The Federal Statute treats payments from an inter-vivos trust as assets disposed of by the individual and subject to the transfer rules - 42 U.S.C. 1396p(d)(3)(A)(iii), 42 U.S.C. 1396p(d)(3)(B)(i). Distributions to someone other than the Grantor from a revocable or irrevocable trust are subject to the transfer rules.
Example: Trust provides for discretionary distributions of income and principal for children. Ten years after trust established by individual, $60,000 principal distribution made to a child. One year after this distribution, individual applies for Medicaid. Medicaid will be denied. Distribution from trust subject to 60-month look-back. Under current law, the penalty will begin only after the individual is institutionalized and assets are reduced to $2,000.
Therefore, the period of ineligibility will be in excess of eight months commencing the date of application.
Many attorneys are drafting trusts with "trigger" provisions (i.e. income or principal distributed to or for the benefit of grantor until entry into a nursing home, then principal distributed to children.) That is, payment to the individual is "foreclosed" upon entry into the nursing home with the result that a 60-month look-back is activated. This technique will not work for the above reasons.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2010, Post 115
Monday, August 30, 2010
Thursday, August 26, 2010
Real Estate Planning Ideas For Married Couple Revisited
I recently had an experience where I accomplished the dual goals of benefiting the couple and ingratiating myself to the real estate community simultaneously.
Posts 11 and 13 are to be consulted.
Basically, if a couple lives in an apartment and have enough funds to purchase a house, the following steps should be taken:
1. After institutionalization, a residence should be purchased solely in the name of the community spouse.
2. The community spouse resource allowance would be the maximum so long as the home is purchased after the first day of the month after continuous institutionalization. Basically, the home should remain in the name of the community spouse until after the applicant receives Medicaid.
3. After Medicaid eligibility, the home is sold and the proceeds do not affect eligibility (Post 13 indicates community spouse not limited to community spouse resource allowance after date of eligibility of applicant).
4. By using such technique, you have basically preserved all of the individual’s funds and ingratiated yourself toward the real estate community since there will be the acquisition of a home, which, in the near future, would be sold.
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 94
Posts 11 and 13 are to be consulted.
Basically, if a couple lives in an apartment and have enough funds to purchase a house, the following steps should be taken:
1. After institutionalization, a residence should be purchased solely in the name of the community spouse.
2. The community spouse resource allowance would be the maximum so long as the home is purchased after the first day of the month after continuous institutionalization. Basically, the home should remain in the name of the community spouse until after the applicant receives Medicaid.
3. After Medicaid eligibility, the home is sold and the proceeds do not affect eligibility (Post 13 indicates community spouse not limited to community spouse resource allowance after date of eligibility of applicant).
4. By using such technique, you have basically preserved all of the individual’s funds and ingratiated yourself toward the real estate community since there will be the acquisition of a home, which, in the near future, would be sold.
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 94
Tuesday, August 17, 2010
Sources of Information for Medicaid Rules
Unlike other areas of New Jersey law, which can be governed basically by cases or statute, the area of Medicaid eligibility is unique in this regard. For example, sources may include federal statutes, state statutes, state administrative regulations, Medicaid communications, verbal comments from state or local Medicaid workers or word-of-mouth.
The state has been remiss in both updating and implementing its Medicaid law. For example, the prior law known as OBRA ’93 was adopted by federal statute in 1993. Notwithstanding, it was not until May 16, 2001, that the state of New Jersey adopted administration regulations governing such law.
As required by state procedures, such law was proposed on June 5, 2000, requesting comments from the Bar and technical and substantive changes were issued on May 18, 2001. Notwithstanding, there were basically no substantial changes and the changes related to wording. This lack of attention to numerous comments provided by attorneys was ignored.
Many of the comments provided by attorneys were not only cogent, but were also correct.
Personally, Janice Chapin and I submitted seventeen comments, which we thought would be adopted and indicated obvious inconsistencies between the state law and the federal law. The two most salient discrepancies were and are New Jersey’s refusal to recognize the concept of spousal refusal and the insistence of New Jersey to treat disinheritance of a spouse in a nursing home as a transfer by the nursing home resident.
The Deficit Reduction Act, which was adopted in February, 2006, has not been implemented by regulations.
Since there are no governing regulations and minimal explanation by Medicaid communications, it is my opinion that the best sources for information are the Medicaid supervisors who attend periodic meetings during which the position on various issues are discussed. When the state will issue proposed regulations is unknown at this time. Therefore, in a way, we act at our peril in planning under the new law. I have attempted in my numerous posts to cut through this area of uncertainty and provide recommendations either based upon the prior law (which the new law has not changed) or my interpretation of the new law, based upon the federal statute and telephonic discussions with colleagues and knowledgeable Medicaid supervisors.
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 91
The state has been remiss in both updating and implementing its Medicaid law. For example, the prior law known as OBRA ’93 was adopted by federal statute in 1993. Notwithstanding, it was not until May 16, 2001, that the state of New Jersey adopted administration regulations governing such law.
As required by state procedures, such law was proposed on June 5, 2000, requesting comments from the Bar and technical and substantive changes were issued on May 18, 2001. Notwithstanding, there were basically no substantial changes and the changes related to wording. This lack of attention to numerous comments provided by attorneys was ignored.
Many of the comments provided by attorneys were not only cogent, but were also correct.
Personally, Janice Chapin and I submitted seventeen comments, which we thought would be adopted and indicated obvious inconsistencies between the state law and the federal law. The two most salient discrepancies were and are New Jersey’s refusal to recognize the concept of spousal refusal and the insistence of New Jersey to treat disinheritance of a spouse in a nursing home as a transfer by the nursing home resident.
The Deficit Reduction Act, which was adopted in February, 2006, has not been implemented by regulations.
Since there are no governing regulations and minimal explanation by Medicaid communications, it is my opinion that the best sources for information are the Medicaid supervisors who attend periodic meetings during which the position on various issues are discussed. When the state will issue proposed regulations is unknown at this time. Therefore, in a way, we act at our peril in planning under the new law. I have attempted in my numerous posts to cut through this area of uncertainty and provide recommendations either based upon the prior law (which the new law has not changed) or my interpretation of the new law, based upon the federal statute and telephonic discussions with colleagues and knowledgeable Medicaid supervisors.
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 91
Tuesday, August 10, 2010
Medicaid has Continually Interpreted that the State be the Remainderman of all Trusts
The administrative regulations (N.J.A.C. 10.71-4.10(f)) require that in order for a trust for the "sole benefit of" a spouse (subject to the c.s.r.a.), disabled child or disabled individual under the age of 65 to be exempt, the State must be the first remaining beneficiary. That is, the reimbursement requirement imposed by New Jersey applies to all "sole benefit of" trusts. Response to Comment 33 of the OBRA Regulations indicates so long as the Medicaid claim is satisfied, the trust can provide for other remainder beneficiaries.
This interpretation that the State be the remainderman is a requirement based upon a misunderstanding of the federal statute.
OBRA '93 requires that the state be reimbursed from trusts known as "(d)(4)(A)" trusts (trusts for disabled individuals under 65, Miller Trusts, pooled income trusts) - 42 U.S.C. 1396p(d)(4). These trusts are known as exempt trusts. Miller Trusts no longer exist. It is noted that the only "sole benefit of" trust referenced under this federal statute relates to a trust for a disabled individual under the age of 65. The exemption from the transfer rules for transfers for the "sole benefit of" a spouse or for the "sole benefit of" a disabled child is not based upon the aforementioned federal statute dealing with exempt trusts. The exemption for these transfers is based upon the federal statute which sets forth the list of exempt transfers - 42 U.S.C. 1396p(c)(2). While the federal statute requires that the remainderman of "(d) (4) (A)" exempt trusts be the State, there is obviously no such requirement in the transfer provisions and Medicaid is being more restrictive than the federal law.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2010, Post 114
This interpretation that the State be the remainderman is a requirement based upon a misunderstanding of the federal statute.
OBRA '93 requires that the state be reimbursed from trusts known as "(d)(4)(A)" trusts (trusts for disabled individuals under 65, Miller Trusts, pooled income trusts) - 42 U.S.C. 1396p(d)(4). These trusts are known as exempt trusts. Miller Trusts no longer exist. It is noted that the only "sole benefit of" trust referenced under this federal statute relates to a trust for a disabled individual under the age of 65. The exemption from the transfer rules for transfers for the "sole benefit of" a spouse or for the "sole benefit of" a disabled child is not based upon the aforementioned federal statute dealing with exempt trusts. The exemption for these transfers is based upon the federal statute which sets forth the list of exempt transfers - 42 U.S.C. 1396p(c)(2). While the federal statute requires that the remainderman of "(d) (4) (A)" exempt trusts be the State, there is obviously no such requirement in the transfer provisions and Medicaid is being more restrictive than the federal law.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2010, Post 114
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