TOPICS IN MEDICAID PLANNING

Competent Person with Option to Reside in Two States

2012-01-23T07:10:00.000-08:00

Very often the elder law attorney will be faced with a situation in which an individual who is competent and needs nursing home care resides in a state other than New Jersey. The family is considering whether the individual should go into a nursing home in the other state or should go into a nursing home in New Jersey.

Although the cardinal rule is that the decision should be made with respect to what is best for the parent, such decision may be made with reference to the law in both states.

It is my opinion that an attorney should not practice elder law in two jurisdictions as the law changes day to day in almost every jurisdiction. Therefore, I would recommend that the competent parent be on a conference call between the attorneys from two jurisdictions.

The attorneys from each jurisdiction should advise as to how Medicaid works in each of the jurisdictions and let the family decide which jurisdiction is appropriate.

An attorney rendering such advice who is licensed in only one jurisdiction, could be acting criminally for giving advice in the other jurisdiction. Also keep in mind, that if the person is incompetent, a change in jurisdiction would be impossible as the individual could not form domiciliary intent.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© January 2012, Post 181

Attributes of an Elder Law Attorney

2012-01-17T07:35:00.000-08:00

The elder law attorney must be familiar with various areas of law. These areas include elder law, tax law, constitutional law and estate law. The following are merely some examples. In a prior ICLE seminar, Janice Chapin, Esq. pointed out that the Medicaid statute should not be reviewed from the tax point of view but should be reviewed from the benefits point of view. The following are an example of this and other examples:

1. In the Mishkin case, the court held that the IRA of a community spouse was a resource. Technically, since Medicaid incorporates the social security statutes by reference and such IRA is not a resource for social security purposes, this decision is technically incorrect.
2. The elder law attorney must be familiar with the constitution. In one of my prior seminars, entitled: Constitutional Aspects of Elder Law, I stress such constitutional issues and in particular the doctrine of federal pre-emption.
3. The elder law attorney must be familiar with estates and trusts. For example, an estate in probate is an inaccessible resource. The question becomes when a community spouse inherits, whether the property in probate becomes a resource.
4. The elder law attorney must be able to rely on other professionals and determine what the appropriate time is. In Blog 165, I pointed out the need for other professionals and the appropriate time.
5. The approach of the elder law attorney is pointed out in Blog 167. That is, the elder law attorney should not dictate to the client what to do, but should point out the various possibilities and let the client decide.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© January 2012, Post 180

Resource and Lien Regulations Not Drafted with Reference to Each Other

2012-01-09T06:01:00.000-08:00

In our Legislation course at law school, we learned the doctrine of in pari materia. This means that statutes are drafted with reference to each other.

Unfortunately, this is not the case with respect to the resource rules and the lien regulations.

For example, in Blog 60, I pointed out that the state treats a disinheritance as a transfer to the extent of the elective share. The spouse's beneficial interest in any life estate or trust shall be valued at one-half the total of the property of the trust. Therefore, it would appear that a testamentary trust provided solely income to the spouse in the nursing home would prevent disinheritance from being treated as a transfer. That is, a trust with twice the income of the community spouse devised to the spouse in the nursing home satisfies the elective share requirements. However, lien regulations under N.J.A.C. 1:49-14.1(n)3. provides that if a trust is a discretionary trust, the Medicaid beneficiary cannot compel distributions and if the Medicaid recipient had no interest for 5 years, the trust is not subject to the lien. However, such testamentary trust would be treated as a disinheritance and not satisfy the elective share.

Therefore, I have concluded in my materials on an ICLE program entitled: "Estate Planning Issues" Final Medicaid Regulations (Finally!), that the best approach to avoid such problems would be to devise the elective share to the nursing home recipient.

The discrepancy between the lien regulations and the transfer regulations seems ridiculous. That is, if you provide for a discretionary trust for a nursing home resident, that would be treated as a resource notwithstanding the fact that such trust would not be subject to the lien regulations. Query: how could one draft a trust that would not satisfy the lien regulations, if one did not qualify for Medicaid since such devise would be a transfer under the elective share provisions which would require mandatory income.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© January 2012, Post 179

Real Estate Spending as Part of the Spenddown

2012-01-03T08:32:00.000-08:00

In numerous blogs, I have pointed out that real estate expenses are part of the spenddown to Medicaid.

However, sometimes such expenses may raise questions.

For example, in a recent blog (entitled: "Step-Transaction Doctrine"), an interesting issue arises.

Suppose a parent is going to transfer the house to a child because the child provided the necessary care to allow the parent to remain home. We are aware that such transfers are exempt.

The question then becomes can expenses be incurred by the parent before the transfer as part of the spenddown or would Medicaid apply the step-transaction doctrine and say such expenses were for the benefit of the child.

I have spoken to several supervisors and they have taken the position that so long as the expenses were paid while the potential applicant is residing in the home they will not be treated as transfers and be part of the spenddown. I was surprised by such result, but it just points out that you have to inquire even if you are in doubt regarding Medicaid issues.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© January 2012, Post 178

Advantages and Disadvantages of Owning Joint Property with a Sibling

2011-12-20T10:45:00.001-08:00

It has been pointed out in prior blogs that a secondary residence held jointly with a sibling is an inaccessible resource if the sibling refuses to sell. Notwithstanding the fact that such ownership would not disqualify a person from Medicaid if the sibling refused to sell, there are some negative aspects to such planning.

Firstly, if an individual qualified for Medicaid owning such property, one half the joint income would have to be used to defray the cost of the home. Medicaid would not let you use your pension or social security, so the cost of the home would have to be paid by the sibling.

Moreover, if such property were a tenancy in common, the decedent's interest would be subject to the Medicaid lien. However, if such property were a joint tenancy and the applicant died first, there would be a cogent argument that the property is not subject to the lien.

In a prior blog in which I discussed real estate planning (Post 11), I pointed out that an exempt transfer to a sibling who has an equity interest in the home and who is residing in the home for at least one year prior to the date of institutionalization is an exempt transfer. This reference is to the primary residence and presumably the spouse of the Medicaid applicant has predeceased. If the potential applicant transfers the property to a sibling who had such equity interest in the home, the transfer would be exempt and not subject to the Medicaid lien. However, if the sibling predeceased and the property passed by operation of law to the applicant, the interest would be subject to the lien.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2011, Post 177

Disinheritance of a Child

2011-12-19T06:49:00.001-08:00

In a prior post (Post 124), I stressed the point that the will is not only to dispose of one's assets but also is a legacy.

That is, in common law jurisdictions, one can disinherit a child. The question is should one disinherit a child and if so, how to make such provisions.

Under the civil law system, there is a concept known as "forced share," which means that a child has an interest in an estate as we have in a concept known as the elective share.

I advise my clients carefully that before they disinherit a child, they should be aware of the fact that it is a legacy and should be sure that they desire to do so. Notwithstanding, if a child is to be disinherited, the question is how to make such provisions.

In such case, I use language similar to: "I have made no provisions under this will for my child, for reasons best known to him". In a recent article in The New York Times, that was the language suggested.

Other language, which might be more inflammatory, opens one up to a will challenge and I believe that the best language is provided above. Merely leaving out the name of the child also could lead to litigation, and a reference to the child in the above manner seems advisable.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2011, Post 176

The Relationship of Elder Law Attorney, Geriatric Care Manager and Long-Term Insurance

2011-12-12T08:51:00.000-08:00

Several of my previous blogs have stressed the need for other professionals, such as geriatric care managers, doctors, long-term insurance experts, colleagues and the various institutions.

A typical example might be an individual transferring from New York to New Jersey and the family is in doubt as to the appropriate type of care. In such case, I would not meet with the client initially, but would refer a geriatric care manager to advise me of the appropriate venue.

Also, many writers are of the opinion that it is an attorney's obligation to advise of long-term care insurance before undertaking any planning.

Therefore, I would view it as an ethical issue as to the appropriate time an attorney should render his advice. Ideally, counsel should meet with a client and the appropriate expert so that information is given simultaneously.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2011, Post 175

Ethical Issues Relating to the Listing as a "Super Lawyer"

2011-12-05T06:53:00.000-08:00

After much controversy, the rules of professional conduct 7.1 effective November 2, 2009 discussing a listing as a Super Lawyer, authorized such listing so long as the following requirements are met:

"A truthful communication that the lawyer has received an honor or accolade is not misleading or impermissibly comparative for purposes of this Rule if: (1) the conferrer has made inquiry into the attorney's fitness; (2) the conferrer does not issue such an honor or accolade for a price; and (3) a truthful, plain language description of the standard or methodology upon which the honor or accolade is based is available for inspection either as part of the communication itself or by reference to a convenient, publicly available source."

This opinion was clarified by Opinion 42 Issue December 16, 2010 which requires language similar to the following so that the word "Super Lawyer" does not imply a comparison to other lawyers.

An appropriate listing is: "Mr. Smith is on a list called Super Lawyers for the year 2011. Such list is prepared by Thomson Reuters. The selection process includes peer nominations, a blue ribbon panel review and independent research of candidates. Such list does not imply a comparison to other lawyers, but is compiled by the above process. This advertisement has not been approved by the Supreme Court."

Therefore, a listing of one as a "Super Lawyer" is unethical unless the above qualification is made.

It would appear that these opinions are based upon the First Amendment rule of the public to be informed rather than the First Amendment right of an attorney to state his qualifications.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2011, Post 174

The Step-Transaction Doctrine

2011-11-29T06:30:00.001-08:00

In the area of corporate reorganizations, there is a theory known as the "Step-Transaction" doctrine. The argument is that you cannot accomplish in two steps what would be disallowed in one. Therefore, any corporate reorganizations, which appear to be non-taxable, are treated as taxable when the taxpayers attempt to accomplish in several steps what is not allowed in one transaction. A further discussion of this topic in the corporate area is beyond the scope of our analysis.

However, the state attempted to apply the doctrine when transfers to disabled children were not allowed. The attempted theory was that if the disabled child transferred the assets to another child after the initial transfer, under the step-transaction the transfer would have been treated to the healthy child and not the disabled child. However, the state has recanted its position. There is no justification for application of the doctrine in the elder law area.

However, in discussing the two-year rule (child providing the necessary care so that a transfer of a house to the child is exempt from the transfer rules), I pointed out that there should not be a preconceived plan that the transferee child divide the transferred assets amongst the protected transferee and the other children. That is, there is always a danger that the state could apply the doctrine, in which case a transfer would not have been deemed made to the child who provided the necessary care, but rather to all the children, which would result in a penalizing transfer.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 173

Purposes of a Buy-Sell Agreement

2011-11-21T06:54:00.000-08:00

In Post 138, I raised the possibility that stock of a closely-held corporation might be deemed an inaccessible resource. Although not directly related to the elder law area, I think it would be helpful to discuss the purposes of a buy-sell agreement.

A buy-sell agreement has the following purposes:

1. To set the value for estate tax purposes
2. To provide liquidity to the estate of the shareholder
3. To prevent the beneficiaries of a shareholder from owing stock so that the remaining shareholder(s) can have the stock
4. If a stockholder is disabled, the stock can be purchased mandatorily.

Valuation of stock is set forth in Section 7203 of the Internal Revenue Code, which requires that stock can be valued in accordance with the industry.

Although the purchase of stock during lifetime can be optional, it must be mandatory upon death.

One might also provide that if a shareholder becomes disabled it is mandatory that the stock be purchased by the corporation. In the event such shareholder does not become disabled, the stock can be treated as key-man insurance. That is, such insurance would replace the value of the deceased shareholder to the corporation.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 172

The Issue of Competence

2011-11-16T09:25:00.000-08:00

Many people confuse the meaning of competence for medical purposes and for legal purposes.

The standard for legal competence varies depending upon the document to be signed. For example, competence with respect to testamentary capacity (ability to make wills) requires that the individual be aware of the objects of his or her bounty, the assets that they own and the disposition to those individuals. Competence for power of attorney purposes requires that the grantor of the power understand that control is being given to the holder.

It is extremely important in preparing a power of attorney that the power not be joint, either several or together. A joint power of attorney gives rise to conflict, which should be avoided at all costs.

Some of the clauses in a power of attorney should include transfers when appropriate (i.e. the home to a child or children who provided the necessary care, the home to a spouse who does not go into a nursing home,) HIPAA language, revocation of a prior power of attorney, avoiding staleness and the ability to undertake general Medicaid planning.

A major issue, which will be discussed by Janice Chapin, Esq., at our upcoming webinar entitled: "Constitutional Aspects of Elder Law and Guardianship" is the mental state of an individual coming from another jurisdiction to New Jersey. As indicated in the seminal case of Shapiro v. Thompson 394 U.S. 618,89 S. Ct. 1322,22 L. Ed. 2d, if a person enters New Jersey, it would be unconstitutional to deny such individual benefits. The question to be addressed is that if the person came to New Jersey and were not competent, I believe the person would not be entitled to benefits, since the person's domicile would be the last jurisdiction in which the individual had competence. Another major issue is the definition of domicile. In this regard, I refer you to In Re Dorrance's Estate 309 Pa. 151, 163 A. 303, cert. denied, 288 U.S. 617 (1932). Although domicile is a subjective determination (a place where a person lives and intends to make a home,) such subjective termination is made by objective factors such as time spent in a jurisdiction, place of filing of income taxes, the jurisdiction in which a car was rented and similar matters.

Finally, from a legal point of view, if an individual meets the test of competence at the moment of signing of documentation, that would be sufficient. Therefore, it is an attorney's ethical obligation to make his or her own determination of legal competence in order for an individual to sign documents.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 171

Engagement Letters for Elder Law Attorneys

2011-11-08T07:37:00.000-08:00

Very often an individual will be represented by two attorneys in the elder law field. For example, an elder law attorney might not have the vision and expertise to handle a real estate transaction or might be of the opinion that to represent two individuals would be a conflict. For example, an attorney representing a potential transferee of real estate (i.e. a child who provided care to allow a parent to remain home rather than go into a nursing home - see Post 6), might be of the opinion that to represent the applicant and the transferee would be a conflict.

It would be wise for the two attorneys to have separate engagement letters as the representation of the individuals is separate. However, if one of the attorneys is of counsel to the lead attorney, a separate engagement letter is not necessary. However, it is my opinion, that it would still be prudent for an individual who is "of counsel" to have a separate engagement letter.

As Carol Johnston, Esq. of the Advisory Committee on Professional Ethics and I pointed out in my webinar entitled "Ethical Dilemmas for Elder Law Practitioners", the question often is not whether there is a conflict, but whether the conflict should be waived. Therefore, elder law counsel who feels there is a conflict, should have a separate engagement letter from the other attorney.

Generally, since the state often violates federal pre-emption (which I will be discussing in my next webinar entitled "Constitutional Aspects of Elder Law and Guardianship", dated December 15, 2011,) counsel should point out in correspondence to a nursing home applicant areas of uncertainty. For example, in order to execute a proper caretaker agreement, the payments to a child must be "reasonable". The state refuses to define reasonable and will not give an a priori decision. Therefore, counsel should indicate in his or her correspondence to the client, this vague language and that you have advised the client that there is no guarantee that the payment to the child would be deemed unreasonable, and the excess of the amount of the payment over the amount deemed "reasonable" by the state would be deemed a transfer.

For example, I personally feel that the word "reasonable" violates the due process clause as it does not provide adequate notice as to the amount of payment that can be made by a parent to the child.

In my upcoming webinar, I point out many of the ambiguities in the state's statue due to violation of federal pre-emption. Whether your ambiguities should be in an engagement letter or a separate letter, is at the discretion of counsel. The main areas of violation of federal pre-emption are "disinheritance of the community spouse" and "spousal refusal".

The state has retracted "reverse half-a-loaf planning." Although I have pointed out in Post 113 that such planning should work, it is highly advisable not to undertake such a plan in light of the state's decision in Medicaid Communications 10-02 and 10-03. Therefore, I would point out in an engagement letter or subsequent letter, the fact that such planning should work but is not acceptable by the state.

I am particularly concerned about the violation of federal pre-emption in the state's denying reverse half-a-loaf planning. Firstly, the real reasons are set forth in Post 113. Moreover, the ruling which denied reverse half-a-loaf planning (Medicaid Communication 10-02), was dated May 26, 2010. Notwithstanding, the state has denied such planning even before that date. It is my opinion that such position not only violates federal pre-emption, but constitutes an ex post facto law, since the state is applying such ruling prior to the date of the Medicaid Communication.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 170

Negating the State's Position that Disinheritance is a Transfer by a Nursing Home Resident

2011-11-01T06:22:00.000-07:00

In Post 60, I pointed out the State's position that disinheritance be treated as a transfer of one-third the augmented estate (i.e. the elective share).

Notwithstanding pursuant to N.J.S.A. 3B: 8-1, a surviving spouse or domestic partner does not have a right of election if the decedent and the surviving spouse or domestic partner (i.e. nursing home resident) had been living separate and apart in different habitations or ceased to cohabit as man and wife, as a result of a judgment of divorce from bed and board or circumstances which would give rise to a cause of action for divorce or nullity of the marriage prior to the date of death of the decedent. In my prior posts, I pointed out that the state violates federal pre-emption in treating a disinheritance as a transfer, on the theory that the elective share is an option and not an affirmative act (i.e. a transfer). Moreover, pursuant to the statute, the elective share does not apply if the decedent and the surviving spouse or domestic partner (i.e. nursing home resident) had been living separate and apart in different habitations or had ceased to cohabit as man and wife.

Therefore, if there is no elective share based upon the definition in N.J.S.A. 3B: 8-1, the state's argument that disinheritance is a transfer is completely negated.

N.J.S.A. 3B: 8-2 provides that the right of a surviving spouse or domestic partner (i.e. nursing home resident) to take an elective share of property in New Jersey is governed by the law of the decedent's domicile at date of death.

The meaning of "augmented estate" is set forth in N.J.S.A. 3B: 8-3 through 3B: 8-18.

Specific reference is made to N.J.S.A. 3B: 8-12 which gives the surviving spouse or domestic partner an election to take his elective share in the augmented estate by filing a complaint in the Superior Court within 6 months after the appointment of the personal representative of the estate. That is, as Post 137 indicates, the right to take the elective share is not an affirmative act but the surviving spouse or the domestic partner may elect to take the elective share. This statute indicates that the 6 month period may be extended for "good cause shown" by the surviving spouse or domestic partner.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 169

Basic Documents Needed by Clients in Estate Planning Revisited

2011-10-24T07:32:00.000-07:00

In a prior post, I discussed the necessary documents for a client. There are several additional points, particularly with respect to joint holders of a power of attorney and joint holders of a living will that I think should be addressed.

Therefore, I will review the prior post with these topics indicated. There are several basic documents that I discuss with every older client whom I represent. However, many of these ideas also apply to younger individuals.

The basic documents for every person, particularly the elderly, are a will, a living will and a power of attorney.

A will is a document that directs how the assets in the name of the individual shall pass upon their death. The nature of the will depends upon the person's situation. For example, the purpose of the will might be to minimize death taxes, which can involve complicated estate planning. Or, the will might be that of a healthy spouse whose partner is in a nursing home, which has rather complicated considerations also.

However, one must keep in mind that a will is not the only document that disposes of assets upon an individual's death. Assets that pass under a will are known as probate assets and those that pass outside of a will are known as non-probate assets. Non-probate assets are those that may pass by beneficiary designation, such as life insurance, retirement plans or annuities. The beneficiary designations of such non-probate assets should be coordinated with the plan under the will.

It is my practice not to dictate to a client the terms of a will. I point out the alternatives, discuss advantages and disadvantages of different approaches, review the assets with the client and let the individual decide what is the best course to follow from a personal point of view. That is, in addition to the objective legal reasons for a will, it is the client's subjective intent (after understanding all possibilities) that should govern the overall estate plan.

It must be kept in mind that a will performs two functions. One is to dispose of one's assets in the appropriate manner. A will is also a legacy. That is, an individual often feels that his or her child has not met expectations and desires to "disinherit" such child. I point out to the individual that such language will be the individual's "legacy" and must be carefully considered before undertaken.

With respect to a power of attorney, the first point of significance is that the document must be "durable". That is, at law, a power of attorney is a consensual agreement by the person granting the power (the principal) and the individual given the power (agent). If an individual becomes incompetent, the ability to consent ceases. Therefore, it is necessary that the power of attorney be "durable" and, therefore, survives the incompetence of the principal. That is, for an elderly person, there is a need for someone to act on one's behalf if such individual becomes incompetent.

There is a form of power of attorney known as a "springing" power of attorney, which becomes effective only if a person is incompetent. I do not recommend such a power since a durable power of attorney avoids the issue of incompetence and a springing power of attorney would only be effective if an individual becomes incompetent. Therefore, the "springing" power of attorney has no benefit.

The key to a power of attorney is that it has language so that all assets of the principal are "accessible" to the agent. In this way, if the principal needs money for any reason, including a nursing home, and is not competent, the agent can "access" these funds.

Also, a power of attorney should have special language, such as the ability to access medical records if the principal (who generally is an elderly person) is unable to do so. The durable language allows this result. Also, a power of attorney should include planning language to cover a situation in which a person may enter a nursing home in the future. The language dealing with Medicaid planning depends upon the situation of the principal and will be discussed more fully in another blog.

Very often a parent will name two children as joint holders of a power of attorney so as to avoid family friction. I think this approach requires careful review, since if the children differ on the power of attorney and one acts on his or her own, such actions might violate the thoughts of the other holder. Even worse would be to name joint holders of a power of attorney who must act together. This could create a non-agreement and possibly court approval, which a power of attorney is to avoid.

It is my practice to reference any type of asset an applicant may have to make sure the power of attorney can be used to liquidate such asset. However, not all companies will require that the power of attorney have language relating to the specific asset. It is important that the power of attorney be done as soon as possible, particularly if the individual is failing. A power of attorney can only be done if the individual is competent.

A living will is a document which provides as to whether extraordinary methods be taken in case an individual cannot make the decision by himself or herself. There are several types of living wills. One form known as an "Appointment of Health Care Representative" gives the individual appointed under a living will the general authority to carry out the wishes of an individual based upon the individual's intent as conveyed to the appointee during lifetime. A second type of living will known as an "Advance Directive for Health Care" sets forth the desires for the individual in advance. For example, this document provides that treatment be withheld if it is "experimental". Such language creates an ambiguity as the definition of "experimental" can vary from medical institution to medical institution. Therefore, it is my recommendation that if an elderly person has someone that he or she trusts, the general grant of authority under the Appointment of Health Care Representative is preferable.

It is necessary that an individual appointing a holder of a living will not name two holders either severally or jointly. Decisions regarding a living will often must be instantaneous. Having joint and several holders or joint holders together could create a conflict situation and ruin the simplicity of the living will. Therefore, holders of a living will must be named successively.

As can be seen, pro-forma language is not suitable for any of the documents discussed, and must be discussed individually in detail. That is, the client makes the final decision with respect to the format of each document, after being fully informed.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2011, Post 168

Approach of Elder Law Attorneys in Dealing with Clients

2011-10-17T06:44:00.000-07:00

Elder law is unique in that the state often disregards the federal rules. In this regard, various blogs have discussed the violation of federal pre-emption. For example, the state's position on spousal refusal, disinheritance of a spouse being treated as a transfer and the requirement that all trusts have the state as the remainderman, all clearly violate the federal statute.

Therefore, the elder law attorney is often presented with the conundrum of the approach to take in advising a client. My particular thinking is that the attorney should not be dictatorial, but should point out the federal law, the state law and even the variants from counties to counties.

For example, I have discussed in numerous blogs the exemption of the transfer of the home to a child who provided care for the parent for two years prior to the nursing home admission as being an excludable transfer. I have also pointed out in one example a situation in which a child does not live in the home, but is willing to. I pointed out the possibility of the child moving into the home in the hope that the parent not go into the nursing home for two years, so that the two year rule should apply. Whether this advice should be given mandatorily or optionally, is obvious. This is just an example of a possible situation in which the client should decide after the attorney advises of the possibilities.

We have also discussed caretaker agreements in which the state has determined that the compensation to the child should be "reasonable". The state refuses to define reasonable. Therefore, in doing a caretaker agreement you must advise the client that the state's position might be unconstitutional and violate due process, as the word "reasonable" is not sufficient to provide adequate notice of the amount of compensation.

Another example of an uncertainty is whether an individual constitutes a dependent relative. We have discussed the fact that a dependent relative residing in the home renders the house an exempt resource. It is not the attorney's decision to decide whether a relative is dependent, but it is the attorney's role to bolster the status of dependency, the various factors for which are set forth in Post 14.

Therefore, it is my opinion that an elder law attorney should never dictate to a client what path to take, but rather should point out the law, the uncertainties of the situation and what the client subjectively is willing to undertake.

Further, in your correspondence to your client, you should set forth a memo as to the plan, the issues presented and the fact that you can never guarantee results because of the uncertain status of New Jersey law.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2011, Post 167

Marketing for the Elder Law Attorney

2011-10-11T10:21:00.000-07:00

Every elder law attorney has his or her own method or methods of marketing. Websites, blogs, articles and speaking are the typical techniques.

I have found it particularly helpful to have a marketing expert to craft my website so as to convey the nature of my practice. I have personally utilized the talents of Daniel Rudy (daniel.rudy1@gmail.com) in developing my website. Mr. Rudy has advised me that it is important in developing a website to convey the nature of your practice and what your firm has to offer. There are many marketing experts who provide such activities.

With respect to lecturing as a marketing technique, it is necessary to present topics of interest. Personally, I am undertaking my fifth webinar in the last two years, which is entitled: "Constitutional Aspects of Elder Law and Guardianship". Past webinars have been entitled: "Medicaid Planning Essentials: What You Need to Know", "Practical Medicaid Planning Revisited" and "Ethical Dilemmas for Elder Law Practitioners". Of course, public speaking is the best venue. I have had the pleasure of speaking at numerous ICLE programs with Janice Chapin, Esq. of North West New Jersey Legal Services.

In addition, on my website, I exhibit one blog a week on a topic that I think is pertinent to the elder law attorney.

Perhaps most important, is to point out the uncertainty of conclusions in the elder law area. This is a topic I will be discussing at my next webinar.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2011, Post 166

Review of the Need for Other Professionals

2011-10-03T08:52:00.000-07:00

It has been stated, and I agree, that it is an obligation of an attorney to advise a client of long-term care insurance before undertaking transfers for any reason. There are many long-term care insurance experts and it is an attorney's obligation to recommend an individual who in the attorney's judgment is most knowledgeable in the area.

I have also discussed the need for a geriatric care manager. Such person is necessary to advise the attorney of the proper facility that an individual should live in. That is, the most basic doctrine of elder law is that a person should live in the least restrictive environment. Therefore, whether the home, an independent living facility, an assisted living facility or a nursing home is most appropriate, is a decision that should be made by a geriatric care manager.

I have discussed the need for an accountant to prepare an individual's tax return, the payment of such tax being part of the spenddown process.

An attorney should have colleagues with whom the attorney consults in light of the confusion of the New Jersey Medicaid law. Particularly, an attorney should have a relationship with legal services, who often are aware of the benefits available.

A disabled child has special status under the Medicaid law. Often, such individual will not have qualified for social security benefits. The state will make its own determination if sufficient information is provided.

It has been discussed in Post 103, that once Medicaid planning is undertaken, financial planning or estate planning is no longer relevant. Therefore, it is necessary to have a relationship with a broker, who would be available to liquidate the individual's stocks or retirement plans.

Also, an attorney should consult with someone regarding Medicare and supplemental benefits. An individual in a nursing home, may require medical treatment, and the cost of the Medigap are covered by Medicaid as discussed in Post 1.

A relationship with administrators of various nursing homes would be advantageous, particularly if you require immediate placement in a nursing home. Such relationship is also advantageous in light of the fact that admission agreements also often have unenforceable contracts, such as a third party guarantee. Convincing the nursing home to eliminate such requirement although required by law (both state and federal), is a difficult task.

Finally, I think it would be helpful if an attorney has experience with a Medicaid supervisor in each of the counties in which he or she practices. This dialogue is often necessary if there are equivocal issues regarding Medicaid.

The list of other professionals is probably infinite, but the above represents some of those that should be part of every elder law attorney's arsenal.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2011, Post 165

The Importance of Timing of Transfers

2011-09-26T06:28:00.000-07:00

In Post 6, I analyzed the reasoning for delaying the transfer of a house to a child who provided care for a parent for the requisite time period and concluded that the transfer should be delayed until the Medicaid proceedings. The reasons were having the advantage of presenting information to justify the necessary care and also to lose the step-up in basis upon death only if necessary.

Similarly, if an individual has a disabled child who is a possible transferee, the transfer should be delayed until the Medicaid proceeding. That is, a transfer currently if the parent never goes into a nursing home, loses the step-up in basis upon death. The transfer results in the child receiving a carryover basis, which can be voided if the parent dies prior to going into the nursing home. Of course, if the child receives the home and resides in it for the requisite time period, the carryover basis can be increased by a $250,000.00 amount or $500,000.00 amount should the client be married.

Since reverse half-a-loaf planning has been denied by the State, if five-year planning is contemplated, the transfer should be made currently regardless of the laws of the step-up in basis to start the clock running on the 60-month lookback period.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© September 2011, Post 164

Summary of Factors to Consider in the Spenddown Process

2011-09-22T06:22:00.000-07:00

In the simplest situation which we have a single applicant applying for Medicaid, the following are some of the salient factors to consider in projecting the date of eligibility. Assuming an average monthly nursing home costs $10,000.00 and social security of $2,000.00 (no pension), and $100,000.00 of assets, consisting of stocks, cash accounts and retirement benefits, the following factors should be considered:

1. The net cost per month would be $8,000.00 ($10,000.00 minus social security).
2. An approximate cost of a pre-paid funeral would be $10,000.
3. The nursing homes often require a deposit of two months nursing home costs, the net amount of which would be $16,000.00
4. There is a cost of liquidating the IRA, the distribution of which results in ordinary income. Therefore, the income tax cost would be part of this spenddown.
5. If there is a money market, many people are concerned that there would be a penalty for termination during a money market term. However, there cannot be a penalty if the term is interrupted by the death of the applicant.
6. Of course, as indicated in Post 3, the cash value of life insurance could also be a factor.
7. If there are stocks, which must be sold, capital gain enters into the computations.

As indicated in Post 103, once the decision is determined that Medicaid is the goal, financial planning is no longer relevant. That is, a client cannot hold on to a valued investment since all resources must be liquidated in order to project the date of eligibility.

Many other topics relate to this, such as an inadvertent inheritance of the Medicaid applicant which is discussed in Post 60.

As indicated throughout the postings, the relevant amount of $4,000.00 or $2,000.00 must be made on the first day of the first moment of institutionalization. Institutionalization has been defined as the earlier of the first day a person enters a nursing home, goes into a hospital or receives home care.

Keep in mind in a spousal situation, the "spousal income allowance," also known as the shelter allowance and/or MMNA, can be set aside for the community spouse. Also the amount of Medigap insurance can be retained by the community spouse, as can $35.00 a month. Therefore, as indicated in Post 1, a spousal situation assigning social security, might be imprudent. Said posting also points out that pension benefits cannot be assigned because of restrictions in the Internal Revenue Code.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© September 2011, Post 163

Review of Partial Interest in Real Estate

2011-09-12T08:27:00.000-07:00

In Post 86, I discussed the advantages and disadvantages of a potential Medicaid applicant transferring property and retaining a life estate. The advantages are that the retained life interest is assigned no resource value nor is it subject to the lien. On the negative side, as pointed out in said Post, New Jersey Practice, Celantano, ¶4.8 indicates that the individual with retained life interest has certain obligations. If an individual is in a nursing home, the social security and/or pension cannot be applied to pay these costs and the burden falls on the remainderman.

In addition, the remainder interest is deemed to be a transfer and could cause a delay of Medicaid. The computations for the value of a life estate and the remainder interest are set forth in a prior Revenue Procedure, which bases its tables on the Internal Revenue Code prior to the IRS adjustment for current interest rates.

The transfer penalty can be avoided by having the remainderman purchase his or her remainder interest. However, the monies paid to the applicant are then available resources.

I have also discussed in Post 48 the fact that inaccessible resources are excludable resources for Medicaid. Therefore, if the applicant owns property jointly with another individual, the property is an inaccessible resource if the co-owner refuses to sell (Post 48).

If the co-owner is a child of the applicant and provided care for at least two years that enabled the applicant to remain at home rather than go into a nursing home, a transfer to the child is exempt from the Medicaid transfer rules (see Post 6). However, if the co-owner is not a child (a stranger), the applicant has an obligation to pay one-half the net cost with no money to do so. Another situation would be if the applicant owned the property jointly with a sibling (see Post 11), and the sibling resided with the applicant for at least one year prior to institutionalization, the transfer to the sibling also results in a non-penalizing transfer.

The advantage of a transfer to the child or the sibling as discussed above, is that the property is also exempt from the Medicaid lien.

From an estate planning point of view, keep in mind that a joint ownership passes by operation of law, while a tenancy in common is a probate asset and passes under the applicant's will.

As in all areas of Medicaid, an applicant after consultation with counsel must review the pros and cons of any planning technique, particularly when we are dealing with jointly-owned real estate.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© September 2011, Post 162

Creativity Required in Elder Law Planning

2011-09-07T09:12:00.001-07:00

Very often a situation will arise where it appears that Medicaid eligibility is lost. Often, creative thinking can preserve eligibility.

I can think of two very clear examples which will emphasize this point.

There is a theory in Medicaid known as the "stupid kid" defense. Assume a child has a power of attorney for a single parent and has $3,000 and the parent has a $2,000 liability. Further assume the child neglects to pay the liability so that the amount of resources at the appropriate time is $3,000. Janice Chapin of Central Jersey Legal Services has been successful in arguing what is known as the "stupid kid" defense. That is, Medicaid has allowed eligibility on the basis that the parent should not suffer neglect of the "stupid kid".

Another example comes to mind. Approximately 20 years ago, Hunterdon County Legal Services had a matter where the only applicant's resource was corporate stock and a buy-sell agreement. Such an agreement often provides for the other shareholders to have an option to buy and that upon the death of the shareholder, the purchase can be mandatory. At an administrative hearing, it was held that such stock was not an available resource since it was subject to the buy-sell agreement.

Like in all Medicaid situations, there is no guarantee that these approaches will work with any County board. However, these arguments have worked in the past and creativity should be the key note planning by any Elder Law attorney.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© September 2011, Post 161

The "Pig" Theory in Elder Law

2011-08-29T07:03:00.001-07:00

Numerous blogs have discussed excludable resources such as funeral expenses, expenses used to fix up the home, transfers to a disabled child, payments pursuant to a Caretaker Agreement, and related matters.

Underlying these expenditures is an unwritten rule known as the "pig" theory. That is, even for an expense that is exempt, there is a subjective limitation. For example, I doubt whether Medicaid would allow funeral expenses of $50,000. Similarly, fix-up expenses on an excludable resource, such as a home, are limited by the theory. It is doubtful whether Medicaid would allow $200,000 in improvements.

Caretaker Agreements have been limited by the word "reasonable." Although Medicaid has not defined the word "reasonable", there is a subjective limitation limited by the "pig" theory.

Although transfers to a disabled child are exempt, it is my inclination that there is some limitation that Medicaid would not accept.

While one motor vehicle is an excludable resource, it is doubtful whether the purchase of a Lamborghini would be allowable. Although such examples are limitless, such theory must be considered even when making an exempt transfer or purchasing an excludable resource.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 160

Key Federal Estate Tax Issues in Elder Law

2011-08-23T07:41:00.000-07:00

Numerous blogs have referred to the fact that knowledge of federal estate tax is necessary for an Elder Law attorney.

I thought it would be helpful at this point to review some of these issues. Major considerations would be the following:

1. If property is transferred with a retained life estate, the property gets a step-up in basis under Section 36.
2. If property is gifted, the transferee gets a carryover basis.
3. The basis of any property is increased by capital improvements such as roofing and improvements for a disabled relative.
4. Cost of maintenance and upkeep after date of death are not deductible.
5. Cost of preparation of property for sale and the cost of sale (such as attorney's fees and broker's commissions) are deductible as administration expenses.
6. Any debt of decedent regardless of its nature, is deductible under Section 2053. Other administration costs that are deductible are costs of sale of any type (such as an auction to sell personal property and commissions to sell stock).
7. For federal estate tax purposes, life insurance over which decedent had any form of ownership and life insurance payable to the estate (including certain items such as post- mortem dividends and post-mortem interest) are includable. However, for New Jersey inheritance tax purposes, life insurance to a named beneficiary is not taxable except for limited items.
8. Other typical administration costs are costs of burial, including the cost of the administrator to travel to administer the estate. However, costs of a beneficiary, are not deductible.
9. Costs of the executor, such as litigation relating to the elective share, are also deductible. However, costs of a beneficiary in seeking elective share are not deductible. An argument can be made that costs of a beneficiary in this case should be deductible as all costs are necessary to resolve the administration of the estate.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 159

Planning When One Spouse Enters a Nursing Home

2011-08-16T06:52:00.000-07:00

Suppose a couple has approximately $700,000.00 in liquid assets and the wife is about to enter the nursing home. The question is what might be an appropriate plan in such a situation.

Since "reverse half-a-loaf planning" has been incorrectly denied by the Medicaid authorities (see Post 113), the best plan might be to transfer all the assets to the healthy spouse. If the ill spouse lives five years, the maximum community spouse resource allowance ($109,560.00) plus any remaining monies would be saved for the healthy spouse.

In the event the healthy spouse predeceases, it is recommended that the will of the community spouse leave the elective share outright to the ill spouse (see The Final Medicaid Regulations (Finally!), 2001 "Estate Planning Issues", by Levin, Mark) with discretionary income and principal to the ill spouse and others. In the event the ill spouse enters the nursing home, the principal can be distributed to the other sprinkle beneficiaries as the transfer rules for trusts apply only to inter-vivos trusts (see Post 15) and not to testamentary trusts. Of course, it is necessary that words such as "distributions of income and principal be paid in a way that the person qualifies for Medicaid" has the opposite result in light of the statutory language in N.J.S.A. 30:4D-6f.

Such planning is particularly appropriate in the event of the possibility that a child goes into a nursing home so that the "kickout" can be to the other child.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 158

The Role of an Elder Law Attorney

2011-08-09T07:32:00.001-07:00

As my numerous postings have indicated, there is often a great discrepancy between the federal Medicaid statute and the state's position. That is, the state is often violative of federal pre-emption.

Therefore, your role as an elder law attorney is not to dictate to a client the path to take. Rather, one should point out the various alternatives, the benefits and the risks.

Such areas as the will of the community spouse, spousal refusal and exempt transfers present issues that are equivocal and not easily decided.

Similarly, whether a child has provided the necessary care to be deemed a "protected transferee," is a subjective issue.

Therefore, it is your role to point out the issues, possibly give recommendation, but not dictate to a client the course to take.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 157

Testamentary Planning for Will of Husband When Ill Wife Remains in the Community

2011-08-01T07:48:00.000-07:00

A client of mine in his forties has an ill wife who will not need nursing home care but requires and will require home care.

Clearly, Medicaid does not pay for home care on a long term basis. Therefore, the format for a testamentary trust of the husband is a major consideration.

The couple have no objects of their bounty other than each other.

Clearly, a restrictive trust or a special needs trust would serve no purpose since the wife receives $2,300.00 in income from a state pension. Therefore, in this situation it would be recommended that the husband's will provide for the wife with discretionary income with broad standards so that she can live in the best manner available. Such language might be "the trustee shall distribute income and principal to or for the benefit of my wife for her health, comfort, welfare and support so that she can live in the best standard and accommodations available."

The inclination to make a restrictive trust should be avoided.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 156

The Significance for Medicaid with Respect to a Joint Tenancy and a Tenancy in Common

2011-07-27T11:21:00.000-07:00

New Jersey law follows the common law that to create a joint tenancy the express words "joint tenants" must be expressed. Ownership by two people other than a husband and a wife without such language creates a tenancy in common.

A joint tenancy passes to a survivor by operation of law, while a tenancy in common passes as a probate asset under an individual's will.

If an individual owns a non-residence with respect to either ownership, such ownership constitutes an unavailable resource if the co-tenant refuses to sell the property. If the property is held with a relative, a joint tenancy will not be subject to the lien until the relative dies, sells or moves out.

On the other hand, if the tenants in common are relatives and the will of the person leaves the property to a non-relative spouse, such property will be subject to the lien upon the death of the tenant in common.

Therefore, a deed is to be carefully reviewed in light of the above.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2011, Post 155

Additional Advantages of Dependent Relative Residing in Home of Applicant

2011-07-22T07:15:00.001-07:00

In Post 14, it was discussed that a dependent relative living in the home of a Medicaid applicant results in the exclusion of the home from consideration as a resource. There is no time requirement for the dependency to occur.

This is unlike the two-year rule pursuant to which a child must reside for two years in the home with the applicant before institutionalization for the house to be transferred without transfer penalty.

Therefore, if it is anticipated that an individual will be entering a nursing home in the near future, a dependent relative should move into the residence.

The results of such planning would be as follows:

1. The home would be excludable as a resource.
2. The home would not be subject to the Medicaid lien upon the death of the Medicaid recipient until such time as the dependent relative dies, sells the property or moves out. As discussed in prior postings, the nature of the dependency is very broad.

Of course, should a child reside in the house with the applicant for two years and provide the care necessary for the applicant to reside at home, this would be preferable. In such case, the home could be transferred to the child and permanently free of the Medicaid lien. This planning is discussed in prior postings (see particularly Post 6).

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2011, Post 154

Review of Federal Pre-Emption

2011-07-14T07:46:00.001-07:00

Many of the blogs I have posted have discussed federal pre-emption. I think it is an appropriate time to review the salient examples of this topic:
1. The state has continued to misinterpret the meaning of spousal refusal (See Post 78).
2. The most egregious example is the state treats the disinheritance of an applicant as a transfer (See Post 60).
3. Of course, the state has denied the planning technique known as reverse half-a-loaf planning (See Post 88) due to another misinterpretation of federal pre-emption.

On the other hand, in two main areas the state has been more lenient. That is, it does not violate federal pre-emption for the state to be more lenient than the federal law. Two key examples of this are:
1. The ninety-day rule (See post 10).
2. The fact the state does not put a lien on a retained life estate.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2011, Post 153

Inaccessible Resources

2011-07-07T07:35:00.000-07:00

In Post 138, I discussed the advantages of holding an inaccessible resource (jointly held real estate) with a relative.

Suppose a Medicaid applicant owns real estate jointly (either a joint tenancy or a tenancy in common) with a non-relative. The affects of such arrangements are as follows:

1. The individual will qualify for Medicaid since the real estate is an inaccessible resource.
2. Unlike Post 138, the real estate cannot be transferred without a penalty.
3. Further upon the death of a Medicaid recipient, the Medicaid outlay will be subjected to the Medicaid lien.
4. In addition, if the property is income-producing, one-half the "net" income must be used to reduce the Medicaid reimbursement rate. The net income is determined without considering "paper" deductions such as depreciation.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© July 2011, Post #152

Practical Application of Purchase of Home by Community Spouse

2011-06-27T08:47:00.000-07:00

Assume wife enters nursing home at the time that spousal resources are $400,000.00. The community spouse resource allowance is $109,560.00 and the spouse's protected amount is assumed to be $2,000.00. The parties are renting an apartment.

Further assume that after the applicant enters a nursing home, the community spouse purchases a condominium for $250,000.00. The protected amount is approximately $360,000.00. Therefore, the spenddown is $40,000.00

The spenddown can consist of pre-paid funeral arrangements for spouses of $20,000.00, two months deposit of nursing home of approximately $20,000.00, attorney's fees and justifiable expenses on the home.

The community spouse could sell the home after the applicant receives Medicaid (see Post 11).

Therefore, Medicaid eligibility could be almost immediate with a savings of approximately $360,000.00 for the community spouse.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 151

Five Year Planning for Husband and Wife with Children

2011-06-20T07:27:00.000-07:00

Suppose a spouse is about to enter a nursing home and spousal resources are $800,000.00 in cash. A potential plan would be to transfer the $800,000.00 to a reliable child. Such child would use the funds on the transferor who enters the nursing home.

The will of the child would be a discretionary trust amongst the remaining parent, the child and other children. If the transferor enters a nursing home within five years, the portion of the $800,000.00 are spent until 60 months after the transfer. If the transferor goes into a nursing home after five years, any remaining monies are saved for the family. The transferee child would use any excess monies on the second parent if such parent enters a nursing home. If the second parent does not enter a nursing home, and then passes away, the child can distribute the monies to him/herself and the remaining children.

If the transferee predeceases the second parent, the funds would go to a testamentary trust. If a child or the remaining parent then enters the nursing home, a kick-out to the other relatives would not be a transfer (see Post 85).

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 150

Inaccessible Resources Revisited

2011-06-14T07:35:00.001-07:00

Post 48 discusses inaccessible resources, which are treated as excludable for Medicaid purposes (N.J.A.C. 10:71-4.4(b)6 ). The theory is that a countable resource is only such that can be converted to monies to pay nursing home costs. Further, suppose a Medicaid applicant resides with a sibling who has an equity interest in the home and who was residing in the home for at least one year prior to the date of institutionalization (see Post 11).

In this situation, not only is the real estate inaccessible, and therefore not a countable resource, but there is an additional benefit. If the sibling resides in the home for the requisite time period, the applicant's interest in the home can be transferred to the sibling without such transfer being subject to the penalty. Therefore, the individual would qualify for Medicaid, and the home would not be subject to the lien.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 149

Dependency Exclusion Revisited

2011-06-09T13:00:00.000-07:00

Post 14 discusses the dependency exclusion for the home of a Medicaid applicant. That is, if a dependent relative (as defined in Program Instruction Number 85-8-9), resides in the applicant's home, the home is excluded for Medicaid purposes.

The key to this exclusion is that there is no time period limitation for the dependent relative to reside in the applicant's home. Therefore, if it is contemplated that an individual may be going into a nursing home, a dependent relative (i.e. a child) can move into the home. Unlike the exclusion from the transfer rules, which requires two years of care (see Post 34), the time limitation on dependency does not apply.

Moreover, if the dependent individual is a relative (would be a relative by definition), the Medicaid lien does not apply upon the death of the Medicaid applicant. The lien would only apply at such time as the family member dies, sells or moves out of the primary residence (see N.J.A.C. 49:14.1).

As indicated in Post 14, financial dependency is easy to prove. For example, even a working child could be financially dependent if such child could not afford an abode where the cost is comparable to recipient's primary residence.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 148

Review of Advantages of Community Spouse Resource Allowance

2011-06-01T07:06:00.000-07:00

As indicated in Post 11, the community spouse resource allowance is not limited after the applicant receives Medicaid.

The advantages of this have been discussed in several posts and are to be considered in accordance with the situation.

For example, if a spouse is in a nursing home and the home has been transferred to a community spouse, the community spouse may sell or gift the residence after the applicant receives Medicaid (see Post 94). Similarly, if the community spouse inherits property after the applicant receives Medicaid, the inheritance is received free of the Medicaid rules.

As indicated in Post 33, if the community spouse is working, it has been suggested that the community spouse cease working until the applicant receives Medicaid. After such time, the community spouse can resume working and receive the earnings free of the Medicaid rules.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 147

Advantages of Purchasing a Home by Community Spouse Revisited

2011-05-25T08:09:00.000-07:00

In Post 11, the advantages of purchasing a home by the community spouse were discussed.

Suppose there are community assets of $400,000.00 and the community spouse is renting a home. The community spouse resource allowance maximum is $109,560.00. The community spouse can protect additional assets by purchasing a home which would be an excludable resource. As indicated by Post 11, the resources of the community spouse are no longer relevant after the applicant receives Medicaid.

Therefore, a viable planning technique would be for the community spouse to temporarily purchase a residence, which could be sold or gifted after the applicant gets Medicaid.

Further, as discussed in Post 33, if the community spouse is working, the community spouse should cease working until after the applicant receives Medicaid.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2011, Post 146

Negative Results of Disclaimer by Nursing Home Resident

2011-05-18T07:53:00.000-07:00

Although a disclaimer may have estate planning benefits, such an action would be treated as a transfer under the Medicaid rules (see Federal Statute 42 U.S.C. Section 1396p(c) and (e)). The first Statute treats a transfer as any disposition and the second statute requires an affirmative act.

Since a disclaimer is an affirmative act, the period of ineligibility from the disclaimer would run not from the date of the disclaimer but from the date the individual was in the nursing home and down to the appropriate amount ($2,000 or $4,000).

Pursuant to Medicaid Communication 10-02 and 10-06 , reverse half-a-loaf planning will not work in New Jersey. Therefore, the only choice is not to disclaim and to spend the monies on the nursing home. The appropriate planning would be to transfer monies to the appropriate donees who would then use the monies for the benefit of the nursing home resident. Should any monies remain after the 5 year look back period, such funds would be saved for the donees.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2011, Post 145

TIAA-CREF and its Effect on Medicaid

2011-05-09T08:32:00.000-07:00

Many Medicaid applicants are recipients of a retirement plan known as TIAA-CREF. This is the retirement benefit paid to those working within the college environment.

There are two basic types of retirement benefits. One provides for an irrevocable election of payment of an annuity. The other type of benefit may be in the form of an annuity, but the remaining balance constitutes an available resource.

Therefore, it is incumbent upon counsel to carefully review the available plan. Should the benefit remain an available resource, this has a negative effect on Medicaid eligibility. However, if the benefit is an irrevocable election, the funds must be used to help defray the cost of Medicaid in the manner of a pension or social security.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2011, Post 144

Designation of Agent Under a Power of Attorney

2011-05-03T08:31:00.000-07:00

The significance of a power of attorney with respect to accessibility has been discussed in Post 54. Another significant aspect of the power of attorney is the designation of the agent. For example, if a husband and wife are adverse in any way, they should not be designated as agent. Similarly, children of the parents may feel that they do not want to serve as agents given a conflict situation.

As discussed in my webinar, Ethical Dilemmas for Elder Law Practitioners, although many conflicts can be waived, the seminal question is whether they should be waived. Therefore, counsel must address the question of representation of the husband and wife when they are adverse. The second issue is the designee of the agent who ideally would not be the spouse or children but should rather be an independent party.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2011, Post 143

Meaning of "Assets" and "Resources"

2011-04-11T07:27:00.000-07:00

Post #7 sets forth the requirements for Medicaid eligibility in terms of the resources an individual and/or a community spouse must have in order for an applicant to have eligibility. Resources refers to funds available to pay nursing home costs.

The transfer rules are determined with respect to "assets." The word "assets" refers to both resources and income. That is, 42 U.S.C. 1396p(c) refers to a disposition of assets giving rise to a penalty. That is a transfer of both resources and income triggers the penalty rules.

Pension and social security monies are income in the first month received, but if not utilized to pay the nursing home or other debts before the first day of the first month following receipt, constitute resources.

Therefore, it is important to note the distinction between assets and resources as the word "assets" constitutes both resources and income. The eligibility rules are defined in terms of resources, while the transfer rules are defined in terms of assets.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2011, Post 142

Negative Aspects of Inaccessible Resources

2011-04-06T10:33:00.000-07:00

In Post 48, inaccessible resources are treated as excludable for Medicaid resource purposes. For example, a tenancy-in-common held by a Medicaid applicant with her sister is an inaccessible resource if the sister refuses to consent to a sale.

Notwithstanding, the definition of the Medicaid reimbursement rate is the outlay of Medicaid reduced by any continuing flow of income that the Medicaid recipient receives. If the tenancy-in-common were rented, one half the "net" rent would have to be used to defray the cost of Medicaid. Moreover, the property would be subject to the Medicaid lien upon the death of the Medicaid recipient.

Therefore, an excludable resource while being an advantage for Medicaid eligibility purposes, does have negative characteristics.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2011, Post 141

State Violates Federal Pre-emption by Limiting Post Eligibility Treatment of Income for Pre-Eligibility Medical Expenses (PEME) for Three Months

2011-03-30T05:45:00.000-07:00

This relates to amounts that may be due to a nursing home if an individual is dilatory in applying for Medicaid.

Clearly, as indicated by the HCFA-PM-85-3 statement, this has been the federal law since 1985. However, Med. Com. No. 10-07 indicates its applicability to state law effective January 1, 2010. Previously, state law had been less restrictive and it allowed PEME to be paid back without the three month limitation. Therefore, since the state's position was less restrictive than the federal law, there was no violation of federal pre-emption.

The state, by limiting eligibility to pay such cost for three months retroactively, violates federal pre-emption in that the state was less restrictive in allowing payments in full. Therefore, its change in position in denying PEME to all applicants even before the date of Med. Com. No. 10-07 violates federal pre-emption, and is incorrect.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2011, Post 140

The Nature of Joint Bank Accounts

2011-03-21T09:38:00.000-07:00

Pursuant to N.J.S.A. 46:2B-11, every account with two names is deemed to be a "joint" bank account under New Jersey law. That is, it is irrelevant as to whether the language is "or", "and" or just has joint names. The account is deemed to be owned by each person in its entirety.

Therefore, as pointed out in many of my blogs, it is dangerous to maintain a joint account in the names of the applicant or others, since the presumption will be that all the funds in the account are owned by the applicant. This presumption can be rebutted by specific proof that the co-holder contributed to the account. In such case, a withdrawal of the co-holder's funds would not be a transfer.

Post 1 points out that it is recommended that joint accounts between applicant and spouse be terminated within 90 days pursuant to the 90-day rule.

The nature of joint accounts is governed by state law and maintaining a joint account between the applicant and another could endanger Medicaid eligibility. In Post 21, I pointed out that if the co-holder predeceases the applicant, the monies would be presumed to pass to the applicant by operation of law, which raises another problem.

The recommendation is that joint accounts between the applicant and another, particularly the spouse, be terminated.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2011, Post 139

Inaccessible Resources Revisited

2011-03-15T08:00:00.000-07:00

In Post 48, I discussed the relevance of inaccessible resources as being excludable for Medicaid eligibility purposes. The theory is that a countable resource is only such that can be converted to monies to pay nursing home costs.

Examples presented were joint real estate if the co-owner refuses to liquidate, property in probate, real estate which may not comport with zoning requirements and unpaid funds such as future salary.

However, this is an area that allows for creativity. For example, as discussed in my Webinar with Carol Johnston on Ethical Dilemmas for Elder Law Practitioners, I raised the possibility that stock of a closely held corporation might be deemed an inaccessible resource if subject to a buy-sell agreement. Also, monies that are not currently payable such as royalties, constitute inaccessible resources as they are not immediately available. The definition of inaccessible resource is not exclusive, but provides examples. Therefore, creativity is required in this area.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2011, Post 138

The Role of the Constitution in Elder Law

2011-03-08T06:37:00.000-08:00

The theme throughout many of my blogs has been the concept of federal pre-emption. That is, the federal law supersedes state law except if state law is less restrictive. For example, Post 113 indicates that under the concept of federal pre-emption, reverse half-a-loaf planning should be acceptable. That is, although the state and federal law appear to conflict, state law is less restrictive and should allow such planning.

Similarly, the state is misguided in its position that the disinheritance of an individual in a nursing home results in a transfer. Section 42 U.S.C. 1396(p)(e) requires an affirmative act for a transfer and the state's law is more restrictive in that the state is imposing a penalty for a transfer on the failure to exercise the elective share, which is not an affirmative act, but rather an option.

There are numerous examples of such violation. One more which is rather important is the refusal of the state to honor spousal refusal. As pointed out in Post 78, spousal refusal and the right of the community spouse to contribute is to be allowed if the state has the right to pursue the community spouse. This is clearly the case in New Jersey as the state can stand in the shoes of the applicant and sue the community spouse for any non-payment. Notwithstanding, New Jersey does not follow this approach.

The concept of federal pre-emption and the extent to which a state follows a law varies from jurisdiction to jurisdiction. Therefore, not only is knowledge of the federal statute absolutely necessary, but the interpretation by the state is even more significant.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2011, Post 137

Givebacks When Transfers Have Been Made to More Than One Person

2011-02-28T09:31:00.000-08:00

The concept of givebacks has been previously discussed (see post 99). Basically under the new law and prior law, givebacks undo a penalty pro-rata. As indicated in such post, givebacks are particularly significant in the current law since they undo the onerous penalty provisions.

The issue arises if transfers have been made to two people and the Medicaid authorities refuse to allow the transfers to be considered “exclusively for another purpose” (see post 43). The question arises if transfers are made to two individuals and Medicaid has determined that the transfers were for a purpose other than to qualify for Medicaid. The State takes a hard line on allowing the exclusion. Therefore, to negate the penalty, the monies must be given back. However, assume that one of the donees does not have sufficient funds. The question becomes can the other donee repay so that the problem of the dual transfers is deemed cured. Several Medicaid supervisors have indicated that the wealthier donee (who has funds) can reverse the transfer penalty for both donees by returning all of the funds himself. This is a viable solution to a difficult problem.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 107

Issues to Consider When a Disabled Individual Under Age 59 Seeks Medicaid Eligibility

2011-02-23T10:36:00.000-08:00

Often an individual becomes disabled early in life. For Medicaid purposes, a (d)(4)(A) trust for the benefit of the individual is a method of establishing an excludable resource so long as the state is the remainderman.

Another salient point is the fact that the individual will generally be receiving disability income payments. Unfortunately, such continuing payments help defray Medicaid's cost and reduce the Medicaid reimbursement rate, and therefore, do not serve to benefit the individual.

Depending upon the nature of the individual's disability, it is extremely important that there be a power of attorney for the individual so that assets can be accessed if the individual becomes incompetent.

As discussed in Post 21, as with any person qualifying for Medicaid, it is extremely important that the will or non probate assets of another not pass to the disabled individual, which would render the person ineligible for Medicaid.

Also, keep in mind that as with any other Medicaid recipient, if the "disabled child" owns property jointly with another, the property is an "inaccessible resource", which would render the property protected. If the disabled child is not a family member seeking Medicaid, Post 42 discusses the fact that transfers to the disabled child are exempt.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 136

Apportionment of Transfer Penalty When Community Spouse Enters Nursing Home

2011-02-15T10:55:00.000-08:00

Transfers by the spouse of an applicant are considered in determining the Medicaid eligibility of the individual. Under both the MCCA and the Deficit Reduction Act, such transfers will 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 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.

Under the Deficit Reduction Act, this allocation is particularly onerous as the transfer is deemed to have occurred at the date the individual would be otherwise eligible but for the transfer.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 135

Planning in the Event a Child Requires Nursing Home Care Before a Parent

2011-02-08T06:39:00.000-08:00

In Post 85, I discussed the advantage of having a trustee with sprinkled powers amongst several beneficiaries, including elderly parents and other relatives.

The theory of such trust is it would be immune from creditors of the wayward child and should not be an available resource for the parent beneficiary.

Assuming an independent trustee and a child requires nursing home care before the parent. The child is one of the remaindermen of the trust. If the child goes into a nursing home, there would be an argument that the trust is not an available resource. However, the child's remainder interest would render the child ineligible upon receipt and death of the other beneficiaries.

The solution to such problem in the event the child enters the nursing home (to avoid the possibility of receipt of the remainder interest), would be a distribution by the trustee to a healthy child.

Such distribution should consider the following:
1. The trusts should not have mandatory "kickout" provisions which refer to Medicaid eligibility - N.J.S.A. 30:4D-6f.
2. The distribution should not be deemed a transfer. That is, statutory provisions against "trigger trusts" only apply to inter-vivos trusts under the federal statute - 42 U.S.C. 1396p(d)(3)(B)(ii).
3. Therefore there would be no resource of the child other than any funds the child may have and the distribution would not trigger 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 2011, Post 134

Ideal Planning for a Potential Medicaid Applicant with a Disabled Child

2011-02-04T07:20:00.000-08:00

Assume an individual who is elderly but does not need nursing home care has one child, who is disabled. The individual has a house and several hundred thousand dollars.

The plan would be to transfer all the assets to the disabled child, which would be an exempt transfer. The disabled child would then use the monies transferred on the care of the individual.

Should the individual go into a nursing home, there would be no transfer. That is, the monies retained by the disabled child would be exempt from the transfer rules as would the monies used by the disabled child for the applicant.

Also, since the home is out of the applicant's "estate", the lien would not apply.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 133

Ethical Issues in Elder Law

2011-01-24T09:23:00.000-08:00

Last week I had the pleasure of conducting an ICLE webinar with Carol Johnston, Esq., Secretary to the Advisory Committee on Professional Ethics. Carol informed us of many ethical issues relating to Elder Law. I am giving one example to point out the overriding principle in the ethical area. That is, although you may have a conflict, the conflict may be waived. The seminal issue is should you waive the conflict. For example, suppose there is a child who provides care to a parent for the required two-year period and the home can be transferred to the child without Medicaid planning. Further suppose, that the child is one of several offspring who are beneficiaries under the client's will.

The ethical issue is should you represent the client and the children. Carol pointed out that although the issue may be waived, it might be prudent not to do so. That is, if you represent a disabled child and a transferor, the remaining children might challenge the transfer and you would be vulnerable to an ethics complaint. That is, there is a presumption when a disproportionate distribution is made to one individual, that undue influence was exercised.

When counsel is presented with a conflict, the issue is not whether the conflict can be waived, but whether it should be waived. Such a principle is overriding in the Medicaid area.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 132

The Necessity to Use a Daily Money Manager

2011-01-17T07:05:00.000-08:00

On occasion Medicaid attorneys will need the assistance of an expert in handling the paperwork for their clients both on a daily basis and for Medicaid purposes. Attached is a description of Liberty Paperwork Solutions describing their services.

My name is Emily Lutz, and my company is Liberty Paperwork Solutions LLC. We are part of a relatively new and growing professional field known as Daily Money Management. Daily Money Managers help individuals and families with their personal paperwork. This may include bill paying, checkbook balancing, filing, organizing and budgeting, as well as submitting and tracking medical insurance claims.

Older adults as well as busy professionals are likely to engage the services of a Daily Money Manager. DMM services can help older adults maintain independence while providing their adult children with peace of mind, knowing their parents’ needs are being met.

We work closely with our clients’ other network of professionals, including attorneys and accountants, so that all information is shared in a timely and accurate manner. If and when the time comes to apply for Medicaid, we can move the application process along by helping to retrieve statements that satisfy the Medicaid “look back” period. We also monitor the accounts on an ongoing basis to make sure the Medicaid recipient does not exceed the specified resources in order to remain eligible.

Liberty Paperwork Solutions LLC has been helping people take care of their personal business and paperwork tasks for over 4 years. With an extensive background in banking and working with seniors, we have many satisfied clients. We are a member of the American Association of Daily Money Managers, and are fully insured. For further questions, or to schedule a complimentary consultation, I can be reached at Emily@LibertyPaperworkSolutions.com, or 973-462-5733.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 131

The Dilemma of Caretaker Agreements

2011-01-10T09:01:00.000-08:00

Agreements pursuant to which a Medicaid applicant can reimburse a child (i.e. Caretaker Agreements) have been discussed in Posts 6, 17, and 34. That is, a child can now be reimbursed if the payments to the child are deemed by the state to be "reasonable". This creates a dilemma as the state will not make an a priori decision regarding the validity of a caretaker agreement. The applicant runs a risk that the amount by which the child is compensated is not deemed by the state to be reasonable. In such event the excess payment to the child by the parent is deemed to be a penalizing transfer.

Therefore, it is important that counsel indicate in his letter that the validity of a Caretaker Agreement is not guaranteed as the state will only honor payments by the parent that are deemed to be "reasonable", and that the parties are at the mercy of the state.

I particularly call your attention to Post 52 in which I suggest the documents to be submitted to support a Caretaker Agreement.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 129

Ethical Issues Relating to Joining Network Groups

2011-01-05T09:55:00.000-08:00

As many attorneys and other professionals have been joining network groups to promote business, the issue arises as to an attorney's ethical obligations. That is, a network group is formed so that the members provide referrals to each of the members of the group.

There is certainly no ethical problem joining a network group unless you are financially penalized for not recommending members of the group.

However, counsel's obligation is always to his client. Therefore, while the joining of a network group is not an ethical problem, making recommendations to individuals in the group rather than to the best professional that counsel knows, violates the obligation attorneys have to provide their clients with the best advice available. This creates a dilemma for an attorney joining a network group who wants to generate work and decides only to refer matters to members of the group. If he or she does so with knowledge of a more competent professional in a particular area, counsel is violating his or her obligation to provide an individual with the best recommendation available.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 130

The Necessity to Use a Qualified Home Care Agency

2011-01-03T08:50:00.000-08:00

It is necessary on many occasions to use a qualified home care agency. Below is a description of one of the outstanding home care agencies (Freedom Eldercare) located in Hackensack, New Jersey. The telephone number of Freedom Eldercare is (201) 883-1200 and the fax number is (201) 833-1283.

When choosing home care for a loved one, you should be aware of the risks associated with using a non licensed agency or independent provider.

Liabilities and abuses

Payroll Taxes
Consumers and the families of those receiving care are confronted by a confusing array of federal and state laws. The simplest and most direct requirement is that anyone who gets a paycheck must pay the government any taxes due. This includes social security, Medicare, federal and state unemployment, and state and federal payroll taxes.

When the consumer is the employer and responsible for compliance, and none of these taxes are being paid, the government may sue the consumer or their estate for back taxes, interest and penalties. In a situation where many days of care or many hours each week of care over a long period of time have been delivered, this tax responsibility can be a substantial amount. Other remedies that authorities may seek can include civil fines and criminal penalties.

There are also many problems for workers. No payment into social security leaves them vulnerable in their old age, and no protection is afforded for their periods of unemployment. Also, workers may not be receiving the minimum wage and overtime protection to which they may be entitled.

Worker Related Injuries
This is the most potentially financially devastating result for consumers and workers who are unaware of the employer-employee relationship. If no workers’ compensation protection is provided (as mandated by law for employees for nearly every state), and the worker sustains an on-the-job accident, the liabilities can be substantial. Medical costs, and disability payments for workers could cause financial hardship for even a very wealthy client. For clients who could not afford to pay, the worker could be left with no help for a devastating injury. Many consumers incorrectly assume that homeowner’s insurance will cover this type of loss, when, in fact, homeowner’s insurance usually specifically excludes employees in the home.

Abuse and Exploitation
Most workers who enter the home care industry are caring, giving people. Unfortunately, there are also those who know that it is very easy to take advantage of frail, functionally limited, often cognitively impaired clients. Registries or independent contractor agencies, because they have little ongoing liability and want to avoid being considered as the employer of the worker, may provide inadequate or no background investigations on their caregivers. This could subject clients to physical, psychological or financial abuse. Families of the consumer can help, but time constraints and geographical distances often don’t allow for this.

Supervision of the Worker
Because of Internal Revenue Service regulations, registries and independent contractor agencies cannot provide any substantive work supervision, scheduling, or training to workers in home care without becoming employers. If they do, the company, by law, becomes the employer of the worker. Supervision, scheduling and worker training are important benefits to consumers and workers and are provided only by agencies that hire their workers.

For consumers and their families, hiring a licensed home care agency provides assurance that someone with experience and responsibility is reviewing the changing care needs of the client. The licensed home care agency provides ongoing assessments of the limits of care that individual workers are allowed to provide. They also provide appropriate supervision that can potentially head off, or at least deal with, the sometimes difficult relationship issues that can occur between clients and their care workers.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 128

The Date of Determining the Community Spouse Resource Allowance

2010-12-20T11:03:00.000-08:00

The date of determining the Community Spouse Resource Allowance is defined as being determined the first day of the first month of institutionalization.

However, institutionalization is not limited to nursing home placement. In actuality, it would commence the first day of the first month that a person went into a hospital. If the person were receiving home care, the determination would be the first day of the first month of home care.

Any combination of the above would apply, the determination being made at the earliest date. However, if the continuous period can be broken by a thirty-day time period then the above does not apply. For example, if a married individual enters a nursing home for rehabilitation and returns home without home care for a period of in excess of thirty days, the Community Spouse Resource Allowance would have to be re-determined at the appropriate date. As mentioned in Post 50, if the Community Spouse Resource Allowance increases after institutionalization, but before the date of determination of Medicaid eligibility, the individual gets the benefit of the increased Community Spouse Resource Allowance.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© December 2010, Post 126

Planning for Transfers Post May 26, 2010

2010-12-13T07:02:00.000-08:00

As indicated by Medicaid Communication No. 10-02 and No. 10-06 (see Post 113), the state has denied reverse half-a-loaf planning. My argument in favor of reverse half-a-loaf planning is set forth in post 113.

Suppose an individual after May 26, 2010, (Med Com 10-06) has made a transfer in contemplation of reverse half-a-loaf planning. Since transfers after May 26, 2010, Med Com 10-06 has rejected the planning.

The question then becomes what steps to take now that the gift has been made and the give-back will not work. My recommendation is that the transferee use the funds for the care of the applicant. In an ideal world, reverse half-a-loaf can be reinstated and a give-back effectuated at that time. In reality, this is unlikely. Therefore, the gifted funds should be used for the care of the applicant. If the funds are exhausted prior to the five-year look-back period, no funds will be saved, but the individual will qualify for Medicaid. If the monies (considering pension and social security), sustain the applicant for the five-year period, any monies gifted in excess of the funds used cover the look-back period are preserved.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© December 2010, Post 127

Basic Rules and Planning Techniques of Medicaid

2010-12-06T08:20:00.000-08:00

I would like to summarize in a succinct form some of the basic ideas presented in prior blogs.

It is necessary to understand the general distinction between Medicare and Medicaid. Medicare is a federal benefit that an individual receives if he or she attains the age of 65 years. Medicare generally pays for an individual's doctor bills and health care costs. Medicaid is also a governmental benefit. The first type of Medicaid, known as Community Medicaid, has strict income and asset requirements and pays for health care needs. The second type of Medicaid, which is the major topic of this blog, pays for nursing home costs once the requirements for Medicaid are met.

There is an intertwining relationship between estate planning and Medicaid planning. One of my cardinal rules for Medicaid planning is that once undertaken other considerations are irrelevant. For example, it is necessary that all assets be liquidated so that they can be used for planning or as part of the spenddown process. Estate planning then becomes irrelevant.

Often a client will say to me that he or she desires to preserve a certain stock or not to liquidate an IRA since these resources are a value to them. I point out the necessity for liquidating assets so that the date of eligibility can be projected and Medicaid planning be undertaken.

The major issue relating to the decision to undertake estate planning versus Medicaid planning relates to the size of the individual's estate. That is, if an individual has sufficient assets (including pension and social security), nursing home costs may be insignificant. In such case, the individual's will and estate planning are the major concerns. The average stay in a nursing home is slightly more than two years; therefore, a prudent approach to an individual with substantial assets would lean toward estate planning rather than Medicaid planning.

Institutional Medicaid is the governmental benefit that pays for long-term care. Community Medicaid is another form of Medicaid that is equivalent to welfare.

One form of Medicare pays for medical coverage for doctors, hospitals, etc. Another form of Medicare will partially pay for nursing home costs. However, it is institutional Medicaid and not Medicare that pays for long-term stay in a nursing home. Institutional Medicaid has rules of eligibility. Institutional Medicare pays for rehabilitation or skilled nursing in a facility for 20 days in full and for the following 80 days in part, the gap being known as the co-pay. The co-pay is often paid by Medigap insurance, such as AARP or Blue Cross Blue Shield. However, Medicare pays for a nursing home stay only during such time that an individual is making improvement as deemed by a committee at the facility. After Medicare has expired, payment must be made to the nursing home.

Other than the various financial issues in obtaining a Medicaid eligibility letter, a necessary element of Medicaid eligibility is to obtain a PAS for the applicant. This is an examination by the county nurse which will be given almost immediately if a potential applicant is in a hospital. Otherwise, the family is at the mercy of the schedule of the nurses who often cover several counties. Financial eligibility without a PAS will result in eligibility being delayed until the PAS is obtained.

There are several methods by which a nursing home can be reimbursed for the stay of an individual, some of which are temporary and some of which are permanent. However, it is necessary to keep all of these in mind in projecting the date of eligibility. The methods of payment of a nursing home include Medicare (for a limited period of time), Medicaid, long-term care insurance and private pay.

There is a misconception that Medicare will pay for a long-term institutionalization. As can be seen this is not the case. That is , Medicare will pay for a limited stay at the nursing home if the requirements discussed above are met. Although many nursing homes require private pay for a guaranteed period of time, this requirement is illegal. Also, the family will be presented with a nursing home application, including the key document which is the agreement.

If an individual anticipates purchasing long-term care insurance, an expert should be consulted. The permutations of the type of policy are virtually infinite and will be discussed.

The goal in standard Medicaid planning is for the single individual or the single applicant to have assets reduced to the appropriate number. Similarly, the funds of a married community spouse are to be considered when the applicant is married.

The rules and examples are set forth below:

A. Single individual: $2,000, $4,000 if monthly income is greater than $2,022.

B. Married individual: Asset limitation on community spouse (one-half total resources as of date of institutionalization). 2009 maximum: $109,560, minimum: $21,912.

Example 1: Total Resources: $100,000
Community Spouse Resource Allowance: $ 50,000
Example 2: Total Resources: $300,000
Community Spouse Resource Allowance: $109,560
Example 3: Total Resources: $ 30,000
Community Spouse Resource Allowance: $ 21,912

The Medicaid recipient must not exceed resources of $2,000 (or $4,000) on the first of any month. However, after the applicant receives Medicaid, the community spouse is not limited by the Community Spouse Resource Allowance.

Protection of the home is the most common and most significant Medicaid planning and eligibility issue. Unfortunately, the planning possibilities are often overlooked. For example, as has been discussed above, the Community Spouse Resource Allowance (amount spouse can have for an individual to get Medicaid), is not limited after an individual receives Medicaid. Therefore, application of this rule has particular significance in the real estate area. For example, transfer of the home to a healthy spouse is a common planning technique. The community spouse should delay sale of the residence until the applicant receives Medicaid. That is, after the institutionalized spouse qualifies for Medicaid, the resources of the community spouse are no longer deemed available to the institutionalized spouse. The proceeds of sale can be received by the community spouse free of the Medicaid rules. If the residence is sold by the community spouse before the institutionalized spouse qualifies for Medicaid, the proceeds become an available resource.

There are numerous other planning techniques to protect the home. For example, if a disabled child resides in the home, the home is exempt from the Medicaid rules. A little known rule is that even if such child is not disabled, if the child resides in the home and is "dependent", the home is also protected. Dependency is broadly defined in terms as any family member and the nature of the dependency is also broad (e.g. financial, medical, custodial or other type of dependent relationship). There are numerous other methods for protecting the home that can be discussed with your attorney.

Certain transfers raise eligibility problems. The rules regarding such transfers are rather complicated. Transfers of property that are exempt include transfers to a disabled child, transfers to a spouse or transfer for a purpose other than to qualify for Medicaid.

Another unique asset regarding Medicaid eligibility is life insurance. Often an elderly client will have a small policy with a substantial cash value. While a group policy has no cash value, the aggregate face amount of all policies (including group) is considered in the determination of whether the cash value(s) is an excludable resource. That is, if the face value of a policy or policies (including group insurance) exceeds $1,500, the cash value is counted as a resource for Medicaid eligibility purposes.

The Medicaid application process is tedious. There are two basic documents I present to my clients at the meeting. One document is the list of information required by the respective County Boards of Social Services. The second document is the application for Medicaid. Therefore, in addition to meeting the aforementioned requirements by Medicaid, it is necessary to provide the information requested (such as marital status, pension and social security, and life insurance policies). There are planning techniques for protecting other assets which are the subject of much controversy with the Trenton Medicaid authorities.

I have often sought the need of other professionals in representing a client before the various County Boards of Social Services in seeking institutional Medicaid for a client. For example, the client may be coming to New Jersey and the family uncertain as to the appropriate type of facility available and appropriate. In such case, I recommend that the family consult with a geriatric care manager as to whether home, assisted living or institutional care might be the most appropriate place of residence. In this regard, the assessment of a geriatric care manager is necessary.

An accountant is often necessary in the spenddown process. For example, we may want to prepay income taxes, not only for the spenddown, but also to avoid the situation of an individual or a community spouse having to pay income taxes after the date of qualification for Medicaid.

Of course, if long-term care insurance is available, and I not only recommend such insurance, but have purchased it, this will cut down on the cost of the nursing home.

The Medicaid eligibility process is complicated. The process generally starts with a stay in the hospital and a request for a PAS. Then the individual enters a nursing home for rehabilitation (discussed above). The family must make a decision as to whether the individual remains in the nursing home and seeks institutional Medicaid.

Sometimes, this involves merely spending assets down to the required amounts. On other occasions, planning techniques, such as discussed above, are employed. Documents such as the nursing home application and the Medicaid application process require careful scrutiny.

As discussed above, there is an inter-relationship between Medicaid planning and estate planning.

"Doing nothing" can be a solution to Medicaid planning. For example, for a single individual, I review a client's resources, income from resources, pension, social security, benefits, etc. If the annual income from such resources and income from other sources (i.e. social security,) exceeds the approximate nursing home costs, my recommendation is that planning not be undertaken and that such income be used for the nursing home.

Finally, as discussed above, it is important that there be "access" to assets, generally pursuant to a power of attorney. In this way, monies can be used for the benefit of the individual, particularly with respect to nursing home costs.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2010, Post 125

Basic Documents Needed by Clients in Estate Planning

2010-11-29T09:34:00.000-08:00

It is time to summarize some basic concepts with respect to documents needed for estate planning.

There are several basic documents that I discuss with every older client whom I represent. However, many of these ideas also apply to younger individuals.

The basic documents for every person, particularly the elderly, are a will, a living will and a power of attorney.

A will is a document that directs how the assets in the name of the individual shall pass upon their death. The nature of the will depends upon the person's situation. For example, the purpose of the will might be to minimize death taxes, which can involve complicated estate planning. Or, the will might be that of a healthy spouse whose partner is in a nursing home, which has rather complicated considerations also.

However, one must keep in mind that a will is not the only document that disposes of assets upon an individual's death. Assets that pass under a will are known as probate assets and those that pass outside of a will are known as non-probate assets. Non-probate assets are those that may pass by beneficiary designation, such as life insurance, retirement plans or annuities. The beneficiary designations of such non-probate assets should be coordinated with the plan under the will.

It is my practice not to dictate to a client the terms of a will. I point out the alternatives, discuss advantages and disadvantages of different approaches, review the assets with the client and let the individual decide what is the best course to follow from a personal point of view. That is, in addition to the objective legal reasons for a will, it is the client's subjective intent (after understanding all possibilities) that should govern the overall estate plan.

It must be kept in mind that a will performs two functions. One is to dispose of one's assets in the appropriate manner. A will is also a legacy. That is, an individual often feels that his or her child has not met expectations and desires to "disinherit" such child. I point out to the individual that such language will be the individual's "legacy" and must be carefully considered before undertaken.

With respect to a power of attorney, the first point of significance is that the document must be "durable". That is, at law, a power of attorney is a consensual agreement by the person granting the power (the principal) and the individual given the power (agent). If an individual becomes incompetent, the ability to consent ceases. Therefore, it is necessary that the power of attorney be "durable" and, therefore, survives the incompetence of the principal. That is, for an elderly person, there is a need for someone to act on one's behalf if such individual becomes incompetent.

There is a form of power of attorney known as a "springing" power of attorney, which becomes effective only if a person is incompetent. I do not recommend such a power since a durable power of attorney avoids the issue of incompetence and a springing power of attorney would only be effective if an individual becomes incompetent. Therefore, the "springing" power of attorney has no benefit.

The key to a power of attorney is that it has language so that all assets of the principal are "accessible" to the agent. In this way, if the principal needs money for any reason, including a nursing home, and is not competent, the agent can "access" these funds.

Also, a power of attorney should have special language, such as the ability to access medical records if the principal (who generally is an elderly person) is unable to do so. The durable language allows this result. Also, a power of attorney should include planning language to cover a situation in which a person may enter a nursing home in the future. The language dealing with Medicaid planning depends upon the situation of the principal and will be discussed more fully in another blog.

It is my practice to reference any type of asset an applicant may have to make sure the power of attorney can be used to liquidate such asset. However, not all companies will require that the power of attorney have language relating to the specific asset. It is important that the power of attorney be done as soon as possible, particularly if the individual is failing. A power of attorney can only be done if the individual is competent.

A living will is a document which provides as to whether extraordinary methods be taken in case an individual cannot make the decision by himself or herself. There are several types of living wills. One form known as an "Appointment of Health Care Representative" gives the individual appointed under a living will the general authority to carry out the wishes of an individual based upon the individual's intent as conveyed to the appointee during lifetime. A second type of living will known as an "Advance Directive for Health Care" sets forth the desires for the individual in advance. For example, this document provides that treatment be withheld if it is "experimental". Such language creates an ambiguity as the definition of "experimental" can vary from medical institution to medical institution. Therefore, it is my recommendation that if an elderly person has someone that he or she trusts, the general grant of authority under the Appointment of Health Care Representative is preferable.

As can be seen, pro-forma language is not suitable for any of the documents discussed, and must be discussed individually in detail. That is, the client makes the final decision with respect to the format of each document, after being fully informed.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© November 2010, Post 124

Medicaid Planning for Residents

2010-11-22T08:42:00.000-08:00

Suppose a husband and wife own a residence and one enters a nursing home. There are several possibilities regarding Medicaid planning. Firstly, the home is an exempt resource when one spouse enters a nursing home, as indicated in Post 11. If the home is transferred to the community spouse, and is sold or gifted by the community spouse after the applicant receives Medicaid, the home is protected.

Assume community spouse wants to reside in a home, but not the primary residence that currently exists. If the primary residence is sold, a second residence purchased within three months is exempt to the extent of the proceeds of sale of the first residence - see N.J.A.C. 10:71-4.4(b)8.ii.

Another possibility is to sell the residence and the community spouse move into an apartment. At the first day of the first month of sale, the community spouse resource allowance would apply to the community spouse and once the spenddown requirements are met, eligibility would be attained.

For a single person entering a nursing home, the house is exempt until sold for such period as allowed by the County Board. The County Boards vary on the time allowed. The balance of the proceeds would be subject to the spenddown process.

Finally, if a husband and wife have cash and live in an apartment and one enters a nursing home, purchase of a home by the community spouse would protect the cash and would be an exempt resource. Also, the community spouse resource allowance would enter into the picture.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© November 2010, Post 123

The Role of a Legal Assistant in an Elder Law Attorney's Office

2010-11-16T07:05:00.000-08:00

The following is a description of how I utilize the talents of my qualified Legal Assistant and her comments regarding work performed:

My name is Juliet Rudy and I am often asked what are the duties of my job as a Legal Assistant. The purpose of this blog is to describe such duties.

Working in an Elder Law Attorney's office is varied and interesting. Meetings with clients can be fascinating. I often sit in on these meetings and take notes. Accurate note taking is highly important so that everything is correctly documented. If the client is applying for Medicaid, there will be numerous documents to request from the client. Once we have all these documents, the legal assistant needs to gather all the information and, in due course, apply for a date for the Medicaid application. The legal assistant will often draft a Transmittal Letter to accompany the application and often attend the meeting with the County Board of Social Services on certain cases. Of course, all documents are reviewed by Counsel prior to submission.

If the matter is an estate planning matter, the legal assistant will often draft the will by himself or herself after having interviewed the client. A more complicated will would require an attorney's assistance. Other documents which can be drafted by a legal assistant are the power of attorney and living will. Again, an attorney is always needed to review documents before drafted in final form.

Other areas of law covered in an Elder Care Attorney's office may include estate administration. A legal assistant can apply for probate and take on most of the duties of an administration like drafting and sending out letters of probate and undertaking a child support search under the attorney's guidance.

In a smaller office, a legal assistant may have general administrative and accounting duties, in addition to the legal duties.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© November 2010, Post 122

Current Status of Medicaid Planning

2010-11-09T10:23:00.000-08:00

As indicated in Post 113, reverse half-a-loaf planning is no longer viable in the state of New Jersey. Therefore, other than the special techniques relating to the home or exempt transfers, the only planning available would be five-year planning.

That is, a potential applicant should transfer all resources and retain sufficient resources to pay for five years' nursing home costs. Therefore, any monies remaining after the look-back period have been saved from nursing home costs.

It is hoped that reverse half-a-loaf planning will be reinstated as indicated in my argument set forth in Post 113.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© November 2010, Post 121

Methods of Informing the Public of the Nature of Your Practice

2010-11-03T10:46:00.000-07:00

In today's legal world, it is necessary to inform the public of the services which your office can render.

For example, I have found the website as an invaluable tool for describing the nature of your practice and type of services rendered. I have been fortunate enough to have a friend who is an expert on providing information by website and other means to inform the public of the work offered by my office.

It is highly recommended that an Elder Law attorney retain a person with such expertise, since the presentation of your work and experience in the proper manner requires a knowledge of the methods to inform the public.

Of course, public speaking in any venue is important. The key to public speaking is to adjust the nature of your speech to your audience. For example, I have spoken before local groups, support groups, continuing legal education programs and webinars, at law school and at national conferences. The topic may have been the same, but the level of technicality was adjusted for the audience.

Finally, it is absolutely necessary to have colleagues with whom you can discuss pending issues, as "no man is an island", especially in the Elder Law area.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© November 2010, Post 118

Some Basic Tax Issues in the Elder Law Area

2010-10-27T08:46:00.000-07:00

It has been said that the "ideal" Elder Law attorney be knowledgeable both in the Medicaid rules and tax issues.

For example, if monies are transferred as part of a Medicaid plan (currently Reverse Half-a-Loaf is disfavored by the State, see Medcom 10-02 and 10-06), in any case, clients often have the impression that the receipt of monies gifted result in income. That is clearly not the case as Section 61 of the Internal Revenue Code provides that receipt of all funds results in taxable income except if there is a specific exclusion. Section 102 of the Internal Revenue Code provides that any monies gifted are not subject to income tax. Therefore, if transfers are made for any reason, it is only the earnings on the transfer that are subject to the tax and not the gift itself.

Another issue discussed in many of my blogs relates to transfer of a house (for example, see Post 6 dealing with transfer of a home to a "protected transferee"). This deals with transferring a home to a child who provided necessary care for two years before a person enters a nursing home. The law indicates in such a case a transfer of the home to the child is exempt from the transfer rules. I have recommended that the transfer not occur until the Medicaid application proceeding. The reasons are set forth in Post 6. An additional reason would be that if the individual dies before a Medicaid application, the basis of the house to the beneficiary will be "stepped-up" the date of death. However, once the property is transferred, there is a "carry-over basis" and the transferee will have the same basis as the donor.

Another misconception by clients is that distributions from an estate are subject to income tax. Under the fiduciary income tax rules, the distributions are only subject to tax to the extent of the estate income (technically referred to as distributable net income). Of course, there are exceptions to this rule, such as life insurance, the distribution of which is not subject to tax except for minor items, such as post-mortem dividends.

Any Medicaid planning or estate planning must include tax advice. The above are just some basic issues and rules to be discussed.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© October 2010, Post 117

Deposit in a Continuing Care Retirement Community

2010-10-19T07:43:00.000-07:00

Under the current law, monies held as a deposit in a Continuing Care Retirement Community are treated as a resource. They are available for use in the facility, but prevent current Medicaid eligibility.

However, if the individual relocates to another nursing home, the deposit will be made available to such individual.

This opens up a planning opportunity since the monies returned from the deposit and other resources of the individual are now available for reverse half-a-loaf planning (see post 88).

Therefore, while such a living arrangement may be desirable, a decision must be made as to allow a parent to remain there or to do Medicaid planning by removing the funds and using the above-mentioned planning technique.

Of course, the viability of utilizing the reverse half-a-loaf question has been disallowed by the state. (Medicaid Communication 10-02, 10-06). My response to this denial is set forth in posting numbers 110 and 113.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2010, Post 105

“Doing Nothing” as a Solution to Medicaid Planning

2010-10-13T11:45:00.000-07:00

As part of my initial conference (assume client is single) is a discussion of a client’s resources, income from resources, pension, social security, veteran’s benefits, etc.

I then compute the approximate annual income from resources and the other sources to compare to nursing home costs. If such income exceeds or approximates nursing home costs, my recommendation is that planning not be undertaken and that such income be used for the nursing home.

Of course, you then run the risk that the person is in the nursing home for a lengthy period of time and, therefore, there could be a substantial depreciation of assets. However, keeping in mind that the average stay in a nursing home is slightly more than two years, a prudent approach in such a case would be to do nothing.

However, it is extremely important that there be “access” to the assets, generally pursuant to a power of attorney. In this way, the monies can be used for the benefit of the individual, particularly with respect to nursing home costs.

This is just an approach to consider and should not be treated as a recommendation.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2009, Post 101

Estate Planning vs. Medicaid Planning

2010-10-06T10:20:00.000-07:00

One of my cardinal rules for Medicaid planning is that once undertaken other considerations are irrelevant. For example, it is necessary that all assets be liquidated so that they can be used for planning or as part of the spenddown process. Estate planning then becomes irrelevant.

Often a client will say to me that he or she desires to preserve a certain stock or not to liquidate an IRA since these resources are a value to them. I point out the necessity for liquidating assets so that the date of eligibility can be projected and Medicaid planning be undertaken.

Another type of estate planning vs. Medicaid planning issue relates to the size of the individual’s estate. As pointed out in a prior blog, “doing nothing” may be a solution to Medicaid planning. That is, if an individual has sufficient assets (including pension and social security), nursing home costs may be insignificant. In such case, the individual’s will and estate planning become the focus of the attorney’s undertaking. The average stay in a nursing home is slightly more than two years; therefore, a prudent approach to an individual with substantial assets would lean toward estate planning rather than Medicaid planning.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2009, Post 103

Changes in the Medicaid Law Over Time

2010-09-27T06:46:00.000-07:00

We have seen Congress attempt to restrict Medicaid planning through the years.

COBRA, OBRA ’93 and the current attempt, the Deficit Reduction Act, are the major congressional changes since I have been practicing law.

Janice Chapin and I have discussed these numerous changes in our ICLE programs, particularly the Final Medicaid Regulations Finally, Hot Topics in Medicaid Planning, and The Impact of the Final Medicaid Regulations on Planning.

As I am not a constitutional lawyer, I do not feel that I can comment on the constitutionality of a federal statute. However, the most egregious changes have occurred in the Deficit Reduction Act (except for a limited time when Congress actually attempted to eliminate the possibility of a lawyer giving Medicaid advice, struck down on First Amendment basis) in that a transfer is deemed to be made not on the date the property is shifted, but rather at the date when the applicant would be “otherwise eligible” for Medicaid but for the transfer. Examples that would ruin the “otherwise eligible” requirement would be prior transfers or a non-excludable home.

The 60-month look-back (Post 15) is terrible in itself, but the problem is that it catches all transfers during the time period and moves them to the above-forward date.

Perhaps more important than the federal changes are the state regulations. Reference is the aforementioned ICLE publication, the Final Medicaid Regulations Finally. As mentioned in a prior blog, the book basically discusses New Jersey’s Medicaid law under OBRA ’93 and its violation of the federal law (i.e. federal pre-emption).

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 98

Summary of Key Planning Ideas

2010-09-22T06:42:00.000-07:00

I think this is an appropriate time at my blog site to summarize what I think are the key planning techniques which survive the new law. Rather than discuss them in detail I will summarize such techniques with a reference to the post number.

The key planning techniques are as follows:

1. Payment of Debts and Expenses (Post 4).
2. Property Owned by Applicant Residing with Caretaker Child (Post 6).
3. Real Estate Planning Ideas for a Married Couple (Post 11).
4. Community Spouse Not Limited to Community Spouse Resource Allowance After Date of Eligibility of Applicant (Post 13).
5. The Significance of a Dependent Relative Residing in the Home With Applicant (Post 14).
6. Preserving the Community Spouse Resource Allowance (Post 26).
7. The Problem of the Working Spouse (Post 33).
8. Property Owned Jointly With Other Than Spouse (Post 35).
9. Assets Transferred to a Disabled Child (Post 42).
10. The Necessity for Other Professionals (Post 46).
11. Inaccessible Resources (Post 48).
12. Policy Decisions Affect Medicaid Rules (Post 49).
13. Transfers of an Excludable Resource (Post 58).
14. The Importance of a Carefully Prepared Transmittal Letter (Post 67).
15. Spousal Refusal (Post 78).
16. Real Estate Expenses as Part of the Spenddown (Post 83).
17. Changes That Affect Medicaid Planning (Post 84).
18. Reverse Half-a-Loaf Planning (Post 88).
19. Sources of Information for Medicaid Rules (Post 91).
20. Monies Received During the Month (Post 96).

I feel that a summary of the above key posts would be beneficial in light of the topics presented.

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 97

Utilization of Legal Staff in Medicaid Application Process

2010-09-16T07:14:00.000-07:00

Although I have practiced Medicaid Law for in excess of thirty years, I find that proper utilization of legal staff can be an invaluable asset to a firm.

My assistant, Juliet Rudy, is a lawyer in England and Wales. Her skills and knowledge in the Medicaid area have been acquired in a very short period of time.

Juliet came to be my employee through Jewish Vocational Services, a placement agency for individuals of all ethnic backgrounds, which extends itself beyond description in making placements. In addition, the agency provides such services for free.

I made a call to the agency through a relative of mine and within two hours they provided me with Juliet's resume and I hired her immediately.

I suggest that in hiring staff that a Medicaid attorney consider hiring someone with the intelligence of Juliet so that the attorney can concentrate on generating the practice and focusing on the legal issues.

In today's economy, it is necessary to have the help of others as I pointed out in Post 46 (The Necessity for Other Professionals).

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© September 2010, Post 116

Monies Received During the Month

2010-09-14T09:38:00.000-07:00

Prior posts have indicated that Medicaid eligibility is determined on the first day of the month. Therefore, resources received during the month do not result in ineligibility unless not properly disposed of during the month. This issue has been addressed in Post 31 (the problem of recurrent disqualification). It is important to constantly monitor a recipient’s account during the month since the $2,000 (or $4,000) resource requirement for an applicant can be lost. Any use of the money (except for a gift) would be an appropriate spenddown. Clothes or prepaid funeral expenses would be typical for a single person. A married individual with a home could use the funds for reasonable expenses for the home.

Post 13 indicates that the community spouse resource allowance is not limited after eligibility of the applicant. Therefore, any monies received by the community spouse after that date are irrelevant. However, if the community spouse does receive funds prior to eligibility, such funds must be deal with in the same manner as discussed for the applicant. With respect to the community spouse, Post 50 indicates that the community spouse’s resource allowance changes annually and this should be considered, if applicable.

Post 3 indicates that under certain circumstances prior to eligibility, it would be desirable to increase the community spouse resource allowance (but not beyond the limit) by transferring life insurance of the applicant.

Another related problem discussed in Post 33 deals with the problem of the working spouse. In this situation, the receipt of monies by the community spouse on an ongoing basis precludes Medicaid eligibility. See Post 33 for the solution. It is important that the community spouse not resume working until eligibility of the applicant is granted, unless there is the possibility of reducing the receipt of funds below the community spouse resource allowance. Such hypothetical might be the existence of a substantial debt on the home such as a mortgage or reverse mortgage.

Finally, with respect to monies received during the month and the amount of the resource allowance, it is my practice to have the applicant qualify with lesser funds than the resource allowance to cover the possibility of a miscalculation resulting in ineligibility.

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 96

Methods of Holding Account(s) of Medicaid Recipient

2010-09-08T12:44:00.000-07:00

A common question is the form in which an account or accounts should be held in the name of a Medicaid recipient so as not to endanger Medicaid eligibility. I am providing the following list of preference in reverse order for your consideration:

1. Usually, individuals without the advice of counsel, have a joint account with the applicant and the spouse in which is placed the social security/pension of the applicant and the spouse. Such a procedure would result in being denied Medicaid or loss of eligibility. That is, Medicaid will treat the account as being completely the resource of the applicant and also completely the resource of the community spouse regardless of the source of funds.

2. An account may be held jointly with a child. Such a technique is okay, but you must make it clear that none of the child’s assets be placed into the account. Also, any withdrawal of funds by the child would be treated as a Medicaid gift and result in temporary ineligibility.

3. The best method for holding an account would be the child on behalf of the parent under a power of attorney. A separate account could be maintained for social security payments with the child designated as representative payee. Post 1 discusses this and related issues in greater detail.

4. Post 1 also indicates that under certain circumstances, the nursing home can be representative payee of the social security payments (read Post 1 carefully). Payments from qualified plans cannot be assigned due to restrictions under the Internal Revenue Code.

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 93

Distributions of Inter Vivos Trusts Under the Deficit Reduction Act

2010-08-30T07:28:00.000-07:00

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

Real Estate Planning Ideas For Married Couple Revisited

2010-08-26T10:20:00.000-07:00

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

Sources of Information for Medicaid Rules

2010-08-17T05:42:00.000-07:00

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

Medicaid has Continually Interpreted that the State be the Remainderman of all Trusts

2010-08-10T11:18:00.000-07:00

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

The State Reaffirms Medicaid Communication 10-02 in Medicaid Communication 10-06

2010-07-30T07:26:00.000-07:00

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

Unpaid Nursing Home or Assisted Living Expenses

2010-07-30T07:25:00.000-07:00

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

Mental State - Difference Between Medical and Legal

2010-07-21T06:47:00.000-07:00

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

Retain Life Estate As a Medicaid Planning Technique

2010-07-13T08:12:00.000-07:00

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

Special Planning Problems for Elderly Person (Single)

2010-07-06T10:49:00.000-07:00

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

Changes That Affect Planning For Medicaid

2010-06-29T10:15:00.000-07:00

The various posts have addressed the fact that there are annual changes that affect the projection of the date of Medicaid and Medicaid planning. These changes must be kept in mind as one projects the probable date for Medicaid (see Post 7, “Rules of Medicaid Eligibility”). The changes discussed include the following:

1. The community spouse resource allowance maximum and minimum, which changes the first of every year effective January 1. Currently, the maximum is $109,560 and the minimum is $21,912 (see Post 50 for further discussion of the rules governing such changes).

2. Also, the penalty rate for transfers changes annually on the first of any given year retroactive back to November 1 of the prior year (see Post 51 for this topic in greater detail).

3. The income cap, which currently is $2,022, is particularly relevant with respect to Medicaid waiver programs which also change annually.

4. Although not previously discussed, but particularly significant, is the fact that the costs of nursing home care also change annually. Therefore, if you are anticipating eligibility in the next calendar year, this change or anticipated change must be kept in mind.

5. The amount the potential applicant receives for social security increases each year in a percentage equal to the COLA.

6. The pension that the potential applicant receives may or may not increase annually and this should also be considered.

7. The pension and social security payments and their effect on post-eligibility Medigap insurance are discussed extensively in Post 1. That is, planning not only is to be considered through the date of eligibility, but with respect to several issues, including Medigap insurance, is to continue after eligibility.

8. Of course, post-eligibility planning must consider the fact that a Medicaid recipient would lose eligibility if resources exceed $2,000 on the first of any given month. Post-eligibility planning also is stressed in Post 13 which discusses the fact that the community spouse is not limited by the community spouse resource allowance after the date of eligibility of applicant.

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 84

Real Estate Expenses As Part Of The Spenddown

2010-06-24T07:12:00.000-07:00

Real Estate Expenses As Part Of The Spenddown

In Post 11, the basic rule that real estate owned by a married couple is an excludable resource.

At various points in the posts presented, we have indicated that reasonable expenses relating to the home can also be treated as part of the spenddown.

However, Medicaid insists that any monies expended on the home be needed and that verification be provided.

For example, in reviewing my files I noticed a case with extraordinary home improvement expenses, which were necessary and allowed as part of the spenddown by the County Board. The expenses allowed and the verification provided were as follows:

1. $12,500 air conditioner (doctor’s letter about wife’s breathing problems).

2. $ 4,900 boiler (letter provided indicating deterioration of current boiler and necessity for a new boiler).

3. $13,000 landscaping and drainage (pictures submitted of flooded property).

4. $ 2,900 electrical upgrade (letter provided and pictures shown regarding condition of current electrical setup).

5. $ 2,007 replacing shed damage (pictures shown).

Although Post 53 stresses that allowable expenditures are limited by the concept of reasonableness, verification of an extraordinary amount of home expenditures was allowed in this particular case.

The point of this example is to show that necessity is the test for expenditures and that verification can often justify unanticipated expenditures.

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 83

Method For Increasing Community Spouse Resource allowance

2010-06-15T07:54:00.000-07:00

Method for Increasing the Community Spouse Resource Allowance

The community spouse resource allowance, which is the amount of resources that the community spouse may have at the time of eligibility of the applicant has been given a broader interpretation by the county boards and provides an opportunity for protecting a greater amount. For example, we have defined the community spouse resource allowance as being determined at the first moment of the first month of continuous institutionalization at a hospital or a long-term care facility (see particularly Post 8).

However, Medicaid is allowing this “snapshot” to be taken prior to the above dates if the individual is at home and is paying for his or her care to a homecare provider of such services like an aide or a licensed practical nurse. Therefore, assume that a person enters a nursing home with spousal assets of $80,000. The community spouse resource allowance would be $40,000. However, further suppose the individual has been cared for at home for the last two years and at the first day of the first month of homecare assets of the husband and wife total $300,000. The individual then enters a nursing home with the above-referenced $80,000. The community spouse resource allowance based upon resources of $300,000 at the first day of the first month of homecare, would be $109,560. Therefore, the person would immediately qualify for Medicaid and, have expended a substantial portion of the protected amount.

Awareness of this extended interpretation would allow the individual to decide to go into the nursing home at an earlier date. For example, if the individual entered the nursing home when the applicant had $2,000 and the community spouse had $109,560, the community spouse resource allowance having been determined at a much earlier date at $109,560, would allow this individual to now immediately qualify for Medicaid.

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 82

Transfer to New Jersey of Individual Receiving New York Medicaid

2010-06-09T06:14:00.000-07:00

A common situation involves a Medicaid recipient in New York who desires to relocate to a nursing home in New Jersey. The seminal question is whether such Medicaid eligibility is transferrable. The general answer is no and a new application for Medicaid must be made in New Jersey under the applicable rules.

The rules governing Medicaid eligibility are substantially different in New York than in New Jersey. For example, Medicaid in New York will cover 24-hour home care. Although our home care benefits have increased in New Jersey, they are not equivalent to New York.

I have spoken to supervisory people in Morris County and it has been observed that there is one exception. Lincoln Park Nursing Home in Lincoln Park will honor New York Medicaid eligibility.

One final issue relating to this topic is the constitutional question as to the point in time that an individual moving to New Jersey can become eligible for governmental benefits. As Janice Chapin, Esq. pointed out in our Institute for Continuing Legal Education materials entitled, Hot Topics in Medicaid Planning, since 1969 the rule has been that a state cannot impose a duration of residency on public benefits. The Supreme Court of the United States in Shapiro v. Thompson, 394 U.S. 618 (1969) ruled that states cannot deny welfare benefits to those newly arrived from other states. That is, the moment that an individual enters that State of New Jersey, such individual becomes eligible for benefits (subject to meeting the requirements).

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 81

State Incorrectly Interprets Transfer Penalty Period in Medicaid Communication No. 10-02

2010-06-01T08:54:00.000-07:00

On May 26, 2010 the State issued Medicaid Communication No. 10-02. In denying give-backs (the basis of reverse half-a-loaf planning), Medicaid authorities have relied on the underlined language, "all assets transferred for less than fair market value have been returned to the individual", of the federal statute (42 U.S.C. Section 1396p(c)(2)(C)).

I cited to the Medicaid authorities Comment 7 to the OBRA '93 regulations and the State's Response. The language expressly allows for give-backs.

It was then called to my attention that under the Supremacy Clause, all assets have to be returned, when the federal statute is read in conjunction with the aforementioned Comment and Response to the OBRA '93 regulations.

It is my respectful opinion that the State is incorrect on this point and that federal pre-emption is not applicable. My reasoning is as follows:

(1) 42 U.S.C. Section 1396p(c)(2)(C) does appear to contradict the above and control under the doctrine of federal pre-emption;

(2) However, the federal statute requiring a transfer of all assets was also in effect at the time that the aforementioned Comment and Response were made (Response being the State's interpretation);

(3) Therefore, since the State law allowing give-backs is less restrictive than the federal statute, give-backs and reverse half-a-loaf planning are not impaired.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© June 2010, Post # 110

Significant Change in State’s Position on Caretaker Agreements

2010-05-24T10:53:00.000-07:00

At a meeting of Medicaid supervisors last week, a major change in the Medicaid law was adopted:

Payments by applicant for care and services provided by a child were initially discussed in Post 17 under the theory that such payments by an applicant are reasonable. Medicaid allowed payments by a parent to a child in the amount of approximately $13,000 in a case that I submitted. Justification for payment for such services was provided.

Subsequently, the State took a restrictive position and limited the payments pursuant to a Caretaker Agreement to the amount received by a nurse’s aide, which generally approximates to $10 per hour.

The State now has reconsidered its position and will revert to its prior stance on Caretaker Agreements that the amount reimbursed to a child can exceed its prior limitation and allow payments by the applicant to the child that are “reasonable” with respect to such services.

This is a major change in position and allows significant savings if the payments to the child are justifiable.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© May 2010, Post 80(2)

Unique Solution to Transfer by Applicant Prior to Representation

2010-05-20T10:43:00.001-07:00

Transfers by an applicant after the Deficit Reduction Act present unique problems. (See Post 15). Various posts have discussed partial or complete solutions to such problems such as use of the monies for the applicant or return of the monies. However, any monies returned become resources of the applicant.

I was recently presented with a problem which again brought to my attention the significance of a caregiver’s agreement.

Assume the following facts:

1. Transfers by an applicant without the advice of counsel.
2. Intent to qualify for Medicaid in the near future.

There was a pre-existing care agreement and the applicant had substantial liabilities. I resolved this problem in the following manner:

1. The child returns the money to the potential applicant to undo the penalty.
2. Parent, depending upon the situation, can use the monies to pay debts, make payments pursuant to a pre-existing care agreement or spenddown either prior to entrance to a nursing home or after admission.

Pre-existing transfers require creativity for solutions. For example, in another matter, a sibling of the donee loaned monies to the donee who reimbursed the applicant who, in this case, had substantial debts and the monies reimbursed were immediately used for the spenddown. The children arranged between themselves for repayment of the loan.

Another common situation would be prior transfers and the parent having a substantial liability due to a reverse mortgage. Similarly, return of the monies would undo the penalty and the monies could be spent down immediately to pay the debt.

This discussion again stresses the point of reviewing all the facts and see if there is a possible solution to resolve what initially appears to be an unresolveable problem (see also Post 18).

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 80

Dependent Child Revisited – Meaning of Dependency

2010-05-13T08:38:00.000-07:00

Suppose a child is living in a potential applicant’s home because such child cannot live alone due to physical limitations. The child would clearly render the home an excludable resource as set forth in Program Instruction No. 85-8-9 (see Post 14).

If the parents were to go into a nursing home, the home would be protected under the aforementioned program instruction and the dependent relationship.

Since the child is also disabled, any assets transferred to such child would be free from transfer penalty (see Post 42).

The thought might occur that the transfer of funds to the child could hinder the dependent relationship and, therefore, render the house an includable resource. However, financial dependency is only one of the situations described in the program instruction. Other forms set forth as examples include medical, custodial or any other type of dependent relationship. Therefore, the broad definition of “dependent relationship” would allow immediate Medicaid as both the house and funds transferred are protected.

This post indicates the breadth and meaning of dependent relationship and points out that even financial independence would not ruin the excludable nature of the home.

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 79

Spousal Refusal

2010-05-05T12:41:00.001-07:00

The theme of many of these postings and programs that Janice Chapin, Esq. of Central Jersey Legal Services and I have conducted for the Institute of Continuing Legal Education (“ICLE”) has been the lack of attention by Medicaid to federal law (i.e. federal pre-emption). A major area for this contention relates to the concept of spousal refusal. That is, if a community spouse refuses to contribute his or her funds to the nursing home costs of an applicant, under what circumstances should Medicaid still be granted? The federal law basically states that Medicaid will not be denied if a community spouse refuses to contribute if the State has the right to sue the spouse for the costs that should be contributed.

The State of New Jersey again does not follow the federal law and has a list of onerous requirements for spousal refusal to be given effect (i.e. Medicaid granted despite the refusal). There are forms to be filled out and questions to be answered. The major requirements for spousal refusal (and the granting of Medicaid in New Jersey) are (1) a lengthy separation of at least 20 years, (2) non-cooperation of the community spouse, (3) at least three attempts to communicate with the community spouse.

The State then evaluates whether Medicaid should be granted.

It is a rare case in which the State will honor spousal refusal. Therefore, if spousal refusal is not granted, and the spouse has in excess of the resource requirement (currently $109,560), 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.

© May 2009, Post 78

Nursing Home Procedures

2010-04-30T09:26:00.000-07:00

In addition to the Medicaid eligibility requirements, it is not unusual for the procedures of the nursing home to present problems or be a stumbling block to Medicaid eligibility.

For example, the nursing home application should be read carefully by the family members submitting the application. I have seen an application which gave the nursing home the unilateral right to terminate the agreement. Although this is extreme, the signer of the application (it’s not the person going into the nursing home) should sign under a power of attorney with the words “signing in a representative capacity and not individually.” Many nursing homes have a time period for which you must pay privately. As mentioned in prior posts, this is illegal both federally and for the state, but it is a policy which is enforced by the nursing home.

Also, each nursing home has its policy on the amount of deposit requested. The significance of the deposit is that while there is an unused deposit, the applicant cannot receive Medicaid. This point should be kept in mind in the eligibility process.

Nursing home bills should be reviewed monthly. A monthly bill generally invoices for the daily costs in advance of the month and for personal items for the prior month. Therefore, bills should be reviewed carefully in the spenddown process.

As I have discussed, an additional requirement to eligibility other than the financial requirement is an examination by a county nurse which must be undertaken (PAS).

On many occasions, the nursing home will submit the Medicaid application without the assistance of the family or counsel. I have seen situations for which the nursing home has submitted an application without informing the family. The application was cursory and the family was denied timely eligibility.

Finally, it is extremely important to communicate with the financial director of the nursing home so that you are not viewed as adversaries. Having a prior relationship with the nursing home is an asset since it will assist in the admission of a person if the funds available are not substantial.

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 77

Loss of Eligibility Due to Unnecessary Transfers

2010-04-26T07:04:00.000-07:00

As mentioned in prior posts, there is a misconception that the transfer of an excludable resource results in an excludable transfer. This is not the case. For example, if a potential applicant transfers his residence to a dependent child residing in the home, such a transfer would give rise to a penalty. The proper approach would be to stand pat and not make the transfer as Post 14 indicates that such property is excludable.

Several posts have discussed the concept of a child providing care for a parent two years prior to institutionalization when such care allows the applicant to remain at home. The transfer of property to such child is treated as exempt if deemed so by the County Board. (See Posts 6, 23, 34, 37 and 40). The posts stress that the transfer should not be made until application before the Board as the issue of whether one qualifies as a protected transferee is subjective.

Another type of excludable property is joint property held with another (say a sibling). Such property is treated as “inaccessible,” and, therefore, excludable. However, transfer of such property would give rise to a penalty.

With respect to the above issues, reference is made to Post 58 which deals with the transfer of an excludable resource.

If presented with such a problem (transfer of exempt property giving rise to a penalty), communication should be made with the County Board with a request that the property be re-transferred. Technically, once such transfer is made, it would appear that the penalty could not be cured. However, I have been successful on several occasions by requesting that the property be transferred back into its original state without a penalty imposed. The County Boards have been sympathetic to such an approach.

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 76

Admission to Nursing Homes

2010-04-21T08:36:00.000-07:00

Generally, admission to a nursing home is preceded by a hospital stay. A family member should immediately request a PAS at the hospital (examination by county nurse) which is a prerequisite to Medicaid eligibility in addition to the financial requirements.

If the potential applicant is in the hospital for more than three days, the person may qualify for Medicare to pay the nursing home stay for a limited period of time. If the individual requires physical rehab or skilled nursing home care, Medicare will pay for the first 20 days in full and for the following 80 days except for a co-pay, which should be covered by the Medigap insurance. Keep in mind that Medicare will pay only if there is the required progress for the individual at the nursing home.

One of the issues for long-term admission to a nursing home is that many nursing homes require a private pay guarantee for a certain number of months. This is illegal for both state and federal purposes, but these rules are not enforced.

After Medicaid coverage ceases, if the individual seeks admission to the nursing home a method of payment must be shown. Therefore, if the person has minimal funds, the Medicaid process should have already commenced.

At such time as long-term care is sought, the family will be presented with an application and other documents. It is recommended that these be reviewed by an attorney.

If the nursing home is of the opinion that there may not be a method of payment (i.e. Medicaid hasn’t been granted or insufficient resources), admission to the nursing home may not be granted.

Of course, family members may be willing to private pay until such time as Medicaid is granted.

If an attorney is assisting the family in the application process, the attorney should feel confident that the family is willing to cooperate and has the sufficient documents required by the County Board.

The application is made at the county where the nursing home is located. However, if application is made from the individual’s residence, the application is to be submitted to the county of residence.

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 75

Key Points to Remember in the Computation of the Community Spouse Resource Allowance

2010-04-16T12:24:00.000-07:00

The community spouse resource allowance has been discussed in Posts 8, 13, 26, 30, 50 and 60.

Experience has borne the fact that actual computation of the community spouse resource allowance often involves issues that raise some thought.

The following are some points to remember in computing the protected amount:

1. The community spouse resource allowance is only to consider resources that are countable for Medicaid purposes. For example, the primary residence is an excludable resource and is not to be treated as part of the computations.

2. Bank accounts generally provide the balance in the middle of the month. Request the client to get a letter from the bank as of the appropriate date, the first moment of the first day of the month of institutionalization, in reality, is the close of business on the prior day.

3. A certificate of deposit that is due in several weeks arguably is hard to value. That is, it has been my experience that if a family requests the funds without any penalty, that the bank will comply.

4. If there are assets subject to a penalty for withdrawal such as an IRA or an annuity, the withdrawal penalty is not to be considered. With respect to an IRA, it is suggested that the stocks be sold within the IRA (no tax at that point) so that after distribution and income tax, there is not an additional tax due to the necessity to liquidate appreciating assets.

5. Joint property (such as real estate) is to be valued at one-half the fair market value of the real estate. This is different than the treatment for death tax purposes since a fractional interest in real estate is often discounted for fractional interests.

As the above indicates, numerous technical issues arise throughout the Medicaid process, but for purposes of computing the community spouse resource allowance they must be addressed immediately so that eligibility can be projected.

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 74

Importance of Reviewing Checking Records as the Date of Eligibility Approaches

2010-04-07T08:15:00.000-07:00

Post 4 discusses significance of payment of debts and expenses. This post is to serve as a clarification of some of the points made.

1. The general rule, of course, is that resource eligibility is determined as of the first moment of the first day of each month – N.J.A.C. 10:71-4.1(e). For example, if June eligibility is anticipated, the amount reflected in the account on June 1 is not the proper amount. That is, you are to look to the first moment of the first day of each month. The June 1 balance is not the first moment. In actuality, the balance as of the close of business on May 31 is the proper amount. Do not fall into this trap.

2. Another key rule is that subsequent changes after eligibility during the month do not effect the original determination of eligibility – N.J.A.C. 10:71-4.1(e). This is discussed in the context that the funds are used for appropriate purposes prior to the beginning of the first moment of the first day of the subsequent month. Post 4 discusses possible approaches to reduction of the amount. However, it is important to use the funds for an excludable resource such as a prepaid revocable funeral trust or valid expenses of the home if the individual happens to be married. Very often in this circumstance I have seen clients use the funds for purposes that may be subject to question such as checks drawn to the child or checks drawn to cash. It is important to be conservative in this regard.

3. Another rule set forth is that a check drawn on the account reduces the value of the account whether or not negotiated – N.J.A.C. 10:71-4.1(e)2. It is extremely important to be aware that the records will not show the account being reduced by the first of the month since the check was not negotiated. It has been my practice to keep a copy of the check and submit it to Medicaid for the subsequent month in order to establish eligibility. If such a resource is anticipated such as an income tax refund for a medical reimbursement, it would make sense in advance as to plan the use of such monies. For example, meet with the funeral director in advance and make preliminary arrangements. As indicated in prior posts, expenses relating to the joint home are excludable. However, such expenses should be justified and are subject to the concept of reasonableness.

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 73

Transfers Made By Potential Applicant After February, 2006

2010-04-01T06:27:00.000-07:00

Post 18 discusses some of the steps to take when presented with a situation for which transfers have already occurred. The purpose of this post is to expand some of the concepts presented and provide some new curative ideas. I am very often presented with a situation which indicates that a potential applicant has made numerous transfers prior to retaining me. All transfers during the look-back period are aggregated and are deemed to have been made at the time of application (the time a person would be otherwise eligible for Medicaid but for the transfers). The transfer period commences at that time and the various issues presented by such rule are set forth in Post 15. Perhaps the most onerous rule is that the nursing home does not receive Medicaid nor payments from the individual who has exhausted his or her assets.

1. Perhaps, the first ameliorative approach should be to review the exemptions from the transfer rules. The major exemptions are the transfer of home to designated individuals, transfer to a disabled child, transfer for purpose other than Medicaid and assets transferred used for the benefit of the Medicaid applicant.

2. Another approach would be to wait and hope that the potential applicant does not need nursing home care for 60 months.

3. Another approach would be to evaluate the penalty (divide aggregated transfers by applicable penalty rate at the time of application).

4. The monies could be given back to the potential applicant if the situation is propitious. The ideal situation would be if the applicant had excludable resources for which the funds could be used. That is, if the potential applicant were married and the home needed extensive repairs, the monies could be protected. Similarly, monies could be expended on prepaid funeral funds.

This article should be read in conjunction with Post 18 to give a complete picture of the problem and the issues.

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 72

Caretaker Agreement Not Technically Required

2010-03-24T10:32:00.000-07:00

Caretaker agreements have been discussed in Posts 17 and 52. Basically, the regulations provide that if an applicant transfers funds to a child or relative if such transfer is pursuant to a pre-existing agreement, the presumption of a transfer is rebutted. However, careful examination of the language indicates that such agreement may not be necessary. The regulations state that a transfer of assets by the applicant to a friend or relative “may be rebutted by the presentation of credible documentary evidence preexisting the delivery of the care or services.”

The word “may” is to be stressed. My feeling is that if the fact situation clearly indicates that a transfer of monies compensating a friend or relative for past services is obvious, a pre-existing agreement should not be provided.

For example, if the applicant during the look-back period has no funds and needs medicine to keep alive, monies expended by a friend on such medicine with the check indicating that it is a loan should not require a caretaker agreement. Similarly, if a dependent relative (see Post 14) resides in the future applicant’s home, a portion of any expenditures by the dependent relative should be treated as reimbursable.

Although a caretaker agreement should be drafted, the necessity for such may be lessened, particularly if the parties are aware that the applicant will be receiving an inheritance. That is, the child or friend made expenditures on behalf of the applicant with the anticipation of a reimbursement from the applicant.

The above ideas are merely suggestions as to arguments that can be made if a caretaker agreement has been neglected. Obviously, the preparation of such agreement should be a standard course of conduct.

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 71

The Loss of Medicaid Eligibility

2010-03-17T09:51:00.000-07:00

The rules of Medicaid eligibility have been discussed in Post 7 and throughout the various postings provided. That is, the individual must have less than $2,000 (or $4,000 if assets are over the income cap of $2,022).

However, after eligibility, the Medicaid recipient (or family) must carefully monitor the individual’s resources to ensure continuing eligibility. That is, for the recipient, the first day of each month must show resources less than $2,000. Situations to be considered include, but are not limited to, the following:

1. The cash value of insurance with a face value in excess of $1,500 is a resource. I recently submitted an application for which the individual had such a policy, but still qualified for Medicaid since the cash value was so minimal and the bank account did not put total resources over $2,000. However, any remaining cash value not surrendered is to be considered in total resources. Therefore, surrendering the policy make sense even if the cash value doesn’t immediately disqualify you from Medicaid if other resources are considered.

2. Medicaid allocates $35.00 a month to a Medicaid recipient. This number can build up over time and has to be reviewed periodically.

3. Presumably, the recipient maintains a bank account and that is also a resource. Avoiding any problems with pension and/or social security is discussed in Post 1.

4. Monies inherited will eventually cause disqualification. The effect of inheritance by the Medicaid recipient is discussed in Post 28.

These types of issues should not be factors with respect to the community spouse resource allowance. As indicated by Post 13, the community spouse is not limited to $109,560 (for the year 2009) after the applicant receives Medicaid. This is to be distinguished from the requirement for the applicant where the resource allowance must be kept at $2,000 or less on the first day of each month throughout eligibility. Two typical examples of the community spouse rule have been presented in the materials. For example, in the real estate planning ideas presented in Post 11, if the primary residence is in the name of the community spouse, the closing on the sale of property in the sole name of the community spouse should be after the date of the applicant’s eligibility. Similarly, if the community spouse is the beneficiary of an estate, the mere fact of being a beneficiary does not cause the inheritance to be a resource as such is treated as an “inaccessible resource.” However, if the monies are distributed before the date of applicant’s eligibility, the inheritance will be treated as part of the “spousal pot,” and, therefore, the applicant will not qualify.

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 70

Additional Real Estate Planning Idea for Married Couple

2010-03-12T11:58:00.000-08:00

In Post 11, it was discussed that if a couple are renting, the purchase of a home by the community spouse would be a protected asset and expedite Medicaid eligibility. I believe this is a significant planning technique and this post discusses the approach in greater detail. The key rule to remember is that the home constitutes exempt property if resided in by the applicant, the community spouse or both. This article addresses ownership of home by the community spouse. Generally, if a couple is renting , the new home should be purchased solely in the name of the community spouse and resided in at least until after the husband qualifies for Medicaid. That is, after determination of eligibility for Medicaid, the resources of the community spouse are no longer deemed available to the nursing home resident. However, if the home were sold prior to Medicaid, the monies would be part of the spousal “pot” and Medicaid eligibility would be denied or lost.

The key to this planning technique is also to protect the community spouse resource allowance.

The community spouse resource allowance is determined “as of” the date of institutionalization which is the date of continuous placement in a hospital or nursing home. The key to maximizing resources is that, if institutionalization is imminent, purchase the home after institutionalization so as to maximize asset protection. That is, prior to institutionalization we are dealing with cash.

For example, if there is $300,000 in resources at the date of the “snapshot," the community spouse resource allowance would be $109,560. The balance of the monies could be used by the community spouse to purchase a home. That is, the monies not allocated to community spouse resource allowance need not be allocated to nursing home costs. It is a common misconception that resources that are not part of the protected amount must be expended on nursing home costs. There is no such requirement.

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 69

Methods of Payment of Nursing Home Costs

2010-03-12T11:53:00.000-08:00

There are several methods by which a nursing home can be reimbursed for the stay of an individual, some of which are temporary and some of which are permanent. However, it is necessary to keep all of these in mind in projecting the date of eligibility.

Firstly, other than the various financial issues in obtaining a Medicaid eligibility letter, a necessary element of Medicaid eligibility is to obtain a PAS for the applicant. This is an examination by the county nurse which will be given almost immediately if a potential applicant is in a hospital. Otherwise, the family is at the mercy of the schedule of the nurses who often cover several counties. Financial eligibility without a PAS will result in eligibility being delayed until the PAS is obtained.

The methods of payment of a nursing home include Medicare (for a limited period of time), long-term care insurance and private pay.

There is a misconception that Medicare will pay for a long-term institutionalization. This is not the case. Medicare will pay for a limited stay at the nursing home if the following requirements have been met:

1. The individual has resided at a hospital for at least three days.

2. Medicare will make full payment for 20 days if an individual requires skilled nursing or rehabilitation and payment is made so long as sufficient progress is made by the applicant. Medicare will also pay for some or all of the next 80 days with a co-pay that is often covered by the individual’s Medigap insurance. The family must carefully monitor the progress of the potential applicant and the thinking of the nursing home. The nursing home often gives limited notice as to the time Medicare payment ceases. At this time, the family must make the decision as to whether the individual remains in the nursing home or returns home.

If an individual remains in a nursing home, the rules of Medicaid discussed in the various Medicaid postings become applicable.

Many nursing homes require private pay for a guaranteed period of time. Although this requirement is illegal, it is part of the Medicaid game and the family should make initial inquiry as to the policy of any given nursing home.

Also, upon the expiration of Medicare coverage, the family will be presented with a nursing home application, including the key document which is the agreement. Consulting an attorney regarding the terms of the agreement is advisable.

If an individual anticipates purchasing long-term care insurance, an expert should be consulted. The permutations of the type of policy are virtually infinite. Some of the areas that are to be addressed include care at home, increase with the C.P.I., time period for coverage (that is, set number of years or lifetime), waiting period (period before payments commence), etc. I intend to have an expert write an article for this blog discussing long-term insurance in detail.

There are basically two reasons why an individual would purchase long-term care insurance. Usually, the insurance is purchased because the individual or individuals are aware of the intricacies of Medicaid and desire to have monies to avoid such process. However, such insurance can be purchased for estate planning purposes. That is, a wealthy individual might not want a diminution of assets caused by nursing home costs and the insurance would avoid or at least ameliorate that possibility.

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 68