Questions you didn’t know that you did not know about Medicaid planning: What I have learned as a Medicaid specialist at an elder law firm!

Life has a way of going on, the clock is always ticking, and time never stops. However, if that unfortunate time comes when you may need financial assistance from the government to help pay for long term care costs, then your life may come to a screeching halt as you now must look back on your life (five years to be exact) and recall the “why” and “for what” on certain withdrawals from your accounts for this period of time.

Working as a Medicaid Specialist for Rao Legal Group, an estate and elder law firm in Princeton, NJ, I have come to see the value in planning early and preparing for the day when you may need long term care.

The things you do now can change what happens in the last chapter of your life, and so many people don’t even consider the consequences of each and everything they do on a daily basis.

Something as simple as paying your grandson when he mows your lawn every week because that chore has become difficult for you. Did you know that even a small check made out to him for mowing could be called into question later should you decide to apply for Medicaid benefits? And if you wrote out these checks on a weekly basis, then without clear proof that you were getting something in exchange for this payment, Medicaid could likely consider those checks as gifts to him?

Or, how about when your daughter and her family were kind enough to help by doing your grocery shopping for you. Maybe you’re not able to shop on your own, or you simply don’t have the energy for it. When your family pitches in to help you by paying for certain things with their own money, of course you want to reimburse them for the items purchased. Did you write a check? Did you take some cash out of your ATM for this purpose? Are they doing your shopping every week? Did you remember to keep the receipts and keep an accurate record? Do you have a loan agreement in place? If not, Medicaid may look at these checks or withdrawals as gifts, too. And they have up to five years of these transactions, so maintaining proof of all these receipts/reimbursements may be useful to justify such expenses.

Perhaps you have a son who is hardworking and providing for his family by working two jobs, but suddenly, he is unable to work because of an accident. Now, the bills are adding up for him, and his family needs groceries and the electric bill is overdue. This is a time when you would like to help them out, buying food or paying a bill — isn’t that what families do for one another? But what if we told you that Medicaid would treat that as a gift, which could in turn disqualify you for a certain period from receiving government assistance if this transaction occurred within five years of your Medicaid application.

Have you ever needed to have someone move into your home to help with bills? Or maybe you just have a friend who needs a place to stay temporarily. Your friend wants to pay rent to you for the time at your home. Has a rental agreement been prepared? What will Medicaid require as proof of the payments made to you?

On the flip side, sometimes people have worked hard and are lucky enough to have some assets set aside to pay for the needs of their families. They may have even been frugal enough to save this money for the future, along with paying a mortgage on their home. What if your house needs some repairs? Have you hired a contractor to help with some renovations? Did you have them write up a contract? Or did they want you to make out the check to cash? Are you aware that if you do not have accurate records and receipts, then Medicaid might look at those expenses as gifts, too?

Finally, if you own your home — have you considered what could happen if you became ill and needed long term care? What will happen to your home? Have you thought about the rules surrounding Medicaid and the agency’s rights to assess a lien on your home upon your death?

Maybe you have other assets, another property besides your primary residence? Or perhaps you have acquired some stocks and bonds, an IRA, or even a life insurance policy? All such assets will be looked at by Medicaid as countable assets that would need to be completely spent down prior to applying for Medicaid.

Another area to consider is the rising cost of care. You could have a small “nest egg” built up, one you worked hard to put away, and you believe that some of these investments will allow you to live out your life on these assets with a small portion passing down to your loved ones. But with the rising costs of long-term care, one major health event could land you in a situation where that nest egg is depleted and without proper advanced planning, you may not be able to protect your assets.

It can be daunting to apply for Medicaid benefits — trust me, I know this first-hand in my role as a Medicaid specialist and assisting clients and their families with their Medicaid applications.

If you meet the clinical eligibility requirements for Medicaid, you still must jump over the hurdle of meeting the financial eligibility requirements. If you don’t meet with a qualified elder law firm to help you with your planning, you could be missing out on the opportunity to avail yourself of certain strategies to help you to protect some of your assets and still qualify for Medicaid.

Some final questions: Have you set up a Financial or Healthcare Power of Attorney? How about a Will? It is so important to have these Estate Planning documents prepared. When you are suddenly not able to make decisions for yourself, it is imperative that you have someone in place that can make those decisions for you. When the day arrives that you no longer can care for yourself, you want to be ready.

The best advice I can offer to you is to do your research, get your Estate Planning documents prepared by a qualified elder law attorney, and then have your questions addressed by the attorney so that you can be ready when the day comes that you need help. Don’t wait until you already need the help, because remember, life has a way of going on, and the clock is still ticking.

Using Long-Term Care Riders in Estate Planning

For those that reach age 65, estimates show these individuals have a 70% chance of needing long-term care. To protect the assets individuals hope to leave behind to loved ones, one could consider adding an indemnity Long-Term Care (LTC) rider to their life insurance policy.
Though this approach may not work for everyone. Click the link below to learn more from Nationwide about LTC riders while held in an irrevocable life insurance trust.
Source: Nationwide “Using Long-Term Care Riders in Estate Planning”

My special needs child is about to turn 18 – What should I do?

Children with special needs, who are under the age of 18, are considered minors in the state of New Jersey. Until then, parents have full authority to act on behalf of their child(ren) when it comes to making important decisions. But once the child turns 18, parents are often caught off guard when they discover that although the child continues to be dependent on his or her parents long after they turn 18, parents no longer have the same authority as before, as the children are now deemed adults under the eyes of the law. Financial, legal, and healthcare decisions can no longer be made as before, and in the unfortunate situation when one or both parents pass away, assets passing to the child as an inheritance could trigger adverse consequences if the child has been receiving critical government benefits.

So what can you do now to avoid a disaster from occurring?

As a first step, you will need to begin the process of a guardianship (typically, this should be started a few months before the child turns 18). This involves filing a Verified Complaint with the courts, requesting your (and your spouse, where applicable), appointment as legal guardian of your child.  While it is rare for a judge to deny guardianship to a parent, the formalities of the guardianship process still need to be adhered to. 

The application must include, among other things, certifications from two physicians (one of these could be made by a licensed psychologist). The court will then appoint an attorney to conduct an investigation of the interested parties and then prepare a report for the judge, either confirming or rejecting the appointment of the Petitioner. Finally, a hearing is conducted before the judge, so all relevant parties can appear and be heard in court. Once the judge approves the appointment, a final judgment containing the decision is circulated to all parties. 

At this time, the parent(s) will need to appear at the surrogate’s office to become qualified and collect their Letter of Appointment. Be prepared to incur some expenses associated with the filing fees and legal costs, especially if you choose to go with private attorneys for both the submission of your application (as opposed to going pro se) and for the court appointment. Depending on the situation, a court may also be able to appoint an attorney from the Public Defender’s office at no charge to the parents, but this could delay things a bit. A final judgment signed by the judge at the end of the proceeding will then grant you the right to procure Letters of Guardianship.

The next step is to consider whether or not you want to set up Special Needs Trusts (SNT) for your child. Here you have an option to set up (1) a first-party special needs trust and/or (2) a third-party supplemental needs trust as stand-alone trusts. These trusts can hold assets of your child’s or assets passing from you, respectively, without jeopardizing your child’s government benefits. These assets are meant to supplement, but not supplant, any other benefits so your child can have an enhanced quality of life without concern that the critical benefits provided by the government would be denied.  

Finally, you should definitely consider setting up or updating your own existing estate plan to ensure that all of your assets passing to your child upon death are protected by either having the assets pass into the stand alone SNT that you set up (see above paragraph), or have it pass into a SNT under your Will. It is  important to consult with the estate planning attorney as to which trust should hold the inheritance.  Inadvertently naming the wrong SNT could result in having the assets inside of the trust going to the estate, instead of the family or other heirs.  

SSI and Spousal Impoverishment Standards for 2021

Every year the Social Security Administration publishes its list of Supplemental Security Income & Spousal Impoverishment Standards that are adjusted for inflation. These standards define the minimum and maximum amount of resources and income limits that an individual and/or their spouse can have in order to be on Medicaid. Here are the new numbers for 2021 (also available on the Medicaid Website):

 

Individual Limits

Income Cap Limit for an Individual: $2,382.00 per month

Resource Cap for an Individual: $2,000 per month (same as previous year)

 

Spousal Limits

Minimum Monthly Maintenance Needs Allowance (MMNA): $2,155.00

Maximum Monthly Maintenance Needs Allowance: $3,259.50

 

Community Spouse Resources:

Minimum Resource Standard: $26,076.00

Maximum Resource Standard: $130,380.00

 

Home Equity Limits:

Minimum: $603,000.00

Maximum: $906,000.00

 

The expense of nursing home care can devastate a family’s resources as expenses for a nursing home rise. Currently, a stay at a skilled nursing facility can easily cost $15,000 or more per month. It seems hard to fathom how a couple can survive on the above thresholds, especially if there is a “Community Spouse” (i.e. spouse living in the community). There are strict rules for the use of income of the spouse on Medicaid and an even stricter limit for resources. These rules are complex and hard to navigate. However, with the proper legal guidance and direction, you can help plan for your or your loved one’s nursing home care costs, or plan to receive home and community-based waiver services. Whether you or a loved one is looking to qualify for Medicaid or continue to remain eligible for Medicaid to supplement the cost of long-term care, Rao Legal Group is here to help! Contact us via our website at www.EstateElderPlanning.com or call our office at 609-372-2855 to see how we can help you!

The Unicorn of Long-Term Care Insurance

As an estate planning firm that also specializes in elder law, we are always heartened to see a potential Medicaid applicant client’s portfolio containing a long-term care insurance (“LTCI”) policy. This is because, as planners, we know that the client is uniquely positioned to take advantage of creative strategies to accelerate his or her eligibility for Medicaid while protecting some assets from getting swooped up to pay for long term care.  More importantly, it buys us and our clients precious time to think and plan.

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As excited as we are when a potential Medicaid applicant has a long-term care insurance policy, we get even more excited for the rare moment when we discover that the client’s long-term care insurance policy participates in the New Jersey Long-Term Care Insurance Partnership Program – making them “unicorns” among LTCI plans! This is truly a happy occurrence because in these cases we can protect assets by setting aside amounts equal to the insurance benefits received from such a policy so that such assets are treated as “unavailable” or “disregarded” for Medicaid qualification purposes.

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Here is how it works–

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Medicaid has strict limitations on income and assets.  Typically, an unmarried individual Medicaid Applicant (Institutionalized or Ill Spouse) can only have $2000 in resources.  For a married couple, the spouse of the Medicaid applicant (“Community Spouse”) can only keep $130,380 in resources (2021 figures).  These numbers are adjusted for inflation, and every year the government circulates information establishing the thresholds for the following year. If an individual has more assets then the established threshold when applying for Medicaid, he or she is at  risk for being considered over-resourced and therefore would be denied eligibility.

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Due to these strict thresholds, elder law attorneys like myself analyze our client’s countable assets that are deemed “available” for Medicaid purposes and separate those from exempt or “unavailable” assets prior to submitting the application. We want to ensure as much as of the client’s assets as possible are exempt from Medicaid and any excess assets are “spent down” in a Medicaid permissible manner to achieve the maximum benefits.

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This is where long term care insurance and the NJ Long-Term Care Insurance Partnership Program comes in.

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The Partnership Program is a public/private arrangement between the state government and private long-term care insurers to assist individuals in planning for their long-term care needs.  People who purchase these specific types of policies can protect more of their assets should they later need to have the state pay for their long-term care. According to the bulletin issued by the State of New Jersey, “These special rules generally allow the individual to protect assets equal to the insurance benefits received from a Partnership Policy so that such assets will not be taken into account in determining financial eligibility for Medicaid and will not subsequently be subject to Medicaid liens and recoveries”1. For example, if you received $100k in benefits under your long-term care insurance, you may be allowed to protect an additional $100k in assets at the time you apply for Medicaid through a feature known as “Asset Disregard” under the New Jersey Medicaid Program.

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Our office has had the good fortune of being presented with such a “unicorn-like” situation recently.  Because of  our thorough oversight together with our patience & persistence working with the Medicaid caseworkers, we were able to  have them disregard a significant amount of our client’s assets over and above the Medicaid threshold limits and get  our client eligible for Medicaid.  The amount set aside in turn has helped the Community Spouse retain more of the assets than originally anticipated, which became a win-win for all.

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If you have a stand-alone long term care insurance policy, look at the benefits to see if you have this “unicorn plan” or call your agent to find out.  And if and when the time comes where the policy needs to be triggered, call our office immediately so we can provide the proper assistance and guidance on what your next steps ought to be.

 

  1. 1. The Deficit Reduction Act of 2005, Public Law 109-171, (the “DRA”) allows for the expansion of Qualified Long Term Care Insurance Partnership Programs by states (nj.gov)