Joint Assets
In prior Posts, I have indicated that a large portion of New Jersey Medicaid law has not been affected by The Deficit Reduction Act. However, it is important to realize the treatment of certain issues and the current treatment of such issues. This article has been written with that thought in mind.
Under the Medicaid Catastrophic Coverage Act, New Jersey has accorded special treatment to funds withdrawn from a joint bank account – Medicaid Communication 88-15. That is, funds drawn by another other than the applicant from a joint account were not treated as transfer if both parties had complete access to the account and funds were placed into the account by the applicant prior to the look-back period.
OBRA ’93 employs broad language to treat any reduction in individual’s ownership or control of any joint asset as a transfer. New Jersey now follows OBRA ’93 for all joint assets, including bank accounts (i.e. funds withdrawn by another are subject to a transfer penalty). This is now the law in New Jersey.
To the extent that the funds withdrawn were the property of and contributed by the co-owner, the withdrawal of these funds should not result in the imposition of a penalty.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #29
Monday, April 27, 2009
Friday, April 24, 2009
Effect of Inheritance by Medicaid REcipient on Eligibility
Effect of Inheritance by Medicaid Recipient on Eligibility
A. Medicaid Recipient Becomes Beneficiary of an Estate
1. As previously indicated (see Post 27), property in probate is treated as an inaccessible resource. Therefore, merely acquiring the status of beneficiary would not render a Medicaid recipient ineligible.
2. Distribution of the inheritance would render the individual ineligible until the resource requirement was again met.
3. If the distribution is not made to the individual and the individual dies while receiving Medicaid benefits, the prospective inheritance becomes subject to the Medicaid lien as a probate asset.
4. A disclaimer by the potential Medicaid recipient is treated as a transfer and will result in ineligibility.
B. Inheritance by a Recipient of an Inaccessible Resource
1. One type of excludable resource is an inaccessible resource - N.J.A.C. 10:71-4.4(b) (6). Examples set forth in the regulations include “real property that cannot be sold because of the refusal of a co-owner to liquidate.”
2. Therefore, if upon the death of another, a Medicaid recipient becomes a co-tenant in a joint tenancy with right of survivorship or a tenancy in common, the property interest will not result in disqualification if the co-tenant refuses to liquidate. However, upon the death of the Medicaid recipient, the property will be subject to the lien to the extent of his “interest” at date of death.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #28
A. Medicaid Recipient Becomes Beneficiary of an Estate
1. As previously indicated (see Post 27), property in probate is treated as an inaccessible resource. Therefore, merely acquiring the status of beneficiary would not render a Medicaid recipient ineligible.
2. Distribution of the inheritance would render the individual ineligible until the resource requirement was again met.
3. If the distribution is not made to the individual and the individual dies while receiving Medicaid benefits, the prospective inheritance becomes subject to the Medicaid lien as a probate asset.
4. A disclaimer by the potential Medicaid recipient is treated as a transfer and will result in ineligibility.
B. Inheritance by a Recipient of an Inaccessible Resource
1. One type of excludable resource is an inaccessible resource - N.J.A.C. 10:71-4.4(b) (6). Examples set forth in the regulations include “real property that cannot be sold because of the refusal of a co-owner to liquidate.”
2. Therefore, if upon the death of another, a Medicaid recipient becomes a co-tenant in a joint tenancy with right of survivorship or a tenancy in common, the property interest will not result in disqualification if the co-tenant refuses to liquidate. However, upon the death of the Medicaid recipient, the property will be subject to the lien to the extent of his “interest” at date of death.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #28
Thursday, April 23, 2009
Effect of Inheritance by the Community Spouse on Eligibility
Effect of Inheritance by the Community Spouse on Eligibility
The determination of spousal resources is made at the date of institutionalization (the “snapshot”) while resources at the date of application determine eligibility (see “Marital Issues in the Eligibility Process” herein). Suppose a community spouse is a beneficiary under the will of a parent and the parent has recently died. Under what circumstances is this inheritance part of the spousal pot for Medicaid eligibility purposes?
A. Death of parent of community spouse after eligibility
An inheritance by the community spouse after institutionalized spouse becomes eligible for Medicaid is not an available resource and does not result in disqualification. That is, after the date of determination of eligibility for Medicaid, no resources of the community spouse are deemed available to the institutionalized spouse.
B. Death of parent of community spouse prior to eligibility date
1. Suppose the parent of the community spouse dies two weeks before the anticipated date of eligibility. Does the prospective inheritance of the community spouse delay the eligibility date?
N.J.A.C. 10:71-4.4(b) 6. treats property in probate as an inaccessible resource. Therefore, the parent’s death should have no immediate effect on eligibility.
2. Suppose the parent dies six months before the anticipated eligibility date and distribution has not been made to the community spouse.
Query: To what extent can probate be delayed beyond Medicaid eligibility? That is, should you communicate with the executor of decedent’s estate so that distribution is delayed until the applicant receives Medicaid?
C. Distribution of inheritance to community spouse prior to application
1. Probably, such inheritance would be treated as a resource as of the date of application for Medicaid.
2. If you are presented with this situation, the argument could be made that since the statute is silent with respect to resources acquired by the community spouse between the dates of institutionalization and application that such resources are not part of the “spousal pot.”
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #27
The determination of spousal resources is made at the date of institutionalization (the “snapshot”) while resources at the date of application determine eligibility (see “Marital Issues in the Eligibility Process” herein). Suppose a community spouse is a beneficiary under the will of a parent and the parent has recently died. Under what circumstances is this inheritance part of the spousal pot for Medicaid eligibility purposes?
A. Death of parent of community spouse after eligibility
An inheritance by the community spouse after institutionalized spouse becomes eligible for Medicaid is not an available resource and does not result in disqualification. That is, after the date of determination of eligibility for Medicaid, no resources of the community spouse are deemed available to the institutionalized spouse.
B. Death of parent of community spouse prior to eligibility date
1. Suppose the parent of the community spouse dies two weeks before the anticipated date of eligibility. Does the prospective inheritance of the community spouse delay the eligibility date?
N.J.A.C. 10:71-4.4(b) 6. treats property in probate as an inaccessible resource. Therefore, the parent’s death should have no immediate effect on eligibility.
2. Suppose the parent dies six months before the anticipated eligibility date and distribution has not been made to the community spouse.
Query: To what extent can probate be delayed beyond Medicaid eligibility? That is, should you communicate with the executor of decedent’s estate so that distribution is delayed until the applicant receives Medicaid?
C. Distribution of inheritance to community spouse prior to application
1. Probably, such inheritance would be treated as a resource as of the date of application for Medicaid.
2. If you are presented with this situation, the argument could be made that since the statute is silent with respect to resources acquired by the community spouse between the dates of institutionalization and application that such resources are not part of the “spousal pot.”
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #27
Tuesday, April 21, 2009
Preserving the Community Spouse Resource Allowance
Preserving the Community Spouse Resource Allowance
A. The key to planning asset preservation with respect to the community spouse is to remember that although the community spouse resource allowance is determined as of the date of institutionalization, the date at which the community spouse cannot have resources in excess of this amount (subject to the 90-day rule), is the date of application (see Post 25). Therefore, in order to do appropriate Medicaid planning, consideration must be given to utilization of spousal resources from the commencement of planning to the projected date of Medicaid eligibility.
Factors to be considered in determining the amount retained by the community spouse include the following:
i. anticipated personal expenditures by community spouse prior to application;
ii. expenditures of “ill” spouse prior to institutionalization and, of course, nursing home costs prior to Medicaid eligibility;
iii. interest and earning on assets;
iv. any compensation to be received by the community spouse;
v. social security and pension payments of both spouses;
vi. projected date of Medicaid eligibility.
B. As indicated by the above factors, although the community spouse resource allowance is determined objectively, many factors must be considered as part of the planning process. For example, although the current maximum amount that can be protected is $109,560, generally a substantially greater amount can and should be retained by the community spouse. Living expenses of the community spouse and nursing home costs of the institutionalized spouse prior to Medicaid eligibility are major factors. Possibly the key factor is the projected date of Medicaid eligibility which, of course, cannot be determined with certainty.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #26
A. The key to planning asset preservation with respect to the community spouse is to remember that although the community spouse resource allowance is determined as of the date of institutionalization, the date at which the community spouse cannot have resources in excess of this amount (subject to the 90-day rule), is the date of application (see Post 25). Therefore, in order to do appropriate Medicaid planning, consideration must be given to utilization of spousal resources from the commencement of planning to the projected date of Medicaid eligibility.
Factors to be considered in determining the amount retained by the community spouse include the following:
i. anticipated personal expenditures by community spouse prior to application;
ii. expenditures of “ill” spouse prior to institutionalization and, of course, nursing home costs prior to Medicaid eligibility;
iii. interest and earning on assets;
iv. any compensation to be received by the community spouse;
v. social security and pension payments of both spouses;
vi. projected date of Medicaid eligibility.
B. As indicated by the above factors, although the community spouse resource allowance is determined objectively, many factors must be considered as part of the planning process. For example, although the current maximum amount that can be protected is $109,560, generally a substantially greater amount can and should be retained by the community spouse. Living expenses of the community spouse and nursing home costs of the institutionalized spouse prior to Medicaid eligibility are major factors. Possibly the key factor is the projected date of Medicaid eligibility which, of course, cannot be determined with certainty.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #26
Thursday, April 16, 2009
Date of Application Could Be Fatal
Date of Application Could Be Fatal
Usually, the date of eligibility is easy to project. As indicated above, application should be made several months prior to the anticipated date of eligibility. Therefore, after submission of the required documents and financial information to Medicaid, only subsequent monthly financial data need be submitted until eligibility is granted. That is, in the usual case early application is part of a prudent planning process. However, in terms of the date of eligibility, early application could be fatal when there have been transfers.
A. The look-back period is 60 months prior to the date an individual is institutionalized and has applied for Medicaid.
B. If an individual delays applying for Medicaid until 60 months after a transfer, eligibility will be granted.
C. Suppose individual applies for Medicaid 56 months after transferring $200,000 to brother. Applicant is ineligible for Medicaid. Suppose individual applies five months later, which is 61 months after the transfer. Will the original application be fatal or will it be cured by the later application? The original application is fatal and is not cured by the later application. Medicaid will be denied.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #25
Usually, the date of eligibility is easy to project. As indicated above, application should be made several months prior to the anticipated date of eligibility. Therefore, after submission of the required documents and financial information to Medicaid, only subsequent monthly financial data need be submitted until eligibility is granted. That is, in the usual case early application is part of a prudent planning process. However, in terms of the date of eligibility, early application could be fatal when there have been transfers.
A. The look-back period is 60 months prior to the date an individual is institutionalized and has applied for Medicaid.
B. If an individual delays applying for Medicaid until 60 months after a transfer, eligibility will be granted.
C. Suppose individual applies for Medicaid 56 months after transferring $200,000 to brother. Applicant is ineligible for Medicaid. Suppose individual applies five months later, which is 61 months after the transfer. Will the original application be fatal or will it be cured by the later application? The original application is fatal and is not cured by the later application. Medicaid will be denied.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #25
Monday, April 13, 2009
Analysis of Timing - Community Spouse Resource Allowance
Analysis of Timing – Community Spouse Resource Allowance
The key to spousal planning is to recognize the significance of and distinguish between two key points in time: the assessment date and the date of eligibility.
A. The community spouse resource allowance is determined “as of” the date of institutionalization. A “snapshot” is taken at this time solely for purposes of determining the spouse’s protected amount. Actually, the amount is determined as of the first day of the first month of institutionalization.
B. However, for purposes of eligibility, the key point in time is the date of application for benefits. That is, in determining the resources of an institutionalized spouse at the time of application for benefits, all resources held by either the community spouse or the institutionalized spouse (or jointly) are considered available to the institutionalized spouse except for the community spouse resource allowance . Therefore, subject to the 90-day rule (see Post 10), the amount of resources that can be retained by the community spouse without endangering eligibility of the institutionalized spouse is determined as of the date of institutionalization and such determination is utilized at the date of application to determine eligibility.
C. The community spouse resource allowance is not affected by appreciation of spousal resources after institutionalization.
D. Since the assessment date is made “as of” the date of institutionalization, but generally determined at a later date, it is extremely important to maintain financial records.
E. There is a practical reason for using the date of institutionalization for computation of the protected amount. The community spouse requires certainty after institutionalization in order to protect the community spouse resource allowance. If such a determination were not made as of the date of institutionalization, at any point in time the community spouse would not be aware of the amount of resources that could be protected and may have expended more funds than necessary. Therefore, the computation of the allowance is made prospectively.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #24
The key to spousal planning is to recognize the significance of and distinguish between two key points in time: the assessment date and the date of eligibility.
A. The community spouse resource allowance is determined “as of” the date of institutionalization. A “snapshot” is taken at this time solely for purposes of determining the spouse’s protected amount. Actually, the amount is determined as of the first day of the first month of institutionalization.
B. However, for purposes of eligibility, the key point in time is the date of application for benefits. That is, in determining the resources of an institutionalized spouse at the time of application for benefits, all resources held by either the community spouse or the institutionalized spouse (or jointly) are considered available to the institutionalized spouse except for the community spouse resource allowance . Therefore, subject to the 90-day rule (see Post 10), the amount of resources that can be retained by the community spouse without endangering eligibility of the institutionalized spouse is determined as of the date of institutionalization and such determination is utilized at the date of application to determine eligibility.
C. The community spouse resource allowance is not affected by appreciation of spousal resources after institutionalization.
D. Since the assessment date is made “as of” the date of institutionalization, but generally determined at a later date, it is extremely important to maintain financial records.
E. There is a practical reason for using the date of institutionalization for computation of the protected amount. The community spouse requires certainty after institutionalization in order to protect the community spouse resource allowance. If such a determination were not made as of the date of institutionalization, at any point in time the community spouse would not be aware of the amount of resources that could be protected and may have expended more funds than necessary. Therefore, the computation of the allowance is made prospectively.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #24
Thursday, April 9, 2009
Additional Benefits for a Single Individual Owning Home Jointly with a Protected Transferee
Additional Benefits for a Single Individual Owning Home
Jointly with a Protected Transferee
Medicaid planning must consider three interrelated goals: to establish Medicaid eligibility, to avoid disqualification after eligibility and to avoid the Medicaid lien after the death of a recipient of benefits. The discussion in Post 6 relating to a child who “resided” in the home for at least two years prior to institutionalization and provided care which permitted the individual to reside at home rather than go in a nursing home addresses mainly the issue of Medicaid eligibility. The prior post involved related to the transfer of the home to a “protected transferee” and that addressed mainly the issue of Medicaid eligibility. However, the planning issues involved when there is joint ownership by the parent and the child relate to the disqualification of Medicaid after eligibility and avoiding the Medicaid lien. For purposes of this discussion, joint ownership shall refer to a joint tenancy with right of survivorship (i.e., property passes to the survivor upon the death of the first of parent or child).
A. Assuming the requirements of eligibility are met, joint ownership of applicant’s residence with a child who is a protected transferee (or even a child who is not a protected transferee) will not preclude eligibility. N.J.A.C. 10:71-4.4(b)6. treats real property which cannot be sold because of the refusal of a co-owner to liquidate as an inaccessible resource.
B. However, disqualification from eligibility and the Medicaid lien are avoided by a transfer of applicant’s joint interest to a “protected transferee” child.
1. The Medicaid lien is avoided by terminating ownership, and, thereby removing the property from a Medicaid recipient’s “estate.” That is, assets that are part of one’s estate after the individual dies and receives Medicaid are subject to the Medicaid lien. It is noted that the lien statute expressly applies to joint tenancies.
2. Assuming the child disinherits the transferor parent, the problem of inadvertent disqualification is eliminated (joint ownership, child dies first and property passes to parent by operation of law).
3. If both individuals are alive and joint ownership were not terminated and the parent had qualified for Medicaid, a sale of the property would result in one-half the net proceeds being allocated to the parent with subsequent loss of eligibility.
Note: Another category of protected transferee is a (i) sibling who has an equity interest in the home; and (ii) who was residing in the home for at least one year prior to the date of institutionalization. The situation usually arises when sibling is joint owner of a two-family dwelling. The need to avoid the Medicaid lien is not as compelling in this situation as in the circumstances of joint ownership with a child.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #23
Jointly with a Protected Transferee
Medicaid planning must consider three interrelated goals: to establish Medicaid eligibility, to avoid disqualification after eligibility and to avoid the Medicaid lien after the death of a recipient of benefits. The discussion in Post 6 relating to a child who “resided” in the home for at least two years prior to institutionalization and provided care which permitted the individual to reside at home rather than go in a nursing home addresses mainly the issue of Medicaid eligibility. The prior post involved related to the transfer of the home to a “protected transferee” and that addressed mainly the issue of Medicaid eligibility. However, the planning issues involved when there is joint ownership by the parent and the child relate to the disqualification of Medicaid after eligibility and avoiding the Medicaid lien. For purposes of this discussion, joint ownership shall refer to a joint tenancy with right of survivorship (i.e., property passes to the survivor upon the death of the first of parent or child).
A. Assuming the requirements of eligibility are met, joint ownership of applicant’s residence with a child who is a protected transferee (or even a child who is not a protected transferee) will not preclude eligibility. N.J.A.C. 10:71-4.4(b)6. treats real property which cannot be sold because of the refusal of a co-owner to liquidate as an inaccessible resource.
B. However, disqualification from eligibility and the Medicaid lien are avoided by a transfer of applicant’s joint interest to a “protected transferee” child.
1. The Medicaid lien is avoided by terminating ownership, and, thereby removing the property from a Medicaid recipient’s “estate.” That is, assets that are part of one’s estate after the individual dies and receives Medicaid are subject to the Medicaid lien. It is noted that the lien statute expressly applies to joint tenancies.
2. Assuming the child disinherits the transferor parent, the problem of inadvertent disqualification is eliminated (joint ownership, child dies first and property passes to parent by operation of law).
3. If both individuals are alive and joint ownership were not terminated and the parent had qualified for Medicaid, a sale of the property would result in one-half the net proceeds being allocated to the parent with subsequent loss of eligibility.
Note: Another category of protected transferee is a (i) sibling who has an equity interest in the home; and (ii) who was residing in the home for at least one year prior to the date of institutionalization. The situation usually arises when sibling is joint owner of a two-family dwelling. The need to avoid the Medicaid lien is not as compelling in this situation as in the circumstances of joint ownership with a child.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #23
Wednesday, April 8, 2009
In Determining Eligibility, All Rules Must Be Considered
In Determining Eligibility, All Rules Must Be Considered
I recently had a fact situation which required an understanding of several similar rules, only one of which applied.
Facts: Medicaid applicant lived with his disabled sister through the time of application. Applicant had discussed Medicaid eligibility with several attorneys and was advised that the house had to be sold. The sections reviewed by the attorneys and determined to be non-applicable include:
1. The exemption for transfers to a disabled child (Post 42). Child clearly relates to a child of the applicant and would not apply to his sister.
2. Post 6 refers to property owned by applicant residing with caretaker child. Such a caretaker child for purposes of these articles has been referred to a “protected transferee.” Another category of protected transferee is a sibling who has an equity interest in the home and who is residing in the home for at least one year prior to institutionalization. This alternative was also reviewed, but is not applicable since the sibling did not have an interest in the home. Creating an interest in the home for purposes of compliance with the statute would not work since this would result in a transfer. Generally, a sibling has an interest in a home with an applicant either through inheritance or purchase rather than a transfer by the applicant to the sibling of a partial interest.
The client and family discussed the above with me and were of the opinion that within a reasonable time after institutionalization, the house would have to be sold and the individual would have to use the proceeds on nursing home costs. I discussed with them Post 14 which is designated “The Significance of Dependent Relative Residing in the Home with Applicant.” That is, the person in the home was neither a disabled child nor a sister with an equity interest, but the home was still exempt based upon Program Instruction No. 85-8-9, an old Medicaid communication, which requires dependents of a relative rather than the issues perused.
The importance of this situation is that all possibilities must be considered in advising a client regarding eligibility and that many occasions require authority not normally needed in the Medicaid eligibility process. Creativity is especially necessary when dealing with the home. With respect to the home and real property, see Posts 6, 11, 14, 32, 34, 35, 36, 37, 38, 41, 42, and 52.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #22
I recently had a fact situation which required an understanding of several similar rules, only one of which applied.
Facts: Medicaid applicant lived with his disabled sister through the time of application. Applicant had discussed Medicaid eligibility with several attorneys and was advised that the house had to be sold. The sections reviewed by the attorneys and determined to be non-applicable include:
1. The exemption for transfers to a disabled child (Post 42). Child clearly relates to a child of the applicant and would not apply to his sister.
2. Post 6 refers to property owned by applicant residing with caretaker child. Such a caretaker child for purposes of these articles has been referred to a “protected transferee.” Another category of protected transferee is a sibling who has an equity interest in the home and who is residing in the home for at least one year prior to institutionalization. This alternative was also reviewed, but is not applicable since the sibling did not have an interest in the home. Creating an interest in the home for purposes of compliance with the statute would not work since this would result in a transfer. Generally, a sibling has an interest in a home with an applicant either through inheritance or purchase rather than a transfer by the applicant to the sibling of a partial interest.
The client and family discussed the above with me and were of the opinion that within a reasonable time after institutionalization, the house would have to be sold and the individual would have to use the proceeds on nursing home costs. I discussed with them Post 14 which is designated “The Significance of Dependent Relative Residing in the Home with Applicant.” That is, the person in the home was neither a disabled child nor a sister with an equity interest, but the home was still exempt based upon Program Instruction No. 85-8-9, an old Medicaid communication, which requires dependents of a relative rather than the issues perused.
The importance of this situation is that all possibilities must be considered in advising a client regarding eligibility and that many occasions require authority not normally needed in the Medicaid eligibility process. Creativity is especially necessary when dealing with the home. With respect to the home and real property, see Posts 6, 11, 14, 32, 34, 35, 36, 37, 38, 41, 42, and 52.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #22
Monday, April 6, 2009
Inadvertent Disqualification of Individual Due to Death of Another
Inadvertent Disqualification of Individual Due to Death of Another
As indicated in Post No. 4, a Medicaid recipient’s resources on the first of any month after Medicaid must not exceed the resource limitation of $2,000 or $4,000.
The prior death of a relative of a Medicaid recipient could result in the loss of eligibility. The estate plans of individuals of a Medicaid recipient are often a neglected consideration. Such concerns can even arise when an individual has been part of the Medicaid planning process, such as a “protected transferee,” a disabled child or a donee of gifts.
For example, if the home is transferred to an exempt individual, major concern is that the will of the transferee not devise the home to the potential Medicaid recipient or that the potential Medicaid recipient not receive a share of the estate of the transferee by intestacy.
It is important that a Medicaid recipient not be a beneficiary under any will. Therefore, the wills of other relatives, whether or not a participant in the Medicaid planning process, should be reviewed. Generally, ethical considerations will dictate that such individuals retain separate counsel.
Inheritance by intestacy could also result in disqualification, see N.J.S.A. 3B:5-3, 4.
The receipt of nonprobate assets such as insurance proceeds or retirement benefits could also cause disqualification.
With respect to life insurance, if an owner designates a primary beneficiary without contingent beneficiaries, the policy could provide that the insurance would go to the Medicaid recipient. Therefore, beneficiary designations should be carefully reviewed.
The topic of the will of the “healthy spouse” is complicated and has been purposely neglected. Reference is made to my article Practical Medicaid Planning – Part II, 1999 “Estate Planning Issues,” by Levin, Mark.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #21
As indicated in Post No. 4, a Medicaid recipient’s resources on the first of any month after Medicaid must not exceed the resource limitation of $2,000 or $4,000.
The prior death of a relative of a Medicaid recipient could result in the loss of eligibility. The estate plans of individuals of a Medicaid recipient are often a neglected consideration. Such concerns can even arise when an individual has been part of the Medicaid planning process, such as a “protected transferee,” a disabled child or a donee of gifts.
For example, if the home is transferred to an exempt individual, major concern is that the will of the transferee not devise the home to the potential Medicaid recipient or that the potential Medicaid recipient not receive a share of the estate of the transferee by intestacy.
It is important that a Medicaid recipient not be a beneficiary under any will. Therefore, the wills of other relatives, whether or not a participant in the Medicaid planning process, should be reviewed. Generally, ethical considerations will dictate that such individuals retain separate counsel.
Inheritance by intestacy could also result in disqualification, see N.J.S.A. 3B:5-3, 4.
The receipt of nonprobate assets such as insurance proceeds or retirement benefits could also cause disqualification.
With respect to life insurance, if an owner designates a primary beneficiary without contingent beneficiaries, the policy could provide that the insurance would go to the Medicaid recipient. Therefore, beneficiary designations should be carefully reviewed.
The topic of the will of the “healthy spouse” is complicated and has been purposely neglected. Reference is made to my article Practical Medicaid Planning – Part II, 1999 “Estate Planning Issues,” by Levin, Mark.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #21
Thursday, April 2, 2009
Importance of Liquidating Assets in the Medicaid Planning Process
Importance of Liquidating Assets in the Medicaid Planning Process
Reference is made to Post 12 that discusses basic planning situations referred to as “bread and butter” planning techniques. With respect to investments, the value fluctuates from day-to-day. Therefore, if we have a basic situation with an applicant without a community spouse (although would apply to a community spouse situation), the existence of investments precludes an exact determination of resources on the first day of any given month.
Therefore, as part of the pre-Medicaid plan, it is necessary that such assets be liquidated and the capital gain considered in the prepayment of taxes (if applicable).
Such rationale would also apply to assets such as IRA’s with investments within the IRA. Of course, the liquidation of the IRA gives rise to income tax consequences.
Also, it is necessary to prepare a power of attorney for the potential applicant. This is necessary for numerous reasons. However, with respect to an application for Medicaid, it is necessary that the assets of the applicant be “accessible” in the event liquidation is necessary and the applicant is not competent as Medicaid approaches.
In an ideal “bread and butter” situation, it is important to limit the factors to be considered in projecting the date of eligibility for Medicaid. Such factors would include the resources of the client, the individual’s pension and/or social security payments and the monthly cost of the nursing home (including extras). This matter becomes complicated if there are assets subject to fluctuation.
The following is the simplest form of the projection problem:
Applicant (single individual) has bank accounts of $40,000. Monthly social security checks are $1,000. Assume monthly nursing home charges of $6,000. Applying the social security payments against nursing home costs results in a “net” monthly cost of $5,000. Therefore, Medicaid eligibility is anticipated in eight months ($40,000 bank accounts divided by
$ 5,000 “net” monthly cost)
Of course, the above example is markedly simplified. Prior blogs have discussed issues that complicate the eligibility process such as payment of debts, liquidating resources, income tax liabilities, prepaid burial arrangements, life insurance, the handling of pension and social security payments and the recommended priority of payment of debts and expenditures.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #20
Reference is made to Post 12 that discusses basic planning situations referred to as “bread and butter” planning techniques. With respect to investments, the value fluctuates from day-to-day. Therefore, if we have a basic situation with an applicant without a community spouse (although would apply to a community spouse situation), the existence of investments precludes an exact determination of resources on the first day of any given month.
Therefore, as part of the pre-Medicaid plan, it is necessary that such assets be liquidated and the capital gain considered in the prepayment of taxes (if applicable).
Such rationale would also apply to assets such as IRA’s with investments within the IRA. Of course, the liquidation of the IRA gives rise to income tax consequences.
Also, it is necessary to prepare a power of attorney for the potential applicant. This is necessary for numerous reasons. However, with respect to an application for Medicaid, it is necessary that the assets of the applicant be “accessible” in the event liquidation is necessary and the applicant is not competent as Medicaid approaches.
In an ideal “bread and butter” situation, it is important to limit the factors to be considered in projecting the date of eligibility for Medicaid. Such factors would include the resources of the client, the individual’s pension and/or social security payments and the monthly cost of the nursing home (including extras). This matter becomes complicated if there are assets subject to fluctuation.
The following is the simplest form of the projection problem:
Applicant (single individual) has bank accounts of $40,000. Monthly social security checks are $1,000. Assume monthly nursing home charges of $6,000. Applying the social security payments against nursing home costs results in a “net” monthly cost of $5,000. Therefore, Medicaid eligibility is anticipated in eight months ($40,000 bank accounts divided by
$ 5,000 “net” monthly cost)
Of course, the above example is markedly simplified. Prior blogs have discussed issues that complicate the eligibility process such as payment of debts, liquidating resources, income tax liabilities, prepaid burial arrangements, life insurance, the handling of pension and social security payments and the recommended priority of payment of debts and expenditures.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #20
Wednesday, April 1, 2009
Allocation of Transfer Penalty - When Community Spouse Makes Transfer and Then Enters Nursing Home
Allocation of Transfer Penalty – When Community Spouse Makes
Transfer and Then Enters Nursing Home
Transfers by the spouse of an applicant are considered in determining the Medicaid eligibility of such individual. Under prior law, such transfers would also be considered again in determining eligibility for a community spouse who subsequently was institutionalized. That is, transfers by a community spouse who was subsequently institutionalized resulted in a double penalty. OBRA ’93 (which hasn’t been changed by the current law) requires that a “reasonable methodology” be employed to apportion the period of ineligibility between the applicant and a transferor – spouse who is subsequently institutionalized.
Example: Individual is in nursing home. Transfer of assets by spouse results in a 20-month penalty period for individual. Eight months after the transfer, spouse is institutionalized. The remaining penalty period of 12 months is to be apportioned. Presumably, six months will be allocated to each so that individual’s period of ineligibility due to the transfer will total 14 months.
Keep in mind, that under current law the penalty commences as outlined in Post #15.
Note: If one spouse dies or leaves the institution, the remaining portion of the penalty is allocated to the other spouse.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #19
Transfer and Then Enters Nursing Home
Transfers by the spouse of an applicant are considered in determining the Medicaid eligibility of such individual. Under prior law, such transfers would also be considered again in determining eligibility for a community spouse who subsequently was institutionalized. That is, transfers by a community spouse who was subsequently institutionalized resulted in a double penalty. OBRA ’93 (which hasn’t been changed by the current law) requires that a “reasonable methodology” be employed to apportion the period of ineligibility between the applicant and a transferor – spouse who is subsequently institutionalized.
Example: Individual is in nursing home. Transfer of assets by spouse results in a 20-month penalty period for individual. Eight months after the transfer, spouse is institutionalized. The remaining penalty period of 12 months is to be apportioned. Presumably, six months will be allocated to each so that individual’s period of ineligibility due to the transfer will total 14 months.
Keep in mind, that under current law the penalty commences as outlined in Post #15.
Note: If one spouse dies or leaves the institution, the remaining portion of the penalty is allocated to the other spouse.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #19
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