Can I Restructure Assets to Qualify for Medicaid? – Annapolis and Towson Estate Planning

Some people believe that Medicaid is only for poor and low-income seniors. However, with proper and thoughtful estate planning and the help of an attorney who specializes in Medicaid planning, all but the very wealthiest people can often qualify for program benefits.

Kiplinger’s recent article entitled “How to Restructure Your Assets to Qualify for Medicaid says that unlike Medicare, Medicaid is not a federally run program. Operating within broad federal guidelines, each state determines its own Medicaid eligibility criteria, eligible coverage groups, services covered, administrative and operating procedures and payment levels.

The Medicaid program covers long-term nursing home care costs and many home health care costs, which are not covered by Medicare. If your income exceeds your state’s Medicaid eligibility threshold, there are two commonly used trusts that can be used to divert excess income to maintain your program eligibility.

Qualified Income Trusts (QITs): Also known as a “Miller trust,” this is an irrevocable trust into which your income is placed and then controlled by a trustee. The restrictions are tight on what the income placed in the trust can be used for (e.g., both a personal and if applicable a spousal “needs allowance,” as well as any medical care costs, including the cost of private health insurance premiums). However, due to the fact that the funds are legally owned by the trust (not you individually), they no longer count against your Medicaid income eligibility.

Pooled Income Trusts: Like a QIT, these are irrevocable trusts into which your “surplus income” can be placed to maintain Medicaid eligibility. To take advantage of this type of trust, you must qualify as disabled. Your income is pooled together with the income of others and managed by a non-profit charitable organization that acts as trustee and makes monthly disbursements to pay expenses on behalf of the individuals for whom the trust was made. Any funds remaining in the trust at your death are used to help other disabled individuals in the trust.

These income trusts are designed to create a legal pathway to Medicaid eligibility for those with too much income to qualify for assistance, but not enough wealth to pay for the rising cost of much-needed care. Like income limitations, the Medicaid “asset test” is complicated and varies from state to state. Generally, your home’s value (up to a maximum amount) is exempt, provided you still live there or intend to return. Otherwise, most states require you to spend down other assets to around $2,000/person ($4,000/married couple) to qualify.

Reference: Kiplinger (Nov. 7, 2021) “How to Restructure Your Assets to Qualify for Medicaid”

 

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What You Need to Know about Long-Term Care – Annapolis and Towson Estate Planning

The median cost of a private room in a nursing home was $105,850, and in-home care costs were $53,768 to $54,912 annually, according to Genworth’s 2020 Cost of Care Survey. CNBC’s recent article entitled “Most retirees will need long-term care. These are the best ways to pay for it” says these costs vary by location.

Although it is hard to predict a retiree’s needs, the chances of requiring some type of long-term care services are high, about 70% for the average 65-year-old. Men typically need 2.2 years of care, and women may require 3.7 years.

Long-term care insurance may cover all or a portion of services. The premiums depend on someone’s age, gender, health, location and more. However, there’s a 50% chance someone will never need their policy, the American Association for Long-Term Care Insurance estimates, and premium hikes can be costly. Premiums typically increase about 5%, every five years.

A hybrid long-term care policy is another option. These policies are part life insurance or an annuity and part long-term care coverage.

Seniors can buy a policy with an upfront payment, eliminating the risk of future premium increases and their heirs may receive a death benefit if they do not need long-term care. However, it may be harder to compare prices for a hybrid long-term policy than standalone long-term care coverage.

Low-income retirees with assets below certain thresholds may be eligible for long-term care services through Medicaid.

President Joe Biden also called for $400 billion in Medicaid funding for home and community-based care as part of the American Jobs Plan, and separately, House and Senate Democrats introduced bills supporting Biden’s agenda in June.

Reference: CNBC (Aug. 26, 2021) “Most retirees will need long-term care. These are the best ways to pay for it”

 

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How Important Is a Power of Attorney? – Annapolis and Towson Estate Planning

People are often surprised to learn a power of attorney is one of the most urgently needed estate planning documents to have, with a last will and health care proxy close behind in order of importance. Everyone over age 18 should have these documents, explains a recent article titled “The dangers of not having a power of attorney” from the Rome Sentinel. The reason is simple: if you have a short- or long-term health problem and cannot manage your own assets or even medical decisions and have not given anyone the ability to do so, you may spend your rehabilitation period dealing with an easily avoidable nightmare.

Here are other problems that may result from not having your incapacity legal planning in place:

A guardianship proceeding might be needed. If you are incapacitated without this planning, loved ones may have to petition the court to apply for guardianship so they can make fundamental decisions for you. Even if you are married, your spouse is not automatically empowered to manage your financial affairs, except perhaps for assets that are jointly owned. It can take months to obtain guardianship and costs far more than the legal documents in the first place. If there are family issues, guardianship might lead to litigation and family fights.

The cost of not being able to pay bills in a timely manner adds up quickly. The world keeps moving while you are incapacitated. Mortgage payments and car loans need to be paid, as do utilities and healthcare bills. Lapses of insurance for your home, auto or life, could turn a health crisis into a financial crisis, if no one can act on your behalf.

Nursing home bills and Medicaid eligibility denials. Even one month of paying for a nursing home out of pocket, when you would otherwise qualify for Medicaid, could take a large bite out of savings. The Medicaid application process requires a responsible person to gather a lot of medical records, sign numerous documents and follow through with the appropriate government authorities.

Getting medical records in a HIPAA world. Your power of attorney should include an authorization for your representative to take care of all health care billing and payments and to access your medical records. If a spouse or family member is denied access to review records, your treatment and care may suffer. If your health crisis is the result of an accident or medical malpractice, this could jeopardize your defense.

Transferring assets. It may be necessary to transfer assets, like a home, or other assets, out of your immediate control. You may be in a final stage of life. As a result, transferring assets while you are still living will avoid costly and time-consuming probate proceedings. If a power of attorney is up to date and includes a fully executed “Statutory Gift” authorization, your loved ones will be able to manage your assets for the best possible outcome.

The power of attorney is a uniquely flexible estate planning document. It can be broad and permit someone you trust to manage all of your financial and legal matters, or it can be narrow in scope. Your estate planning attorney will be able to craft an appropriate power of attorney that is best suited for your needs and family. The most important thing: do not delay having a new or updated power of attorney created. If you have a power of attorney, but it was created more than four or five years ago, it may not be recognized by financial institutions.

Reference: Rome Sentinel (July 25, 2021) “The dangers of not having a power of attorney”

 

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Quirk in Medicare System’s Observation Status – Annapolis and Towson Estate Planning

There is a troubling quirk in the Medicare system that occurs when older patients are hospitalized and instead of being officially admitted, they are placed on “observation status” reports the article “Caught Paying for Rehab Due to Observation Status? Medicare May Owe You” from The National Law Journal.

Observation status originally was meant to serve as a temporary status for people who were receiving medical care and tests in a hospital setting until they were either sent home or a diagnosis was made, and they were officially admitted.

However, in the past 10 years or so, the number of patients in hospitals deemed to be in observation status has increased enormously, even when patients have received a diagnosis and their doctors have admitted them to the hospital. This is a direct result of the Medicare claims review process, where hospitals risk not being paid because of inpatient services being billed without documents of certain diagnoses and levels of care.

The hospital seeks to protect itself, by designating a patient as observation status. There is no downside to the hospital, since this is covered by Medicare, just under Part B, rather than Part A.

However, for the patient, it is not that simple. First, the denial of Part A inpatient coverage means that the patient has to pay for each and every deductible and copay for each service. Prescription drugs received while the patient is in the hospital are billed separately and are not included under the Part A inpatient payment.

It gets worse. Medicare coverage for post-hospital care is denied or extremely limited for observation status patients. Medicare only covers rehab costs in a facility, if the patient was admitted to the hospital for at least three days.

Observation status days do not count towards those qualifying days. It does not matter if the treating physician had the patient admitted to the hospital, because hospitals can change the status of the patient retroactively.

Until recently, there was no recourse for patients. However, a recent class action suit in Connecticut may see that begin to change. A federal judge held that Medicare beneficiaries whose hospital stays were changed to observation status may appeal to Medicare for reimbursement of their payments to rehabilitation facilities. As a result of Alexander v. Azar, patients have the right to recover payments for their nursing home rehabilitation stays.

Patients whose doctors placed them on observation status still are not permitted to appeal.

Speak with your elder law estate planning attorney, if this scenario applies to you or family member.

Reference: The National Law Review (May 26, 2020) “Caught Paying for Rehab Due to Observation Status? Medicare May Owe You”

 

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Your Children Wish You Had an Estate Plan – Annapolis and Towson Estate Planning

It is the adult children who are in charge of aging parents when they need long-term care. They are also the ones who settle estates when parents die. Even if they cannot always come out and tell you, the recent article, “Why your children wish you had an Elder Law Estate Plan” from the Times Herald-Record spells out exactly why an elder law estate plan is so important for your loved ones.

Avoid court proceedings while living. In a perfect world, everyone over age 18 will have an advance directive, including a power of attorney, a health care proxy, and a living will. These documents appoint others to make financial, legal, and medical decisions, in case of incapacity. Without them, the children will have to get involved with time-consuming, expensive guardianship proceedings, where a judge appoints a legal guardian to make these decisions. Your life is turned over to a court-appointed guardian, instead of your children or another person of your choosing.

Avoid court proceedings after you die. If you die and assets are in your name alone, then your estate will go through probate, a court proceeding that can be time consuming and costly. Not having any assets in trusts leaves your kids open to the possibility of wills being challenged, disputes among family members and litigation that can drag on for years.

Wills in probate court are public documents. Trusts are private documents. Do you really want a stranger to access your will and learn about your assets?

An elder law estate plan also plans for the possibility of long-term care and costs. Nursing home care costs can run between $12,000—$18,000 per month. If you do not have long-term care insurance, you can create a Medicaid Asset Protection Trust (MAPT) that protects assets in the trust from nursing home costs, once the assets are in the trust for five years. The MAPT also protects assets from homecare provided by Medicaid, called “community” Medicaid, once the assets are in the trust for 30 months under a new rule that starts on October 1, 2020.

The “elder law power of attorney” has unlimited gifting powers that could save about half of a single person’s assets from the cost of nursing homes. This can be done on the eve of needing nursing home care, but it is always better to do this planning in advance.

Having a plan in place decreases stress and anxiety for adult children. They are likely busy with their own lives, working, caring for their children and coping in a challenging world. When a plan is in place, they do not have to start learning about Medicaid law, navigating their way through the court system, or wondering why their parents did not take advantage of the time they had to plan properly.

You probably do not want your children remembering you as the parents who left a financial and legal mess behind for the them to clean up. Speak with an elder law estate planning attorney to create a plan for your future. Your children will appreciate it.

Reference: Times Herald-Record (May 23, 2020) “Why your children wish you had an Elder Law Estate Plan”

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What Should I know about Financial Powers of Attorney? – Annapolis and Towson Estate Planning

A financial power of attorney is a document allowing an “attorney-in-fact” or “agent” to act on the principal’s behalf. It usually allows the agent to pay the principal’s bills, access her accounts, pay her taxes and buy and sell investments. This person, in effect, assumes the responsibilities of the principal and can act for the principal in all areas detailed in the document.

Kiplinger’s recent article from April entitled “What Are the Duties for Financial Powers of Attorney?” acknowledges that these responsibilities may sound daunting, and it is only natural to feel a little overwhelmed initially. Here are some facts that will help you understand what you need to do.

Read and do not panic. Review the power of attorney document and know the extent of what the principal has given you power to handle in their stead.

Understand the scope. Make a list of the principal’s assets and liabilities. If the individual for whom you are caring is organized, then that will be simple. Otherwise, you will need to find these items:

  • Brokerage and bank accounts
  • Retirement accounts
  • Mortgage papers
  • Tax bills
  • Utility, phone, cable, and internet bills
  • Insurance premium invoices

Take a look at the principal’s spending patterns to see any recurring expenses. Review their mail for a month to help you to determine where the money comes and goes. If your principal is over age 72 and has granted you the power to manage her retirement plan, do not forget to make any required minimum distributions (RMDs). If your principal manages her finances online, you will need to contact their financial institutions and establish that you have power of attorney, so that you can access these accounts.

Guard the principal’s assets. Make certain that her home is secure. You might make a video inventory of the residence. If it looks like your principal will be incapacitated for a long time, you might stop the phone and newspaper. Watch out for family members taking property and saying that it had been promised to them (or that it belonged to them all along).

Pay bills. Be sure to monitor your principal’s bills and credit card statements for potential fraud. You might temporarily suspend credit cards that you will not be using on the principal’s behalf. Remember that they may have monthly bills paid automatically by credit card.

Pay taxes. Many powers of attorney give the agent the power to pay the principal’s taxes. If so, you will be responsible for filing and paying taxes during the principal’s lifetime. If the principal dies, the executor of the principal’s will is responsible and will prepare the final taxes.

Ask about estate planning. See if there is an estate plan and ask a qualified estate planning attorney for help. If the principal resides in a nursing home paid by Medicaid, talk to an elder law attorney as soon as possible to save the principal’s estate at least some of the costs of their care.

Keep records. Track your expenditures made on your principal’s behalf. This will help you demonstrate that you have upheld your duties and acted in the principal’s best interests, as well as for reimbursement for expenses.

Always act in the principal’s best interest. If you do not precisely know the principal’s expectations, then always act with their best interests in mind. Contact the principal’s attorney who prepared the power of attorney for guidance.

Reference: Kiplinger (April 22, 2020) “What Are the Duties for Financial Powers of Attorney?”

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Planning for Long-Term Care Before It’s Too Late – Annapolis and Towson Estate Planning

Starting to plan for elder care should happen when you are in your 50s or 60s. By the time you are 70, it may be too late. With the national median annual cost of a private room in a nursing facility coming in at more than $100,000, not having a plan can become one of the most expensive mistakes of your financial life. The article “Four steps you can take to safeguard your retirement savings from this risk” from CNBC says that even if care is provided in your own home, the annual median national cost of in-home skilled nursing is $87.50 per visit.

There are fewer and fewer insurance companies that offer long-term care insurance policies, and even with a policy, there are many out-of-pocket costs that also have to be paid. People often fail to prepare for the indirect cost of caregiving, which primarily impacts women who are taking care of older, infirm male spouses and aging parents.

More than 34 million Americans provided unpaid care to older adults in 2015, with an economic value of $522 billion per year.

That is not including the stress of caring for loved ones, watching them decline and needing increasingly more help from other sources.

The best time to start planning for the later years is around age 60. That is when most people have experienced their parent’s aging and understand that planning and conversations with loved ones need to take place.

Living Transitions. Do you want to remain at home as long as is practicable, or would you rather move to a continuing care retirement community? If you are planning on aging in place in your home, what changes will need to be made to your home to ensure that you can live there safely? How will you protect yourself from loneliness, if you plan on staying at home?

Driving Transitions. Knowing when to turn in your car keys is a big issue for seniors. How will you get around, if and when you are no longer able to drive safely? What transportation alternatives are there in your community?

Financial Caretaking. Cognitive decline can start as early as age 53, leading people to make mistakes that cost them dearly. Forgetting to pay bills, paying some bills twice, or forgetting accounts, are signs that you may need some help with your financial affairs. Simplify things by having one checking, one savings account and three credit cards: one for public use, one for automatic bill-paying and a third for online purchases.

Healthcare Transitions. If you do not already have an advance directive, you need to have one created, as part of your overall estate plan. This provides an opportunity for you to state how you want to receive care, if you are not able to communicate your wishes. Not having this document may mean that you are kept alive on a respirator, when your preference is to be allowed to die naturally. You will also need a Health Care Power of Attorney, a person you name to make medical decisions on your behalf when you cannot do so. This person does not have to be a spouse or an adult child—sometimes it is best to have a trusted friend who you will be sure will follow your directions. Make sure this person is willing to serve, even when your documented wishes may be challenged.

Reference: CNBC (Jan. 31, 2020) “Four steps you can take to safeguard your retirement savings from this risk”

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How to Spot Problems at Nursing Homes – Annapolis and Towson Estate Planning

The best time to shop for a nursing home, is when you do not need one. If you wait until you can no longer safely or comfortably live on your own, you probably will not be in a position to do a lot of legwork to investigate facilities. Do your research well ahead of time, so you know the nursing homes in your area that provide high-quality care and, more importantly, the ones that have significant problems.

As you evaluate and compare facilities, you need to know how to spot problems at nursing homes. The marketing brochure, website and lobby might be lovely, but you should base your decision about a long-term care facility on much more data than those things. Here are some tips on how to dig for possible problems at nursing homes:

  • Online search. Check out the nursing home’s website to get an overview of the services it offers and the industry affiliations or certifications it has. Look at the daily menus to see if the meals are nutritious and have enough variety. Most people would not enjoy eating the same main course two or three times a week. Look at the activities calendar to see if you would be happy with the planned social events. On some websites, you can view the floor plans of the resident rooms.
  • Ask your primary care doctor to name a few facilities he would recommend for his parents, and those where he would not want them to live.
  • Local Office on Aging location. Every state has an Office on Aging. Contact them to get as much information as you can about safety records, injuries, deaths, regulation violations and complaints about local nursing homes.
  • Your state’s Long-term Care Ombudsman (LCO). Every state also has an Ombudsman who investigates allegations against nursing homes and advocates for the residents. Your state LCO should have a wealth of information about the facilities in your area.
  • State Online Database or Reporting System. Some states have online databases or collect reports about nursing homes.
  • Medicare’s Nursing Home Compare website. Medicare maintains an online tool, Nursing Home Compare, that provides detailed information on nursing homes. Every nursing home that gets any funding from Medicare or Medicaid is in this database. You can enter the name of a specific nursing home or search for all the facilities in a city or zip code. The tool includes information about abuse at long-term care facilities. On the webpage, you can explore the Special Focus Facility section to find nursing homes with a history of problems.
  • Word of mouth. Ask your friends, relatives and neighbors to recommend a quality nursing home. Personal experience can be extremely valuable.
  • Make a short list of the top candidates. After you collect as much information as you reasonably can, narrow your options down to four or five facilities that best meet your needs and preferences.
  • Visit your top choices. There is no substitute for going to a nursing home and checking it out in person. Pay attention to the cleanliness of the place throughout, not just in the lobby. Give the facility the “sniff” test. Determine whether they use products to mask unpleasant odors, instead of cleaning thoroughly. See whether the residents are well-groomed and wearing fresh, clean clothes. Observe the interaction of the staff with the residents. Notice whether people who need assistance at mealtime, get the help they need without having to wait.
  • Take online reviews with a grain of salt. Fake reviews are all over the internet. If you see a nursing home with only a few reviews, and they are all five stars, be skeptical.

Once you gather this information, you will be ready in the event you need to stay in a nursing home for a short recuperation from surgery or longer term.

References:

AARP. “Finding a Nursing Home: Don’t Wait Until You Need One to Do the Research.” (accessed December 5, 2019) https://www.aarp.org/caregiving/basics/info-2019/finding-a-nursing-home.html

CMS. “Find a nursing home.” (accessed December 5, 2019) https://www.medicare.gov/nursinghomecompare/search.html

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Alternatives to Medicaid – A Short Primer on Long-Term Care Insurance – Annapolis and Towson Estate Planning

Medicaid is a state-run program that caters to those surviving on less than 125% of the official poverty level. Many elderly individuals forego purchasing long-term care insurance, in favor of relying on Medicaid to cover their expenses. Unfortunately, after bankrupting themselves to qualify for Medicaid nursing home coverage, many of these same individuals find themselves dismayed at the lack of choice and care options.

Qualifying for Medicaid Long-Term Care

To obtain long-term care benefits through Medicaid, you must meet the income and asset requirements. In addition, you must be unable to perform at least two of the following six activities of daily living:

  • Feeding
  • Bathing
  • Walking
  • Transferring
  • Toilet Use
  • Dressing

If you qualify, you may be able to get all or most of your care covered, but you don’t have as many options when it comes to choice of facility. Medicaid also doesn’t typically cover adult daycare, assisted living, respite care, or in-home care.

Alternatives for Medicaid Long-Term Care – Not Medicare

With Medicare covering about 1/5th of nursing home care in the U.S., elderly individuals are forced to look at alternative means to cover skilled nursing and other long-term care needs. As it stands, Medicare Part A covers up to 100 days of skilled nursing care. Requirements to qualify are stringent, and few people have the time or understanding to correctly navigate the Medicare system.

Long-Term Care Insurance

If you’re insurable and can afford the premiums, long-term care insurance may be the best option for your long-term care needs. Coverage will vary based on your insurance company and plan options. Be sure to get coverage for all you anticipate you’ll need.

In 2019, the average cost of a semi-private room in a nursing home was $7,513 per month. Private rooms average over $8,000 per month. Even if you don’t anticipate needing that level of care, you should be aware that a one-bedroom apartment in an assisted-living facility costs over $4,000 a month. With inflation, this will likely increase. You don’t want to come up short on coverage.

If long-term care insurance is an option for you, be sure to start planning early. Insurance companies are known to reject more applicants, the older they get. Review your plans each year to ensure your policy still meets your anticipated needs. Make changes if necessary, and never stop paying your premiums, unless you want your insurance to lapse.

Resources:

ElderLawAnswers. “Alternatives to Medicaid: A Long-Term Care Insurance Primer” (Accessed November 28, 2019)  https://www.elderlawanswers.com/elder-law-guides/5/a-long-term-care-insurance-primer

Investopedia. “Medicaid vs. Long-Term Care Insurance: What to Know” (Accessed November 28, 2019)  https://www.investopedia.com/articles/05/031005.asp

Investopedia. “Strategies to Help Pay for Eldercare” (Accessed November 28, 2019)  https://www.investopedia.com/articles/personal-finance/102014/top-5-elder-care-strategies.asp

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