As stressed in prior posts, Medicaid eligibility may not be permanent. If the requirements for eligibility are not met at the first moment of the first day of a given month, eligibility will be lost. A general discussion of that problem is set forth in Post 21, which discusses loss of eligibility upon the death of another.
The salient development with respect to the community spouse is that the regulations to OBRA '93 (which are still in effect) appear to disqualify an individual from eligibility due to the existing of elective share rights.
Planning considerations for the will of a spouse of an individual who is or may be entering a nursing home are broader than the issue of Medicaid disqualification. However, Medicaid planning must address the possibility that the "healthy spouse" might predecease the potential Medicaid applicant or Medicaid recipient. Lack of planning in this area could undo lifetime Medicaid planning. For purposes of this discussion, the wife is assumed to be the potential Medicaid applicant, and the will under discussion is that of the husband.
Supposed the husband desires to "disinherit" his wife and preserve assets for the next generation if he dies first. See the New Jersey elective share provisions. N.J.S.A. 3B:8-1 et. seq. The regulations and comments would appear to treat the failure of the wife to exercise her elective share rights as a transfer, the amount of which would presumably be one-third the augmented estate of the husband (N.J.S.A. 3B:8-1,3).
Example 1: Husband predeceases wife (nursing home resident, not yet eligible for Medicaid) devising his estate to their children. Assuming elective share rights of $90,000, failure to exercise these rights would result in a period of ineligibility ( see post 15).
Such interpretation violates the federal statute and raises numerous preemption issues.
For a further analysis and the general estate planning issues if a community spouse predeceases The Final Medicaid Regulations (Finally!), 2001, "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.
Monday, November 30, 2009
Wednesday, November 25, 2009
Trust for a Disabled Child
Medicaid has insisted that the first remaining beneficiary of all trusts be the State. This concept has been in effect since the institution of OBRA '93 and is based upon a misreading of the federal statute.
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 community spouse resource allowance), 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 '93 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 the State be reimbursed from trusts known as "(d)(4)(A)" trusts (trusts for disabled individuals under 65, Miller Trusts-no longer effective in New Jersey, pooled income trust-trusts for groups of disabled children). These trusts are known as exempt trusts. 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. 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 that the federal law.
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 community spouse resource allowance), 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 '93 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 the State be reimbursed from trusts known as "(d)(4)(A)" trusts (trusts for disabled individuals under 65, Miller Trusts-no longer effective in New Jersey, pooled income trust-trusts for groups of disabled children). These trusts are known as exempt trusts. 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. 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 that the federal law.
Wednesday, November 18, 2009
Transfer of an Excludable Resourse
There is a misconception that if an individual transfers an excludable resource that such a transfer is exempt from the transfer rules. This is incorrect.
For example, as indicated by "Real Estate Planning ideas for a Married Couple" - Post 11, the home is an excludable resource whether owned by the applicant, spouse or jointly.
Suppose the house is in the husband's name and he transfers the house to the child. This transfer is subject to the transfer penalty even though the transfer is of an excludable resource. The proper technique with respect to the home is to transfer the home into the sole name of the community spouse (whether owned jointly or by the applicant) at the time of institutionalization (the reason for such transfer are set forth in Post 11).
However, the house can be transferred by the community spouse to the child after the applicant receives Medicaid. This is consistent with the principles set forth in Post 13 that the community spouse is no longer limited to the community spouse resource allowance after the date of eligibility. Similarly, the appropriate time for transfer is at that time and when the house is in the sole name of the community spouse.
For example, as indicated by "Real Estate Planning ideas for a Married Couple" - Post 11, the home is an excludable resource whether owned by the applicant, spouse or jointly.
Suppose the house is in the husband's name and he transfers the house to the child. This transfer is subject to the transfer penalty even though the transfer is of an excludable resource. The proper technique with respect to the home is to transfer the home into the sole name of the community spouse (whether owned jointly or by the applicant) at the time of institutionalization (the reason for such transfer are set forth in Post 11).
However, the house can be transferred by the community spouse to the child after the applicant receives Medicaid. This is consistent with the principles set forth in Post 13 that the community spouse is no longer limited to the community spouse resource allowance after the date of eligibility. Similarly, the appropriate time for transfer is at that time and when the house is in the sole name of the community spouse.
Friday, November 13, 2009
Multiple Transfers During the Lookback Period
To understand the effect of multiple transfers during the current 60-month lookback period, a review of the prior law under OBRA '93 would be helpful.
Under the prior law, there are two basics situations with respect to such transfers. One relates to overlapping penalty periods and the other relates to a penalty period expiring prior to the date of the subsequent transfer.
Under OBRA '93, overlapping penalty periods were governed by N.J.A.C.10:71-4.10(m)2., which provides:
" In the case of an asset transfer which occurs during an existing transfer penalty period, the penalty for the subsequent transfer shall not begin until the expiration of the previous penalty period."
The regulations made it clear that if a penalty period expires prior to the date of a subsequent transfer, transfers would not be aggregated ( even if within the 36-moth lookback period). Under OBRA '93, consider the following example:
Individual transfers $24,000 on January 1, 2004 and another $24,000 on February 1, 2004. Individual applies for Medicaid on July 1, 2004. Assume penalty rate of $6,000 and other eligibility requirements have been met. The penalty for the February transfer cannot commence until the penalty for the January transfer expires on May 1. The penalty for the February transfer commences on May 1 and expires on September 1. Application for Medicaid will be denied.
The prior concept regarding multiple transfers have no applicability for multiple transfers under the Deficit Reduction Act. Keep in mind that the key date which triggers the lookback period is the date on which an individual is eligible for Medicaid but for the application of the penalty period ( see post 15 regarding the New Transfer Rules). Therefore, it is logical that any transfer 60 months prior to the new date would deemed to have been made at the date of application (since new rules commence February, 2006, the full 60-month lookback does not occur until February, 2011). Therefore, the new law aggregates all transfers made during the 60-month lookback period at the date of application.
Hopefully, this conundrum would not occur. For example, consideration could be given to a return of the monies transferred and the monies used on exempt resources such as prepaid funeral expenses, back taxes, or improvement of the home. The difficulty of justifying a transfer in most cases is discussed in Post 43. Parenthetically, the State is currently taking the position that any transfers by a resident of an assisted living facility cause permanent ineligibility.
Under the prior law, there are two basics situations with respect to such transfers. One relates to overlapping penalty periods and the other relates to a penalty period expiring prior to the date of the subsequent transfer.
Under OBRA '93, overlapping penalty periods were governed by N.J.A.C.10:71-4.10(m)2., which provides:
" In the case of an asset transfer which occurs during an existing transfer penalty period, the penalty for the subsequent transfer shall not begin until the expiration of the previous penalty period."
The regulations made it clear that if a penalty period expires prior to the date of a subsequent transfer, transfers would not be aggregated ( even if within the 36-moth lookback period). Under OBRA '93, consider the following example:
Individual transfers $24,000 on January 1, 2004 and another $24,000 on February 1, 2004. Individual applies for Medicaid on July 1, 2004. Assume penalty rate of $6,000 and other eligibility requirements have been met. The penalty for the February transfer cannot commence until the penalty for the January transfer expires on May 1. The penalty for the February transfer commences on May 1 and expires on September 1. Application for Medicaid will be denied.
The prior concept regarding multiple transfers have no applicability for multiple transfers under the Deficit Reduction Act. Keep in mind that the key date which triggers the lookback period is the date on which an individual is eligible for Medicaid but for the application of the penalty period ( see post 15 regarding the New Transfer Rules). Therefore, it is logical that any transfer 60 months prior to the new date would deemed to have been made at the date of application (since new rules commence February, 2006, the full 60-month lookback does not occur until February, 2011). Therefore, the new law aggregates all transfers made during the 60-month lookback period at the date of application.
Hopefully, this conundrum would not occur. For example, consideration could be given to a return of the monies transferred and the monies used on exempt resources such as prepaid funeral expenses, back taxes, or improvement of the home. The difficulty of justifying a transfer in most cases is discussed in Post 43. Parenthetically, the State is currently taking the position that any transfers by a resident of an assisted living facility cause permanent ineligibility.
Friday, October 16, 2009
Minimum Monthly Needs Allowance (m.m.n.a.)
Minimum Monthly Needs Allowance (m.m.n.a.)
Old and new laws allow post-eligibility income (pension, social security) to be shifted to community spouse. This is based upon theory that a spouse living in family residence should receive a certain minimum amount of income to pay for housing or "shelter" costs. Argument has been made on behalf of community spouse that principal generating the income needed (reasonable rate of return) should be shifted from applicant to spouse (in essence, increasing the community spouse resource allowance). The new law provides for the "income first" rule which requires that applicant's income be shifted first to make up the m.m.n.a., and if more income is needed (unlikely), then assets can be shifted.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
Copyright October 2009, Post 56
Old and new laws allow post-eligibility income (pension, social security) to be shifted to community spouse. This is based upon theory that a spouse living in family residence should receive a certain minimum amount of income to pay for housing or "shelter" costs. Argument has been made on behalf of community spouse that principal generating the income needed (reasonable rate of return) should be shifted from applicant to spouse (in essence, increasing the community spouse resource allowance). The new law provides for the "income first" rule which requires that applicant's income be shifted first to make up the m.m.n.a., and if more income is needed (unlikely), then assets can be shifted.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
Copyright October 2009, Post 56
Tuesday, October 6, 2009
The Medicaid Lien
The Medicaid Lien
As discussed in prior posts, Medicaid planning by counsel must consider three interrelated goals: to establish Medicaid eligibility, to avoid disqualification after eligibility and to avoid the Medicaid lien after the death of the recipient. The Medicaid lien is discussed in N.J.A.C. 49:14.1. The lien is applicable to an individual’s “estate,” which is basically defined as real or personal property and other assets in which the Medicaid beneficiary had any legal title or interest at the time of death to the extent of that interest, including assets conveyed to a survivor, heir or assign of the beneficiary through joint tenancy, tenancy in common, survivorship, life estate, living trust or other arrangement . . . The regulation goes on to discuss certain types of trusts which are also subject to the lien.
There are many issues that could be discussed with regard to the coverage and the language of the lien statute, which are beyond the scope of this article.
Basically, the initial inquiry should be the factors that give rise to the existence of the lien. Firstly, in order for there to be a lien, a deceased individual must have an asset that did not preclude Medicaid eligibility. Secondly, such asset must come within the lien statute.
Typical examples of such assets have been discussed in prior postings, which would include both a discussion of the lien and, in certain circumstances, how to avoid the applicability of the lien:
1. Of course, the most obvious example of assets in one’s “estate” for lien purposes is joint assets particularly joint tenancies with right of survivorship and tenancies in common. For Medicaid purposes, such assets are treated as “inaccessible resources.” See Post 35 for a more detailed discussion of joint assets.
2. Property Owned By Applicant Residing With Caretaker Child (Post 6).
3. Although not discussed in great detail, the transfer of the home by a married couple to another would temporarily take the property out of the lien statute. Basically, the lien would not apply upon the death of the first spouse since property passing to a spouse is not subject to the lien. Medicaid would apply to the lien to such property upon the death of the second spouse.
4. The lien does not apply to the estate of deceased beneficiary if a family member of the deceased beneficiary had continuously resided in the home of the beneficiary (see Post 14 relating to Dependent Relative).
5. Post 23 discusses the transfer of a home owned jointly by an individual to a Protected Transferee (i.e. caretaker child) as removing the home from the lien as one of the benefits.
6. Post 42, which discusses assets transferred to a disabled child, which is an exempt transfer.
7. The most significant exemption from the lien statute, which previously had been allowed as administrative decision is incorporated in the regulations which state “a life estate in which the beneficiary held an interest during his or her lifetime.”
There are an infinite number of issues relating to the lien and the applicability of the lien which could be discussed. Of particular significance is the applicability of the lien to certain types of testamentary trusts. The above discussion is intended to familiarize the reader with the significance of the lien and some of the salient issues.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2009, Post 55
As discussed in prior posts, Medicaid planning by counsel must consider three interrelated goals: to establish Medicaid eligibility, to avoid disqualification after eligibility and to avoid the Medicaid lien after the death of the recipient. The Medicaid lien is discussed in N.J.A.C. 49:14.1. The lien is applicable to an individual’s “estate,” which is basically defined as real or personal property and other assets in which the Medicaid beneficiary had any legal title or interest at the time of death to the extent of that interest, including assets conveyed to a survivor, heir or assign of the beneficiary through joint tenancy, tenancy in common, survivorship, life estate, living trust or other arrangement . . . The regulation goes on to discuss certain types of trusts which are also subject to the lien.
There are many issues that could be discussed with regard to the coverage and the language of the lien statute, which are beyond the scope of this article.
Basically, the initial inquiry should be the factors that give rise to the existence of the lien. Firstly, in order for there to be a lien, a deceased individual must have an asset that did not preclude Medicaid eligibility. Secondly, such asset must come within the lien statute.
Typical examples of such assets have been discussed in prior postings, which would include both a discussion of the lien and, in certain circumstances, how to avoid the applicability of the lien:
1. Of course, the most obvious example of assets in one’s “estate” for lien purposes is joint assets particularly joint tenancies with right of survivorship and tenancies in common. For Medicaid purposes, such assets are treated as “inaccessible resources.” See Post 35 for a more detailed discussion of joint assets.
2. Property Owned By Applicant Residing With Caretaker Child (Post 6).
3. Although not discussed in great detail, the transfer of the home by a married couple to another would temporarily take the property out of the lien statute. Basically, the lien would not apply upon the death of the first spouse since property passing to a spouse is not subject to the lien. Medicaid would apply to the lien to such property upon the death of the second spouse.
4. The lien does not apply to the estate of deceased beneficiary if a family member of the deceased beneficiary had continuously resided in the home of the beneficiary (see Post 14 relating to Dependent Relative).
5. Post 23 discusses the transfer of a home owned jointly by an individual to a Protected Transferee (i.e. caretaker child) as removing the home from the lien as one of the benefits.
6. Post 42, which discusses assets transferred to a disabled child, which is an exempt transfer.
7. The most significant exemption from the lien statute, which previously had been allowed as administrative decision is incorporated in the regulations which state “a life estate in which the beneficiary held an interest during his or her lifetime.”
There are an infinite number of issues relating to the lien and the applicability of the lien which could be discussed. Of particular significance is the applicability of the lien to certain types of testamentary trusts. The above discussion is intended to familiarize the reader with the significance of the lien and some of the salient issues.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2009, Post 55
Monday, September 14, 2009
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
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
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