In Medicaid Communication 10-02, the state denied reverse half-a-loaf as a viable planning technique based upon language in the Federal Statute 42 U.S.C. Section 1396p(c)(2)(C).
Medicaid Communication 10-06 reaffirms the position previously taken, that reverse half-a-loaf planning is not a viable planning opportunity, but grandfather's the planning technique for Medicaid applications prior to May 2010 for assets returned prior to May 26, 2010.
My position is that the state is still incorrect in their interpretation. My blog "State Incorrectly Interprets Transfer Penalty Period in Medicaid Communication 10-02" illustrates how Medicaid Communications 10-02 and 10-06 contradict comment 7 to the OBRA '93 regulations, which contains language explicitly allowing for give-backs.
It is thus my opinion that reverse half-a-loaf planning remains a justifiable planning technique, regardless of date, because of the language in the OBRA '93 comment and the less restrictive state comment which would control over the more restrictive federal statute.
Members of the Elder law bar are considering challenging the state's position based upon the above argument.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2009, Post 113
Friday, July 30, 2010
Unpaid Nursing Home or Assisted Living Expenses
A situation that often arises is that an individual is dilatory in applying for or receiving Medicaid. Therefore, there could be an amount due to the nursing home.
The question arises as to the method of payment for such past due costs.
A significant administrative law decision takes the position that past due amounts for either nursing home or assisted living costs can be paid by pension and/or social security. The state had maintained that that could not be the case, but the matter has been submitted to the director for final decision.
Currently, the director has accepted the principle of utilizing the pension and/or social security for back payment of institutional costs, but only on a limited basis.
The director will limit the retroactive period to three months.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2010, Post 112
The question arises as to the method of payment for such past due costs.
A significant administrative law decision takes the position that past due amounts for either nursing home or assisted living costs can be paid by pension and/or social security. The state had maintained that that could not be the case, but the matter has been submitted to the director for final decision.
Currently, the director has accepted the principle of utilizing the pension and/or social security for back payment of institutional costs, but only on a limited basis.
The director will limit the retroactive period to three months.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2010, Post 112
Wednesday, July 21, 2010
Mental State - Difference Between Medical and Legal
I have recently had a case in which the hospital psychiatrist opined that a client was "incompetent" and, therefore, should not sign his will, power of attorney and living will.
My office staff and I discussed with the psychiatrist and his assistants the fact that "competence" has a different meaning for legal and medical purposes.
The doctor felt that the individual was not competent according to his normal medical standards. We explained to the psychiatrist and his staff that "competence" has a different meaning for legal purposes.
For example, with respect to a power of attorney, we explained that it is sufficient for the individual to understand that he is allowing the holder of the power of attorney (the agent) the authority to handle his assets. Similarly, with respect to the living will, it is sufficient for the individual to understand that he is granting the authority for another to make the specified decision with respect to extraordinary care. A more onerous standard governs testamentary capacity since an individual must understand the nature of his assets, the objects of his bounty and how the assets are disposed of under his will.
After discussion with the medical staff, they agreed that the legal standard should be employed. In fact, we requested and obtained a patient representative and a nurse to witness the will. The will was successfully executed without any concern for challenge.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2010, Post 111
My office staff and I discussed with the psychiatrist and his assistants the fact that "competence" has a different meaning for legal and medical purposes.
The doctor felt that the individual was not competent according to his normal medical standards. We explained to the psychiatrist and his staff that "competence" has a different meaning for legal purposes.
For example, with respect to a power of attorney, we explained that it is sufficient for the individual to understand that he is allowing the holder of the power of attorney (the agent) the authority to handle his assets. Similarly, with respect to the living will, it is sufficient for the individual to understand that he is granting the authority for another to make the specified decision with respect to extraordinary care. A more onerous standard governs testamentary capacity since an individual must understand the nature of his assets, the objects of his bounty and how the assets are disposed of under his will.
After discussion with the medical staff, they agreed that the legal standard should be employed. In fact, we requested and obtained a patient representative and a nurse to witness the will. The will was successfully executed without any concern for challenge.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2010, Post 111
Tuesday, July 13, 2010
Retain Life Estate As a Medicaid Planning Technique
Retain Life Estate as a Medicaid Planning Technique (Pros and Cons)
In an ICLE seminar material entitled, Hot Topics in Medicaid Planning, in the chapter entitled “Real Property,” I discussed the possibility of the potential applicant transferring a home to a child and retaining a life estate.
Some of the salient features of such a transaction are as follows:
1. There is a gift of the remainder interest, and such gift becomes subject to the transfer rules of the Deficit Reduction Act. However, if such transaction occurs more than 60 months prior to the date of application, the beneficial factors listed below apply.
2. No value is assigned to the retained interest for resource eligibility purposes. Therefore, a person applying for Medicaid with a retained life estate would not be treated as having a resource for that interest.
3. The basis in the property is “stepped-up” upon mother’s death (Sections 1014 and 2036 of the Internal Revenue Code).
However advantageous such technique may appear, it is important to consider some major stumbling blocks. As indicated in New Jersey Practice, Celentano, ¶4.8, the author points out various financial obligations of the life tenant (i.e. the Medicaid recipient in our hypothetical) which include the duty to keep the property in as good repair as when the estate began.
4. Ordinarily the life tenant is required to pay taxes, make repairs and pay interest on a mortgage. Possibly the life tenant may be required to provide security to protect the interest of the remainderman.
Therefore, a life tenant-Medicaid recipient will have financial obligations. However, if such individual is a Medicaid recipient, the life tenant will not have any funds to pay such obligations since the Medicaid reimbursement rate is to be reduced by social security and pension monies. Notwithstanding, Medicaid has recently adopted the position that pension and social security can be used to pay the life tenant’s obligations.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2009, Post 86
In an ICLE seminar material entitled, Hot Topics in Medicaid Planning, in the chapter entitled “Real Property,” I discussed the possibility of the potential applicant transferring a home to a child and retaining a life estate.
Some of the salient features of such a transaction are as follows:
1. There is a gift of the remainder interest, and such gift becomes subject to the transfer rules of the Deficit Reduction Act. However, if such transaction occurs more than 60 months prior to the date of application, the beneficial factors listed below apply.
2. No value is assigned to the retained interest for resource eligibility purposes. Therefore, a person applying for Medicaid with a retained life estate would not be treated as having a resource for that interest.
3. The basis in the property is “stepped-up” upon mother’s death (Sections 1014 and 2036 of the Internal Revenue Code).
However advantageous such technique may appear, it is important to consider some major stumbling blocks. As indicated in New Jersey Practice, Celentano, ¶4.8, the author points out various financial obligations of the life tenant (i.e. the Medicaid recipient in our hypothetical) which include the duty to keep the property in as good repair as when the estate began.
4. Ordinarily the life tenant is required to pay taxes, make repairs and pay interest on a mortgage. Possibly the life tenant may be required to provide security to protect the interest of the remainderman.
Therefore, a life tenant-Medicaid recipient will have financial obligations. However, if such individual is a Medicaid recipient, the life tenant will not have any funds to pay such obligations since the Medicaid reimbursement rate is to be reduced by social security and pension monies. Notwithstanding, Medicaid has recently adopted the position that pension and social security can be used to pay the life tenant’s obligations.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2009, Post 86
Tuesday, July 6, 2010
Special Planning Problems for Elderly Person (Single)
The posts have discussed in detail methods of protecting the elderly. However, often a parent will have issues with a child. The problems addressed in this post are not those of a disabled child, but deal more with the typical problem of a will for a child-beneficiary with creditor issues or a child-beneficiary who may be unable to handle money.
This post will discuss one approach for the will of the elderly parent who is survived by a creditor-prone child with other beneficiaries such as siblings or issue. For purposes of this article, I will assume that the child has both siblings and/or issue.
Numerous possibilities come to mind when providing for a child. Clearly, if the funds are devised to the child outright, the funds upon receipt will be subject to claims of creditors. The method by which the elderly individual should provide for such child is clearly by trust under the parent’s will (testamentary trust).
The trust that provides maximum protection would give the trustee pure discretion to distribute the income and/or principal. If the trust had language allowing distributions for the child’s support, etc., such distribution might be subject to a creditor’s claims. However, if the trustee could distribute income and/or principal at the trustee’s discretion, that would be a better approach and render the child’s inheritance less available to creditors.
After considering this problem in great detail and discussing the matter with bankruptcy lawyers, I have concluded that I would desire a trust that accomplishes the following goals:
1. Distributions can be made to the child when needed.
2. Render the trust as immune to creditors as possible.
3. Be available to the child if his or her problems have been resolved.
The trust that I recommend given the above issues would allow the trustee to distribute income or principal to or amongst the child and his issue or the child and his siblings or both.
A creditor seeking to attach the child’s interest would be faced with the argument that a trust which is purely discretionary for the child and other relatives is not available to creditors since there is no interest in a trust of the child alone since the trust is discretionary for the child and others.
Perhaps the most important aspect of the trust is its discretionary nature, which would allow the trustee to terminate the trust and distribute the principal to the child if the situation changes and the creditor problems are deemed to no longer exist by the trustee.
The key to such planning is that there must be a trustee designation (and presumably contingent designations) that provides confidence that the intent of the will is carried out.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2009, Post 85
This post will discuss one approach for the will of the elderly parent who is survived by a creditor-prone child with other beneficiaries such as siblings or issue. For purposes of this article, I will assume that the child has both siblings and/or issue.
Numerous possibilities come to mind when providing for a child. Clearly, if the funds are devised to the child outright, the funds upon receipt will be subject to claims of creditors. The method by which the elderly individual should provide for such child is clearly by trust under the parent’s will (testamentary trust).
The trust that provides maximum protection would give the trustee pure discretion to distribute the income and/or principal. If the trust had language allowing distributions for the child’s support, etc., such distribution might be subject to a creditor’s claims. However, if the trustee could distribute income and/or principal at the trustee’s discretion, that would be a better approach and render the child’s inheritance less available to creditors.
After considering this problem in great detail and discussing the matter with bankruptcy lawyers, I have concluded that I would desire a trust that accomplishes the following goals:
1. Distributions can be made to the child when needed.
2. Render the trust as immune to creditors as possible.
3. Be available to the child if his or her problems have been resolved.
The trust that I recommend given the above issues would allow the trustee to distribute income or principal to or amongst the child and his issue or the child and his siblings or both.
A creditor seeking to attach the child’s interest would be faced with the argument that a trust which is purely discretionary for the child and other relatives is not available to creditors since there is no interest in a trust of the child alone since the trust is discretionary for the child and others.
Perhaps the most important aspect of the trust is its discretionary nature, which would allow the trustee to terminate the trust and distribute the principal to the child if the situation changes and the creditor problems are deemed to no longer exist by the trustee.
The key to such planning is that there must be a trustee designation (and presumably contingent designations) that provides confidence that the intent of the will is carried out.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2009, Post 85
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