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Hooper Law Office,LLC Estate Planning Blog

Monday, November 9, 2015

What if I do not meet the economic tests?

If you do not meet the economic tests, you do not qualify for Medicaid, but do not panic.  With the proper planning those who fail the eligibility tests can still be helped.

For example, if you do not meet the asset test because you own too many non-exempt assets, the law gives you the right to “spend down” your non-exempt assets to the  approved level.  Once you reach the approved dollar amount (currently $2,000.00), you will qualify for Medicaid.

Spending down your assets may not be as bad as it sounds.  The spend down process can involve turning your non-=exempt assets (which you do not get to keep) into exempt assets (which you do get to keep).  You turn one into the other.  If all of your non-exempt property is converted into exempt property, then none of it is counted against you when you apply for Medicaid.


Monday, November 2, 2015

How soon do I need to get legal advice?

The timing of your planning is dependent on your particular circumstances.  For example, starting your spend down too early can cause serious problems.  If you are  married, you  may convert some of your non-exempt assets to exempt property before the date that Medicaid uses to decide how much of your non-exempt assets your in-home spouse can keep.

If you are single, spending down or divesting in order to qualify for Medicaid before you enter a nursing home may seriously limit your placement choices.


Monday, October 26, 2015

How much additional property is my spouse allowed to keep?

The Medicaid rules of every state provides that your in-home spouse is entitled to all of the exempt assets and an additional amount f non-exempt property.  The non-exempt property includes one-half of the assets that the two of you had on the dated used by Medicaid to determine your eligibility, subject to strict limitations as to the maximum amount.  A community spouse with property in excess of the limit of non-exempt assets will cause your application to be denied.

Since the law allows singles and married couples to own a modest amount of assets and still qualify for Medicaid, why not try to maximize that which the government says you get to keep?  So if you find yourself in the unfortunate position where you or your spouse need to apply for Medicaid, you have every right to “spend down” your assets in order to incur the shortest penalty period and keep as much of your property as the government allows.  By carefully following the spend down rules, you can accomplish both goals!

Determining how to best comply with the spend down rules, while still protecting your property to the greatest extent legally allowed, requires exceptional knowledge, resourcefulness and creativity.  If you want the best possible results, you need to speak with your estate planning attorney sooner rather than later.


Monday, October 19, 2015

What other assets can I keep?

In order to qualify for Medicaid, you cannot currently own non-exempt assets that exceed $2,000.00.  This applies to you as a Medicaid applicant regardless of whether you are married or single.


Monday, October 12, 2015

Which assets are considered exempt assets?

The following assets are considered exempt:

  • Your home;
  • Your car;
  • Your personal belongings; and
  • A small number of other types of assets. 

While laws vary from state to state, generally your personal residence is an exempt asset for purposes of Medicaid eligibility.  However, technical rules exist pertaining to how much of your home’s value is exempt.  In order to keep your home classified as exempt, it is advisable to express your intent to return to your home after the nursing home stay.

If you are single, your state may be permitted to place a lien on your home (under certain circumstances) that will be enforced when the house is sold.  Although there are legal ways to require the state to release its lien, or at the least to minimize it, a thorough knowledge of the Medicaid rules is essential.

One care is exempt.  Any additional vehicles will be treated as non-exempt.

In determining your Medicaid eligibility, most states typically ignore personal belongings.  The exception is if your personal belongings have an unusually high value.  So unless you have an original Picasso hanging on the wall, or some other valuable artwork or collection, your personal belongings are probably safe.

A small number of other assets are also not subject to the spend down requirements.  These include prepaid burial plans and a small amount of life insurance.  Funeral or burial assets may be of different types.  Some types are subject to limitations.


Monday, October 5, 2015

How do I qualify for Medicaid?

To qualify for Medicaid, you must pass two economic tests.  The first is an income test.  If you enter a nursing home and apply for Medicaid, you are required to contribute all of your income to the cost of care, except for a small amount that you are permitted to keep for personal needs.  Medicaid then pays the balance.  If your income is greater than the cost of your care, you pay everything.  Medicaid pays nothing.

If you are not in a nursing home, income eligibility rules are much more complicated.  You will need a lawyer with expertise in this technical area of law to guide you through this minefield. 

If you have a spouse living at home (known as the “community spouse” or “in-home spouse”), the income test is handled differently.  The spouse at home is allowed to keep all of his or her own income and is not required to contribute to the cost of care.  If your spouse has little or no income, a special rule applies that allows your spouse to keep some of the income to pay for your spouse’s living expenses.

The second economic test relates to your assets.  The government will screen your assets to determine if they are “exempt” or “non-exempt”.  Owning an exempt asset will not disqualify you from receiving Medicaid, but owning more than the permitted amount of non-exempt assets will disqualify you.  The rules concerning exempt assets are different depending upon whether or not you are married.


Monday, September 28, 2015

What about my health insurance or my Medigap policy?

Like Medicare, your health insurance pays only for treatment and rehabilitative care.  It will not pay for custodial care in a nursing home.  Your Medigap policy is considered a supplement to Medicare benefits:  it pays only if Medicare pays.  These insurance policies are also known as Medicare Supplements.  When you do not qualify for Medicare, or when your Medicare stops paying benefits, your Medigap policy also stops paying.  Only Medicaid pays for long-term care costs.


Monday, September 21, 2015

What is Medicare and will it pay my long-term care costs?

Medicare is a federal health insurance program for individuals over the age of 65 or for those who are disabled.  Medicare pays only for rehabilitative care; it does not pay for “custodial” nursing home care.

To qualify for Medicare coverage, your nursing home stay must be preceded by a hospital stay of at least three days.  Medicare will pay 100% of the cost for your first 20 days of nursing home care when receiving physical therapy or other rehabilitative treatment.  Medicare will then pay only a portion of the next 80 days of your nursing home care.  After 100 days, all Medicare benefits stop.  Medicare benefits will also stop before the 100-day period elapses if you are not making any progress toward your rehabilitation and recovery.  Medicare is not designed to pay for long-term custodial care, and it will not provide coverage beyond these limits.



Tuesday, September 8, 2015

What is Medicaid?

Medicaid is a government funded, needs-based program designed to pay for nursing home care and other long-term care for those who cannot afford it themselves.  Until recently, Medicaid was only available for long-term care in a skilled nursing facility.  many states have now adopted (or are adopting) laws that extend Medicaid coverage to care at h home, in assisted living facilities, or in other residential care options beyond nursing homes.  To qualify for Medicaid, you must be "indigent," which means that you have limited income, almost no savings, and only those assets that the government permits (known as "exempt" assets).  In addition, you must be functionally impaired so as to need significant help with your daily living needs.

 

Although Medicaid is a federal program, Medicaid benefits are administered by the states.  The law gives each state some latitude in determining whether an individual is indigent and eligible for Medicaid benefits.  To determine if an individual is indigent, the state will examine whether the individual meets the state’s income and asset tests.  There are different tests depending upon whether the person applying for benefits is single or married.  Medicaid benefits are also only available for U.S. citizens and qualified aliens.  Also, it is important not to confuse the benefits provided by Medicaid with the benefits provided by a different federal program, Medicare. 


Monday, August 31, 2015

What are Family Trusts and QTIP Planning?

Special planning is required when a second marriage couple desires to protect the inheritance of both the surviving spouse and the children. Without this special planning, the danger exists that one or the other can become disinherited. Family Trusts and QTIP planning prevent this tragedy.

Here is how they work:

The estate plans of many second marriage couples are designed so that the estate of the first spouse to die is divided into two separate trusts. The first trust is referred to as the "Family Trust" since it is usually designed to benefit the entire family (spouse and children). This trust takes advantage of the deceased spouse's estate tax "applicable exclusions" (an amount that the deceased spouse can leave to the beneficiaries' tax-free).

The instructions of your Family Trust can state that the estate's tax-free assets are to be used to benefit your surviving spouse, along with any children you wish to benefit, in exactly the manner that you want them benefited. During the lifetime of the surviving spouse, the income and principal of the Family Trust can be distributed based upon the needs of both the surviving spouse and the children. This means that you can guarantee that both receive an inheritance!

If your estate has more assets than can be placed in the Family Trust tax-free, the excess assets are then "spilled" into a second trust that is designed to benefit only the surviving spouse for the surviving spouse's lifetime. This second trust is called a Qualified Terminable Interest Property (QTIP) trust because the surviving spouse has only a "qualified" lifetime right to the trust's assets that "terminates" at the spouse's death. The remainder of the QTIP trust can then be distributed as you direct. Under the special rules for the QTIP trust, your surviving spouse is entitled to all of the income of the trust, which must be distributed at least annually. You also have the discretion to give your spouse access to the principal of the trust if you choose to do so.

Property placed in a QTIP trust qualifies for an estate tax marital deduction. This means that the trust's assets are subject to estate taxation only after the death of the  surviving spouse. Thus your spouse can obtain the full tax-free benefits of the trust's assets during his or her lifetime. 

Although the lifetime estate tax-free benefits of the Family and QTIP Trusts for a surviving spouse and children are considerable, this is not its most important feature. The most important feature takes place when the surviving spouse dies. It is then that any remaining assets of the trust must be distributed according to your instructions (not according to the desires of your spouse who might be tempted to leave it to a new spouse or to the children of the new spouse). This type of planning affords you the confidence of knowing that any remaining assets in the Family or QTIP Trusts will go to your children or other beneficiaries exactly as you want. 

Although Family and QTIP trusts offer many attractive planning opportunities in first or subsequent marriages, like all other estate planning tools, they should be considered in light of the specific planning desires of each family. It is a strategy that should only be used after a detailed discussion of your planning goals with the estate attorney concerning how to best protect all of your assets. 


Monday, August 24, 2015

What other protections do I need to consider in a second marriage?

There is no "one size fits all" set of estate planning protections that is appropriate for all people at all times. You are unique, your loved ones are unique, the assets you own are unique, and the goals you have for how you want to protect your loved ones and property are unique. The combination of all of these factors is why, if you are entering a second marriage, it is important to assemble your estate planning team of professionals (estate planning attorney, accountant, financial planner, and insurance professional) and discuss your goals with the team. This allows them to analyze your situation and advise you concerning the particular provisions your need to have in place for your personal situation. You should be prepared to review, discuss, and receive their counsel concerning the following: 

  • The assets owned by both you and your spouse;
  • Your respective investments philosophies;
  • A careful review of each spouse's beneficiary designations to make sure that outdated decisions will not cause unintended consequences;
  • The goals you and your new spouse are trying to accomplish for yourselves, for your children from previous marriages, and for any children of the new marriage;
  • The advisability of having a prenuptial or postnuptial agreement to classify your property;
  • The importance of having new heath care and financial powers of attorney to appoint appropriate individuals to carry our your directions;
  • An analysis of retirement plans and Social Security benefits to maximize available income for the two of you during your joint lifetimes and to provide for the surviving spouse;
  • How Family Trusts and QTIP (Qualified Terminable Interest Property)

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