Medicaid eligibility rules. .This two-part article provides a road, map to current Medicaid eligibility law. Part II, below, describes a variety of planning strategies and opportunities to help a tax adviser counsel elderly individuals and married couples, as well as concerned members of their families. It also discusses various pitfalls, including state law variations to which advisers must be attuned at·tune
tr.v. at·tuned, at·tun·ing, at·tunes
1. To bring into a harmonious or responsive relationship: an industry that is not attuned to market demands.
This two-part article provides an analysis of Medicaid eligibility rules eligibility rules,
n.pl the conditions that define who may be entitled to dental benefits, when persons first become entitled to such benefits, and any provisions that determine how long an individual remains entitled to benefits. and planning techniques. Part I, in the May 2003 issue, examined the critical rules on timing a Medicaid application, transferring assets to trusts to preserve family wealth and understanding the tax consequences of asset transfers and the potential liability of the Medicaid applicant's adviser. Part II, below, considers several other strategies available to protect an individual's assets in the event of Medicaid assistance, and a number of additional techniques particularly suitable for married couples.
Planning Techniques for Singles
Converting to Exempt Assets
By converting nonexempt assets (such as cash) into exempt assets, an individual can protect his or her assets from being deemed "resources" that will restrict Medicaid eligibility. Under 42 USC An abbreviation for U.S. Code. Sections (Sections) 1396r-5(c)(5) and 1382b(a), an individual's exempt assets include, among other items:
* A residence;
* Household goods;
* Personal effects personal effects n. an expression often found in wills ("I leave my personal effects to my niece, Susannah") personal effects (things) include clothes, cosmetics, and items of adornment. ;
* An automobile;
* A burial space;
* Tools of wade;
* Certain resources of a blind or disabled person; and
* Insurance policies with a cash value of less than $1,500.
Exempt assets are categorized cat·e·go·rize
tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es
To put into a category or categories; classify.
cat by both Federal and state law, so the specific exemptions and amounts vary from state to state.
An individual can convert liquid assets Cash, or property immediately convertible to cash, such as Securities, notes, life insurance policies with cash surrender values, U.S. savings bonds, or an account receivable. into an exempt residence asset without having to buy a more expensive new home. For example, he or she can improve a residence by installing a new roof, heating or air conditioning air conditioning, mechanical process for controlling the humidity, temperature, cleanliness, and circulation of air in buildings and rooms. Indoor air is conditioned and regulated to maintain the temperature-humidity ratio that is most comfortable and healthful. system, kitchen or bathroom. He or she can also make repairs or pay down the mortgage.
In addition, the individual can purchase other exempt property Exempt property, under the law of property in many jurisdictions, is property that can neither be passed by will nor claimed by creditors of the deceased in the event that a decedent leaves a surviving spouse or surviving descendants. (e.g., an automobile or a burial plot). Some states, however, limit the value of the exempt automobile to a set amount. Also, an individual can prepay pre·pay
tr.v. pre·paid, pre·pay·ing, pre·pays
To pay or pay for beforehand.
pre·payment n. bills (e.g., expenses for estimated income taxes, real estate taxes, insurance premiums or utilities). However, the true value of exempt property is reduced by the real possibility of collection by the state from a Medicaid recipient's estate.
Using a Split Transfer
A split transfer (a "50/50" split) offers a way for an individual to shorten his or her ineligibility INELIGIBILITY. The incapacity to be lawfully elected.
2. This incapacity arises from various, causes, and a person may be incapable of being elected to one office who may, be elected to another; the incapacity may also be perpetual or temporary. period without having to gift away all of his or her property before the 36-month lookback period. Because most individuals cannot anticipate that they will need nursing home care 36 months in advance, they do not want to make large gifts based on the mere possibility of a need for future nursing home care. More commonly, individuals discover that they need Medicaid assistance when they have fewer than 36 months in which to accomplish their Medicaid planning.
Under the 50/50 split-transfer strategy, the prospective Medicaid applicant gifts half of his or her property during the 36-month lookback period, and retains the other half. The gift counts toward calculating the ineligibility period. The applicant then "spends down" the retained assets. In most cases, the ineligibility period will be half of what it would have been had the applicant gibed his or her entire property.
Example 1: L lives in a state in which the monthly cost for a nursing home is $4,000. He has $240,000 in assets. He made a gift to his daughter, M, of $120,000 on June 1, 2002. L applied for Medicaid on May 1, 2003. The gift to M is within 36 months, and counts in calculating L's ineligibility period, which is $120,000/$4,000 = 30 months from June 1, 2002. L uses the remaining $120,000 of his assets to pay for his nursing home care during the 30-month ineligibility period.
Example 2: The facts are the same as in Example 1, except, on June 1,2002, L spent the remaining $120,000 to pay off his mortgage. L executed a will leaving his house to M. He applied for Medicaid on May 1, 2003. The gift to M is within 36 months, and counts toward his ineligibility period, which is $120,000/$4,000 = 30 months from June 1, 2002. When L dies, M will inherit the house without any mortgage.
If L had instead gibed $240,000 to M on June 1, 2002, his ineligibility period would have been $240,000/$4,000 = 60 months from June 1, 2002, and M would have inherited a house subject to a $120,000 mortgage. M's net inheritance is the same, because the mortgage liability offsets the extra funds. By using a split transfer, L can cut his ineligibility period in half. From the $120,000 M received, she pays for L's nursing home care only during the period of ineligibility, through Nov. 30, 2004 rather than May 31, 2007.
The split-transfer technique is a conservative approach that offers a substantial savings in assets (net of medical care expenses) available to pass on to heirs. However, the 50/50 formula will often need to be adjusted to account for increases in nursing home costs and other factors, including any income an individual receives.
Compensating Family Members for Caregiving
Many families try to shift assets from the prospective Medicaid applicant to other family members as compensation for prior services (such as providing care). An individual can pay reasonable compensation to family members for providing care, but the debt must be a valid one. A New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of court (16) denied the expense when a debt was a sham False; without substance.
A sham Pleading is one that is good in form but is so clearly false in fact that it does not raise any genuine issue. arrangement to transfer funds away from the Medicaid applicant, and it did not have the indicia Signs; indications. Circumstances that point to the existence of a given fact as probable, but not certain. For example, indicia of partnership are any circumstances which would induce the belief that a given person was in reality, though not technically, a member of a given of a bona fide [Latin, In good faith.] Honest; genuine; actual; authentic; acting without the intention of defrauding.
A bona fide purchaser is one who purchases property for a valuable consideration that is inducement for entering into a contract and without suspicion of being loan. However, a Connecticut court permitted an expense when the individual and his relative had a valid written agreement to pay for the care. (17)
Generally, such an arrangement is embodied in a written contract that may provide either for periodic payments or a lump-sum payment to a caregiver. A lump-sum payment under such a contract is not subject to either or estate tax, but the caregiver must pay income tax on the payment.
Protecting the Home
An individual's home often represents the bulk of his or her savings over a lifetime. As was noted above, although a residence is an exempt asset excluded from calculating Medicaid eligibility, a state can impose a lien on an individual's residence for Medicaid expenses paid, but not if the individual reasonably intends to return home. For an individual residing in a nursing home who requires constant care, the state may argue under Section 1396p(a)(1)(B)(ii) that the individual cannot reasonably expect to return home. (18)
Example 3: E owns a home. She broke her hip While descending the basement stairs. As part of her recovery, she resides in a nursing home. E's hip does not fully heal, making it difficult for her to get up and down the stairs Adv. 1. down the stairs - on a floor below; "the tenants live downstairs"
downstairs, on a lower floor, below in her home. M, E's recently divorced daughter, who is over 21 and not disabled, moves into the home while E is in the nursing home. M has a job that permits flexible hours. E may argue she can reasonably expect to return home, because M is available to help her up and down the stairs.
Example 4: N, a former marathon runner, is troubled by arthritis and knee injuries as she ages. She anticipates she may have to go to a nursing home next year. N persuades her brother, B, to move into her home. B pays N fair market value for a one-fourth equity interest in the home. N spends the cash received from B for a new kitchen, bathroom and roof. N has converted the cash into an exempt asset. One year later, when N enters a nursing home, B will have lived in the home for one year and will have an equity interest. The state cannot impose a lien on the home.
Using a Power of Attorney
One of the simplest devices for Medicaid (or any estate) planning is a financial power of attorney (POA), in which an individual (the principal) designates another person (an attorney-in-fact) to act in his or her place for financial purposes. A POA may be limited to a specified action and/or period or it may last for the rest of the principal's life. In any case, it ceases to operate no later than the principal's death. The POA language should grant specific powers, not just general powers. Often, institutions insist on a specific power before acting as directed by an attorney-in-fact.
For Medicaid planning, a well-drafted financial POA should give the attorney-in-fact the specific power to make gifts and otherwise plan for the estate. For example, the attorney-in-fact should have the power to make maximum use of the $11,000 per-year gift tax exclusion and to transfer assets before the 36-month lookback period. In some circumstances, as discussed earlier, a gift during such period will also be beneficial.
It is very important for the individual to state his or her intention to continue to use the residence and to return to it if ever institutionalized in·sti·tu·tion·al·ize
tr.v. in·sti·tu·tion·al·ized, in·sti·tu·tion·al·iz·ing, in·sti·tu·tion·al·iz·es
a. To make into, treat as, or give the character of an institution to.
b. . Under Section 1396p(a)(1)(B), the individual's residence is exempt from Medicaid liens as long as an institutionalized person intends to return home and the state fails to prove otherwise. The POA is one way an individual can state such intention.
In addition to the more general financial POA, another useful estate planning Estate Planning
The overall planning of a person's wealth, including the preparation of a will and the planning of taxes after the individual's death.
Contrary to popular belief, estate planning involves much more than preparing a will, and it is not only for the tool is a healthcare POA.
Disclaiming and/or Disinheriting Property
A disclaimer is a written statement by a prospective heir (or devisee devisee n. a person who receives a gift of real property by a will. The distinction between gifts of real property and personal property are actually blurred, so terms like beneficiary or legatee cover those receiving any gift by a will.
DEVISEE. ) that he or she does not want to inherit property. The decedent's property is then distributed as if the prospective heir had predeceased the decedent An individual who has died. The term literally means "one who is dying," but it is commonly used in the law to denote one who has died, particularly someone who has recently passed away. . This method is often used to pass property from an individual in a high estate and girl: tax bracket Tax Bracket
The rate at which an individual is taxed due to a particular income level.
Each income class is taxed at a different level. Generally, the more you make the more you are taxed. to a lower-bracket individual.
Under Section 1396p(e)(1)(A), an individual's assets include "any income or resources which the individual or such individual's spouse is entitled to but does not receive because of action by the individual or such individual's spouse." As a result, Medicaid counts any disclaimed property as an individual's available assets. Similarly, a will that disinherits an institutionalized spouse will also cause an ineligibility period for Medicaid purposes. Thus, a disclaimer or disinheritance disinheritance n. the act of disinheriting. (See: disinherit)
DISINHERITANCE. The act by which a person deprives his heir of an inheritance, who, without such act, would inherit.
2. is generally not effective for Medicaid planning. One possible way to mitigate this problem may be for the "community spouse" (19) to leave the "institutionalized spouse" only the statutory minimum share. In any event, the adviser should assess whether the beneficial estate and gift tax effects of a disclaimer or disinheritance outweigh the effect on Medicaid eligibility.
Retaining a Life Estate in Real Property
A life estate in real property is a type of ownership in which a life tenant owns the property during his or her life and a remainder interest holder owns the property free and clear on the life tenant's death. The creation of a life estate is a transfer subject to the 36-month lookback period.
Example 5: P, a 70-year old, owns a house worth $200,000. P transfers a remainder interest in the house to his children, S and D, and retains a life estate. The remainder interest is valued by actuarial tables Noun 1. actuarial table - a table of statistical data
table, tabular array - a set of data arranged in rows and columns; "see table 1" at $72,000. P has made a transfer of $72,000 subject to the Medicaid 36-month lookback period. On P's death, S and D receive a stepped-up basis in the house for tax purposes.
As the above example shows, an individual may be better off maintaining the home as an exempt asset, rather than carving out a life estate. However, unlike the home itself, the life estate may not be subject to a Medicaid lien or estate recovery on the Medicaid recipient's death.
* Deducting Medical Expenses
Another approach is for a potential Medicaid applicant to transfer all of his or her assets to a family member on the condition that the latter use those assets to pay for the applicant's eventual nursing home costs. The family member can then deduct those costs as a medical expense, assuming he or she pays more than half of the nursing home resident's support and the claimed medical expenses exceed 7.5% of adjusted gross income. The potential benefit of this approach to the donee The recipient of a gift. An individual to whom a power of appointment is conveyed.
donee n. a person or entity receiving an outright gift or donation.
DONEE. family member is even greater if the Medicaid applicant can delay becoming institutionalized, resulting in a shorter penalty period.
Using a Life Insurance Trust
A life insurance trust is an irrevocable trust Irrevocable Trust
A trust that, once its setup, cannot be changed at all.
This is to prevent fraudulent activities.
See also: Exemption Trust, Trust, Unit Trust
A trust that is unable to be amended, altered, or revoked. that owns a life insurance policy on an individual's life. The policy benefits are usually payable to the trust; the trust grantor An individual who conveys or transfers ownership of property.
In real property law, an individual who sells land is known as the grantor.
grantor n. usually designates the beneficiaries. If a Medicaid applicant owns a life insurance policy on his or her life, he or she can transfer the policy to a life insurance trust to insulate in·su·late
tr.v. in·su·lat·ed, in·su·lat·ing, in·su·lates
1. To cause to be in a detached or isolated position. See Synonyms at isolate.
2. the proceeds from Medicaid recoupment To recover a loss by a subsequent gain. In Pleading, to set forth a claim against the plaintiff when an action is brought against one as a defendant. Keeping back of something that is due, because there is an equitable reason to withhold it. .
Example 6: Q owns a life insurance policy on his life with a $200,000 face value and a, $10,000 cash surrender value The amount of money that an insurance company pays the insured upon cancellation of a life insurance policy before death and which is a specific figure assigned to the policy at that particular time, reduced by a charge for administrative expenses. . He transfers the policy to an irrevocable Unable to cancel or recall; that which is unalterable or irreversible.
IRREVOCABLE. That which cannot be revoked.
2. A will may at all times be revoked by the same person who made it, he having a disposing mind; but the moment the testator is life insurance trust 60 months before applying for Medicaid. Q receives Medicaid for several years, and the state obtains a $150,000 lien against Q's estate. Q dies, leaving an estate of $4,000. The life insurance proceeds pass outside Q's estate, and are probably not subject to a Medicaid lien.
If an individual creates a life insurance trust at least 60 months before applying for Medicaid, he or she can use a life insurance policy, together with an irrevocable trust, to transfer a significant amount of money to heirs.
Planning Techniques for Married Persons
The planning techniques for married persons include all of the techniques for single persons, plus others described below.
Maximizing the CSRA CSRA Central Savannah River Area
CSRA Center for Survey Research and Analysis (University of Connecticut)
CSRA Canadian Street Rod Association
CSRA Canadian Snowcross Racing Association
CSRA Canadian Soccer Referees' Association
The maximum amount of assets that a community spouse may retain is called the community spouse resource allowance (CSRA).The CSRA varies by state, from a minimum of $18,132 to a maximum of $90,660 in 2003. Under Section 1396r-5(g), this figure is tied to the Consumer Price Index and is adjusted annually.
Under Section 1396r-5(f)(2) and (g), the community spouse may retain up to one half of the couple's assets, but not more than the state's CSRA and not less than the $18,132 Federal minimum. Some states, such as Alaska, California, New York and North Dakota North Dakota, state in the N central United States. It is bordered by Minnesota, across the Red River of the North (E), South Dakota (S), Montana (W), and the Canadian provinces of Saskatchewan and Manitoba (N). use $90,660 as the minimum, which is the highest minimum permitted (i.e., in these states, the minimum is the same as the maximum). The adviser should determine the CSRA figure for the state in which he or she is located.
Under Section 1396r-5(f)(2) and (g), the CSRA is calculated by taking the greatest of (1) the minimum set by the state; (2) the lesser of $90,660 or one half of the couple's total nonexempt assets; or (3) the amount transferred by a court order or established by a fair hearing.
Example 7: H has nonexempt assets of $100,000 and W has nonexempt assets of $70,000. The CSRA is calculated as follows: (1) the state minimum is $90,660; (2) the lesser of $90,660 or one half of the couple's nonexempt assets is $85,000 ($170,000/2); (3) there is no amount transferred by a court order or fair hearing. The greatest of these amounts is $90,660, which is the CSRA.
Any excess resources over the CSRA are considered Medicaid available under Section 1396r-5(c). Exempt assets are not counted.
According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. 20 CFR CFR
See: Cost and Freight Section 416.1202(a), the IRA Ira, in the Bible
Ira (ī`rə), in the Bible.
1 Chief officer of David.
3 Two of David's guard.
IRA. and Keogh accounts of one spouse are generally not considered resources available to the other spouse. However, the New Jersey Supreme Court has held, in spite of this regulation, that a husband's IRA is a countable (mathematics) countable - A term describing a set which is isomorphic to a subet of the natural numbers. A countable set has "countably many" elements. If the isomorphism is stated explicitly then the set is called "a counted set" or "an enumeration". asset for the purpose of determining his wife's Medicaid eligibility when the wife enters a nursing home, but the husband remains in the community. (20) Retirement funds are generally not countable assets if the retiree can elect either a lump sum Lump sum
A large one-time payment of money. or a periodic payment and he or she elects the latter.
Several strategies exist for maximizing the amount of assets in the "snapshot" of each spouse's assets taken on the institutionalized spouse's first day of care. One of these strategies is to postpone debt payment and delay major expenses (such as home repairs) until after the first day of institutionalization Institutionalization
The gradual domination of financial markets by institutional investors, as opposed to individual investors. This process has occurred throughout the industrialized world. . This includes postponing any spend-down of resources. In addition, a couple can have the community spouse take out a loan on an exempt asset (such as a home equity loan on their principal residence) prior to institutionalization to increase total assets. The community spouse can then later pay back the loan as part of his or her spend-down. If the couple's assets equal or exceed twice the CSRA, the above techniques for maximizing the snapshot may not be needed.
As a result of the snapshot taken of each spouse's assets on the first day the institutionalized spouse enters the nursing home, the resources of the community spouse acquired after the first day of institutionalization do not count as available resources.
After institutionalization, the institutionalized spouse's assets should be used to pay for his or her care. In addition, the community spouse should hold title to all assets acquired after the snapshot is taken. If the CSRA is greater than the community spouse's assets, Section 1396r-5(f)(2) provides that the institutionalized spouse may transfer sufficient assets to the community spouse to bring the community spouse's share up to the CSRA.
Because the institutionalized spouse may be too ill to make such a transfer, the adviser should counsel the spouses, as early as possible, to exercise a financial POA, as described earlier. Provided the POA includes the power to make gifts, the attorney-in-fact (usually the other spouse, but sometimes the individual's child or trusted friend) can make a gift to bring the community spouse's share up to the CSRA. However, if the community spouse requires long-term nursing care, the CSRA will no longer apply; his or her assets will have to be substantially reduced to qualify for Medicaid benefits:
Often, the best Medicaid planning will conflict with the best estate tax or income tax planning Tax planning
Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. . For example, if an institutionalized spouse transfers assets to a community spouse or other donee to avoid a Medicaid lien, the community spouse or other donee will lose the advantage of a stepped-up tax basis for the asset at the institutionalized spouse's death.
Using the Community Spouse's Income Allowance
Udder udder: see mammary gland. Section 1396r-5(d), the community spouse is entitled to income up to the minimum monthly maintenance needs allowance (MMMNA MMMNA Minimum Monthly Management Needs Allowance ). The MMMNA is set by each state and ranges from a minimum of $1,493 to a maximum of $2,267 per month for 2003. This amount is adjusted annually for inflation. Section 1396r-5(e)(2)(B) provides that the community, spouse has a right to a fair hearing if there is exceptional hardship that justifies a higher figure.
If the community spouse's income is less than the MMMNA, he or she may obtain a deduction from the institutionalized spouse's income to bring his or her income up to the MMMNA. Alternatively, under Section 1396r-5(e)(2), the community spouse may request a fair hearing to increase his or her CSRA (i.e., by transferring income-earning assets from the institutionalized spouse). Some states require that the institutionalized spouse's current income be transferred first to the community spouse before any income-earning assets, which reduces the opportunity to protect family assets through a transfer. The definition of income can also vary among the states.
Creating a Testamentary Trust testamentary trust n. a trust created by the terms of a will. Example: "The residue of my estate shall form the corpus (body) of a trust, with the executor as trustee, for my children's health and education, which shall terminate when the last child attains the age
Under Section 1396p(d)(2)(A), a community spouse can create a testamentary trust without jeopardizing the institutionalized spouse's Medicaid eligibility. In addition, the community spouse may have to leave the minimum statutory share to the institutionalized spouse. However, advisers must draft and administer trust provisions carefully to avoid payment of income or principal directly to the institutionalized spouse. Thus, payments from the trust should be made directly to third parties. In any event, advisers should consult applicable state law for any restrictions on the use of such trusts for Medicaid eligibility purposes.
Terminating the Marriage
A community spouse can divorce the institutionalized spouse to insulate his or her income from being deemed available to the institutionalized spouse. The divorce will also insulate the community spouse's assets from Medicaid. This planning technique is rarely used; it generally applies only to couples with significant assets who cannot obtain long-term care long-term care (LTC),
n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. (LTC LTC
lieutenant colonel ) insurance to cover a prolonged period of nursing home care.
Example 8: R and S, married, are ages 75 and 71, respectively. Throughout their marriage, R was self-employed and made substantial Keogh contributions. R now has a $1 million balance in his Keogh account. S worked for a small company that did not have a retirement plan. She has an IRA with a $100,000 balance. R is in poor health, and will soon need nursing home care. He cannot transfer his Keogh assets to S or their children without being subject to income tax.
A qualified domestic relations order Qualified Domestic Relations Order (QDRO)
A judgment, decree, or order that gives a pension plan participant access to retirement assets that must be used to pay an ex-spouse or dependent children. (QDRO See Qualified Domestic Relations Order. ) is an order issued as part of a divorce proceeding that divides up retirement plan assets. A QDRO does not disqualify To deprive of eligibility or render unfit; to disable or incapacitate.
To be disqualified is to be stripped of legal capacity. A wife would be disqualified as a juror in her husband's trial for murder due to the nature of their relationship. a retirement plan, under Secs. 401(a) (13) (B) and 414(p).Thus, a distribution can be made under a QDRO (and possibly rolled over into an IRA), so that each spouse will have separate retirement plans on divorce.
Example 9: The facts are the same as in Example 8, except that R and S decide to divorce. Under a QDKO, R's Keogh plan A retirement account that allows workers who are self-employed to set aside a percentage of their net earnings for retirement income.
Also known as H.R. 10 plans, Keogh plans provide workers who are self-employed with savings opportunities that are similar to those under is directed to distribute $450,000 to S. S takes the distribution and rolls it into her IRA. Thus, R has $550,000 in his Keogh and S has $550,000 in her IRA. S's IRA is not a resource available to R for Medicaid purposes.
Divorce as a Medicaid planning tool has obvious drawbacks. First, there are the emotional and psychological factors; marriage and divorce are more than just economic arrangements. Second, there is the loss of the marital deduction marital deduction n. when one spouse dies, the survivor may take a tax deduction of half of the value of the estate of the dying spouse. Thus, the minimum value of the estate before there is a possible federal estate tax rises from $600,000 to $1,200,000 at the death . However, because Medicaid has a claim against the estate, the net estate most likely will not be large enough to be subject to estate tax.
In the event a couple does decide to divorce to preserve their collective assets, each should have a separate attorney. Otherwise, if a guardian ad litem A guardian appointed by the court to represent the interests of Infants, the unborn, or incompetent persons in legal actions.
Guardians are adults who are legally responsible for protecting the well-being and interests of their ward, who is usually a minor. is later appointed for the institutionalized spouse, the guardian may have the right to void the divorce judgment and its property division.
The divorcing couple will likely want to transfer a greater share of marital assets to the community spouse. Some states (e.g., New York) require specific written reasons for an unequal property division. (21) If one of the reasons given for distributing property to the community spouse is to minimize Medicaid-available assets, the court may balk balk
the action of a horse when it refuses to obey a command to which it usually responds. See also jibbing. at approving the proposed property distribution. Thus, non-Medicaid reasons should be found for any unequal asset distribution.
Miscellaneous Planning Techniques
Transfer home to community spouse: The home is an exempt asset. However, as discussed above, it may be subject to a Medicaid lien and estate recovery. Also, a sale of the home will convert the exempt home into Medicaid-available funds.
If, however, the institutionalized spouse transfers his or her interest in the home to the community spouse, the latter can later sell the home. The conversion of the exempt home into nonexempt cash will take place after the Medicaid snapshot has been taken, so the funds should not be Medicaid-available, although they may later be subject to estate recovery.
Convert cash to exempt assets: As discussed above, this is a useful technique for all individuals. Married individuals can convert the institutionalized spouse's assets into exempt assets, while leaving the community spouse's assets liquid.
Purchase an annuity: A couple may purchase an annuity for a community spouse to bring his or her income up to the MMMNA. If this is a transfer for full and fair consideration, it may not affect Medicaid eligibility. (22) In addition, the annuity contract Annuity Contract
The written agreement between an insurance company and a customer outlining each party's obligations in an annuity coverage agreement. This document will include the specific details of the contract, such as the structure of the annuity (variable or fixed), any should be irrevocable and without a cash surrender value. However, caution is needed, as states tend to attempt to exercise estate recovery on annuities.
Plan for terminal illness of a community spouse: Depending on an individual's particular medical problems, one spouse may require extended nursing home care, while the other may be terminally ill Terminally Ill
When a person is not expected to live more than 12 months.
Any gifts given out by the afflicted person at this time may be considered as a dispersion of the estate rather than a gift. , but not require such care. In that case, it is important to try to divert the community spouse's assets from the institutionalized spouse.
The community spouse may use a testamentary trust (described earlier) to restrict the availability of funds to the institutionalized spouse. Also, the community spouse should change all beneficiaries on insurance policies and retirement plans to a party other than the institutionalized spouse. Finally, the community spouse should change all joint bank accounts, stock accounts, etc., to remove the institutionalized spouse's name.
Use joint bank accounts: Some individuals set up joint bank accounts with spouses or friends to facilitate banking as they become older. Section 1396p(c)(3) treats any withdrawal by the community spouse from a joint bank account owned by the institutionalized spouse and the community spouse as a transfer of assets The conveyance of something of value from one person, place, or situation to another.
The law recognizes that persons are generally entitled to transfer their assets to whomever they wish and for whatever reason. The most common means of transfer are wills, trusts, and gifts. for Medicaid purposes. As long as the funds are used solely for the institutionalized spouse, a withdrawal will not be considered such a transfer. Otherwise, the withdrawal is deemed a transfer subject to the 36-month lookback period.
Advisers have many opportunities to preserve a client's family assets when LTC is required. Despite unconstitutional attempts to legislate To enact laws or pass resolutions by the lawmaking process, in contrast to law that is derived from principles espoused by courts in decisions. against Medicaid planning, many clients will benefit by properly timing a Medicaid application, knowing the effect on Medicaid eligibility of transfers made during the lookback period, and understanding which assets are exempt. As with any estate planning, advance preparations are the most successful.
In addition to the techniques described, clients should explore various LTC insurance plans. Advisers should caution clients about plans that do not provide for inflation or are insufficient for the expected cost of LTC. Also, the plan's cost is important. If a client waits to purchase the insurance until he or she needs LTC, the insurance may be very expensive (or even unattainable).
Advisers should he aware that the Medicaid rules change often; state variations are common and rule changes may even be retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question.
A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a . Further, they should explain to clients the adverse income, gift and estate tax aspects of Medicaid planning and allow them to make an informed choice as to each planning technique.
* In addition to direct transfers and trusts, an individual has a variety of ways to protect assets from Medicaid, including powers of attorney, disclaimers and life estates.
* The planning techniques for married persons include all the techniques for singles, plus others.
* Advisers should explain to clients the adverse income, gift and estate tax aspects of Medicaid planning and allow them to make an informed decision as to each technique.
(16) In the Matter of Walter Anson, 406 NYS 1. Is not. See Nis. 2d 916 (3d Dep't 1978).
(17) Walter Morgan Walter Morgan may be:
(18) See the states' rules governing intent to return home, which may include presumptions against such intent.
(19) In referring to a married couple, the "community spouse" is the one who continues to live in the community; the "institutionalized spouse" is the one who receives care.
(20) Sophie Mistrick, 154 NJ 158 (1998).
(21) See NY Dom. Rel. Law Section 236B(5)(d)(1)-(10) (McKinneys 1995).
(22) See Correira, "Using Private Annuities and Installment Notes An installment note is a form of promissory note calling for payment of both principal and interest in specified amounts, or specified minimum amounts, at specific time intervals. This periodic reduction of principal amortizes the loan. in Medicaid Planning," 25 Est. Pln'g 381 (October 1998) (sidebar includes state-by-state interpretations on annuities in the Medicaid context).
Terry W. Knoepfle, J.D., CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000.
Associate Professor of Taxation and Business Law
College of Business Administration
North Dakota State University North Dakota State University, at Fargo; land-grant and state supported; coeducational; chartered and opened 1890 as North Dakota Agricultural College, achieved university status in 1960.