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The Consumer's Guide to Medicaid Planning and Division of Assets
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» Elder Law Issues and discussions on topics of interest.
» Estate & Trust Administration Articles of interest to Executors, Trustees and Beneficiaries, particularly in probate and trust matters.
» Medicaid, Income & Asset Protection for long term care Issues and discussions on topics of interest.
» Social Security & Medicare Issues and discussions on topics of interest.
» Special Needs Trusts Key topics to protect a disabled child, grandchildren, family members and others.
» Veterans' Benefits for long term care Learn eligibility for assisted living and home-based waiver programs and other articles of interest.
» Wills & Trusts Protecting your family and yourself if the unexpected happens.
Speaking Events
Fredrick P. Niemann, Esq. was recently the featured speaker in Colts Neck, NJ at a seminar entitled Investments & Estate Planning for Trusts and Wills for High Net Worth Individuals.
Medicaid Planning for Asset and Income Protection and Long Term Care
Do You Need a New Jersey Medicaid/Medicare Attorney?
"Early Dementia, Alzheimer’s. My Mom’s health deteriorated to the point she required full-time care. She wanted to live at home, but required regular help with the essentials of daily living (i.e. dressing, bathing, etc.). As her caregiver daughter, the responsibilities fell on me to figure out what to do. Thank goodness for Scarinci Hollenbeck and Mr. Niemann.
He met with me and explained all of my options for my mom, from at home/community care, assisted living, state, county and local programs for the elderly, financial eligibility for benefits, Medicaid qualification, pharmaceutical assistance, utility aid, Medicare and Veteran’s benefits, etc. While I felt overwhelmed by it all, Mr. Niemann clearly was in control of what could be done for Mom. We engaged him to make applications for subsidized at-home care and assistance through available grant programs and as part of his services to us, he is counseling us on a reverse mortgage, income and financial products to enhance Mom’s monthly income and to reduce her expenses. Mom would tell me to let Mr. Niemann make all the decisions although I am her Power of Attorney. I value so much his confident and generally caring manner. If you’re trying to help your Mom, Dad or family member deal with a life changing health condition, call Scarinci Hollenbeck. I’m glad I did and so is Mom."
—Mary Layton, Farmingdale, NJ
Americans are living longer than ever before. As a result, we face more challenges and transitions in our lives. Often, one of the most difficult transitions people face is the change from independent living in their own home or apartment to living in a long term care facility of “nursing home.”
Most people who make the decision to move to a nursing home often do so during a time of great stress. Some have been hospitalized after a serious medical condition, such as a stroke or a fractured hip. Others have progressive illnesses such as dementia, Parkinson’s or multiple sclerosis.
No matter the reason for the move, the spouse or relative who helps a person transition into a nursing home is often faced with the daunting tasks of finding the right facility and securing a payment source for the care and services provided by the nursing home. Both tasks can be considered difficult in New Jersey, as there are more than 64 nursing homes in Central Jersey alone and 364 nursing homes and assisted living facilities in the entire state to choose from and the monthly cost for nursing homes in Monmouth County average between $7,500 to $11,000 or more!
PLEASE NOTE THAT CONGRESS HAS PASSED SWEEPING LEGISLATION THAT SIGNIFICANTLY AFFECTS MEDICAID NURSING HOME BENEFITS.
The new law imposed punitive new restrictions on the ability of the elderly to transfer their assets before qualifying for Medicaid coverage in a nursing home.
These changes can have far-reaching implications regarding your ability to access quality and affordable long term care.
Some of the provisions include:
- The look back period is extended from 3 to 5 years.
- The value of a house that can be exempt is $500,000.
- Annuities and many other planning tools will be eliminated.
- Monthly gifts are severely curtailed.
Individuals might consider readjusting their long-term care path based on this potential new legislation. Preplanning may be increasingly more important in order to maximize the possibility of saving your family’s assets. Once illness strikes, the options become fewer.
If you have questions about this very important area of law, please contact Fredrick P. Niemann, Esq. at 888-800-7442 or email him at info@njelderlawcenter.com.
Frequently Asked Questions (FAQs)
If a person is going to transfer assets, do they need to do it more than five (5) years prior to entering a nursing home?
No. The five (5) years is simply a look back. If transfers occurred prior to the five (5) years look back, there is no penalty. If transfers occurred during the five (5) year look back, there is a penalty. In most instances, the penalty is significantly shorter than five (5) years.
Is it too late to do Medicaid Planning if someone is already in a nursing home?
No. Medicaid Planning can be done even after someone has already entered a nursing home.
Under Medicaid is it alright to transfer $13,000 to each family member every year?
No. The $13,000 per year gifting limit is part of the gift tax law, not the Medicaid law. Medicaid does not permit any transfers within a look back period without them being subject to penalty. On the other hand, if gifts made for Medicaid purposes exceed $13,000 per person, per year, this does not necessarily trigger payment of a gift tax. It simply means that a gift tax return will have to be filed. Beginning in January 2002, a person can gift $1,000,000 during his lifetime or on death in addition to the $13,000 per person per year without paying any tax.
Does the person receiving the gift for Medicaid Planning purposes have to pay income taxes on the gift?
No. A gift is not taxable income. The person receiving does not declare the gift on their 1040. However, if the person receiving the gift invests the gift, they must report the investment income from the gift on their 1040.
Are there any income tax issues to be considered in Medicaid Planning?
Yes. If a person withdraws money from an IRA, it is taxable income. If a person liquidates E or EE Bonds, it is taxable income. If a person liquidates H Bonds, which have been converted from E or EE Bonds, it generates taxable income. If a person withdraws money from an annuity, a portion of the withdrawal is taxable income. If a person assigns an annuity, it triggers immediate income tax on the deferred income. These are a few of the many examples of events which trigger income tax. Carryover basis, step up in basis and tax on sale of home are some of the others. Good Medicaid Planning incorporates good tax planning.
Can trusts be used for Medicaid asset transfer purposes?
Yes. The Federal Government has approved the use of certain types of trusts for Medicaid Planning purposes.
Is it true that a home is not counted for Medicaid eligibility purposes?
In some cases, a home is not counted as an asset for Medicaid eligibility purposes. However, the home must always be considered in Medicaid Planning. Even if it is not counted as an asset for Medicaid eligibility purposes, New Jersey will file a lien on the home upon the Medicaid applicant's death.
Is there a way I can transfer my home to my children but insure that I can live there for the rest of my life?
Yes. There is a technique known as a life estate. Under a life estate, the parent transfers a remainder interest in the home to the children but reserves the right to live there for the rest of the parent's life. The children cannot sell the home out from under the parent or mortgage it without the parent's consent.
Is an annuity a good Medicaid Planning technique?
Under current New Jersey law, purchasing a commercial annuity may be treated as a transfer of assets or subject to estate recovery. Therefore, it is not a good Medicaid Planning technique.
Is it important to address legal planning documents in Medicaid Planning?
Yes. It is always important to review Wills, Living Wills and Powers of Attorney. These documents are usually not designed for situations in which a family member will be applying for Medicaid. For example, if there is a husband and wife and the husband is entering the nursing home, the wife's Will usually leaves her assets to the husband. This needs to be changed.
HOW TO PAY FOR NURSING HOME CARE
One of the things that concerns people most about nursing home care is how to pay for that care. The four most utilized methods of doing so include:
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Long Term Care Insurance
If you are fortunate enough to have this type of coverage, it may go a long way towards paying the cost of the nursing home. However, long term care insurance has only started to become popular in the last few years and most people facing a nursing home stay do not have this coverage.
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Pay with your Own Funds
This is the method many people are required to use at first. Quite simply, it means paying for the cost of a nursing home out of your own pocket. However, with nursing home bills averaging between $7,500 and $11,000 per month in our area, few people can afford a long-term stay in a nursing home using this method.
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Medicare
Medicare is the national health insurance program primarily for people 65 years of age and older, certain younger disabled people and people with kidney failure. Medicare provides short term assistance with nursing home costs, but only if you meet the strict qualification rules.
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Medicaid
Medicaid is the federal and state funded and state administered medical benefit program that can pay for the cost of the nursing home if certain asset and income tests are met.
There is a great deal of confusion about Medicare and Medicaid. The following will outline the differences.
MEDICARE
Medicare is the federally funded and state administered health insurance program primarily designed for older individuals (those over age 65). There are some limited nursing home care benefits that can be available under Medicare. In general, if you are enrolled in the traditional Medicare plan, you have had a hospital stay of at least three days and then are admitted into a skilled nursing facility (often for rehabilitation or skilled nursing care), Medicare may pay for a while, with a maximum benefit of 100 days of coverage. Most people do not meet the medical requirements for the 100 day benefit period as most nursing home residents require custodial care.
If you qualify, traditional Medicare may pay the full cost of the nursing home stay for the first 20 days and can continue to pay the cost of the nursing home stay for the next 80 days, but with a deductible that is nearly $120 per day. Some Medicare supplement insurance policies may pay part or all the cost of the deductible. Even if Medicare does cover the 100 day period, what happens after the 100 days of coverage have been used? At that point, in either care, you are back to one of the other alternatives: long term care insurance, paying the bills with your own assets or qualifying for Medicaid.
Medicaid
Medicaid is a benefits program that is primarily funded by the federal government and administered by each state (the rules can vary from state to state). The primary benefit of Medicaid is that, unlike Medicare (which only pays for skilled nursing), the Medicaid program will pay for long term care in a nursing home once you have qualified. You will need to demonstrate the need for nursing home care (not being able to manage in a home environment, requiring assistance with activity of daily living skills for more than 2.5 hours per day) and you will need to meet the strict financial requirements established by your state.
APPLYING FOR MEDICAID
Once you apply for Medicaid, you will lose the opportunity to protect your assets, throwing away the flexibility that exists prior to an application. If your assets show that you have more than the allowable amount, you will be required to spend-down those assets. You will probably lose money and flexibility if you file for Medicaid too soon or too late. The timing of your filing is important.
GENERAL INFORMATION
Medicaid Applications
A Medicaid application requires a mountain of paperwork, and is then submitted to a government processing system, which makes filing an application for public benefits an enormous project. Although the federal government shares the cost of funding the Medicaid program with the states and requires the state government to uphold certain standards with respect to efficiency and the granting of Medicaid applications, it is not uncommon for the state or county office to fall behind on meeting the federally imposed guidelines.
Therefore, when applying for Medicaid or other public benefits, it is helpful for applicants to be well prepared and well-versed in the legal implications of all information to be supplied in support of the application. Also, when the state of county office fails to meet a deadline or erroneously renders a disposition on an application, the applicant must be prepared to exercise his Constitutional and state statutory rights.
Following is a sample list of Medicaid application issues which should be addressed in an effort to avoid unnecessary delays and denials.
1. Selecting a Program
Applicants for public benefits must decide which programs for which they wish to apply. The choice of programs may depend on the applicant's living situation, physical condition, and financial status. Certain benefits programs are also specifically geared to victims of traumatic brain injuries or Alzheimer’s Disease. Many states, including New Jersey have dual institutional Medicaid programs which have slightly differing income and asset standards and offer different coverage with respect to hospital stays.
2. Timeliness of Filing
Although families have the opportunity to expedite their Medicaid eligibility through asset protection planning under the guidance of an Elder and Disability Law attorney, it is vitally important that applicants do not apply for Medicaid prematurely. Strategies for Medicaid planning often include triggering a penalty period for Medicaid eligibility purposes. While the time in which to wait to file an application may be more or less than five years, filing an application during a period of ineligibility could potentially cause a significant delay in the applicants eligibility approval status. It is, therefore, important to check with your planning advisor as to the date after which the application may be filed.
3. Authorization to Apply
In most cases, the applicant himself is unable to visit the welfare office and offer detailed information on his financial status. The law, therefore, specifically provides that a relative, welfare agency staff member, staff member of the institution in which the applicant resides, or a professional such as a doctor or attorney may apply on the applicant's behalf. In cases where an attorney has been retained to apply on behalf of an applicant, the attorney must acquire an authorization from the applicant or his/her attorney-in-fact to obtain, discuss and submit financial data in support of the Medicaid application. Because the Medicaid eligibility laws and policies are rapidly changing, subject to shifts in politics and lobbying by advocates for the elderly, applicants are well advised to retain individuals with comprehensive knowledge of the Medicaid eligibility rules and all strategies that may be legally employed to expedite eligibility.
4. Physical Criteria
Qualifying for Medicaid involves not only financial criteria, but also physical requirements. Therefore, applicants must demonstrate through a physical exam that he or she is unable to perform the activities of daily living, including feeding, dressing, bathing, toileting and continence. If it cannot be shown to Medicaid that the care is medically necessary, the Medicaid application will be denied.
5. Intake Procedures
In some counties, the applicants or families themselves are required to complete the paperwork. While some counties are more lenient as to what types of documents may be submitted by mail, the initial filing of a Medicaid application generally requires a face to face interview with a Medicaid caseworker.
6. Substantiating the Data
The Medicaid application itself is several pages, and the answers to each question must be substantiated by legal or financial documentation. These supporting documents include: social security cards, Medicare cards, health insurance cards, birth certificates, marriage certificates, death certificates, life insurance policies, deeds, car registrations, household expense bills, funeral arrangement documents, pay or pension stubs, and financial statements typically dating back three years prior to the time the Medicaid application is filed. If certain documents are missing, such as proof of birth or marriage, your professional can help you obtain certain documents from the Registrar of Vital Statistics in your area. Each Medicaid office has a computer program to verify social security numbers, employment history, or other personal information. Likewise, if any financial information is not disclosed to a county welfare office, the office may deny the application based on information it periodically receives from the Internal Revenue Service. Intentional failure to disclose relevant financial data is considered Medicaid fraud. Even in cases where Medicaid eligibility has initially been granted, the county welfare office may revoke the approval upon receiving the IRS records.
7. Additional Documentation and County Variation
In addition to the personal and financial data, applicants who have been able to protect assets through planning for benefits may also have additional supporting information to submit to the welfare office. The treatment of these additional supporting documents may vary from county to county. For instance, both a husband and wife may present prepaid funerals as non-countable assets. Both Care Agreements and Caregiver Affidavits which help applicants protect assets without triggering penalties, must also be submitted to support an application, but their treatment may vary with variations in other financial data and the county accepting the application. Trusts that have been established must also be submitted to the welfare office since they may affect benefits eligibility, depending upon their provisions.
Some county welfare offices require such individuals to complete a plan of liquidation of assets in certain situations. Such cases may necessitate professional advice to protect the applicant’s rights, to protect a portion of the proceeds for his or her family members or to enhance his or her institutional care.
The requirement that financial statements dating back five years prior to the filing of the application be submitted also varies from county to county. Depending on the circumstances, some counties have been known to request as little as four months of statements.
8. Enforcing the Applicant's Rights
Applicants should be aware of their federal rights to a prompt disposition of their application. Enforcing the federally mandated deadline of 90 days found in the Code of Federal Regulations, and the state deadlines (in New Jersey, the recommended processing time is 30 days) can be done through a fair hearing, which is an informal proceeding before an administrative law judge. These hearings are often used to expedite the decision making process of the county and state welfare agencies. Individuals who do not exercise their federal and state rights to a prompt decision on their Medicaid applications might otherwise find themselves waiting over a year to learn whether their nursing home bills, which had been accruing, will be covered by the benefits programs.
DIAGNOSIS OF ALZHEIMER’S, PARKINSON’S AND OTHER CRISIS CONDITIONS
Do You Have a Loved One with Alzheimer’s Disease, Dementia, or Memory Loss?
You May Qualify for Assistance and Cut the Cost of Their Long-Term Care
Our FREE Report Reveals the 9 Steps You Should be Taking RIGHT NOW to Protect Your Loved One's Hard-Earned Savings and Regain Peace of Mind.
I know you're worried.
You have a loved one who's showing signs of memory loss and you're concerned that it might be Alzheimer's Disease...or perhaps your loved one has already been diagnosed, maybe the diagnosis is equally terrifying like Parkinson’s, M.S., stroke… the list goes on.
In either case, you're concerned about getting them good care and wondering where you'll find the strength to carry on throughout the course of a disease that can sometimes last for 10 or even 20 years.
And when you think about the cost...you begin to worry if you might lose everything to Alzheimer's.
WHAT STEPS SHOULD I BE TAKING RIGHT NOW?
Of course, it’s important that you talk to your doctor as soon as your loved one starts to show signs of memory loss.
And even though you may fear the worst... that it’s Alzheimer’s disease...there are any number of less serious reasons why someone might be experiencing memory loss. Not all of them are related to Alzheimer’s...but some of them have very similar symptoms.
But even if the medical side of things is being handled, there are several crucial steps on the legal and financial side of things which you should consider immediately. That’s because the cost of care for someone with Alzheimer’s and other progressively degenerating conditions is incredibly expensive. Studies show that the cost of care in New Jersey averages more than $380,000 for an Alzheimer’s patient over his or her lifetime. Custodial care for stroke and M.S. are even higher.
That’s why you should take steps now...while you can still plan.
After all, who can afford $6,000 per month for Alzheimer’s assisted living or $10,000 per month for nursing home care without some assistance?
Fortunately, there are often programs available to help you if you act now and plan ahead.
The first step is to consult with an attorney who works with Alzheimer’s patients and their families.
It is critical that you and your loved ones have a chance to put the proper planning in place while there is still time. The simple fact is that none of us knows how much time we have on this earth. When Alzheimer’s or memory loss is part of the equation, the planning becomes more complicated.
That is because you may “know” exactly what your spouse or loved one would want. But if those wishes have not somehow been put down in writing, then the law may not recognize your supposed “knowledge.” In legal-speak, it’s considered hearsay and has no legal merit.
Instead, the law in New Jersey says the Alzheimer’s patient must have the legal capacity (i.e. the ability to understand) the planning steps. For that reason, that's why we suggest you plan right now...while the Alzheimer’s patient can participate in the planning. The longer you wait, the greater the risk becomes.
Information is Power
While the consequences of Alzheimer's can be stunning, it is important to remember that there is good information available to you and your family.
Our firm has helped families in New Jersey, and we have prepared a FREE 9 Step Plan that addresses some of the most common, real-world issues faced by people like you...it's full of answers to questions that we hear on a weekly basis.
Here are some of the strategies I reveal...
- Discover some of the biggest mistakes that families of individuals with Alzheimer's make (and how you can avoid them!)
- Detailed information concerning the stages of Alzheimer's Disease, and what steps you should be taking at each phase
- Learn how to legally handle the issue of making medical decisions and living arrangements for your loved one
- A comprehensive review of the various estate planning strategies available to you, and how each may allow you to protect your loved one's hard-earned savings
- Discover the financial assistance programs that may be available to help cover the cost of your loved one's care
- Information about the little-known benefit available to honorably discharged veterans that may help cover the cost of assisted living or home health care
- Answers to some of the most frequently asked questions that we hear from families in situations similar to yours
- ...and much more!
I strongly encourage you to request your free, no-obligation copy of The Plain Truth About Alzheimer's Disease. It explains some of the strategies that families are using to protect their loved ones right now.
CONTACT US TODAY
To speak to an attorney, call Fredrick P. Niemann, at 888-800-7442 or e-mail him at info@njelderlawcenter.com to set up an office consultation at your convenience.