Asset Spend-Down for Medicaid Qualification Navigating the - - PowerPoint PPT Presentation

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Asset Spend-Down for Medicaid Qualification

Navigating the Complexities of Classifying Assets, Individuals vs. Married Couples, and Appeals Process

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific THURSDAY, MARCH 10, 2016

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Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

Michael J. Keenan, Attorney, Keenan Law, South Glastonbury, Conn. Kyla G. Kelim, Esq., Aging in Alabama, Fairhope, Ala.

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FOR LIVE EVENT ONLY

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Qualifying for Medicaid

South Glastonbury, CT www.keenan-law.com

Michael J. Keenan, Esq Michael J. Keenan, Esq.

michael@keenan michael@keenan-

• law.com

law.com

Presentation for Presentation for Strafford Publications Strafford Publications March 10, 2016 March 10, 2016

Warning

• Unlike Medicare & Social Security, Medicaid is a federal program

Unlike Medicare & Social Security, Medicaid is a federal program run by departments of state governments; run by departments of state governments;

• States can differ widely in how they manage the Medicaid

States can differ widely in how they manage the Medicaid program; program;

• The figures used (income limits, asset limits, penalty calculations,

The figures used (income limits, asset limits, penalty calculations, etc.) vary state etc.) vary state-to to-state; state;

• Be mindful of this unique federal

Be mindful of this unique federal-state dynamic during the state dynamic during the presentation. presentation.

www.keenan www.keenan-

• law.com

law.com

• Unlike Medicare & Social Security, Medicaid is a federal program

Unlike Medicare & Social Security, Medicaid is a federal program run by departments of state governments; run by departments of state governments;

• States can differ widely in how they manage the Medicaid

States can differ widely in how they manage the Medicaid program; program;

• The figures used (income limits, asset limits, penalty calculations,

The figures used (income limits, asset limits, penalty calculations, etc.) vary state etc.) vary state-to to-state; state;

• Be mindful of this unique federal

Be mindful of this unique federal-state dynamic during the state dynamic during the presentation. presentation.

6 6

Medicaid Introduction Medicaid Introduction



Established in 1965, Title XIX of the SSI Program; Established in 1965, Title XIX of the SSI Program;



Federal government sets minimum coverage standards, states Federal government sets minimum coverage standards, states may expand their programs beyond the minimum requirements; may expand their programs beyond the minimum requirements;



Available to anyone who is disabled and has exhausted their Available to anyone who is disabled and has exhausted their financial resources; financial resources;



SSI beneficiaries are automatically eligible for Medicaid in most SSI beneficiaries are automatically eligible for Medicaid in most states; states;



Nursing home care and community care. Nursing home care and community care.

www.keenan www.keenan-

• law.com

law.com



Established in 1965, Title XIX of the SSI Program; Established in 1965, Title XIX of the SSI Program;



Federal government sets minimum coverage standards, states Federal government sets minimum coverage standards, states may expand their programs beyond the minimum requirements; may expand their programs beyond the minimum requirements;



Available to anyone who is disabled and has exhausted their Available to anyone who is disabled and has exhausted their financial resources; financial resources;



SSI beneficiaries are automatically eligible for Medicaid in most SSI beneficiaries are automatically eligible for Medicaid in most states; states;



Nursing home care and community care. Nursing home care and community care.

7 7

Countable Assets Countable Assets



State sets a limit on “countable” resources State sets a limit on “countable” resources – assets that can be assets that can be converted to cash and used to pay for care; converted to cash and used to pay for care;



Joint accounts are generally considered 100% owned by the Joint accounts are generally considered 100% owned by the applicant, regardless of how many joint owners there are; applicant, regardless of how many joint owners there are;



Real estate solely owned by an applicant is considered countable Real estate solely owned by an applicant is considered countable even though it is illiquid; even though it is illiquid;



Trusts for which the applicant is a beneficiary is generally Trusts for which the applicant is a beneficiary is generally countable; countable;



“Availability” is a key concept in Medicaid. “Availability” is a key concept in Medicaid.

www.keenan www.keenan-

• law.com

law.com



State sets a limit on “countable” resources State sets a limit on “countable” resources – assets that can be assets that can be converted to cash and used to pay for care; converted to cash and used to pay for care;



Joint accounts are generally considered 100% owned by the Joint accounts are generally considered 100% owned by the applicant, regardless of how many joint owners there are; applicant, regardless of how many joint owners there are;



Real estate solely owned by an applicant is considered countable Real estate solely owned by an applicant is considered countable even though it is illiquid; even though it is illiquid;



Trusts for which the applicant is a beneficiary is generally Trusts for which the applicant is a beneficiary is generally countable; countable;



“Availability” is a key concept in Medicaid. “Availability” is a key concept in Medicaid.

8 8

Non Non-Countable Assets Countable Assets

• A nursing home resident can keep very little in liquid assets (up to $2,000 in

A nursing home resident can keep very little in liquid assets (up to $2,000 in most SSI states); most SSI states);

• Healthy community spouse can keep ½ of the joint assets up to $119,200 with

Healthy community spouse can keep ½ of the joint assets up to $119,200 with a “floor” of $23,844 (2016 figures). These figures can vary state a “floor” of $23,844 (2016 figures). These figures can vary state-to to-state; state;

• The home if occupied by a spouse, disabled/blind child or child under age 21,

The home if occupied by a spouse, disabled/blind child or child under age 21,

• r if applicant plans to return home;
• r if applicant plans to return home;
• Personal effects;

Personal effects;

• One car for the healthy community spouse;

One car for the healthy community spouse;

• Term life insurance;

Term life insurance;

• A small amount of cash

A small amount of cash-value life insurance; value life insurance;

• “Partnership Policy” long term care insurance payout equivalent.

“Partnership Policy” long term care insurance payout equivalent.

• Certain annuities;

Certain annuities;

• Certain types of trusts;

Certain types of trusts;

• Retirement accounts in some states.

Retirement accounts in some states.

www.keenan www.keenan-

• law.com

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• A nursing home resident can keep very little in liquid assets (up to $2,000 in

A nursing home resident can keep very little in liquid assets (up to $2,000 in most SSI states); most SSI states);

• Healthy community spouse can keep ½ of the joint assets up to $119,200 with

Healthy community spouse can keep ½ of the joint assets up to $119,200 with a “floor” of $23,844 (2016 figures). These figures can vary state a “floor” of $23,844 (2016 figures). These figures can vary state-to to-state; state;

• The home if occupied by a spouse, disabled/blind child or child under age 21,

The home if occupied by a spouse, disabled/blind child or child under age 21,

• r if applicant plans to return home;
• r if applicant plans to return home;
• Personal effects;

Personal effects;

• One car for the healthy community spouse;

One car for the healthy community spouse;

• Term life insurance;

Term life insurance;

• A small amount of cash

A small amount of cash-value life insurance; value life insurance;

• “Partnership Policy” long term care insurance payout equivalent.

“Partnership Policy” long term care insurance payout equivalent.

• Certain annuities;

Certain annuities;

• Certain types of trusts;

Certain types of trusts;

• Retirement accounts in some states.

Retirement accounts in some states.

9 9

Gifting Gifting

• The applicant’s finances are audited for the 5

The applicant’s finances are audited for the 5-year period leading up to year period leading up to the Medicaid application; the Medicaid application;

• Any transfers of assets out of the applicant’s name that does not

Any transfers of assets out of the applicant’s name that does not benefit the applicant is a “gift” and a disqualifying transfer; benefit the applicant is a “gift” and a disqualifying transfer;

• The size of the transfer/gift will determine the length of the period of

The size of the transfer/gift will determine the length of the period of ineligibility for Medicaid (the “penalty period”); ineligibility for Medicaid (the “penalty period”);

• The penalty period begins to run once the applicant is otherwise

The penalty period begins to run once the applicant is otherwise eligible for Medicaid; eligible for Medicaid;

• Beware of clients’ confusion with the gift tax exemption (currently

Beware of clients’ confusion with the gift tax exemption (currently $14,000). $14,000).

www.keenan www.keenan-

• law.com

law.com

• The applicant’s finances are audited for the 5

The applicant’s finances are audited for the 5-year period leading up to year period leading up to the Medicaid application; the Medicaid application;

• Any transfers of assets out of the applicant’s name that does not

Any transfers of assets out of the applicant’s name that does not benefit the applicant is a “gift” and a disqualifying transfer; benefit the applicant is a “gift” and a disqualifying transfer;

• The size of the transfer/gift will determine the length of the period of

The size of the transfer/gift will determine the length of the period of ineligibility for Medicaid (the “penalty period”); ineligibility for Medicaid (the “penalty period”);

• The penalty period begins to run once the applicant is otherwise

The penalty period begins to run once the applicant is otherwise eligible for Medicaid; eligible for Medicaid;

• Beware of clients’ confusion with the gift tax exemption (currently

Beware of clients’ confusion with the gift tax exemption (currently $14,000). $14,000).

10 10

Permitted Transfers Permitted Transfers



To a spouse; To a spouse;



To a disabled or blind child; To a disabled or blind child;



To a trust for a disabled individual who is under age 65; To a trust for a disabled individual who is under age 65;



The house may be transferred to (besides those above): The house may be transferred to (besides those above):

• Child under age 21

Child under age 21

• Child who has lived in the house for 2 years prior to the

Child who has lived in the house for 2 years prior to the applicant moving to a nursing home and provided care to keep the applicant moving to a nursing home and provided care to keep the applicant out of the home during that time. applicant out of the home during that time.

• Sibling with an equity interest in the house and who has lived

Sibling with an equity interest in the house and who has lived there for one year prior to applicant’s nursing home placement. there for one year prior to applicant’s nursing home placement.

www.keenan www.keenan-

• law.com

law.com



To a spouse; To a spouse;



To a disabled or blind child; To a disabled or blind child;



To a trust for a disabled individual who is under age 65; To a trust for a disabled individual who is under age 65;



The house may be transferred to (besides those above): The house may be transferred to (besides those above):

• Child under age 21

Child under age 21

• Child who has lived in the house for 2 years prior to the

Child who has lived in the house for 2 years prior to the applicant moving to a nursing home and provided care to keep the applicant moving to a nursing home and provided care to keep the applicant out of the home during that time. applicant out of the home during that time.

• Sibling with an equity interest in the house and who has lived

Sibling with an equity interest in the house and who has lived there for one year prior to applicant’s nursing home placement. there for one year prior to applicant’s nursing home placement.

11 11

Income Treatment Income Treatment

 Generally, all of the applicant’s income must go to the

Generally, all of the applicant’s income must go to the nursing home. nursing home.

 The applicant can keep a small amount each month for

The applicant can keep a small amount each month for their personal needs account at the nursing home; their personal needs account at the nursing home;

 Deduction for uncovered medical costs (including

Deduction for uncovered medical costs (including medical insurance premiums); medical insurance premiums);

 An allowance can be allocated to the community spouse

An allowance can be allocated to the community spouse if a need can be demonstrated; if a need can be demonstrated;

 Some states have income caps, but the excess can go to

Some states have income caps, but the excess can go to a “D4B” or “Miller” trust; a “D4B” or “Miller” trust;

 The income of the community spouse is ignored.

The income of the community spouse is ignored.

www.keenan www.keenan-

• law.com

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 Generally, all of the applicant’s income must go to the

Generally, all of the applicant’s income must go to the nursing home. nursing home.

 The applicant can keep a small amount each month for

The applicant can keep a small amount each month for their personal needs account at the nursing home; their personal needs account at the nursing home;

 Deduction for uncovered medical costs (including

Deduction for uncovered medical costs (including medical insurance premiums); medical insurance premiums);

 An allowance can be allocated to the community spouse

An allowance can be allocated to the community spouse if a need can be demonstrated; if a need can be demonstrated;

 Some states have income caps, but the excess can go to

Some states have income caps, but the excess can go to a “D4B” or “Miller” trust; a “D4B” or “Miller” trust;

 The income of the community spouse is ignored.

The income of the community spouse is ignored.

12 12

Spend-Down Rules

South Glastonbury, CT www.keenan-law.com

Michael J. Keenan, Esq. Michael J. Keenan, Esq.

michael@keenan michael@keenan-

• law.com

law.com

Presentation for Presentation for Strafford Publications Strafford Publications March 10, 2016 March 10, 2016

Asset Limitations

• The starting point for the spend

The starting point for the spend-down analysis is understanding down analysis is understanding the asset limitation; the asset limitation;

• Once the asset limitation is determined, the applicant must

Once the asset limitation is determined, the applicant must “spend down” his countable assets until his asset level falls below “spend down” his countable assets until his asset level falls below the asset limitation; the asset limitation;

• The asset limitation for a single applicant is a very low amount

The asset limitation for a single applicant is a very low amount ($2,000 in most SSI states). ($2,000 in most SSI states).

www.keenan www.keenan-

• law.com

law.com

• The starting point for the spend

The starting point for the spend-down analysis is understanding down analysis is understanding the asset limitation; the asset limitation;

• Once the asset limitation is determined, the applicant must

Once the asset limitation is determined, the applicant must “spend down” his countable assets until his asset level falls below “spend down” his countable assets until his asset level falls below the asset limitation; the asset limitation;

• The asset limitation for a single applicant is a very low amount

The asset limitation for a single applicant is a very low amount ($2,000 in most SSI states). ($2,000 in most SSI states).

14 14

Asset Limitation Asset Limitation for a Married Applicant for a Married Applicant



The state will take a “snap shot” look at the countable marital The state will take a “snap shot” look at the countable marital assets on the first day of institutionalization for the sick spouse; assets on the first day of institutionalization for the sick spouse;



All of the couple’s countable assets will be lumped together in All of the couple’s countable assets will be lumped together in

• ne figure (regardless of which spouse owns which assets);
• ne figure (regardless of which spouse owns which assets);



That figure will be split in half with ½ attributable to the That figure will be split in half with ½ attributable to the institutionalized spouse, ½ attributable to the community spouse; institutionalized spouse, ½ attributable to the community spouse;



The institutionalized spouse will be able to keep a very low The institutionalized spouse will be able to keep a very low amount ($2,000 in most SSI states); amount ($2,000 in most SSI states);



The community spouse can keep up to $119,200 with a “floor” of The community spouse can keep up to $119,200 with a “floor” of $23,844 (2016 figures). These figures can vary state $23,844 (2016 figures). These figures can vary state-to to-state. state.

www.keenan www.keenan-

• law.com

law.com



The state will take a “snap shot” look at the countable marital The state will take a “snap shot” look at the countable marital assets on the first day of institutionalization for the sick spouse; assets on the first day of institutionalization for the sick spouse;



All of the couple’s countable assets will be lumped together in All of the couple’s countable assets will be lumped together in

• ne figure (regardless of which spouse owns which assets);
• ne figure (regardless of which spouse owns which assets);



That figure will be split in half with ½ attributable to the That figure will be split in half with ½ attributable to the institutionalized spouse, ½ attributable to the community spouse; institutionalized spouse, ½ attributable to the community spouse;



The institutionalized spouse will be able to keep a very low The institutionalized spouse will be able to keep a very low amount ($2,000 in most SSI states); amount ($2,000 in most SSI states);



The community spouse can keep up to $119,200 with a “floor” of The community spouse can keep up to $119,200 with a “floor” of $23,844 (2016 figures). These figures can vary state $23,844 (2016 figures). These figures can vary state-to to-state. state.

15 15

Spending Down Spending Down



“Spending Down” generally means spending assets on products or services “Spending Down” generally means spending assets on products or services that will benefit the institutionalized spouse that will benefit the institutionalized spouse or

• r the community spouse;

the community spouse;



Paying the nursing home bill and buying items for the institutionalized Paying the nursing home bill and buying items for the institutionalized spouse’s room at the nursing home are valid spend spouse’s room at the nursing home are valid spend-down items; down items;



The costs of fixing or sprucing up the home for the community spouse are The costs of fixing or sprucing up the home for the community spouse are valid spend valid spend-down items; down items;



Paying off the debts (mortgage, credit card bills, medical bills, etc.) of Paying off the debts (mortgage, credit card bills, medical bills, etc.) of either spouse is permitted; either spouse is permitted;



Purchasing prepaid funeral contracts for both spouses is permitted. Purchasing prepaid funeral contracts for both spouses is permitted.

www.keenan www.keenan-

• law.com

law.com



“Spending Down” generally means spending assets on products or services “Spending Down” generally means spending assets on products or services that will benefit the institutionalized spouse that will benefit the institutionalized spouse or

• r the community spouse;

the community spouse;



Paying the nursing home bill and buying items for the institutionalized Paying the nursing home bill and buying items for the institutionalized spouse’s room at the nursing home are valid spend spouse’s room at the nursing home are valid spend-down items; down items;



The costs of fixing or sprucing up the home for the community spouse are The costs of fixing or sprucing up the home for the community spouse are valid spend valid spend-down items; down items;



Paying off the debts (mortgage, credit card bills, medical bills, etc.) of Paying off the debts (mortgage, credit card bills, medical bills, etc.) of either spouse is permitted; either spouse is permitted;



Purchasing prepaid funeral contracts for both spouses is permitted. Purchasing prepaid funeral contracts for both spouses is permitted.

16 16

Spending Down Spending Down



The spend The spend-down should cease as soon as the asset limitation is down should cease as soon as the asset limitation is realized; realized;



Gifting assets to third parties is not spending down. Gifts are Gifting assets to third parties is not spending down. Gifts are disqualifying transfers of assets; disqualifying transfers of assets;



Adding children as joint owners on accounts or real estate is not Adding children as joint owners on accounts or real estate is not spending down; spending down;



You should retain written verification of all spend You should retain written verification of all spend-down items down items (cashed checks, receipts, paid bills, etc.). (cashed checks, receipts, paid bills, etc.).

www.keenan www.keenan-

• law.com

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

The spend The spend-down should cease as soon as the asset limitation is down should cease as soon as the asset limitation is realized; realized;



Gifting assets to third parties is not spending down. Gifts are Gifting assets to third parties is not spending down. Gifts are disqualifying transfers of assets; disqualifying transfers of assets;



Adding children as joint owners on accounts or real estate is not Adding children as joint owners on accounts or real estate is not spending down; spending down;



You should retain written verification of all spend You should retain written verification of all spend-down items down items (cashed checks, receipts, paid bills, etc.). (cashed checks, receipts, paid bills, etc.).

17 17

Asset spend-down for Medicaid qualification Strafford Publications

AGING IN ALABAMA Presented by Kyla G. Kelim, Esq. attorney@elderconsults.com protecting your life’s work

SPEND-DOWN STRATEGIES FOR INDIVIDUAL APPLICANTS

19

INCOME AND RESOURCES

• Income below $ 2199
• Single – Countable Resources below

$2000 $2000

• Life insurance/burial funds less than $

1500 (or $5000)

20

• 1. EXEMPT PURCHASES
• Funeral/Burial
• Car
• Pay debt (mortgage) but remember you are
• Pay debt (mortgage) but remember you are

probably clearing a debt that will ultimately benefit Medicaid

• Supplies/clothing/sundries

21

EXAMPLE: EXEMPT PURCHASES

• SINGLE CLIENT IS GOING IN NURSING HOME, HAS

$25,000.00.

• HAS NO LIFE INSURANCE, NO FUNERAL POLICY
• HAS NO LIFE INSURANCE, NO FUNERAL POLICY
• OPTION 1: do nothing, spenddown on the nursing home,
• nce below $2000 then client qualifies for Medicaid. When

client passes away, heirs pay for funeral out of their own pocket

• OPTION 2: buy a prepaid policy that complies with your

state’s regulations, spenddown on nursing home. At death, funeral is paid from policy. THIS IS BETTER.

22

• 2. EXEMPT TRANSFERS
• To disabled child (everything)
• To caretaker child (house)
• To sibling with an equity interest (house)
• To sibling with an equity interest (house)
• To minor child (house)
• To special needs trust (for disabled child or self

settled if under age 65)

• To special needs trust (pooled for over age 65)

23

EXAMPLE: EXEMPT TRANSFER

• SINGLE CLIENT IS GOING IN NURSING HOME, HAS $25,000.00.
• HAS NO RESOURCES FOR ITEMS SHE/HE MAY NEED
• OPTION 1: do nothing, spenddown on the nursing home, once

below $2000 then client qualifies for Medicaid. When client below $2000 then client qualifies for Medicaid. When client needs something (lift chair, uncovered therapy, maybe private room fees (but maybe not), property taxes, insurance, cell phone, eyeglasses), family pays out of their own pocket

• OPTION 2: open a special needs trust, you are spentdown on

nursing home. The client’s trust pays for uncovered needs. At death, Medicaid gets what is left. THIS IS BETTER.

24

• 3. NON EXEMPT TRANSFERS
• For those with enough to get through look-

back period or who can get through it at home, maximize income, transfer to irrevocable trust irrevocable trust

• For those without enough to get through

look-back period, start penalty period, go home (or to lower level of care) to continue the penalty period running then go back

25

EXAMPLE: NON-EXEMPT TRANSFERS

• SAME SINGLE CLIENT TO GO TO NURSING HOME, HAS

$500,000 in cds, $3,000 monthly income

• TRANSFER 1/2 (or whatever will pay for the nursing home

during five year period)

• Assume nursing home costs $7500 per month, then you

have 60 months to pay for the nursing home, $4,000 per month shortfall (or whatever), costs $240,000.00, at end

• f 5 years, pay until down to $2,000, go on Medicaid,

$250,000 is preserved

26

• 4. FANCY STUFF
• Consider resetting the snapshot date if the

planning has not been done

• For example: Client has child who will buy home

(not disabled, not caretaker, not minor), has (not disabled, not caretaker, not minor), has $40,000.00 and is admitted to nursing home. House needs work. Consider having client go home with care, perform repairs, then have child buy home (for fair market value)

27

EASY RIGHT?

• HIRE A CPA OR TAX IRA

CONTRIBUTIONS CONTRIBUTIONS

28

5 (A). MAXIMIZE INCOME: WHAT ABOUT YOUR SERVICE?

• You must apply to qualify for Medicaid
• Veterans of a war
• No service connected disability required
• Get up to 2120/1149 for care
• Get up to 2120/1149 for care
• 1 day of wartime, arena of war not necessary
• VA putting in a 3 year lookback period with a 10

year penalty

29

5(B) MAXIMIZE INCOME: MEDICARE SAVINGS PROGRAM

• QMB/SLMB/QI
• Income driven: 1010/1208/1357
• Married 1355/1622/1823
• Most states limit assets (federal limit: single:
• Most states limit assets (federal limit: single:

7280, married: 10,930)

• Several states (including AL) do not count

assets

30

• 6. IF YOU HAVE TIME TO PLAN
• Long term care insurance
• Irrevocable Trust
• Correct problems with spending (paying for

family member obligations, gifting) family member obligations, gifting)

• Transfer home, reserve life estate (some

states may seek recovery)

• CCRC buy in

31

SPEND-DOWN STRATEGIES FOR MARRIED APPLICANTS

32

INCOME AND RESOURCES

• Income below $ 2199 for applicant,

some states count couples’ income

• Single – Countable Resources below

$2000 $2000

• Married -- Countable Resources

below $238,440

• Life insurance/burial funds less than

$ 1500 (or $5000) each

33

• 1. EXEMPT PURCHASES
• Funeral/Burial
• House
• Car
• Car
• Pay debt (mortgage, minimize debt for

community spouse)

• Work on home

34

EXAMPLE: EXEMPT PURCHASES

• MARRIED CLIENT IS GOING IN NURSING HOME, HAS

$65,000.00.

• COUPLE HAS NO LIFE INSURANCE, NO FUNERAL POLICY
• OPTION 1: do nothing, spenddown on the nursing home,

give spouse 1/2 (or may have to spenddown to $25,000),

• OPTION 1: do nothing, spenddown on the nursing home,

give spouse 1/2 (or may have to spenddown to $25,000),

• nce below $2000 then client qualifies for Medicaid. When

client passes away, spouse pays for funeral out of that spouse’s 1/2

• OPTION 2: buy a prepaid policy that complies with your

state’s regulations, spouse gets a minimum of 23,844, spenddown on nursing home. At death, funeral is paid from

• policy. THIS IS BETTER.

35

• 2. EXEMPT TRANSFERS
• To spouse (but if spouse is sick…)
• To disabled child (everything)
• To caretaker child (house)
• To sibling with an equity interest (house)
• To sibling with an equity interest (house)
• To minor child (house)
• To special needs trust (for disabled child or self

settled if under age 65)

• To special needs trust (pooled for over age 65)

36

EXAMPLE: EXEMPT TRANSFER

• MARRIED CLIENT IS GOING IN NURSING HOME, HAS $50,000*.
• HAS NO RESOURCES FOR ITEMS SHE/HE MAY NEED
• OPTION 1: do nothing, give spouse 1/2*, spenddown rest on the

nursing home, once below $2000 then client qualifies for

• Medicaid. When client needs something (lift chair, uncovered

therapy, maybe private room fees (but maybe not), property taxes, insurance, cell phone, eyeglasses), spouse pays out of their therapy, maybe private room fees (but maybe not), property taxes, insurance, cell phone, eyeglasses), spouse pays out of their $25,000.

• OPTION 2: give spouse 1/2, open a special needs trust for the
• ther 1/2, you are spentdown on nursing home. The client’s trust

pays for uncovered needs. At death, Medicaid gets what is left. THIS IS BETTER.

• *Some states permit the spouse to keep up to $119,220 without

spending any on the nursing home, like Florida

37

3(A). COMMUNITY SPOUSE INCOME

• In most states, community spouse can keep all
• f his income (if over the MMMNA)
• The MMMNA (Minimum Monthly Maintenance

Needs Allowance) changes each July: it is $1,991.25 per month ($2490 Alaska)($2291.25 $1,991.25 per month ($2490 Alaska)($2291.25 Hawaii)(minimum) $2980.50 (maximum) $597.38 for excess shelter resource ($747 Alaska)($687.38 Hawaii)

• So for spouses that will need MMMNA avoid

strategies that maximize income of spouse

38

3(B) COMMUNITY SPOUSE ASSETS

• CSRA – community spouse resource

allowance – spouse may keep up to ½ of the resource amount ($119,220)

• Some states permit up to half
• Some states permit up to half
• Some states require s “spenddown” – must

spend ½ to keep ½

• Spouses may keep a minimum of $23844

without spenddown)

39

• 4. FANCY STUFF
• Consider resetting the snapshot date if the

planning has not been done

• For example: Client has spouse who will keep

home, has $40,000.00 and is admitted to nursing home, has $40,000.00 and is admitted to nursing

• home. House needs work (or has mortgage).

Consider having client go home with care, perform repairs (or pay mortgage), then transfer home to spouse

40

5 (A). ANNUITIES

• MUST BE CAUTIOUS!
• Annuity must be Medicaid compliant
• Use to maximize spousal income

(particularly if already over MMMNA)

• Use to maximize spousal income

(particularly if already over MMMNA)

• Must be actuarially sound
• Must have Medicaid as beneficiary

41

5(B) INCOME ONLY TRUSTS

• Beware trust language
• Effective if done correctly
• Still subject to 5 year lookback
• Still subject to 5 year lookback

period for planning

42

• 6. IF YOU HAVE TIME TO PLAN
• Long term care insurance
• Irrevocable Trust
• Correct problems with spending (paying for family

member obligations, gifting) member obligations, gifting)

• Transfer home, reserve life estate (some states may

seek recovery)

• CCRC buy in

43

• 7. WHAT’S YOURS IS MINE, WHAT’S MINE IS

MINE, WHAT’S OURS IS MINE

• Medicaid will count couple as one person
• Spouse at home can generate further

penalties by transferring assets

• Beware the “caretaker” at home, once assets
• Beware the “caretaker” at home, once assets

are split, Medicaid will still monitor those assets, must strictly comply with rules

44

Common Mistakes & Pitfalls

South Glastonbury, CT www.keenan-law.com

Michael J. Keenan, Esq Michael J. Keenan, Esq.

michael@keenan michael@keenan-

• law.com

law.com

Presentation for Presentation for Strafford Publications Strafford Publications March 10, 2016 March 10, 2016

Spending Down Prematurely

• It’s possible to begin the spend

It’s possible to begin the spend-down down too too early early;

• In many cases the goal is to maximize the amount that the

In many cases the goal is to maximize the amount that the community spouse is allowed to keep; community spouse is allowed to keep;

• The community spouse can keep ½ of the countable assets on the

The community spouse can keep ½ of the countable assets on the snap snap-shot date (1 shot date (1st

st day of institutionalization) up to $119,200

day of institutionalization) up to $119,200 (2016); (2016);

• If the couple begins the spend

If the couple begins the spend-down down before before the snap the snap-shot date shot date then it will lower the amount the community spouse can keep. then it will lower the amount the community spouse can keep.

• It’s possible to begin the spend

It’s possible to begin the spend-down down too too early early;

• In many cases the goal is to maximize the amount that the

In many cases the goal is to maximize the amount that the community spouse is allowed to keep; community spouse is allowed to keep;

• The community spouse can keep ½ of the countable assets on the

The community spouse can keep ½ of the countable assets on the snap snap-shot date (1 shot date (1st

st day of institutionalization) up to $119,200

day of institutionalization) up to $119,200 (2016); (2016);

• If the couple begins the spend

If the couple begins the spend-down down before before the snap the snap-shot date shot date then it will lower the amount the community spouse can keep. then it will lower the amount the community spouse can keep.

46 46

Gift Tax Confusion Gift Tax Confusion



Many (most?) clients mistakenly believe that they are allowed to gift up Many (most?) clients mistakenly believe that they are allowed to gift up to the gift tax exclusion amount ($14,000 in 2016) without a Medicaid to the gift tax exclusion amount ($14,000 in 2016) without a Medicaid problem; problem;



The IRS will not care about gifting below $14,000 per person per year, The IRS will not care about gifting below $14,000 per person per year, but the Medicaid program but the Medicaid program does does care; care;



Make sure clients understand the difference between IRS gift tax rules Make sure clients understand the difference between IRS gift tax rules and Medicaid gifting rules; and Medicaid gifting rules;



Gifting up to the exclusion amount is not spending down, although it Gifting up to the exclusion amount is not spending down, although it may may be a component of a strategic gifting strategy for Medicaid planning be a component of a strategic gifting strategy for Medicaid planning purposes; purposes;



A related misconception: that you are not allowed to gift more than A related misconception: that you are not allowed to gift more than $14,000 per person, per year. $14,000 per person, per year.



Many (most?) clients mistakenly believe that they are allowed to gift up Many (most?) clients mistakenly believe that they are allowed to gift up to the gift tax exclusion amount ($14,000 in 2016) without a Medicaid to the gift tax exclusion amount ($14,000 in 2016) without a Medicaid problem; problem;



The IRS will not care about gifting below $14,000 per person per year, The IRS will not care about gifting below $14,000 per person per year, but the Medicaid program but the Medicaid program does does care; care;



Make sure clients understand the difference between IRS gift tax rules Make sure clients understand the difference between IRS gift tax rules and Medicaid gifting rules; and Medicaid gifting rules;



Gifting up to the exclusion amount is not spending down, although it Gifting up to the exclusion amount is not spending down, although it may may be a component of a strategic gifting strategy for Medicaid planning be a component of a strategic gifting strategy for Medicaid planning purposes; purposes;



A related misconception: that you are not allowed to gift more than A related misconception: that you are not allowed to gift more than $14,000 per person, per year. $14,000 per person, per year.

47 47

Not Paying Family Members for Care Not Paying Family Members for Care



Family members sometimes devote extraordinary amounts of time Family members sometimes devote extraordinary amounts of time and effort toward providing care and services for the client; and effort toward providing care and services for the client;



Paying family members for their care services is often a viable Paying family members for their care services is often a viable spend spend-down option; down option;



Payment for services rendered, not a disqualifying gift; Payment for services rendered, not a disqualifying gift;



Check your state agency to see how such an arrangement would be Check your state agency to see how such an arrangement would be treated when the Medicaid application is processed; treated when the Medicaid application is processed;



Best practices: have a written and notarized agreement signed by Best practices: have a written and notarized agreement signed by all parties, keep logs/journals of services provided, keep the hourly all parties, keep logs/journals of services provided, keep the hourly rate reasonable. rate reasonable.



Family members sometimes devote extraordinary amounts of time Family members sometimes devote extraordinary amounts of time and effort toward providing care and services for the client; and effort toward providing care and services for the client;



Paying family members for their care services is often a viable Paying family members for their care services is often a viable spend spend-down option; down option;



Payment for services rendered, not a disqualifying gift; Payment for services rendered, not a disqualifying gift;



Check your state agency to see how such an arrangement would be Check your state agency to see how such an arrangement would be treated when the Medicaid application is processed; treated when the Medicaid application is processed;



Best practices: have a written and notarized agreement signed by Best practices: have a written and notarized agreement signed by all parties, keep logs/journals of services provided, keep the hourly all parties, keep logs/journals of services provided, keep the hourly rate reasonable. rate reasonable.

48 48

Relying on Spend Relying on Spend-Down Advice Down Advice from the Nursing Home from the Nursing Home

 Clients will often rely on advice from billing departments

Clients will often rely on advice from billing departments and social workers at the nursing home; and social workers at the nursing home;

 In most cases, the nursing home will only mention

In most cases, the nursing home will only mention paying the nursing home bills as a spend paying the nursing home bills as a spend-down item; down item;

 No legal obligation for a nursing home to walk a family

No legal obligation for a nursing home to walk a family through through all all of the spend

• f the spend-down options;

down options;

 The nursing home is a business and their “client” is the

The nursing home is a business and their “client” is the nursing home, not the residents and their families. nursing home, not the residents and their families.

 Clients will often rely on advice from billing departments

Clients will often rely on advice from billing departments and social workers at the nursing home; and social workers at the nursing home;

 In most cases, the nursing home will only mention

In most cases, the nursing home will only mention paying the nursing home bills as a spend paying the nursing home bills as a spend-down item; down item;

 No legal obligation for a nursing home to walk a family

No legal obligation for a nursing home to walk a family through through all all of the spend

• f the spend-down options;

down options;

 The nursing home is a business and their “client” is the

The nursing home is a business and their “client” is the nursing home, not the residents and their families. nursing home, not the residents and their families.

49 49

Life Insurance Policies Life Insurance Policies



Small, long Small, long-forgotten life insurance policies often create big forgotten life insurance policies often create big Medicaid eligibility problems; Medicaid eligibility problems;



Clients often forget they have certain policies; Clients often forget they have certain policies;



Clients are often unclear as to whether or not their policies have a Clients are often unclear as to whether or not their policies have a cash value; cash value;



Life insurance policies with cash values may need to be spent down Life insurance policies with cash values may need to be spent down to obtain Medicaid eligibility; to obtain Medicaid eligibility;



Make sure you are absolutely clear on your clients’ life insurance Make sure you are absolutely clear on your clients’ life insurance situation and obtain verifying documentation. situation and obtain verifying documentation.



Small, long Small, long-forgotten life insurance policies often create big forgotten life insurance policies often create big Medicaid eligibility problems; Medicaid eligibility problems;



Clients often forget they have certain policies; Clients often forget they have certain policies;



Clients are often unclear as to whether or not their policies have a Clients are often unclear as to whether or not their policies have a cash value; cash value;



Life insurance policies with cash values may need to be spent down Life insurance policies with cash values may need to be spent down to obtain Medicaid eligibility; to obtain Medicaid eligibility;



Make sure you are absolutely clear on your clients’ life insurance Make sure you are absolutely clear on your clients’ life insurance situation and obtain verifying documentation. situation and obtain verifying documentation.

50 50

Spending Down More than Necessary Spending Down More than Necessary

 Make sure you are certain about the asset limitation;

Make sure you are certain about the asset limitation;

 The state should issue a written notice indicating your

The state should issue a written notice indicating your client’s asset limitation; client’s asset limitation;

 Make sure your client stops their spend

Make sure your client stops their spend-down as soon down as soon as possible. as possible.

 Make sure you are certain about the asset limitation;

Make sure you are certain about the asset limitation;

 The state should issue a written notice indicating your

The state should issue a written notice indicating your client’s asset limitation; client’s asset limitation;

 Make sure your client stops their spend

Make sure your client stops their spend-down as soon down as soon as possible. as possible.

51 51

Spending Down Exempt Resources Spending Down Exempt Resources

 Become absolutely clear on what your state treats as

Become absolutely clear on what your state treats as “exempt” assets; “exempt” assets;

 Example: Individual Retirement Accounts (IRA’s) are

Example: Individual Retirement Accounts (IRA’s) are exempt in many states, but these accounts are often exempt in many states, but these accounts are often mistakenly included in a spend mistakenly included in a spend-down. down.

 Become absolutely clear on what your state treats as

Become absolutely clear on what your state treats as “exempt” assets; “exempt” assets;

 Example: Individual Retirement Accounts (IRA’s) are

Example: Individual Retirement Accounts (IRA’s) are exempt in many states, but these accounts are often exempt in many states, but these accounts are often mistakenly included in a spend mistakenly included in a spend-down. down.

52 52

Missing Opportunities Missing Opportunities for Exempt Transfers for Exempt Transfers

 There are several exceptions to the general rule that

There are several exceptions to the general rule that gifting is not allowed; gifting is not allowed;

 Transfers to disabled children (or trusts for such

Transfers to disabled children (or trusts for such children); children);

 Transfer of the house to a caregiver child;

Transfer of the house to a caregiver child;

 Pose questions to clients that may uncover

Pose questions to clients that may uncover

• pportunities to make exempt transfers and
• pportunities to make exempt transfers and

reducing/eliminating the need for a spend reducing/eliminating the need for a spend-down. down.

 There are several exceptions to the general rule that

There are several exceptions to the general rule that gifting is not allowed; gifting is not allowed;

 Transfers to disabled children (or trusts for such

Transfers to disabled children (or trusts for such children); children);

 Transfer of the house to a caregiver child;

Transfer of the house to a caregiver child;

 Pose questions to clients that may uncover

Pose questions to clients that may uncover

• pportunities to make exempt transfers and
• pportunities to make exempt transfers and

reducing/eliminating the need for a spend reducing/eliminating the need for a spend-down. down.

53 53