Archive for the ‘Medicaid Planning’ Category
December 11, 2009
We would all like our parents to live long, healthy, independent lives. However, the reality is that although many of our parents will live long lives, most will not be able to stay healthy and independent forever. In fact, 70% of people over age 65 will need long term care during their lifetimes. Unfortunately, we cannot turn the clock back for our parents, but we can help them plan for the future. And the truth of the matter is that although planning is important for our parents, it is even more essential for us, the children, who are often left with an ailing parent and no game plan. Here is a brief overview of how to get started:
- Gather basic information:
- Ask for a list of all doctors, estate planning lawyers, accountants, and financial planners that your parents have used with contact information.
- Gather copies of financial records, insurance policies and any legal documents that have been prepared for your parents including wills, trusts, and powers of attorney.
- Start asking important questions like:
- In the event your parents’ health declines, would any children or relatives be willing and available to help? How many days and hours a week. Would a child or relative consider moving in with the parents or having the parents move in with him/her?
- What financial resources do your parents have to pay for care? What income will they be taking in each month through pensions, annuities, social security, etc. and what savings will be available?
- Make sure your parents have essential up-to-date estate planning documents like a Last Will and Testament, Financial Power of Attorney and Health Care Power of Attorney.
- If your parents would need nursing home care, would they have the financial resources to pay or would it quickly deplete their savings? The average annual cost of a nursing home room in the Cleveland Metropolitan area is $73,912.50.
Medicaid provides free long-term care as long as certain income and resource requirements are met. However, because Medicaid’s resource limit is so low (currently $1,500) without proper planning, your parents will have to deplete all their resources before they can qualify. There are many planning opportunities available in order to not only preserve as much of your parents’ savings as possible but also to improve the financial situation of your parents’ spouse, should they need long term care. Contact attorney Elizabeth Perla at (440) 333-2503 to discuss your parents planning options.
November 5, 2009
As described in more detail in the “Long Term Care Planning- Don’t Despair, Prepare!” post, Medicaid provides free long-term care as long as certain income and resource requirements are met. Although most long-term care Medicaid recipients are in nursing homes, there are also Medicaid Waiver Programs available that provide alternatives to Nursing Home Care. Here are a few programs:
Passport
- Provides personal care, respite care, homemaker services, home delivered meals, adult day care, chore services, emergency response, medical equipment and supplies, medical transportation, home health case management, etc.
- Must live in a non-institutionalized setting and have a physician who will authorize a home care plan.
Assisted Living Waiver Program
- Pays cost of Assisted Living Facility or Residential Care Facility services excluding the cost of room and board.
- Must be a nursing home resident or live in Residential Care Facility for at least 6 months or be enrolled in Passport.
To take advantage of Medicaid Waiver Programs, you must meet the same financial eligibility requirements as for traditional long-term care Medicaid. Contact attorney Elizabeth Perla at (440) 333-2503 to discuss your planning options.
November 3, 2009
There are many Medicaid planning strategies designed to transfer assets without incurring a penalty. (See “Personal Caregiver Agreement” post). This blog will explore many of these strategies. One such strategy is the Irrevocable Trust. With an Irrevocable Trust, which is a trust that cannot be changed or terminated, drafted so that you receives only income and not principal, you can transfer your assets, wait 60 months and apply for long-term Medicaid without penalty.
Why Can’t I Set Up a Revocable Trust Instead?
As a revocable trust can be changed or terminated by you at any time, the assets remain in your control. As long as you retain control of an asset, the state considers it a countable resource for Medicaid eligibility purposes. Hence, while a Revocable Trust can be a beneficial Medicaid planning tool in some cases (See “Before Applying for Medicaid a Married Couple Should Consider a Revocable Trust” post and “When a Spouse in on Medicaid, Look to a Revocable Trust” post) placing an asset in a Revocable Trust will not remove it from your countable resources and hence, will not affect Medicaid eligibility.
How is an Irrevocable Trust Superior to Simple Gifting?
The Irrevocable Trust has many advantages over simple gifting.
- The trust can protect your assets from your recipients’ creditors and your recipients’ spouses should they get divorced.
- You can appoint yourself Trustee so that you can continue to manage the assets and make distributions to your loved ones at your discretion.
- You can continue to control the disposition of the assets at your death by retaining a testamentary limited power of appointment.
An Irrevocable Trust can be a great Medicaid planning tool if you have started planning early and have sufficient funds. Contact attorney Elizabeth Perla today at (440) 333-2503 to discuss the Irrevocable Trust and other Medicaid planning tools.
November 3, 2009
In my previous post “Long Term Care Planning- Don’t Despair, Prepare!” I discuss the cost of long-term care and the importance of planning for Medicaid. This blog will try to dispel many of the misconceptions relating to Medicaid planning. One such misconception is that a person can simply give away assets in order to qualify for long-term Medicaid.
When a person applies for Medicaid, he will be asked whether he or a spouse made any gifts within the last 60 months. (Different rules apply to gifts made prior to 2/8/09). This question is asked because a person will be penalized for any gift made within 60 months of his application for Medicaid if the gift was made for the purpose of long-term Medicaid eligibility. For example:
Mom gives her daughter her home worth $200,000 and the contents of her bank accounts totaling $40,000 within 60 months of her application for Medicaid. Mom’s penalty period will be 39.8 months. ($240,000 divided by $6,023 (private pay rate) = 39.8 months).
This means that once Mom is in a nursing home and financially eligible for long-term Medicaid, meaning she has less than $1,500, the government will not pay for any of her long-term care for 39.8 months! How will Mom pay for her care for the next 39.8 months?
Mom made a terrible mistake that could have been avoided with proper Medicaid planning. Moreover, an even more common mistake is to do nothing at all! Failing to plan could result in the complete depletion of an individual’s lifesavings on long-term care. Why spend all your hard earned money on care when you don’t need to? Contact attorney Elizabeth Perla today at (440) 333-2503 to discuss your Medicaid planning options.
November 3, 2009
In the prior post, “Know What a Living Trust Can Do for You (And What it Can’t Do For You)”, I discussed how a home, which is generally not a countable resource for Medicaid purposes, is countable when it is held in a Revocable Trust. I explained how such an arrangement can cause a single person to be ineligible for Medicaid and how it can work to a married couple’s advantage. I want to reiterate the advantage of a revocable trust to a married couple who is applying for Medicaid.
As stated previously, whereas a single person is only permitted to have $1,500 of countable resources, the spouse of the nursing home Medicaid applicant is permitted to keep half of the couple’s countable resources, up to $109,560. The advantage of a revocable trust can be seen in the following example:
John and Jane Smith are married and applying for long-term Medicaid for John. As part of the application process, the state looks at all of John and Jane’s assets. The couple has $50,000 in an IRA, $40,000 in bank accounts, $20,000 in mutual funds and a home valued at $250,000. The home is held in a Revocable Trust (aka a Living Trust).
Since the home is in a revocable trust it is not exempt and is a countable resource. Thus, the Smiths have $360,000 of total countable assets. However, a Community Spouse is only allowed to keep half of the total countable resources, up to $109,560. Thus, in this case, the Smiths will be able to keep $111,060 which is the maximum amount that Jane can keep as the Community Spouse ($109,560) plus the maximum amount that John can have as a Medicaid recipient ($1,500). The Smiths will have to spend down the remaining $248,940 to qualify.
However, instead of spending any of their money, the Smiths can simply move the home out of their Revocable Trust and deed it in John and/or Jane’s name. The home will then be considered an exempt resource and not countable for Medicaid eligibility purposes and the Smiths will be down to $110,000 in countable resources, under the maximum resource amount of $111,060. John Smith will have qualified for long-term Medicaid without him or his wife spending down a dime.
Alternately, if the Smiths had their home outside of a revocable trust, it would have cost them $53,500. The $250,000 home would have been exempt and not a countable resource. Thus, the Smiths would have had a total of $110,000 in countable resources. Jane would have been permitted to keep half that amount ($55,000) and John would have been able to keep $1,500, and the remaining funds ($53,500) would have had to be spent down to qualify.
If you are married and considering applying for long-term Medicaid for you or your spouse, or you know someone who is, contact attorney Elizabeth Perla today at (440) 333-2503 to discuss the revocable trust. The potential saving are simply too great to pass up.
