Although we have two federal statutes that basically govern Medicaid eligibility, OBRA ’93 and the Deficit Reduction Act, the State does not often honor pre-emption and that the rules of the federal government are to govern. Further, County Boards have different interpretations of various issues.
It is my policy to consult with a Medicaid supervisor before submitting an application so that I can review any issues and get the benefit of their expertise. For example, Post 6 indicates that in certain circumstances if a child resides with an applicant and the care by the child allows the applicant to remain at home, the home can be transferred to the child without penalty. However, each County Board has its own interpretation of the necessary care to be provided by the child.
Posts 27 and 28 discuss the effect of inheritance on the community spouse and the applicant, respectively. Basically, an inheritance is deemed to be an “inaccessible resource.” However, each County treats a delay in distributing an inheritance differently since once an inheritance is distributed it becomes a resource. The Internal Revenue Code in discussing the fiduciary income tax for the estate treats an estate closed and distributed after an unreasonable delay.
Another related area is Post 42 which discusses assets transferred to a disabled child. To qualify as a disabled child, the individual need not have an eligibility letter from Social Security. The State will make an independent determination. This does not exactly comply with the title of different approaches of each County Board, but I think the importance of the issue is relevant.
A very common issue is the exemption from the transfer rules for a transfer for purposes other than to qualify for Medicaid. It is particularly difficult to show that a transfer by an elderly person was solely for another purpose. However, I have succeeded in this area by pointing out the uniqueness of the situation of the transfer, the health of the elderly person at the time and the need of funds by the transferee. Generally, County Boards will not consider this exemption.
Of course, what one County Board may consider an “inaccessible resource” might be considered available by another County Board. For example, a parcel of land that is too small to meet the zoning requirements should be treated as “inaccessible.” I have had different County Boards treat this differently. My personal opinion is, that if a potential resource cannot be “converted to money,” it is “inaccessible.”
Post 53 discusses the fact that allowable expenses and such expenditures are limited by the concept of reasonableness. Obviously, this area and the decision made with respect to such expenditures would vary from County Board to County Board.
The above examples are for illustrative purposes and this article could be extended into a book as the differences by the County Boards are infinite.
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 65
Wednesday, December 23, 2009
Income Taxes and Medicaid Eligibility
Post 20 discusses the importance of liquidating assets in the Medicaid planning process. Events such as distribution of IRA’s, sales of securities and surrender of life insurance give rise to tax consequences. Therefore, prepayment of taxes is one of the spenddown techniques.
It is important to realize that nursing home costs may qualify for the medical deduction under Section 213 of the Internal Revenue Code. The applicant must have a “cognitive impairment” or fail two out of the four activities of daily living.
There are also unique sources of income that could have an effect on Medicaid eligibility. For example, Post 27, discusses the fact that although property in probate is treated as an “inaccessible resource,” the distributions made by an estate to a beneficiary result in taxable income. Fiduciary income tax is a course unto itself, but basically, the distributions result in income tax to the extent of the income of the estate for that year (technically called distributable net income).
Previously, County Medicaid Boards did not ask for verification of income for prior years (Forms 1099). Now such inquiry is made. The reason for this, is that Medicaid is looking for closed out accounts and the disposition of such accounts and also assets that may have inadvertently been omitted.
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 64
It is important to realize that nursing home costs may qualify for the medical deduction under Section 213 of the Internal Revenue Code. The applicant must have a “cognitive impairment” or fail two out of the four activities of daily living.
There are also unique sources of income that could have an effect on Medicaid eligibility. For example, Post 27, discusses the fact that although property in probate is treated as an “inaccessible resource,” the distributions made by an estate to a beneficiary result in taxable income. Fiduciary income tax is a course unto itself, but basically, the distributions result in income tax to the extent of the income of the estate for that year (technically called distributable net income).
Previously, County Medicaid Boards did not ask for verification of income for prior years (Forms 1099). Now such inquiry is made. The reason for this, is that Medicaid is looking for closed out accounts and the disposition of such accounts and also assets that may have inadvertently been omitted.
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 64
Wednesday, December 2, 2009
Life Insurance Issues Revisited
In prior Post 3, I discussed life insurance issues. This post will discuss them in greater detail with an emphasis on life insurance planning.
As indicated in Post 3, the cash value of a life insurance policy has an effect on Medicaid eligibility with the cash value being a resource. The solution to this problem is to borrow against the cash value or surrender the policy. As indicated, in a community spouse situation, a transfer to the community spouse might make sense.
"Paid up" insurance may or may not have cash value. Similarly, if dividends are used to increase the value of insurance, there may or may not be cash value. Keep in mind that the surrender of a policy is a taxable event with the gain being the difference between the amount realized and premiums paid. This results in ordinary income.
There are many uses for life insurance in today's world that do not have a direct bearing on Medicaid. For example, in the last twenty years, term insurance has become popular. Term insurance is used for purposes such as buy-sell agreements and to cover the costs of a child's college education. Such policies have no cash value.
As pointed out in Post 3, the key problem to avoid is the situation where there is group insurance ( no cash value) and the cash value policy is under $1,500. The rule is that the policies are aggregated for these purposes and the cash value counts towards eligibility.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
As indicated in Post 3, the cash value of a life insurance policy has an effect on Medicaid eligibility with the cash value being a resource. The solution to this problem is to borrow against the cash value or surrender the policy. As indicated, in a community spouse situation, a transfer to the community spouse might make sense.
"Paid up" insurance may or may not have cash value. Similarly, if dividends are used to increase the value of insurance, there may or may not be cash value. Keep in mind that the surrender of a policy is a taxable event with the gain being the difference between the amount realized and premiums paid. This results in ordinary income.
There are many uses for life insurance in today's world that do not have a direct bearing on Medicaid. For example, in the last twenty years, term insurance has become popular. Term insurance is used for purposes such as buy-sell agreements and to cover the costs of a child's college education. Such policies have no cash value.
As pointed out in Post 3, the key problem to avoid is the situation where there is group insurance ( no cash value) and the cash value policy is under $1,500. The rule is that the policies are aggregated for these purposes and the cash value counts towards eligibility.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
Child Moving In with Parent to Satisfy Caretaker Requirement
Post 6 and 23 discuss the planning technique of an applicant transferring property to a child whose care allowed the parent to remain at home for at least a two-year period prior to institutionalization. These articles assume the time period had been met.
However, as can be seen Medicaid planning requires creativity. For example, a parent/ possible applicant may be living at home and needs the care of a child (assumes single). If the child moves in and provides the necessary care, Post 6 sets forth the procedure for transferring the home to the caretaker child (i.e. transfer at Medicaid hearing). Therefore, i have had a client (potential applicant) request her daughter to move into the home and hopefully the parent will not go into a nursing home for at least two years. For a more detailed analysis, see Post 6.
This plan resulted from a lengthy discussion with the client of numerous possibilities regarding the home ( for such discussions, see Post 18 and 41).
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
However, as can be seen Medicaid planning requires creativity. For example, a parent/ possible applicant may be living at home and needs the care of a child (assumes single). If the child moves in and provides the necessary care, Post 6 sets forth the procedure for transferring the home to the caretaker child (i.e. transfer at Medicaid hearing). Therefore, i have had a client (potential applicant) request her daughter to move into the home and hopefully the parent will not go into a nursing home for at least two years. For a more detailed analysis, see Post 6.
This plan resulted from a lengthy discussion with the client of numerous possibilities regarding the home ( for such discussions, see Post 18 and 41).
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
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