Hooper Law Office,LLC Estate Planning Blog

Monday, November 17, 2014

If I am disabled, can somebody make gifts on my behalf?

This is a very important question.  If you become disabled and have no base level planning in place, it is likely that it will be left to a judge to appoint a guardian to make your decisions for you.  In situations such as this, the court-appointed guardian has little or not ability to plan for your long term care needs if such planning involves a divestment plan.

It is vitally important that you have a comprehensive estate plan in place that will preserve the ability for your chosen helpers to prepare a long term care plan, including a divestment plan, if you become disabled.  Being able to "cross that bridge when you come to it" through comprehensive estate planning ensures that you leave your options open and maintain control of your assets as long as possible.

Monday, November 10, 2014

What is "divestment?"

Divestment, simply put, is the transfer of an asset where you do not get full value in return for the asset transferred.  Giving money or other assets to your kids will be considered a divestment.  Similarly, transferring assets to a charity may also be considered a divestment.  Forgiving a debt is yet another form of divestment that will get some people in trouble.  Often we get the question:  what about the $14,000 per year that I am allowed to transfer?  That $14,000 is an annual exclusion amount that refers to gift tax issues and has no bearing on the Medicaid rules.

Why should you care about divestments?  During the Medicaid application review process, every divestment that appears on the financial records will be assessed a penalty.  Too many poorly planned divestments, or an inappropriately timed Medicaid application, could result in a n excessively long ineligibility period.  How to strategically plan the divestments to accomplish your asset protection goals is one of the most important skills your planning team will bring to the table.

Monday, November 3, 2014

Will the nursing home take my personal belongings?

This is a question we get often.  Under  most circumstances, the state will ignore your personal belongings when making a determination whether you are eligible for Medicaid.  The exception to this rule is if you have personal belongings that are of "unusual value."  What constitutes "unusual value" probably depends largely on the interpretation of the county case worker or the state, but unless you have an original Picasso hanging on the wall your personal belongings are probably safe.

Monday, October 27, 2014

What about annuities?

Annuities have long been promoted as a "magic bullet" for Medicaid/nursing home planning.  This view is often advanced by sales-driven advisors more intent on gaining a large commission than helping their clients.  But, while it is true that you should not assume that an annuity is the magic cure for your nursing home concerns, neither should you assume that they are  not useful for the Medicaid planning process.  The proper annuity, used in appropriate circumstances is of tremendous value in the nursing home planning process.

The basic idea behind using annuities in Medicaid planning is to convert what otherwise would be considered an at-risk cash asset of the  nursing home spouse to an income stream for the community spouse which will be protected from the "spend down" process.  Annuities may also be used as a means to "buy" your way through a penalty period imposed on transfers that you made.  Like any tool, when used in the proper circumstances they can be indispensable asset protection techniques.  The secret is to work with a competent team of advisors, including an estate planning attorney and financial advisor that view your goals, not their commissions, as their primary concern and are willing to work together to develop a customized plan to meet those goals.


Monday, October 20, 2014

Is it illegal to give my assets away to qualify for Medicaid?

There is nothing illegal about transferring your assets in order to qualify for Medicaid.  Proper long term care planning requires strict compliance with the law and full disclosure of all transfers.

Many people feel that there is something wrong with giving away their assets in order to qualify for government assistance with nursing home expenses.  If this is the way you feel, don't do it.  Many others wish to conserve their assets so that they will not run out of money and, if they don't need everything for their care, perhaps have something left to leave their family.  They feel that they shouldn't be penalized for living within their means and saving, while those who didn't save anything receive government assistance.  For this group of people, a carefully designed Medicaid qualification plan will allow them to protect what they have worked so hard for all of their life by making divestments in strict accordance with the law.

Monday, October 13, 2014

If I give my assets to my kids, what happens if they get divorced or die before me?

This is a serious problem and the reason why a good Medicaid qualification plan will use trusts.  The reason to give money to your children is to protect it so it will be accessible by the family if you need it in the future.  Giving your hard-earned assets to your children outright makes those assets subject to every bad thing that can happen to your children.  In addition to divorce there is bankruptcy, lawsuits and your children's own medical bills.  Also, in the event your child dies, the assets may return to you and disqualify you from Medicaid.  Therefore, you should either place some assets into an irrevocable trust that will pay you income, but no principal, or have your children set aside the assets you give to them in an irrevocable trust that they set up.  This provides for centralized management and protection from their problems.  Often a good Medicaid qualification plan will use a combination of these trusts.

Monday, October 6, 2014

If I give away assets, do I have to wait until I go into the nursing home?

You must disclose any gifts, or other uncompensated transfers, that you made within 60 months of applying for Medicaid.  In general, when you make a gift it will cause you to be disqualified from receiving Medicaid for a period of time.  The number of months of ineligibility is calculated by dividing the amount of the gift by the amount that Medicaid will pay for a month of nursing home care.  The beginning of the penalty period coincides with the date on which you are residing in a nursing home and, except for the gift, are otherwise qualified to file a Medicaid application.  You will not be penalized for any gifts, no matter how large, that were made more than 60 months prior to applying for Medicaid.

Monday, September 29, 2014

If my spouse goes to the nursing home, will I have to spend all of our money?

No.  Wisconsin has Medicaid rules that are designed to ensure that the at-home spouse's finances are not completely devastated by nursing home costs.  These rules are commonly referred to as the Spousal Impoverishment Rules.  Typically, the spouse at home is allowed to retain one-half of the cash assets that the couple had on the day the other spouse went into the nursing home.   There are however minimum and maximums to consider.  The maximum amount Wisconsin will allow the community spouse to retain is in the neighborhood of $110,000, and the minimum amount is $50,000.  These amounts will typically be adjusted on a yearly basis to take into account inflation.

As an example, a  married couple with $150,000 in cash assets on the day one spouse becomes institutionalized will have to spend down to $75,000 before the spouse in the nursing home can gain Medicaid eligibility.  A couple with over $220,000 would have to spend down to $110,000, and a couple with less than $100,000 would get to keep $50,000.

This of course begs the question: how do I spend down?  To get to the spend-down target, there is really only one rule: the community spouse must get value in return for the money spent.  If the assets are given away, the state will view that transfer as a "divestment," and such uncompensated transfers will be penalized.  The "spend-down" process is where the creativeness, resourcefulness, and knowledge of your planning team will truly pay dividends.  Spending down without incurring excessive periods of ineligibility while, at the same time, ensuring the assets are being used effectively and protected is the most important goal in planning.  Once again, this is where a team of advisors is critical to success.

Monday, September 22, 2014

I am single. What is the limit of assets I can own and still qualify for Medicaid?

As a single person you must "spend down" your assets to a very low level before you are qualified to receive Medicaid assistance.  The amount you are allowed to keep is roughly $2,000.  Not included in this limit are certain exempt assets such as a modestly priced car, a small amount of life insurance, personal property and funds designated for your burial.

Your personal residence will not be counted in the asset limit if you have expressed the intent to return to your  home.  The government may place a lien on your home that will be paid when the house is sold.  There are ways to either defeat this lien or to minimize it, but this requires a thorough knowledge of the rules.  This is an area where you will definitely need expert legal advice from an attorney who concentrates in long term care planning.

Monday, September 15, 2014

I'm on a fixed income; how will I make ends meet if my spouse goes to the nursing home?

It is not the government's intent to impoverish the spouse who remains at home.  In general, the "community spouse" gets to keep all of their income.  In addition, if the community spouse has a low level of income they will get some or all of the "nursing home" spouse's income up to about $2,500 per month.  As an example, assume the husband is in the nursing home and the wife's (community spouse) only income is $600 of social security.  She would be eligible to take $1,900 of the husband's income.

Monday, September 8, 2014

Can the nursing home kick me out if I run out of money?

If the nursing home takes Medicaid reimbursement they can't kick you out.  This is true even if they don't have a "Medicaid bed" available.  Only a minority of nursing homes refuse to take Medicaid, so in most cases, you will be able to stay in the same semi-private room you had when you were paying with your own money.  If you were in a private room they will move you to a semi-private room when you go on Medicaid, unless your family is able to pay the difference in cost, but you won't be out on the street.  Because it is possible that the nursing home you select doesn't take Medicaid reimbursement, it is always a good idea to check before you enter if there is any chance you will run out of money.

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