In Post 1, I discussed the handling of social security after a person qualifies for Medicaid. Since I have had this question on numerous occasions, I thought I would briefly summarize this issue.
After an individual qualifies for Medicaid, the nursing home will request that you assign social security and pension to them as representative payee.
The problems with such an approach are as follows:
1. Pension monies cannot be assigned as under the Internal Revenue Code they are inalienable (cannot be assigned).
2. Medicaid subsidizes Medigap insurance. Therefore, assigning the social security causes you to rely on the nursing home to pay the Medigap insurance, when you have the right to withhold the Medigap insurance and pay it yourself.
3. A Medicaid recipient can retain $35 a month. You can retain that in a separate account rather than assign that to the nursing home.
Therefore, if the nursing home requests to be the representative payee, refuse to do so and give the above as your answer.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2012, Post 186
Monday, February 27, 2012
Tuesday, February 21, 2012
Review Sale of Remainder Interests in a Life Estate
In Post 36, there was a discussion about transferring property and retaining a life estate.
The advantages to such technique are the life estate has no resource value and is not subject to the Medicaid lien. However, the disadvantage is that when a property is transferred and a life estate is retained, there is a transfer of the remainder interest. The tables for determining the remainder interest can be obtained from your Medicaid office. However, they are identical to the Internal Revenue service tables of 1988 (before the rate of interest became variable) or are set forth in Rev. Proc. 64-19.
The technique I suggested was that if a nursing home applicant transfers property and retains a life estate, the remainderman should purchase the remainder interest so that there is no transfer.
Although this seems like an ideal solution, there are some drawbacks.
Firstly, after the individual gets Medicaid, the expenses of the life tenant must be paid by the remainderman. That is, the applicant cannot use his or her pension or social security to pay the interests of the life tenant. As pointed out in Post 36, if the remainder interest were transferred to a "protected transferee", (i.e. a child who provided the necessary care to allow the applicant to stay at home rather than to go into the nursing home), there would be no period of ineligibility with respect to the transfer and the remainderman would not have to make any payment since the remainder interest is protected under the transfer rules.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2012, Post 185
The advantages to such technique are the life estate has no resource value and is not subject to the Medicaid lien. However, the disadvantage is that when a property is transferred and a life estate is retained, there is a transfer of the remainder interest. The tables for determining the remainder interest can be obtained from your Medicaid office. However, they are identical to the Internal Revenue service tables of 1988 (before the rate of interest became variable) or are set forth in Rev. Proc. 64-19.
The technique I suggested was that if a nursing home applicant transfers property and retains a life estate, the remainderman should purchase the remainder interest so that there is no transfer.
Although this seems like an ideal solution, there are some drawbacks.
Firstly, after the individual gets Medicaid, the expenses of the life tenant must be paid by the remainderman. That is, the applicant cannot use his or her pension or social security to pay the interests of the life tenant. As pointed out in Post 36, if the remainder interest were transferred to a "protected transferee", (i.e. a child who provided the necessary care to allow the applicant to stay at home rather than to go into the nursing home), there would be no period of ineligibility with respect to the transfer and the remainderman would not have to make any payment since the remainder interest is protected under the transfer rules.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2012, Post 185
Tuesday, February 14, 2012
Difference Between Transfers from Inter-Vivos Trusts and Testamentary Trusts
As indicated in Blog 115, distributions from inter-vivos trusts can be a transfer. The example given is as follows:
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.
Statutory provisions against "trigger trusts" apply only to inter-vivos trusts under the federal statute - 42 U.S.C. 1396p(d)(3)(B)(ii). As indicated in Blog 85, distributions from testamentary trusts are not transfers. However, such trusts should not have mandatory "kickout" provisions which refer to Medicaid eligibility.
Notwithstanding, if the distributions from the testamentary trusts, do not satisfy the elective share, such trusts may be deemed to transfer if the elective share is not satisfied (see Blog 183). That is, even though distributions from testamentary trusts are not transfers, if the elective share is not satisfied, the state takes the approach that disinheritance of a spouse results in a transfer. This position is incorrect, and this is discussed in Blog 169.
As discussed in many blogs, it is the obligation of the attorney to inform the client of the possibility, while warning them that a solution to one problem can create another problem.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2012, Post 184
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.
Statutory provisions against "trigger trusts" apply only to inter-vivos trusts under the federal statute - 42 U.S.C. 1396p(d)(3)(B)(ii). As indicated in Blog 85, distributions from testamentary trusts are not transfers. However, such trusts should not have mandatory "kickout" provisions which refer to Medicaid eligibility.
Notwithstanding, if the distributions from the testamentary trusts, do not satisfy the elective share, such trusts may be deemed to transfer if the elective share is not satisfied (see Blog 183). That is, even though distributions from testamentary trusts are not transfers, if the elective share is not satisfied, the state takes the approach that disinheritance of a spouse results in a transfer. This position is incorrect, and this is discussed in Blog 169.
As discussed in many blogs, it is the obligation of the attorney to inform the client of the possibility, while warning them that a solution to one problem can create another problem.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2012, Post 184
Tuesday, February 7, 2012
Review of Meaning of "Transfer"
On several previous blogs, I pointed out that 42 U.S.C. 1396(p)(c ) and 42 U.S.C.(p)(e) require an affirmative act. Therefore, such actions as a gift or a disclaimer constitute a transfer.
However, as I have pointed out, an "option" is not an affirmative act. Therefore, the state's decision that the failure to exercise the elective share is a "transfer" is incorrect. The ability to exercise an elective share is an option, which is an inaction, rather than an action.
Federal pre-emption is basically the problem in New Jersey elder law, and the most egregious example is the state's misinterpretation of the word "transfer".
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2012, Post 183
However, as I have pointed out, an "option" is not an affirmative act. Therefore, the state's decision that the failure to exercise the elective share is a "transfer" is incorrect. The ability to exercise an elective share is an option, which is an inaction, rather than an action.
Federal pre-emption is basically the problem in New Jersey elder law, and the most egregious example is the state's misinterpretation of the word "transfer".
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2012, Post 183
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