Yesterday I spoke to Jill, whose mom and dad have been talking to their friends. They have mentioned to Jill that they are getting nervous that they need to do some Estate Planning. They know that many of their friends have established a “trust”, but do they really need to do that since all they have is a house? Should they protect their house from the nursing home? I explained their options:
Do nothing but a great Durable Power-of-Attorney with unlimited gifting. This way when one of them gets sick, the home can be transferred to the well spouse and no one can touch the home for the time being. The problem with this plan is, once the first spouse gets sick, you have to then start planning for the second spouse. If the “well” spouse passes before doing any planning, the “sick” spouse will likely inherit everything and we will have to spend some down on that spouse’s care. “Option 1” is not a very good option.
Transfer the home to children or other relatives, with a life estate for mom and dad. This option will allow Mom and Dad to remain in the home for their lifetimes. The home cannot be sold without their permission. Additionally, they will be able to maintain any real estate tax exemptions (i.e. veteran’s and enhanced STAR). However, if the home is transferred and Mom and Dad do not get through a lookback period, Mom and Dad will have to rely on all of the other owners to transfer the home back so that the home can be protected. The home has the potential to be exposed to a bad marriage or credit problems of another owner (i.e., their child). There are also capital gains tax concerns if the house is sold during the parents’ lifetimes. “Option 2” is better than Option 1, but still has multiple drawbacks.
Transfer the home to a revocable trust. This option is not the right option if Mom and Dad are looking to do long-term care planning. This option still gives Mom and Dad access and control over the home. There are less concerns if the home is their primary residence, but, as in Option 1, there are issues that arise if one spouse passes and the home needs to be sold because the other spouse can no longer live there safely. If they are looking to protect their home from a long term illness, “Option 3” can help, but it is not the best option….keep reading.
Transfer the home to a Medicaid Asset Protection Trust. This is typically the best option all around. With the transfer and a properly drafted trust, Mom and Dad will maintain any real property tax exemptions. The home will not be considered an asset of Mom and Dad’s, even if sold. Mom and Dad have the right to live in the home for their lifetimes without being required to pay rent to the trustees. If Mom and Dad cannot get through the 5-year look-back period without needing a nursing home, the house is in the trust and the trust can be revised to return the house to Mom and Dad so that they can explore other options.
While the plan to protect your house from a nursing home seems to be pretty cut and dry, it is very important to discuss your options with an Elder Law Attorney, just in case your family meets any exceptions under the law that would add even more options.
So, you have decided that you are in need of Medicaid services, but you are not sure where to begin. Aside from contacting an Elder Law Attorney to make sure that you meet the asset and income thresholds set by Medicaid, there are also a number of other items that are required to start the Medicaid process. The documents you need to file for Medicaid will be required for applicant and spouse and any minor children under the age of 21.
First, Medicaid requires copies of identifying information such as:
- Social Security card or verification of number from the Social Security Administration
- United States Birth or Baptismal Certificate or for those family members not born in the U.S.A.:
- Certificate of Naturalization
- United States Passport and/or Visa
- Alien registration card
- Military Discharge Papers
- Marriage Certificate
- Death Certificate of Spouse
Health Insurance Providers
Second, Medicaid requires verification of any other health insurance providers responsible:
- Copy of your Medicare Card
- Copy of any other health insurance card as well as verification of any premium(s) paid
Proof of Residency
Third, Medicaid requires proof of residency to verify which county will be responsible for making the payments towards your care:
- Rent Receipt and/or lease
- Utility Bills (most current)
- Mortgage statement; property and school tax bills (most current)
- 2 letters of residence, from other than a relative, stating the length of time at the given address
- Letter from person(s) you live with verifying that they supply room and board
Fourth, Medicaid requires that you verify your income.
- Pay Stubs for previous eight (8) weeks, if any
- Unemployment Insurance book, if any
- Statement of rental and/or room and board income
- Support payments – divorce or separation papers
- Award letter and/or photocopy of check stub for the following:
- Social Security
- Railroad retirement, if applicable
- Veterans benefits
- Pensions (letter showing gross and net pension on letterhead of union or employee benefits department)
- Insurance endowments
- N.Y.S. disability
- Worker’s Compensation
- If self-employed; business book and records
- Income tax returns for a stated number of years based on the application being filed or verification of non-filing from the IRS
Finally, Medicaid requires financial statements from all financial institutions that you have dealt with throughout the lookback period (5 years for nursing home and up to 3 months for home care). You will need the title page of Life insurance policies and a letter from the carrier stating the current cash value. You will also need copies of real estate deeds to all properties and closing papers for any properties that were sold during the look-back period.
It is recommended that if you have the opportunity to plan in advance, you start to save the financial statements. Many financial institutions will charge you for the duplication of these statements and over a five-year lookback, that can get extremely costly. Having all of these documents in advance of filing will help both reduce the stress of trying to obtain the documents in Medicaid’s short windows of time, and will allow for the process to move along more efficiently and result in a more successful application. Happy organizing!
Very often I hear from parents that they worked really hard for their assets and they would like to leave those assets to their children. Unfortunately, they tend to believe that the best way to transfer those assets to children is through their Last Will and Testament.
Last Will and Testament
A Last Will and Testament is an after-death document that only governs assets that are held in the decedent’s name alone if there are no named beneficiaries on that account. This option does not take into consideration life events and exposure to long-term care costs. There are many options when it comes to leaving assets for children:
Transfer the assets directly to the children in mom and dad’s lifetime. While this option assures that children will get the funds, it does not take into consideration the effects on long-term care. If mom and/or dad were to need Medicaid nursing home coverage within the 5-year look-back period, these funds would have to be returned. There is no guarantee that those funds will not be spent down by the children. If they are spent down, mom and dad have bigger problems. These funds also run the risk of potential exposure to the child’s bad marriage or credit problems.
Transfer the assets to a revocable trust. This is not the right option if mom and dad are looking to do long-term care planning. This option still gives mom and dad access and control over the assets. While the assets can ultimately be inherited from the trust, if mom and/or dad get sick and need nursing home coverage, the assets in the trust are fully exposed to the cost of care.
Transfer the assets to an Irrevocable Trust. If they are looking to protect assets and ultimately pass them on to their children, this is typically the best option all around. With the transfer and a properly drafted trust, the assets will not be considered an asset of mom and dad’s, even if they need long-term care coverage (once they get beyond the 5-year look-back). If mom and dad cannot get through the 5-year look-back period without needing a nursing home, the assets are in the trust and the trust can be revised in a limited way to allow for the return of the funds to mom and dad so that they can explore other options to protect the funds. Funds in the trust are also not exposed to a child’s bad marriage or creditor problems.
While the plan may seem to be pretty cut and dry, it is very important to discuss your options with an experienced Elder Law Attorney – just in case your family meets any exceptions under the law that would add even more options.
In my many years of practice, I have found that not every parent is aware of all of the benefits to which their disabled child may be entitled. Social Security has additional benefits available to Disabled Adult Children (DAC) who were found to be disabled prior to the age of 22.
In order to qualify for SSD as a DAC, you must be unmarried, at least 18 years old, and have become disabled before turning 22 years old. Adult children qualify for benefits under their parent’s Social Security eligibility. This means that the parent under whom they qualify must be:
- deceased, or
- receiving Social Security retirement benefits, or
- receiving SSD benefits in order for the DAC to qualify to receive benefits as well.
The SSA reviews claims for adult children under the same general eligibility and medical eligibility criteria as they do with any other adult disability application. The only difference is the fact that the parents’ work credits are accounted for rather than the child’s in deciding if the child has sufficient contributions to the SSD fund to meet this portion of the general eligibility criteria for receiving disability benefits.
It is also important to note that according to SSA regulations, a child need not be a biological child of the qualifying parent. A stepchild, grandchild, and sometimes even step-grandchildren can qualify, provided the parent or grandparent under whom they qualify for SSD benefits was their legal guardian.
Not only is it important to make sure that your Disabled Adult Child has the proper advance directives or guardianship in order, but it is also just as important to discuss this child with the Social Security office when you apply for your retirement benefits. This benefit could mean the difference between a highly restricted life under SSI rules and some flexibility under the SSD rules. They may have a little more independence and possibly more money to help them live monthly.
So, the stimulus checks went out. Now what?
For those who received those funds, the hope was that you would be using the funds to help pay for things you need and in turn, that would help the economy.
What happens if you are on Medicaid?
What happens if you are in a nursing home or other facility and you are on Medicaid? Is that income part of your Net Available Monthly Income (NAMI) and due to the nursing home? The FTC says absolutely NOT!!
On May 15, 2020, Lois Greisman, Elder Justice Coordinator, FTC issued a statement saying, “According to the CARES Act, those economic impact payments are considered tax credits and tax credits don’t count as “resources” for federal benefits programs like Medicaid. That means that nursing homes and assisted living facilities can’t take that money from residents simply because the resident is on Medicaid.”
How to ensure you receive the stimulus payment
My suggestion would be that you contact your facility to inquire what they have done with the payment, if they received the payment directly. Those funds should go into your personal needs allowance account or your personal bank account. If you get the funds for your loved one, make sure that the billing over the past months does not reflect an additional payment of this stimulus payment.
In the end, many facilities may not realize that they were not entitled to those funds. You should have a conversation with the facility and if things don’t get resolved, contact your attorney general.
In the current world of uncertainty, the words of Helen Keller ring true, “Alone we can do so little, together we can do so much”.
With every day being so unpredictable, it is nice to see that the Centers for Medicare & Medicaid Services (CMS) has been working to try and make this chaos more manageable for both the patients and the skilled nursing facilities.
Medicare Major Adjustments
Recently, CMS released a statement making major adjustments to the Medicare requirements as they pertain to skilled nursing facilities.
Traditionally, a patient would require a 3-day hospital admission before entering a skilled nursing facility for Medicare to pay the rehabilitation fees for that client. As explained by the Medicare Rights Center:
At this time, Medicare has removed the 3-day qualifying hospital stay requirement for beneficiaries who experience dislocations or are otherwise affected by the coronavirus public health emergency. According to Medicare, this waiver includes but is not limited to beneficiaries who:
- Need to be transferred to a SNF, for example, due to the nursing home evacuations or to make room for local hospitals
- Need SNF care as a result of the current public health emergency, regardless of whether they were previously in the hospital
60-Day Requirement Period
In addition to the waiver of the 3-day admission, CMS has also adjusted the 60-day requirement in between benefit periods. As the Medicare Rights Center reports, “Beneficiaries who cannot start a new benefit period because of the public health emergency can get another 100 days or covered SNF care without having to begin a new benefit period.”
“If you have been brutally broken but still have the courage to be gentle to others then you deserve a love deeper than the ocean itself” (Nikita Gill)
As a Frontline worker in the midst of this global pandemic, we at Russo Law Group recognize that you are putting the needs of your patients and residents above those of yourself and your family. While many of us pause and wait for the rainbows at the end of this storm, you have continued to work on the front lines in hospitals, clinics, and skilled nursing facilities to provide essential health and emergency care services.
We would like to do whatever we can to support you. Since we are estate planners, we are offering to provide you with a complimentary estate plan as our “thank you” to you.
Your estate plan would include:
- Health Care Proxy
- Living Will (if appropriate)
- Durable Power of Attorney; and
- Last Will and Testament with a Minor’s Trust.
We believe that these legal documents are essential to ensure that your personal needs and property management wishes are honored at all times.
If this would be helpful to you, then please do not hesitate to contact partner Deanna M. Eble at (516) 393-3176 or email her at [email protected].
In my experience, one of the biggest concerns for clients, especially seniors, is that they do not want to lose their home to long-term care costs.
Recently I met with Sal. He has two children and always thought that when he passed his children would inherit the home that he and his wife worked so hard to maintain. Sal has been a widow for three years now and he is starting to feel his age (82). Sal came to my office to see what options he has to protect his house. He had been talking to his friends and neighbors and was concerned about the horror stories he was hearing about people who ultimately lost the home value to long-term care costs.
At the start of our discussion, Sal and I first had to determine what his goals were and what his comfort levels were. I explained that based on his needs and wants, we could come up with a plan to help achieve his goals.
Option 1 – Irrevocable Trust
Transfer the home into an irrevocable trust. The transfer of the home into the irrevocable trust will be subject to a Medicaid nursing home penalty if Sal needs nursing home care within the next 5 years. If properly written, Sal will have the right to live in his home for his lifetime. With the proper language in the trust, Sal will also maintain his real property tax exemptions (i.e., Veteran’s and enhanced STAR).
When your home is owned by a Trust, the trustees are not the “owners”. The Trustees are just managing the assets in the trust. This is an important detail to understand because this means that the trust isn’t subject to the trustee’s financial or personal turmoil.
Option 2 – Transfer Ownership
Transfer the home to Sal’s children (or other family members) and Sal would maintain a “life estate” on the property. The transfer of the home with a life estate will also be subject to a Medicaid nursing home penalty if Sal needs nursing home care within the next 5 years (with some exceptions). The life estate on the property will allow Sal to live in the home for his lifetime. Sal’s children cannot sell the home in his lifetime without his permission. This will also ensure that Sal maintains any property tax exemptions that he is currently receiving such as Veteran’s exemption and enhanced STAR.
When considering this second option, the caution is that Sal’s children become owners of the property. This can be problematic should they have financial problems or if they are in a bad marriage (now, or in the future). I have even had the issue with a child predeceasing the parents and then the home has to pass through probate of that child’s estate.
Further discussion was had with regard to other options such as doing nothing at this time or putting the home into a revocable trust. Sal understood that neither of these options would protect the value of the home from long-term care costs, but would make it very easy to apply for a reverse mortgage if he wanted to pay for his care in the future.
It is important to meet with an experienced elder law attorney who can listen to your goals and advise you as to your options in obtaining those goals in the best way possible.
Recently I received a telephone call from a client looking to sell their home. The home had been transferred to a trust years earlier and they wanted to know if they would qualify for the $250,000 (per resident owner) capital gains exclusion on the sale of their home.
Generally speaking, the Internal Revenue Code provides, with certain limitations and exceptions, that gross income does not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, the taxpayer has owned and used the property as the taxpayer’s principal residence for periods aggregating 2 years or more. An individual taxpayer may exclude up to $250,000, and certain taxpayers who file a joint return may exclude up to $500,000 of gain from the sale or exchange of such property.
In fact, a couple may exclude up to $500,000 of gain on a joint tax return even if only one spouse satisfies the ownership requirements, however, both spouses must satisfy the use test.
In determining use, the IRS looks to:
- Was this their primary residence?
- Did they have beneficial enjoyment of the corpus of the trust?
- Do they have the exclusive use, possession and occupancy of the residence?
- Is the income subject to a power of disposition, exercisable by the creator of the trust without approval or consent by another party?
After doing a detailed assessment of the trust in relation to the prongs that the IRS requires for the exclusions, we were able to appeal to the IRS. We amended the tax returns for this client and received a full refund of the tax on the capital gains that their accountant had them pay at the time of the sale.
Kelly is 24 years old. She is on the autism spectrum and is receiving SSI. She is doing her best to be independent, but the monthly stipend is limited and it is difficult to live on her own with minimal funds. What is her best option to keep her benefits and have the means to sustain herself?
An ABLE account can be established for Kelly. An ABLE account is an account that can be established for an individual who was diagnosed with a disability prior to the age of 26. This account can receive up to $15,000 per year without affecting Kelly’s benefits. The ABLE account can accumulate up to $100,000. Once it reaches $100,000 Kelly’s benefits will be suspended, but not lost. Kelly will be required to spend the funds in her account on her needs until those funds are below $100,000 again and then her benefits will continue. ABLE accounts can also be used to pay for food and shelter for Kelly without jeopardizing her SSI benefits.
Hearing this, Kelly was excited. With this account, Kelly is able to work on being independent while not worrying about losing her benefits.
In addition, if Kelly was to have a supplemental needs trust established for her by a family member or friend, they can fund her ABLE account with those funds so that she can pay for the things that SSI does not allow (i.e. food and shelter) and she can use the supplemental needs trust for her non-necessities.
It is the best of both worlds!
Recently I received a call from a long-time client in a complete panic. She had been talking to her friend about the planning that they each implemented and the friend insisted that the client established the wrong trust for her niece. The niece is on government benefits and the friend had her convinced that if the niece received the money in trust, she would have to pay back the government with those funds.
When establishing any type of trust, it is important to understand 1. Who will be the beneficiary of the trust; 2. Why the trust is being created; and, most importantly, 3. Where the money is coming from to fund the trust.
- Different rules apply depending on the beneficiary of each trust. If the beneficiary is someone collecting social security disability and Medicare benefits, the trust is going to be much more discretionary, as opposed to creating a trust for the benefit of someone receiving SSI and Medicaid benefits.
- If the trust is being established to protect assets for someone who is receiving government benefits, that trust must have language to address whether that beneficiary is allowed to receive the funds directly without losing their benefits. The restrictions that are imposed on SSI and Medicaid recipients will limit the Trustees ability to pay for certain things out of the trust (such as food and shelter).
- Lastly, but probably the most important thing, where the money is coming from to fund the trust. If the trust is being established with the assets of a beneficiary on government benefits, that trust must have provisions to pay back Medicaid for services provided. If the trust is being funded with assets from a third party, those provisions do not need to be in the trust.
These factors are just the major points in considering when you want to establish a trust. It is always better to speak to an experienced attorney to understand the why and how.
With the Home Care industry already struggling to maintain proper staffing, and Medicaid restructuring their payment system a few years ago, the idea of getting 24-hour coverage by paying privately or through Medicaid has become cumbersome.
As a result of a recent ruling focusing specifically on the wages that should be paid to a live-in aide, less and less families who are paying privately for this service will be able to afford 24-hour coverage.
It has long been understood that if a family or Medicaid were providing 24-hour “live-in” care, that Home Health Aide would be paid for a 13-hour day. They would be allotted 8 hours to sleep and an hour each for breakfast, lunch and dinner. In a recent decision by the New York Supreme Court, New York County, the “13-hour rule” was held to be “null, void and invalid”.
- The terms “live-in” and “sleep-in” have been redefined –
- Live-in is defined as someone whose residence is that of their employer’s and who has no other residence
- Sleep-in is defined as someone who works and sleeps in their employer’s residence but maintains a separate legal residence
- The companionship exemption, which offers the option to avoid paying for sleep time, is specifically not available to third-party employers, such as home care agencies. It is an option only available to direct-hire domestic household employers.
With this mind-set of paying an aide 24 hours for care, there is growing concern that more and more seniors will find placement in nursing homes because it will be more cost effective.
There is also concern that these same issues will plague the MLTC (managed long-term care) and CDPAP (consumer-directed personal assistance plans) programs. While we have not received any specific ruling on paying aides through these programs, it is just a matter of time.
One of the most frustrating things as a Special Needs planning attorney is to have someone in my office doing planning and they tell me that they need to disinherit a family member because they are receiving some kind of government benefits. Their mindset is that they are looking out for that loved one, but in reality, they may be unnecessarily disinheriting them.
Pat was in my office a few years ago. After doing planning to get Pat’s husband on Medicaid in a nursing home, it was time to plan for Pat. Pat has a daughter, Sarah and a son, John. John is disabled and still living with Pat. Pat explained all the wonderful things that John does to maintain some independence despite that fact that he has extreme needs and is currently on Social Security Disability and Medicaid. Pat’s daughter Sarah is married and has children.
While creating a trust for Pat’s assets, she informed me that she did not want to leave anything to John because she did not want to create problems for his Medicaid coverage. She explained that she already spoke with Sarah about it and she is going to leave everything to Sarah who promised she would take care of John. I explained to Pat that I have the following concerns:
- What if Sarah has to file bankruptcy?
- What if Sarah gets divorced?
- What if Sarah dies before John?
- What if Sarah gets sued?
I explained that in all of these scenarios, Pat is leaving John with no guarantee that he will be cared for. Pat believes that Sarah’s husband will just step in and take over, but what happens if he remarries and the new wife doesn’t want that?
Pat is better off making sure that her documents establish a supplemental needs trust for John’s share of the inheritance. This will guarantee that John’s share is always there for his needs without affecting his important government benefits like Medicaid. Pat can have Sarah act as the Trustee of that trust and then name alternates, and by making this change, Pat is protecting John from life events that may happen to Sarah and that gave Pat peace of mind.
“My mother has too much money, so I guess she has to pay privately for her home care”, Mary told me recently.
As an Elder Law Attorney for over 17 years, I can tell you that I hear this almost daily. We live in such an on-demand world these days that we look to the internet for all of our answers. Pain in your side, WebMD will give me the answer. No need to pay that co-payment for real advice, right? Wrong!
While the internet is a great source of information, it doesn’t replace the need to speak to a professional about your specific case, whether legal or medical.
In the case of Mary, who thinks that mom has too much money for Medicaid to pay for home care, without the guidance of an experienced Elder Law attorney, she will spend down tens of thousands of dollars before she sees any relief. What happens if she spends down all of mom’s money and then Medicaid doesn’t give mom the care for all of the hours that Mary thinks she needs?
Then there is Sue. Sue also did her research online and she found out that mom has “too much income”. She has also decided that Medicaid wouldn’t possibly pay for the help her mom needs because her income is over the Medicaid allowance and there is nothing that she can do. What Sue did not know is that Medicaid rules vary from state to state. What she read on the internet may not have even been related to New York laws! As a result, Sue is not only struggling to contribute her own funds to pay for mom’s care, but she is also spending all of her “down time” away from her own family so that she can help keep costs down while helping to take care of her mom.
In both scenarios, an Elder Law Attorney would have reviewed mom’s individual assets and income and needs to come up with a plan. The attorney would have told Mary about the transfers that Medicaid allows, while still providing Medicaid home care coverage for mom. The attorney would have done a cost-benefit analysis with Sue to determine if a pooled income trust was a viable option for mom’s income so that she can qualify for Medicaid home care services without a complete spend down of her monthly income.
While the internet may be a great starting point full of resources, it is ALWAYS best to speak with an experienced professional about your own personal issues to create the plan that is best for you and your family.
So you own your home and you think that it will be transferred to your family upon your passing without going to court. But is that really the case? What does all of this mean?
A house that is owned by spouses often makes such a reference (i.e. John Smith and his wife, Jane Smith) or has the designation as “tenants by the entirety”. This type of ownership means that the surviving spouse will automatically take the full ownership of the property upon the passing of the first spouse. No change to the deed is necessary.
However, this designation does not automatically transfer the property to the surviving children upon the passing of the surviving spouse. You would have to take additional steps, either through a trust or will, to make sure that your home is transferred to the beneficiary that you designate.
Let’s look at a few different types of typical deed language and what each means:
- ”Joint with right of survivorship” (“JTWROS”).
This is similar to that of tenants by the entirety, but in this case, the owners are not married and you can have more than two owners under this designation all owning equal shares. Upon the passing of an owner, the surviving “joint tenants” (or owners) automatically own the property in equal shares.
- “Tenants in common” (“TIC”).
This designation means that each owner has an equal ownership interest (the percentages do not have to be equal). If one owner passes, their interest is transferred to their estate and will pass according to their Last Will and Testament or under New York state intestacy laws if there is no Will. Their beneficiaries then own that percentage of the property. The transfer of the property through someone’s estate will require additional legal fees and court fees. Not to mention the delays by the court to process the transfer. If a deed is silent as to the type of ownership, ie, it does not state JTWROS or TIC, then it is considered a TIC ownership.
The life estate designation means that person retaining that interest has an ownership interest which changes as they age. Having a life estate means that the person can live in that property for the rest of their life or even rent the property if so desired. That life estate owner has to give his or her permission to sell the home because they have a right to live in the home for their lifetime. The life estate interest also means that they are responsible of the maintenance and upkeep of the property. Upon the life estate holder’s passing, the property then passes, in its entirety, to the Grantees (typically the owner’s children) listed on the deed. It is also possible to have a life estate on more than one property.
Please note that these designations don’t all provide protection of the property if an owner is looking to have Medicaid cover their long-term care costs.