Steps To Be Taken When Planning Is Uncertain

Steps To Be Taken When Planning Is Uncertain

A common situation for a lawyer is to confer with a spouse who explains that her husband’s physical and mental condition are unclear at this point. The husband is in the hospital with a serious and potentially life-threatening condition. If the problems can be cured, the husband will then go to rehab. If that is successful, a nursing home is a possibility.

The joint assets (basically bank accounts) are approximately $200,000, and the assets in the wife (also basically bank accounts) are approximately $100,000. Due to the husband’s tenuous situation, any Medicaid planning would appear to be inappropriate particularly in light of the fact that the husband might pass away.

However, there are basic steps that should be taken even in a situation such as the above:

1. Assets should be transferred into the name of the wife for management purposes as there is an appropriate power of attorney.

2. With respect to a will for the wife, see Post 21 and reference to my article Practical Medicaid Planning – Part II, 1999 “Estate Planning Issues,” by Levin, Mark. Home should be transferred into wife’s sole name (see Post 11).

3. Family should verify accessibility of all assets. That is, make sure that the power of attorney for the husband will be acceptable by all banks or financial institutions. If not, revise the power of attorney.

4. Leave one account for husband as a receptacle for social security and/or pension.

5. Prepare a list of any transfers after February, 2006, which will remain an issue until after February, 2011.

6. Do not acquire annuities with substantial penalty amounts in the event the annuity monies are needed for costs. If healthy spouse is working, that spouse should review company policy about taking a leave in case Medicaid becomes an issue in the future and the additional earnings become an impediment to eventually seeking Medicaid (see Post 33).

7. Confer with counsel as to the possibility of a foolproof plan without taking any steps at the present time. See Post 42 which discusses the transfer of assets to a “disabled child.”

8. Review pension and social security of applicant and spouse. In the above-referenced case, the total pension and social security equaled approximately $6,500. Therefore, if Medicaid did become an issue, these payments should cover the Medicaid reimbursement rate without the need for planning.

As in many of my prior postings, this list is not exhaustive, but rather is illustrative of issues to be addressed.

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

© September 2009, Post 54

Assets Transferred to a Disabled Child

Assets Transferred to a Disabled Child

One of the areas often neglected in Medicaid is transferring funds to a disabled child. “Disabled” would be satisfied if the child were on S.S.I. or a social security disability.

Many “disabled” children can handle money depending the nature of the disability.

I had a matter in which a husband and a wife had a total of $750,000 and were both going into a nursing home. At the Medicaid meeting, I presented the plan to the County Board and the Board agreed that such a transfer would be exempt.

The nature of the child’s disability was psychological, but was not severe. Medicaid does not seem to inquire as to the disposition of funds by the disabled child. In this case, the disabled child (after both his parents got Medicaid) transferred the funds to his brother and the monies were protected and both parents immediately qualified for Medicaid.

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 #42

Practical Idea for Protecting the Home

Practical Idea for Protecting the Home

This article is another example of utilizing some of the theoretical rules discussed with respect to the home. This article addresses the two-year rule pursuant to which an applicant can transfer her home to a child and, if the child lives in the home for two years and provides care so that the mother need not go in a nursing home, the transfer would be exempt from the transfer rules (see Post 6).

The typical example would be Mrs. Jones owns a home and some other minor assets. Mrs. Jones is not ready to go into a nursing home but is declining to some extent.

Her daughter, Diane, is single and would like to take care of her mother.

Rather than the house be sold and the mother go into a nursing home, Diane would move in with Mrs. Jones and provide such care as to satisfy the two-year rule. Hopefully, Diane would be able to reside with her mother for two-years prior to application for Medicaid. In this way, the home would be saved and transferred to Diane, who happens to be the mother’s sole heir.

See Post 6, which discusses the two-year rule in more detail.

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 #41

Caretaker Child - Practical Aspects

Caretaker Child – Practical Aspects

Prior posts have addressed mainly the rules and theoretical basis for various aspects of Medicaid planning. The next several articles will deal with practical applications of some of the aforementioned rules.

Suppose Mrs. Smith has a home, is competent, but is also a nursing home candidate. Susan, her daughter, has her own home and is willing to have Mrs. Smith move in and make improvements and/or expansions to her home to accommodate her mother.

The various posts (see Posts 6, 23)) that have been discussed are particularly applicable in this situation.

The plan would be for the daughter to make the necessary improvements and/or expansions on her home, Mrs. Smith would sell her home and move into Susan’s home. Prior to moving in there would be a caretaker agreement that would provide for the services and living arrangements to be provided by Susan in exchange for reimbursement by Mrs. Smith which would be set forth in a caretaker agreement.

Such an approach would not only save the value of the house of the family by way of payment to Susan, but would allow the mother to reside with her family and have care rather than live in a nursing home.

As indicated in Post 17, it is absolutely necessary that there be a third party valuation which sets forth the amount of payments to be made by Mrs. Smith. Such payments must be at the prevailing rate in the community. Any payments by Mrs. Smith in excess of that would be treated as a transfer.

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 #40

Caretaker Child Revisited

Caretaker Child Revisited

In a prior Post 6, I discussed in some detail the rationale for preparing a power of attorney for a potential applicant that allows the residence to be transferred to the child who provided care (i.e. “protected transferee”) if appropriate for Medicaid planning purposes. However, it is important to discuss the type of evidence to be adduced at the County Board of Social Services to influence the Board to make a decision that the child provided the requisite care so that the transfer can be made at that time either by the applicant (if competent) or under the power of attorney if applicant is then incompetent. I have found that two documents provided to the Board are sufficient for establishing the requisite care for the two-year period and the fact that such care permitted the individual to reside at home rather than go into a nursing home.

Firstly, an affidavit prepared by the child discussing the care provided (with any necessary documentation) is most helpful. In the simplest situation, I had a case in which a nurse of a prominent nursing home retired to take care of her mother at home. Obviously this is not the typical case but is an extreme example. The usual case involves a child living in the parent’s home who is working and provided certain elements of care. To prepare a proper affidavit inquiry should be made with respect to the following areas: whether the child worked near the residence of the applicant, to what extent did the child provide medicine which the applicant could not self-administer, whether the child was available during the day to immediately go home and take care of the potential applicant if necessary, how much time did the child spend with the potential applicant during non-working hours, to what extent the child would go on vacation (going on vacation is not fatal since I believe that intermittent care by another would not ruin the “protected transferee” status), to what extent the child helped the potential applicant with basic physical care needs such as cleaning, etc., the child’s role in providing transportation and coordination of care with the parent’s physicians, did child directly provide any basic medical care on a regular basis such as taking blood pressure. The list of such inquiries is infinite but the key is to show that but for the care of the child, the parent would need to go into a nursing home.

Secondly, it is recommended that a letter from the potential applicant’s physician stating to the best of his/her knowledge the child provided the necessary care to allow the potential applicant to remain at home. This letter should be brief and to the point. In my experience, I have not requested an affidavit from a physician since I feel it would be inappropriate.

Such an approach should get the desired result (transfer of home to child).


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 #34

The Problem of the Working Spouse

The Problem of the Working Spouse

On many occasions an institutionalized spouse will have a community spouse who is still employed. The earnings of the community spouse when added to pension and social security of both parties prevents Medicaid eligibility. The solution to such a problem is as follows:

1. Keep in mind that the resources of the community spouse after the applicant receives Medicaid are not considered as a factor in continuing eligibility.

2. In the hypothetical, but for the earnings of the community spouse, which were used to fund nursing home costs, the individual would be eligible for Medicaid.

3. Arrangements should be made for the community spouse to cease working for a limited period of time to eliminate the continuing flow of income from her earnings.

4. Medicaid eligibility, particularly giving consideration to the community spouse resource allowance, the current maximum being $109,560, should be an uncomplicated procedure.

5. The spouse should make arrangements that after the applicant receives Medicaid, the community spouse commences work and again her resources are not limited.

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 #33

The Need for a General Durable Power of Attorney

The Need for a General Durable Power of Attorney

One of the most important aspects of Medicaid planning is that there be access to assets of the applicant. If the applicant is incompetent, the power of attorney should be used to have access to these assets. The word “durable” refers to the fact that the power of attorney must have special language so that even if the applicant is incompetent, the assets can be used or liquidated.

Reference is made to Post 20 which indicates that a typical applicant might have bank accounts, securities, E bonds, IRA’s, life insurance policies and/or a residence. 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.

If an individual is not competent and there is no power of attorney or the power of attorney is not deemed to have access to the asset, a costly guardianship is required.

The power of attorney should not be pro forma (i.e. standardized). Particularly in the elder law area, the individual’s situation is to be considered in drafting the language for a power of attorney. This will be discussed further in future posts.

Generally, only a copy of a power of attorney is necessary except for real estate transactions. Also, the County Board of Social Services asks for a power of attorney as part of the application process.

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.


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 #32

The Problem of Recurrent Disqualification

The Problem of Recurrent Disqualification

A. A Medicaid recipient may be entitled to monies on a recurring basis, which will raise continuing disqualification problems.

1. For example, an individual may be entitled to several payments due to an asbestos class action recovery.

2. Such funds received during a given month not expended by the “first moment of the first day” of the subsequent month will result in disqualification if the resource requirement is exceeded.

B. Planning in advance may avoid disqualification.

1. Possible uses of such funds received on a recurrent basis are funeral expenses, clothing and outstanding medical bills.

2. If the Medicaid recipient has a caretaker agreement (see Post 17), which allows the recipient to reimburse a child or relative for prior services rendered by such individual, payments made under the agreement could solve the problem. Also, exempt transfers such as to a “disabled” child will ameliorate the problem.

3. All bills and expenses should be paid immediately. If receipt of the money causes the Medicaid recipient to exceed the resource requirement on the first of the next month, private payment must be made even if the monies available on the first of the month exceed the resource requirement by even a minimal amount.

4. Prepaid burial costs can be increased.

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 #31

Joint Assets

Joint Assets

In prior Posts, I have indicated that a large portion of New Jersey Medicaid law has not been affected by The Deficit Reduction Act. However, it is important to realize the treatment of certain issues and the current treatment of such issues. This article has been written with that thought in mind.

Under the Medicaid Catastrophic Coverage Act, New Jersey has accorded special treatment to funds withdrawn from a joint bank account – Medicaid Communication 88-15. That is, funds drawn by another other than the applicant from a joint account were not treated as transfer if both parties had complete access to the account and funds were placed into the account by the applicant prior to the look-back period.

OBRA ’93 employs broad language to treat any reduction in individual’s ownership or control of any joint asset as a transfer. New Jersey now follows OBRA ’93 for all joint assets, including bank accounts (i.e. funds withdrawn by another are subject to a transfer penalty). This is now the law in New Jersey.

To the extent that the funds withdrawn were the property of and contributed by the co-owner, the withdrawal of these funds should not result in the imposition of a penalty.


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 #29

Effect of Inheritance by the Community Spouse on Eligibility

Effect of Inheritance by the Community Spouse on Eligibility

The determination of spousal resources is made at the date of institutionalization (the “snapshot”) while resources at the date of application determine eligibility (see “Marital Issues in the Eligibility Process” herein). Suppose a community spouse is a beneficiary under the will of a parent and the parent has recently died. Under what circumstances is this inheritance part of the spousal pot for Medicaid eligibility purposes?

A. Death of parent of community spouse after eligibility

An inheritance by the community spouse after institutionalized spouse becomes eligible for Medicaid is not an available resource and does not result in disqualification. That is, after the date of determination of eligibility for Medicaid, no resources of the community spouse are deemed available to the institutionalized spouse.

B. Death of parent of community spouse prior to eligibility date

1. Suppose the parent of the community spouse dies two weeks before the anticipated date of eligibility. Does the prospective inheritance of the community spouse delay the eligibility date?

N.J.A.C. 10:71-4.4(b) 6. treats property in probate as an inaccessible resource. Therefore, the parent’s death should have no immediate effect on eligibility.

2. Suppose the parent dies six months before the anticipated eligibility date and distribution has not been made to the community spouse.

Query: To what extent can probate be delayed beyond Medicaid eligibility? That is, should you communicate with the executor of decedent’s estate so that distribution is delayed until the applicant receives Medicaid?

C. Distribution of inheritance to community spouse prior to application

1. Probably, such inheritance would be treated as a resource as of the date of application for Medicaid.

2. If you are presented with this situation, the argument could be made that since the statute is silent with respect to resources acquired by the community spouse between the dates of institutionalization and application that such resources are not part of the “spousal pot.”


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 #27

Preserving the Community Spouse Resource Allowance

Preserving the Community Spouse Resource Allowance

A. The key to planning asset preservation with respect to the community spouse is to remember that although the community spouse resource allowance is determined as of the date of institutionalization, the date at which the community spouse cannot have resources in excess of this amount (subject to the 90-day rule), is the date of application (see Post 25). Therefore, in order to do appropriate Medicaid planning, consideration must be given to utilization of spousal resources from the commencement of planning to the projected date of Medicaid eligibility.

Factors to be considered in determining the amount retained by the community spouse include the following:

i. anticipated personal expenditures by community spouse prior to application;

ii. expenditures of “ill” spouse prior to institutionalization and, of course, nursing home costs prior to Medicaid eligibility;

iii. interest and earning on assets;

iv. any compensation to be received by the community spouse;

v. social security and pension payments of both spouses;

vi. projected date of Medicaid eligibility.

B. As indicated by the above factors, although the community spouse resource allowance is determined objectively, many factors must be considered as part of the planning process. For example, although the current maximum amount that can be protected is $109,560, generally a substantially greater amount can and should be retained by the community spouse. Living expenses of the community spouse and nursing home costs of the institutionalized spouse prior to Medicaid eligibility are major factors. Possibly the key factor is the projected date of Medicaid eligibility which, of course, cannot be determined with certainty.


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 #26

Date of Application Could Be Fatal

Date of Application Could Be Fatal

Usually, the date of eligibility is easy to project. As indicated above, application should be made several months prior to the anticipated date of eligibility. Therefore, after submission of the required documents and financial information to Medicaid, only subsequent monthly financial data need be submitted until eligibility is granted. That is, in the usual case early application is part of a prudent planning process. However, in terms of the date of eligibility, early application could be fatal when there have been transfers.

A. The look-back period is 60 months prior to the date an individual is institutionalized and has applied for Medicaid.

B. If an individual delays applying for Medicaid until 60 months after a transfer, eligibility will be granted.

C. Suppose individual applies for Medicaid 56 months after transferring $200,000 to brother. Applicant is ineligible for Medicaid. Suppose individual applies five months later, which is 61 months after the transfer. Will the original application be fatal or will it be cured by the later application? The original application is fatal and is not cured by the later application. 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.


© April 2009, Post #25

Inadvertent Disqualification of Individual Due to Death of Another

Inadvertent Disqualification of Individual Due to Death of Another

As indicated in Post No. 4, a Medicaid recipient’s resources on the first of any month after Medicaid must not exceed the resource limitation of $2,000 or $4,000.

The prior death of a relative of a Medicaid recipient could result in the loss of eligibility. The estate plans of individuals of a Medicaid recipient are often a neglected consideration. Such concerns can even arise when an individual has been part of the Medicaid planning process, such as a “protected transferee,” a disabled child or a donee of gifts.

For example, if the home is transferred to an exempt individual, major concern is that the will of the transferee not devise the home to the potential Medicaid recipient or that the potential Medicaid recipient not receive a share of the estate of the transferee by intestacy.

It is important that a Medicaid recipient not be a beneficiary under any will. Therefore, the wills of other relatives, whether or not a participant in the Medicaid planning process, should be reviewed. Generally, ethical considerations will dictate that such individuals retain separate counsel.

Inheritance by intestacy could also result in disqualification, see N.J.S.A. 3B:5-3, 4.

The receipt of nonprobate assets such as insurance proceeds or retirement benefits could also cause disqualification.

With respect to life insurance, if an owner designates a primary beneficiary without contingent beneficiaries, the policy could provide that the insurance would go to the Medicaid recipient. Therefore, beneficiary designations should be carefully reviewed.

The topic of the will of the “healthy spouse” is complicated and has been purposely neglected. Reference is made to my article Practical Medicaid Planning – Part II, 1999 “Estate Planning Issues,” by Levin, Mark.



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 #21

Importance of Liquidating Assets in the Medicaid Planning Process

Importance of Liquidating Assets in the Medicaid Planning Process

Reference is made to Post 12 that discusses basic planning situations referred to as “bread and butter” planning techniques. With respect to investments, the value fluctuates from day-to-day. Therefore, if we have a basic situation with an applicant without a community spouse (although would apply to a community spouse situation), the existence of investments precludes an exact determination of resources on the first day of any given month.

Therefore, as part of the pre-Medicaid plan, it is necessary that such assets be liquidated and the capital gain considered in the prepayment of taxes (if applicable).

Such rationale would also apply to assets such as IRA’s with investments within the IRA. Of course, the liquidation of the IRA gives rise to income tax consequences.

Also, it is necessary to prepare a power of attorney for the potential applicant. This is necessary for numerous reasons. However, with respect to an application for Medicaid, it is necessary that the assets of the applicant be “accessible” in the event liquidation is necessary and the applicant is not competent as Medicaid approaches.

In an ideal “bread and butter” situation, it is important to limit the factors to be considered in projecting the date of eligibility for Medicaid. Such factors would include the resources of the client, the individual’s pension and/or social security payments and the monthly cost of the nursing home (including extras). This matter becomes complicated if there are assets subject to fluctuation.

The following is the simplest form of the projection problem:

Applicant (single individual) has bank accounts of $40,000. Monthly social security checks are $1,000. Assume monthly nursing home charges of $6,000. Applying the social security payments against nursing home costs results in a “net” monthly cost of $5,000. Therefore, Medicaid eligibility is anticipated in eight months ($40,000 bank accounts divided by
$ 5,000 “net” monthly cost)

Of course, the above example is markedly simplified. Prior blogs have discussed issues that complicate the eligibility process such as payment of debts, liquidating resources, income tax liabilities, prepaid burial arrangements, life insurance, the handling of pension and social security payments and the recommended priority of payment of debts and expenditures.


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 #20

Payment by Applicant for Care or Services Provided by Child

Payment by Applicant for Care or Services Provided by Child

A common occurrence is for a child to provide services in the past for someone who is now an applicant for Medicaid. The State takes the position that at the time the services by the child were delivered that they shall be presumed to have been intended to be delivered without compensation. Therefore, funds transferred by the applicant within the look-back rule to compensate a friend or relative shall be presumed to have been Medicaid penalizing transfers. This presumption may be rebutted by documentary evidence which was in existence at the time of the delivery of care or services by the child.

Generally, “documentary evidence” refers to a writing in the nature of a caretaker agreement by which the child would provide the necessary services (parent lived in home with child), which is intended to be reimbursed by the parent and avoid penalty implications.

Such caretaker agreement should include the following:

1. The specific nature of services provided by the child (delineated in an attached schedule to this agreement).

2. An independent valuation of such services possibly by a geriatric care manager if such services include care for the parent, tending to medical needs and related matters. I believe the independent valuation is absolutely necessary to maintain the validity of the agreement. Many attorneys draft caretaker agreements which include the attorney’s estimate of such value. In this regard, the State takes the position that “the amount of compensation or the fair market value of asset transferred [by the applicant] shall not be greater than the prevailing rates for similar care or services in the community. That portion of compensation in excess of the prevailing rate shall be considered to be uncompensated value.” Any portion in excess of such rates shall be deemed a transfer for eligibility purposes.

An improperly drafted agreement can raise very serious problems, particularly under the new transfer rules.


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


© March 2009, Post #17

Community Spouse Not Limited to Community Spouse Resource Allowance After Date of Eligibility of Applicant

Community Spouse Not Limited to Community Spouse Resource Allowance
After Date of Eligibility of Applicant

Previously, it has been discussed (see Post 11) that after the applicant’s receives Medicaid, the community spouse is not limited by the Community Spouse Resource Allowance. Relevant administrative regulations are included for reference.

For example: (see Post 11, one of the reasons for transferring the house to the community spouse is that a sale by the community spouse of the primary residence after the applicant receives eligibility, would result in proceeds not subject to the Medicaid computations. Proceeds of a sale before the date of eligibility would be treated as part of the “pot” and, therefore, preclude current Medicaid eligibility.

Another common situation is an inheritance by the community spouse. N.J.A.C. 10:71-4.4(b)6. indicates that property in probate is an inaccessible resource. Therefore, if the community spouse is a beneficiary of the estate, his or her share of assets of the estate does not enter into the “pot” until distributed. If distribution occurs after the applicant receives Medicaid, the resources received are free without encumbrance. However, if distribution is made prior to eligibility, the resources become part of the “pot.”


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


© March 2009, Post #13

Real Estate Planning Ideas for a Married Couple

Real Estate Planning Ideas for a Married Couple

Protection of the home is the most common and most significant Medicaid planning and eligibility issue. Unfortunately, the planning possibilities are often overlooked. Some of the techniques (e.g. spousal planning) are rendered uncertain due to Medicaid’s position that the failure of a surviving spouse to exercise elective share rights gives rise to a period of ineligibility (see N.J.A.C. 10:71-4.10(b)3., see also Comment 8). Relevant administrative regulations are included for reference.

Planning Ideas for the Married Couple

A. Significant Medicaid rules to consider in the planning process.

1. Transfer rules do not apply to the transfer of the home to designated individuals.

i. spouse

ii. child under 21 or child who is blind or disabled

iii. 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

iv. son or daughter who resided in the home for at least two years prior to institutionalization and provided care which permitted individual to reside at home rather than go to a nursing home.

2. The home constitutes exempt property if resided in by spouse.

3. If home owned by applicant and not resided in by spouse or applicant is unmarried, an absence of more than six months is assumed to indicate that the home is no longer the principal residence - N.J.A.C. 10:71-4.4(b)1.i.

4. After determination of eligibility for Medicaid, no resources of the community spouse are deemed available to the institutionalized spouse.

B. Transfer of home to spouse

1. Typical factual situation: Potential Medicaid recipient and spouse own residence as a tenancy by the entirety. Assume individual qualifies for Medicaid and after qualification, community spouse predeceases and residence passes by operation of law to the Medicaid recipient. In such a case, the residence is no longer exempt and the house would have to be sold and the proceeds applied to payment of nursing home costs before Medicaid eligibility would be reinstated.

2. Planning recommendation: Potential application should transfer interest in the home to the spouse. Spouse should devise residence to someone other than institutionalized individual. Assuming applicant and community spouse had no other assets, such disinheritance would be treated as a transfer by applicant under the new regulations. It is recommended that there be separate counsel for each spouse for this transaction.

Note: If property remained in joint tenancy, there would be no estate recovery upon the death of a Medicaid recipient survived by the community spouse. However, New Jersey Medicaid authorities take the position that if such property remains in the name of the community spouse, upon the death of the community spouse, the estate recovery provisions will apply to said property (with respect to Medicaid costs of the application). Therefore, a transfer of title into the sole name of the community spouse removes the property from the “estate” of a Medicaid recipient, and, therefore, from the estate recovery provisions.

3. Recommendations regarding subsequent sale of residence by community spouse after transfer: Community spouse should not sell residence until after institutionalized spouse qualifies for Medicaid at which time the resources of the community spouse are no longer deemed available to the institutionalized spouse. If the residence is sold by the community spouse before the institutionalized spouse qualifies for Medicaid, the proceeds become an available resource.

Contrast: Residence remains in joint names and is sold after institutionalized spouse qualifies for Medicaid. At such time, one-half the proceeds are allocated to the community spouse and one-half the proceeds are allocated to the Medicaid recipient, who would then lose Medicaid eligibility.

4. It is noted that a re-transfer of the home by the community spouse is not a protected transfer and is subject to transfer penalty. However, a transfer of the home by the community spouse after the institutionalized spouse qualifies for Medicaid should not result in a transfer penalty.

Comment: As indicated above, the regulations provide that the failure to exercise elective share rights is treated as transfer by the applicant and gives rise to a period of ineligibility. Therefore, the will of the community spouse and disinheritance become an issue. Notwithstanding, the above analysis presents several compelling reasons for transferring the residence to the community spouse (sale of residence by community spouse after eligibility, avoidance of lien if Medicaid recipient predeceases community spouse, avoidance of residence passing to Medicaid recipient by “operation of law” if community spouse predeceases, avoidance of loss of eligibility if residence sold while in joint names).

C. Purchase of home by community spouse

1. Typical factual situation: Potential Medicaid recipient and spouse reside in a rented apartment. Couple have $350,000 in liquid resources. Individual enters nursing home.

2. Planning recommendation: Residence should be purchased in name of community spouse. The home constitutes exempt property if resided in by spouse. Community spouse should not sell residence until after applicant qualifies for Medicaid.

3. The above is another example of the purchase of an excludable resource to protect funds.

D. Recent sale of home

1. Factual situation: Couple with minimal resources have recently sold their jointly-owned residence in anticipation of the need for monies to pay husband’s nursing home costs (not being aware of Medicaid rules). Husband enters nursing home several days prior to seeking advice of counsel).

2. Recommendation: Community spouse should immediately purchase another home with the proceeds of sale from the prior home. N.J.A.C. 10:71-4.4(b)8.(ii) indicates that the proceeds of sale constitute an excludable resource to the extent utilized to purchase another home within three months of the date of receipt of the proceeds.

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


© March 2009, Post #11

Significance of the 90-Day Rule

Significance of the 90-Day Rule

Pursuant to N.J.A.C. 10:71-4.8(a)2., an applicant will be eligible for Medicaid when couple’s total resources reduced by community spouse’s share, are equal or less than $2,000 subject to exclusions. Also see N.J.A.C. 10:71-4.8(a)3., which requires that ownership of the community spouse’s share be transferred to the community spouse within 90 days of Medicaid eligibility. Therefore, eligibility will be determined on the basis of total resources of applicant and spouse (i.e. joint accounts), but if applicant has more than $2,000 at the time of eligibility, the County Board will check ownership 90 days after eligibility.

Example: Total resources of institutionalized individual and spouse at date of institutionalization are $300,000. The community spouse resource allowance is $109,560.

Assuming all other requirements are met, institutionalized individual will be eligible for Medicaid when total resources are equal to or less than $111,560.

Therefore, if total resources at the time of application considering those of the applicant and those of the community spouse are equal or less than the appropriate amounts, Medicaid eligibility will be granted. However, within 90 days the Community Spouse Resource Allowance must be in the name of the community spouse and the applicant cannot have more than his or her resource allowance.

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


© March 2009, Post #10

Theory for Using Date of Institutionalization for Computation of Protected Amount

Theory for Using Date of Institutionalization for Computation of Protected Amount

Community spouse requires certainty after institutionalization in order to protect the Community Spouse Resource Allowance. If such a determination were not made as of the date of institutionalization, at any point in time the community spouse would not be aware of the amount of resources that could be protected and may have expended more funds than necessary. Therefore, the computation of the allowance is made prospectively.

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


© March 2009, Post #9

Community Spouse Resource Allowance - Importance of Timing Payment of Expenditures

Community Spouse Resource Allowance

Importance of Timing Payment of Expenditures

A. Expenditure of resources in excess of the Community Spouse Resource Allowance.

Assume husband is the institutionalized spouse. Must resources that are not part of the Community Spouse Resource Allowance be used for nursing home costs? It is a common misconception that resources that are not part of the Community Spouse Resource Allowance must be expended on nursing home costs. There is no such requirement in the statute.

Planning Point: If institutionalization is imminent, try to delay expenditures until after institutionalization in order to maximize asset protection.

B. Assume $100,000 in spousal resources (excluding the home) and home needs repairs and improvements of $20,000. If costs are incurred before institutionalization, the Community Spouse Resource Allowance will be $40,000. However, if costs are incurred after institutionalization, treat such costs as reducing the husband’s share, and the Community Spouse Resource Allowance will be $50,000.

Attorney’s fees would be another expenditure that should be paid after institutionalization.

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


© March 2009, Post #8