: I love my children equally, so I am going to make all of them my legal agent.

Fact: It’s far better for one child to be appointed as the legal agent, so that disagreements between siblings don’t impact decisions. If health care decisions are delayed because of differing opinions, the doctor will often make the decision for the patient. If children don’t get along in the best of circumstances, don’t expect that to change with an aging parent is facing medical, financial and legal issues in a nursing home.

Myth Five. We did our last will and testament years ago, and nothing’s changed, so we don’t need to update anything.

Fact: The most common will leaves everything to a spouse, and thereafter everything goes to the children. That’s fine, until someone has dementia or is in a nursing home. If one spouse is in the nursing home and receiving government benefits, eligibility for the benefits will be lost, if the other spouse dies and leaves assets to the spouse who is receiving care in the nursing home.

A fundamental asset preservation strategy is to make changes to the will. It is not necessary to cut the spouse out of the will, but a well-prepared will can provide for the spouse, preserve assets and comply with state laws about minimal spousal election.

When there has been a diagnosis of early stage dementia, it is critical that an estate planning attorney’s help be obtained as soon as possible, while the person still has legal capacity to make changes to important documents.

The important lesson for all the myths and facts above: see an experienced estate planning elder law attorney to make sure you are prepared for the best care and to preserve assets.

Reference: The Sentinel (May 10, 2019) “Five myths about nursing home costs and estate planning”