“Bread and Butter” Planning Techniques for Medicaid Eligibility
Many potential Medicaid eligibility cases do not require sophisticated planning techniques. Relevant administrative regulations are referenced.
I. Hypothetical
Husband is about to permanently enter nursing home. The husband and wife have the following assets:
Residence $($30,000 mortgage) $200,000 (net of mortgage)
Bank accounts (jointly held) 100,000
Life insurance on husband
($100,000 face, $5,000 cash value) 5,000
Investments (jointly held) 25,000
Debts and anticipated debts are $10,000, which includes attorney’s fees, accountant’s fees and needed repairs on the home.
The planning goals are Medicaid eligibility, maximum preservation of assets and avoidance of loss of Medicaid eligibility.
II. Recommendations
A. Transfer all bank accounts and investments into the name of the wife for management purposes.
B. Residence should be transferred into wife’s sole name. Home should not be sold by wife until after husband is eligible for Medicaid (spouse’s cash not counted toward husband’s assets after husband’s eligibility).
C. Life insurance policy should be cashed in after institutionalization (see N.J.A.C. 10:71-4.4(b)4.).
D. After husband enters the nursing home, pay off mortgage ($30,000), debts and expenses ($10,000), cash in life insurance.
Note: The Community Spouse Resource Allowance is $65,000 (one-half total of bank accounts, investments and cash value of insurance). The amount which is not protected need not be used on nursing home costs, and payment accelerates the date of Medicaid eligibility.
E. Balance of funds used to pay nursing home costs and wife’s expenses in the community. Other possibilities are prepayment of taxes, prepaid funeral funds and general debts.
Suggestion: For alternative arrangements, see Additional Post-Eligibility Considerations, Post No. 2.
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 #12
Monday, March 16, 2009
Friday, March 13, 2009
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
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
Tuesday, March 10, 2009
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
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
Monday, March 9, 2009
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 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
Thursday, March 5, 2009
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
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
Tuesday, March 3, 2009
Rules for Medicaid Planning
Rules for Medicaid Eligibility
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
Subsequent articles will discuss other aspects of the 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.
© March 2009, Post #7
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
Subsequent articles will discuss other aspects of the 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.
© March 2009, Post #7
Monday, March 2, 2009
Property Owned by Applicant Residing with Caretaker Child
Property Owned by Applicant Residing with Caretaker Child
The transfer rules do not apply to the transfer of the home to designated individuals. The materials refer to such individuals as “protected transferees.” For the purposes of the following discussion, the “protected transferee” is assumed to be a child of the individual who provided care to the individual at home.
A. The child must have (i) resided in the home for at least two years prior to institutionalization; and (ii) provided care which permitted individual to reside at home rather than go into a nursing home.
Note: The statute is silent as to the permissible time of transfer.
B. The subjective determination of whether a child has provided the requisite care is made by the County Board upon application for Medicaid. An unfavorable determination by the Board results in a denial of eligibility and a substantial period of ineligibility.
Planning Point: The request for protected transferee status should be made in conjunction with the application for Medicaid. This approach avoids the risk of a period of ineligibility. If the applicant is incompetent, seek court approval for the transfer in a guardianship proceeding and incorporate the written approval by the County Board in your papers.
Planning Point Before Medicaid Application Process: Counsel will often be presented with situation in which a child is residing with applicant in applicant’s residence and applicant-client desires Medicaid planning and does not desire to transfer the home (or counsel is of the opinion that home should be transferred as part of the Medicaid application process). Counsel should incorporate language in potential applicant’s power of attorney that allows residence to be transferred to child if appropriate for Medicaid planning purposes.
C. If protected transferee is one of several children who are equal beneficiaries under the applicant’s will, arrangements should be made by the children to avoid litigation. However, the transfer should be made solely to the child with protected status. Written approval to the transfer from the other children should be obtained if transfer is being made pursuant to a guardianship proceeding.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2009, Post #6
The transfer rules do not apply to the transfer of the home to designated individuals. The materials refer to such individuals as “protected transferees.” For the purposes of the following discussion, the “protected transferee” is assumed to be a child of the individual who provided care to the individual at home.
A. The child must have (i) resided in the home for at least two years prior to institutionalization; and (ii) provided care which permitted individual to reside at home rather than go into a nursing home.
Note: The statute is silent as to the permissible time of transfer.
B. The subjective determination of whether a child has provided the requisite care is made by the County Board upon application for Medicaid. An unfavorable determination by the Board results in a denial of eligibility and a substantial period of ineligibility.
Planning Point: The request for protected transferee status should be made in conjunction with the application for Medicaid. This approach avoids the risk of a period of ineligibility. If the applicant is incompetent, seek court approval for the transfer in a guardianship proceeding and incorporate the written approval by the County Board in your papers.
Planning Point Before Medicaid Application Process: Counsel will often be presented with situation in which a child is residing with applicant in applicant’s residence and applicant-client desires Medicaid planning and does not desire to transfer the home (or counsel is of the opinion that home should be transferred as part of the Medicaid application process). Counsel should incorporate language in potential applicant’s power of attorney that allows residence to be transferred to child if appropriate for Medicaid planning purposes.
C. If protected transferee is one of several children who are equal beneficiaries under the applicant’s will, arrangements should be made by the children to avoid litigation. However, the transfer should be made solely to the child with protected status. Written approval to the transfer from the other children should be obtained if transfer is being made pursuant to a guardianship proceeding.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2009, Post #6
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