Protecting Asset for the Healthy Spouse

By | Medicaid Planning and Gifting

How Can I Pre-Plan Now to Protect Assets For the Healthy Spouse?

Under the Medicaid rules, if either spouse moves to a nursing home, he or she will become eligible for Medicaid to pay for his or her care when the savings have been spent down to $4,000 for the institutionalized spouse and, after no more than $126,420 is deemed available for the community spouse (in 2019). If you took no other planning steps, the balance of your savings would have to be spent down to these levels. However, three approaches can permit you to keep most or all of your savings: (1) purchase an immediate annuity, (2) create and fund an irrevocable income only trust; or (3) spend the excess assets on permissible goods that preserve their value.

Purchase an Annuity

The spouse at home has the option of transforming his or her excess assets into an income stream by purchasing an annuity. The terms of the annuity must be carefully observed, which will be important with respect to the annuity’s passing muster with the Medicaid regulations.

Create and Fund and Income Only Trust

You can make transfers to your children or into trust for their benefit, reserving the ability to live in any real estate transferred and to receive income from the assets in the trust. Doing so would cause up to five years of ineligibility for Medicaid. So you would need to be comfortable with the amount of funds you would keep for yourselves. This option is very popular with many clients as it offers a great deal of protection with a manageable amount of loss of control and access to transferred assets. Understanding the rules of the trust are important before using this trust.

Spend Down Excess Resources

You may also pay off any debts you may have or pay for goods and services you may need or desire. This includes repairs to your house, clothing, personal items, prepaying your funeral, and anything else you may like. Medicaid penalizes transfers or gifts, but not spending if the spending is for the benefit of the Medicaid applicant or his or her spouse.

In addition to taking one or more of the steps described above, if one of you moves to a nursing home, you should transfer all of your assets into the other’s name. He or she should also have a will that disinherits the nursing home spouse. Otherwise, if the healthy spouse passes away first, all of his or her assets will go to the nursing home spouse and have to be spent down to $4,000.

As you can see, there are a number of options available. You cannot choose the best one ahead of time because the proper course of action depends on your situation when one of you moves to a nursing home, which hopefully will be many years away, if it happens at all. At that time, it is critical to meet with an attorney to discuss these options and decide on a course of action that best fits for you while maintaining Medicaid eligibility.

Medicare Update 2019

By | News

Medicare 2019 – Everything You Need To Know

Medicare is an important piece of the American insurance landscape, not only for people age 65 and older, but for all Americans. That said, this benefit is not easy to navigate. Eligible individuals must be thoughtful about the coverage they need, the timing of enrollment, and coordination with other healthcare benefits, if they want to make the most of the Medicare program.

Attached is a report recently published by Northern Trust that recaps the Medicare program and is a good resource for people wanting to learn more.

It addresses the following questions:

  1. What does Medicare cover? Do I still need Private Insurance?
  2. How much does it cost?
  3. I am thinking about early retirement but I am concerned about health insurance coverage and eligibility. What are my options?
  4. I am turning 65 next year and still working, should I transition from private insurance to Medicare and if so, how do I do that?

CLICK HERE TO READ THE FULL REPORT wpi-medicare 2019

Medicare is a critical component of every persons health insurance portfolio but it does not cover long-term skilled nursing. The Medicaid program covers eligible individuals cost for long term skilled nursing, however, there asset and income limits before someone becomes eligible. Generally, a person must have countable assets below $4,000 and monthly income below $10,000 to be eligible. A person who is on Medicare and then transitions over to Medicaid will be required to maintain their Medicare coverage. Medicaid being a welfare program, is an insurer of last resort, whereas Medicare is a primary insurance for people.

Still have questions about planning for your future healthcare needs including long term care planning? Contact us for a no cost consultation.

Matt Leonard

How Trusts Affect Medicaid Eligibility and Estate Recovery

By | Uncategorized

Web-Seminar Presentation Materials – Medicaid Eligibility

On March 20, 2019 I participated in a national webinar entitled How Trusts Affect Medicaid Eligibility and Estate Recovery.  The goal was to review the basic tenants of estate planning and specifically around Medicaid qualification. We reviewed the rules to Medicaid eligibility, discussed the difference between countable and non-countable assets, discussed income and what spousal protections are in place. It was a top-line comprehensive review.

The materials were focused around the difference between revocable trusts and irrevocable trusts and reviewed the tenants that revocable trusts do not work for Medicaid eligibility and qualification while properly drafted Irrevocable Trust could accomplish the goal of protection and qualification for Medicaid benefits.

Attached below is a link to a Power Point Presentation of the slides shared with the attendees of the webinar:

How Trusts Affect Medicaid Eligibility and Estate Recovery Slides

If you wish to review and discuss the rules of Medicaid eligibility, how trusts can be used in your estate plan with regard to your specific facts, please contact us for a no-cost no-obligation consultation.

How Can I reduce Capital Gains Taxes?

By | Uncategorized

Consider Transferring Highly Appreciated Assets to a Parent

If property is held by someone at their death, the “basis” in the property used by the seller to determine taxable gain on its sale is re-set to the fair market value at the date of death.

Income and capital gains tax rates have increased over the last 10 years, and during that time the exemption to avoid estate tax has increased dramatically. This combination (which did not generally exist before now) creates a tremendous opportunity to reduce income tax on property sales. There are many ways to do this. One simple technique is to transfer a highly appreciated asset to a parent. When Mom or Dad passes away, the basis in the asset is increased to its fair market value at the date of death (even though there is no estate tax), which can eliminate income tax on the gain on a sale thereafter, or permit much greater depreciation deductions when re-acquired by the owner.

So for example, if basis is stepped up by $1,000,000, then the tax on sale of the asset will be reduced, which tax savings could easily be $300,000. Note this is an after-tax savings!

There are related issues that should be addressed to protect the asset, account for timing and further enhance the tax benefits.

Medicaid Eligibility Update

By | Uncategorized

Rhode Island has updated its rules to become Medicaid eligible.

If you are a Rhode Island resident and you are seeking Medicaid benefits, you should be aware of some recent changes approved by the Rhode Island Department of Human Services as to your eligibility under the program. Final rules are expected to be published and release shortly but here is a recap of the expected changes:

  1. Income cap of $9,581 meaning that if the applicant has more than $9,581 in income, then they can never become eligible for Medicaid, nor can they start the penalty period.  If they have income under $9,581 but greater than $6,700 and they want to start a penalty period, they can do so but cannot get community Medicaid benefits, like Rx copays and doctor bills.   If their income is under $6,700, then nothing changes.    This went into effect in September and is effective for applications for eligibility delivered after 10/1/18.   50-00-2.4

    Changes Are Coming

  2. Long term care insurance is not considered countable income for purposes of the above income cap.   However, once on Medicaid, it would need to be spent as part of the patient share.    50-00-6.5.2(B)
  3. Burial Funds & Irrevocable Funeral Contracts have new limits which are helpful and could affect clients.  The new cap on Irrevocable funeral contracts is $15,000 and anything over that would be considered a countable asset.   40-00-3.5.5 A(1)(f)
  4. Life insurance is now exempt up to $4,000 of cash surrender value, with anything over being countable.  40-00-3.5.5 A(1)(h)
  5. Retirement Funds now have a new definition, but as long as they are income producing and the client gets at least the RMD, then they should still be fine. 40-00-3.5.5 A(2)(g)
  6. Penalty Divisor is $9,581 since mid September.

Like any social program, the figures and rules for eligibility are constantly revisited and updated based on changes in federal law, budgets, and program changes and advances. Staying current on the latest rules is the challenge.

If you or a loved one is facing serous medical issues requiring skilled nursing care, the Medicaid program will help pay for those costs for applicants who have assets and income within program limits. Contact us to discuss your estate plan and if your estate plan should be revised so as to become eligible for these valuable benefits.

Can I Deduct Nursing Home Expenses?

By | Uncategorized

My mother is in a nursing home. Can she still deduct this expense?

Yes. For 2018, in certain instances nursing home expenses are allowable as medical expenses.

  • If you or someone who was your spouse or your dependent, either when the service was provided or when you paid them, is in a nursing home primarily for medical care, then the entire Long Term Carecost including meals and lodging is deductible as a medical expense.
  • If the individual is in the home mainly for personal reasons, then only the cost of the actual medical care is deductible as a medical expense, not the cost of the meals and lodging.

To determine if your mother qualifies as your dependent for this purpose, refer to Whose Medical Expenses Can You Include and Nursing Home in Publication 502Medical and Dental Expenses.

  • Deduct medical expenses on Schedule A (Form 1040)Itemized Deductions.
  • The total of all allowable medical expenses must be reduced by 7.5% of your adjusted gross income.

This write-off is only available to filers who itemize. People who qualify for it can deduct insurance premiums paid with after-tax dollars, plus many costs not always covered by health insurance—such as for long-term care, prostheses, a wig after chemotherapy and more.

9 Estate Planning Terms You Need To Know

By | News

Estate Planning Terms

No one likes to think about one’s own death. However, planning ahead can help your family avoid unnecessary complications, delay, and expense. This may be done through wills, trusts, joint ownership, and life insurance. In addition, modern estate planning also includes “life” planning through powers of attorney and health care proxies. These enable someone else to act for you in the event of your incapacity. Understanding the following terms is the first step toward planning your estate. However, no estate planning steps should be taken without consulting with a qualified professional.

  • Probate

This is the name for the process in the Probate Court through which the ownership of your assets passes to your heirs. It includes the collection of your assets, the payment of your bills, and the distribution of your estate. It only covers what you own outright, not joint property, trust property, life insurance proceeds, or any assets that have beneficiaries or payable-on-death terms.

  • Will

Your will is a legally binding statement of who will receive your property at your death. It also appoints a legal representative to carry out your wishes. However, the will only covers probate property.

  • Estate Tax

The estate tax applies to both the probate and the nonprobate property of the decedent. For federal purposes, the amount free from taxation is $5.6 million as of 2018 per individual, $11.2 million per married couple. For Rhode Island, a person can pass $1,537,656 free from estate taxation.

Reading your Estate Planning documents is critical to understanding your plan

  • Marital Deduction

On the federal level, anything passing to the surviving spouse of a decedent is not included in the taxable estate and, consequently, is not subject to taxation. All of the couple’s assets are then taxed upon the death of the surviving spouse, unless an estate tax plan has been executed.

  • Trust

A trust is a legal entity under which one person—the “trustee”—holds legal title to property for the benefit of others—the “beneficiaries.” The trustee must follow the rules provided in the trust instrument. An irrevocable trust is one that cannot be changed after it has been created. A revocable trust is one that may be changed or rescinded by the person who created it. Trusts are often used for tax planning, to provide for someone with expertise to manage assets, or to shelter assets to protect them from creditors or for long-term care planning.

  • Durable Power of Attorney

Under a power of attorney, you may appoint someone else to act for you when you are unable to do so yourself. The reason may be your mental incapacity or your inability to be somewhere when needed. The person you appoint—your “attorney-in-fact”—must always act in your best interest and try to make choices you would make if you were able to do so.

  • Health Care Proxy

Similar to a power of attorney, through a health care proxy you may appoint someone else to act as your agent—but for medical, as opposed to financial, decisions. Unlike a power of attorney, the health care proxy does not take effect until your doctor determines that you are incapable of making decisions yourself. Before that decision, your agent may make no decisions on your behalf. You may include in your proxy a guideline for your agent to use in making decisions. These may include directions to refuse or remove life support in the event you are in a coma or a vegetative state. On the other hand, your instructions may be to use all efforts to keep you alive, no matter the circumstances.

  • Community Spouse Resource Allowance (CSRA)

If your spouse has to move to a nursing home, you will have to pay for his or her care out of pocket until he or she qualifies for Medicaid. Under the Medicaid program the nursing home spouse may only have $4,000 in “countable” assets. (Noncountable assets include your home, household belongings, one car, and prepaid funeral plans.) The amount the healthy spouse is permitted to keep under the Medicaid program is known as the “community spouse resource allowance” or “CSRA.” The CSRA is all of the couple’s combined assets up to a cap of $123,600 (in 2018). In some cases, the community spouse is entitled to retain assets above the $123,600 limit when her income is less than the minimum monthly maintenance needs allowance, which is described below.

  • Minimum Monthly Maintenance Needs Allowance (MMMNA)

The Medicaid rules also govern the amount of income the community spouse is entitled to once the nursing home spouse qualifies for Medicaid. Normally, the community spouse keeps his or her income and the nursing home spouse pays his or her income to the nursing home, keeping only a $50.00-a-month “personal needs allowance.” However, if the healthy spouse’s income is low, he or she may be entitled to a share of the nursing home spouse’s income. In each case where a married nursing home resident qualifies for Medicaid, the Department of Human Resources calculates a “minimum monthly maintenance needs allowance” or “MMMNA” for the community spouse based on his or her housing costs. This will range from a low of $2,057.50 to a high of $3,090.00 a month (in 2018). If the community spouse’s own income is below his or her MMMNA, he or she will be entitled to a share of the nursing home spouse’s income to make up the difference.

Want to learn more? Contact Attorney Matthew J. Leonard, Esq. at 401-274-0300 or at mleonard@smsllaw.com to arrange for a free consultation.

Reaction to R.I.’s $9.6B budget proposal: Bad for nursing homes; some good news for kids

By | Uncategorized

PROVIDENCE, R.I. — The proposed $9.6 billion state budget headed for a House vote later this week has elicited both sighs of relief – and groans – since its piece-by-piece unveiling late Friday night.

A blog dedicated to the challenges facing people with developmental disabilities carried this headline: “Crisis appears averted in RI DD Services.”

But nursing homes cried foul over a “devastating” 8.5 percent cut in their state Medicaid reimbursements to offset the millions they won in a court case, that is currently in limbo, because a state lawyer, who has since resigned, missed the appeal deadline. The Raimondo administration is currently begging the Supreme Court for a reprieve.

Here’s what the bill says: “Beginning July 1, 2018, the rates paid to nursing facilities will be reduced by eight and one-half percent (8.5%) from the rates approved by the Centers for Medicare and Medicaid Services and in effect on October 1, 2017 for nine (9) months until March 2019, at which time the rates will revert to the October 1, 2017 level and be increased by one percent (1%).”

Mattiello told reporters the wording is aimed at reinforcing the funding level lawmakers intended all along, in the face of winning arguments by the nursing homes that the state had improperly shortchanged $8 million a year – and a potential $24 million overall – in its calculations.

James Nyberg, the director of one of the two nursing home advocacy groups – LeadingAge RI – issued a statement over the weekend that said the proposed new budget “will have immediate and devastating consequences for nursing homes and their residents.”

“Tucked into the budget is a cut of 8.5 percent for nursing homes that will go into effect July 1st, in just 21 days. How can we, as an industry, be prepared to react responsibly when we are already significantly underfunded?” he asked.

 

Source: Reaction to R.I.’s $9.6B budget proposal: Bad for nursing homes; some good news for kids