Medicaid is a means tested program.  If your countable assets or your income exceed the allowable maximums you do not qualify and Medicaid will not pay your long-term care costs until you do.  Once you need long-term care, in the Washington area you will be spending $8,000 – $12, 000 per month on nursing home care and somewhat less for care in assisted living or at home, depending on the level of care and the hours of coverage.  If you are going to end up qualifying for Medicaid, it makes sense to qualify as soon as possible.  This general discussion applies to Maryland, Virginia and the District of Columbia but there are differences, some very significant, in Medicaid law and practice in the three local jurisdictions. 

If your countable assets exceed the individual resource allowance of $2,500 in Maryland, $2,000 in Virginia and $4,000 in D. C., in order to qualify for Medicaid you would have to decrease your countable assets.  Complicating the process is Medicaid’s penalty for uncompensated transfers.  If you simply give assets away you cannot receive Medicaid benefits until after a penalty period.

One possible choice for the “over-resourced” Medicaid applicant is to convert countable assets into noncountable assets.

In most circumstances and within equity limits, your home is not a countable asset.  So if you have a mortgage loan, pay it down or off.  If your home needs improvements, have those improvements done. 

Irrevocable burial contracts, designated burial savings within limits, and a burial plot, and analogous cremation arrangements, are exempt resources.  Some kind of final expenses are inevitable so these are generally good uses of excess countable resources.

At least one vehicle is exempt in all three jurisdictions whether or not the applicant drives it so long as it is available to meet the applicant’s transportation needs.

There are other various other exempt assets.

Another choice in some cases is to purchase a Medicaid compliant annuity, turning your countable asset into an income stream.  This can be a viable planning strategy but it depends on, among other things, your income before the annuity purchase – lower is better, and  whether some or all of the funds are in an IRA – lower is better.

Gifts, outright or to a trust, or loans to trusted family members can also be beneficial, even when they cause Medicaid to impose a penalty period. The timing of the gift or loan, the use of the funds and the timing of your Medicaid application are all crucial to obtaining the maximum benefit of this strategy.

For married applicants, Medicaid looks at the combined assets of both spouses even if only one is applying.  The non-applicant spouse is allowed to keep up to $123,600 of otherwise countable assets, the community spouse resource allowance (CSRA).  Transfers between spouses are not penalized.

Every case is unique and Medicaid planning requires knowledge, careful analysis and good judgment.  If you or a loved one need or will soon need nursing home level care, call us.  We can help.

 

Medicaid is the primary government program that pays for long-term care of the elderly or disabled. It is a federal-state partnership. Federal law sets out the broad parameters of the program and the states administer it within their borders.

Medicaid is a means tested program. If your countable assets or your income exceed the allowable maximums you do not qualify and Medicaid will not pay your long-term care costs until you do. One way to financially qualify is sell all your assets and use the proceeds to pay your nursing home bill every month until you are out of money and then apply for Medicaid – because now you are eligible. You still have to pay all of your income to the nursing home each month, but Medicaid will pay whatever you are short. You get to keep a personal needs allowance of as little as $40 each month ($40 in Virginia, $70 in DC and $77 in Maryland).

Medicaid planning for a single person is the process of lawfully arranging your affairs to improve on that result so that you can qualify for Medicaid as soon as possible while still having access to funds to pay for the ”extras” Medicaid won’t pay for, and potentially leaving something for your heirs.

Medicaid planning for a married person is lawfully arranging your affairs to qualify for Medicaid as soon as possible and maximize the legal and financial protection for the “community spouse”.

If you or a loved one need or will soon need nursing home level care, call us. We can help.

Your estate planning should include a plan for long-term care.Most Americans do not know the facts surrounding their potential need for long-term care.  This was confirmed recently in a telephone survey of 1,735 Americans over the age of 40, funded by the SCAN Foundation and conducted by the Associated Press (AP) – NORC Center for Public Affairs Research.

Most People Need a Plan for Long-Term Care

According to the Genworth Cost of Care Survey of 2015, 70% of Americans over the age of 65 will eventually need long-term care.  By the year 2040, 22% of the population will be over the age of 65.  This survey showed most people over 40 don’t believe they will ever need long-term care.

Coordinated Care Best Approach

The survey defined person-centered care as “an approach to health care and supportive services that allows individuals to take control of their own care by specifying preferences and outlining goals that will improve their quality of life.” This approach points to the consideration of coordinated care.

Coordinated care involves communication among various medical providers to reduce overlap, misdiagnosis or other medical oversights.  Because many people don’t have a plan, they miss out on the benefits provided by this approach. The survey shows a lack of appreciation for the improved quality of life it can provide.

Cost of Long-Term Care

The study showed most people don’t understand the coverage for long-term care provided by Medicare, Medicaid and private health insurance.  Medicare does not pay for ongoing long-term care, although it will pay for intermittent stays at nursing facilities.  Yet, 34% surveyed thought Medicare would pay for long-term care.

Medicare doesn’t typically pay for care in the home.  However, 36% of those surveyed thought it would.

Most health insurance plans will not cover long-term services like a nursing home or ongoing care provided at home.  Yet, 18% of Americans age 40 and older believe that their insurance will cover the costs of nursing home care.  25% believe their plan will pay for care at home.

Medicaid is the largest payer of long-term care services. Medicaid is a federally and state funded needs-based benefit that covers various types of long-term care depending on the state’s regulations.  In 2013, Medicaid paid for 51% of the national long-term care bill.  However, 51% of Americans age 40 and older reported that they don’t expect to rely on Medicaid to help pay for their ongoing living assistance expenses as they age.

The actual costs for long-term care are staggering.  The Genworth Survey found that for 2013 the average bill for a nursing home was about $80,300 per year and home health care cost about $44,616.

Planning for Long-Term Care

The survey showed that two-thirds of Americans over the age of forty (40) have no plan for long-term care.  It seems likely that many Americans are reluctant to face the possible loss of independence related to aging and therefore don’t plan for this possibility.

While nearly 65% of people surveyed had planned or talked to loved ones about their funeral arrangements, only 42% had planned or discussed long term care. Just 33% had saved money for long-term care.  It seems that  how we want to be memorialized is easier to think about than how we may end up dependent on others.

Don’t Ignore the Need to Plan for Long-Term Care

Although not a popular topic among Americans over 40, a plan for long-term care is important.  If you, a loved one or a client needs help figuring out the options, please think of us.  We can help and we are always happy to hear from you.

 

The cost of long-term care can be catastrophic.We have 78 million aging baby boomers. Few people have sufficient resources to pay for needed long-term care.

In an effort to deal with this concern, the Long-Term Care Financing Collaborative (the “Collaborative”) began meeting in 2012. They are now a formalized group.

The collaborative’s goal is to improve the way the elderly and those living with disabilities pay and prepare for long-term care support and services.

About the Long-Term Care Financing Collaborative

The collaborative is made up of policy experts, consumer advocates and representatives from service providers and the insurance industry. The group also has senior executive branch officials in both the Democratic and Republican administrations, former congressional aides, and former top state health officials.

Who Needs Long-Term Care?

According to the collaborative, between 10 and 12 million adults require long-term supports and services (LTSS). That number is expected to double by 2030.

LTSS is defined as non-medical assistance. This includes help with food preparation, personal hygiene, assistive devices and transportation, bathing, eating and the like.

More than two-thirds of older adults will need some help. Nearly half will have enough need that they will be eligible for private long-term care insurance or Medicaid to pay the bill. More than 6 million older adults need that level of care today. Nearly 16 million will need it in 50 years.

Cost of Long-Term Care

Elderly and disabled persons in need of LTSS often pay for it out of their savings or income from their retirement. This usually is not enough to cover the costs. Many people have to turn to Medicaid for help. The cost of LTSS is expected to double by 2050, which will cause even more people to depend on Medicaid to pay.

Few people have saved enough for LTSS. A typical American between 65 and 74 has financial assets of $95,000 and about $81,000 in home equity. This does not include retirement savings. To pay lifetime medical expenses with a 90% certainty requires savings of about $130,000 plus $69,500 for LTSS costs. It is easy to see how people run out of money.

Individuals pay for about 55% of LTSS costs. Medicaid pays about 37%. Private LTSS insurance pays for less than 5%.

Cost of Long-Term Care to Family and Friends

Long-term care costs also affects families. The collaborative estimates that in 2013, family and friends provided 37 billion hours of unpaid LTSS to adults. This care calculates to $470 billion, three times the amount Medicaid spent on LTSS the same year.

When family members provide care, it often comes at the cost of their job or a portion of their job. Collaborative data suggests a woman in her 50s who leaves a job to care for her aging parents loses $300,000 of income over her lifetime. The collaborative states that “unpaid family caregivers lose an estimated $3 trillion in lost lifetime wages and benefits.”

Cost to Employers 

Employers experience a loss of $17.1 to $33 billion in productivity due to absenteeism, based on collaborative data. Employee turnover and schedule adjustments add to the costs.

Recommendations to Plan for Long-Term Care

On February 22, 2016, the collaborative announced its final set of recommendations.

The final set of recommendations focused significantly on:

  1. A need for universal catastrophic insurance
  2. Private market initiatives and public policies to revitalize the insurance market to address LTSS risk
  3. Enhanced Medicaid LTSS for those with lower lifetime incomes

The collaborative calls for a strong government role. The group considered voluntary and universal insurance programs and concluded that universal was the only viable solution. Universal insurance spreads the risk across the entire population and avoids challenges of adverse selection.

The collaborative noted in the report, “Universal insurance appears to offer broad-based insurance at a comparatively low lifetime cost.”

The collaborative also recommended actions to revitalize the private insurance market.

  • Employers should offering long-term care insurance as part of their benefits packages.
  • Regulatory changes should be made in the insurance industry to create more standardization in policies. The specifics of the regulatory change suggestions include increasing premiums and benefits as the individual ages.
  • Policymakers should continue to encourage insurance industry efforts to combine long-term care insurance with other products.
  • Encourage increased private savings for retirement by making it to easy to enroll through employers’ benefits programs and expanded retirement products, tax subsidies and education.
  • Modernize Medicaid financing and eligibility by expanding coverage to include more people, settings, and care. Eligibility would be based on a functional and needs assessment rather than requiring institutional care.

Get Educated About Long-Term Care

The collaborative recommends more education for everyone about long-term care. Many people do not plan and do not understand the costs. Until there is a firm solution, individuals must take responsibility and plan ahead.

If you or someone you know has questions about how to plan long-term care, contact me.

The Problem 

If you are disabled or elderly  you may not qualify for certain government benefits, such as Supplemental Security Income (SSI) and Medicaid , because your income or “countable assets” are too high.   Generally your home, furnishings, vehicle and certain other specific types of property are not counted, while  bank and financial accounts and the like are counted.

If you are already qualified, and your countable assets increase, you can lose your benefits.  For example, a parent or grandparent leaves assets to a loved one receiving government benefits and this disqualifies the loved one from receiving the benefits.  This can happen when the onset of disability is after the Will or other planning is done, or if the effect of the inheritance on government benefits is simply not addressed.  It can result in the recipient having to “spend down” the entire inheritance, i.e. pay out-of-pocket what the government benefit used to pay for.  When the entire inheritance is gone, the recipient is again eligible for benefits, but in the meantime  the entire inheritance has been wasted.

The Solution

Set up a special needs trust.  Special needs trusts, also called supplemental needs trusts, are trusts  designed to permit the beneficiary to enjoy the benefits of the assets owned by the trust without those assets being counted when qualifying for SSI or Medicaid.

A trust is an arrangement under which one person, the trustee, holds legal title to assets for the benefit of one or more other persons (the beneficiary or beneficiaries).  The trust agreement will contain  directions regarding administration, investment and distribution of trust assets.

First-Party Self-Settled Special Needs Trusts

Trusts funded with the disabled person’s own money are called first party special needs trusts.  They must meet strict requirements of federal law.  The trust must be irrevocable and established before age 65.  The trust must be for a disabled person and the trust assets can only be used for that person’s  benefit.  The trust must include a “payback” requirement.  That means any assets in the trust at termination, often at the death of the disabled person, must be paid to the state up to the amount of government benefits provided.  These trusts are often used when a disabled person comes into money, for example, upon settlement of a personal injury suit.

Third Party Supplemental Needs Trusts

Third party supplemental needs trusts are the solution to the inheritance problem.  Rather than leaving assets outright, the parent or grandparent leaves them to a trustee who receives them with the instructions to provide for the loved one’s needs – those that the government program does not cover – generally anything other than food and shelter.

It is important that the trustee has some discretion and is not required to distribute any income or principal to the beneficiary.  Also, the disabled person cannot have the right to demand payment of any income or principal of the trust from the trustee.  The trustee’s discretion and the beneficiary’s lack of a right to demand distributions are what keeps the trust assets from being countable resources under the SSI and Medicaid rules.

So long as the trust document provides trustee discretion and does not entitle the beneficiary to demand distributions, the trust can be very flexible otherwise.  These trusts are not subject to the strict federal requirements applicable to self-settled trusts.  For example, there can be other beneficiaries and their need not be a pay-back requirement.  Because the future is uncertain, every Will should contain  supplemental needs trust provisions that are triggered whenever a gift would be made under the Will directly to a person eligible for government benefits such as SSI or Medicaid.

Conclusion

Government benefits can be very important for the safety and security of the disabled and the elderly.  However, they are not very generous.  Through proper planning, a parent or other donor can ensure that their gift enhances the recipient’s quality of life and adds to  government benefits, rather than eliminating or reducing the government benefit.

 

Advance directives allow you to express your wishes regarding health care decisions in the event that you are incapacitated and cannot communicate your preferences yourself.

Components of Advance Directives

Usually advance directives address two distinct issues: 1) directions regarding end-of-life medical care – a living will and, 2) designation of a health care agent to act in the event of incapacity –  a health care power of attorney. These two parts are often combined into one document and called an advance health care directive or by a similar name..

  • Living Will: A living will may also be called a health care declaration, or something similar. The person who makes a living will is sometimes called the declarant.   A living will is different from a last will and testament, which directs the distribution of a decedent’s estate.   A living will, on the other hand, takes effect during the declarant’s lifetime and tells medical professionals the type of care the declarant desires should she become incapable of expressing such wishes herself.

Many state laws on advance directives set forth a statutory form which covers some aspects of end-of-life medical care, containing blanks for individual directions and providing that other forms of living will are also valid (although the state laws regarding manner of execution are generally mandatory).

Maryland’s law provides a statutory form that covers three end-of-life situations: 1) Terminal condition (death is imminent), 2) Persistent vegetative state (coma), and 3) End stage condition (incurable condition that will result in death).  For each, there are three choices for level of care: a) just keep me comfortable, b) keep me comfortable and use an i.v. for hydration or nutrition if necessary, and c) use all appropriate medical interventions to prolong my life.

A living will can address other subjects including: Cardiopulmonary resuscitation (CPR); artificial life-sustaining equipment (ventilators, dialysis machines, etc.), and organ donation.

These, of course, are deeply personal decisions that require thoughtful consideration if the living is to reflect the declarant’s values and wishes.

  • Health Care Power of Attorney: A health care power of attorney may also be called a medical power of attorney or durable power of attorney for health care (among other names). You use it to nominate someone to oversee your healthcare decisions in the event you are unable to do so, either temporarily or permanently.  The person who makes the health care power of attorney is sometimes call the principal.  The person named in the document to make decisions for the principal may be referred to as an attorney-in-fact, health care proxy, health care agent, health care surrogate, or something similar.

Regardless of what the agent is called, he is obligated by law to follow your instructions regarding health care decisions.  Your instructions are included in your living will or in the health care power of attorney.  Depending upon your situation, the selection of your primary and back-up health care agent may be obvious and perfectly satisfactory – your spouse or your local and responsible child, etc.  Sometimes it is a tough choice requiring careful thought and difficult conversations.  But it is always an important choice.

When is the best time to create an advance directive?

The best time to create an advance directive is when you’re healthy because you have the opportunity to consider your options carefully when immediate health concerns aren’t on your mind. You can also discuss your choices with your loved ones ahead of time.

It is especially advisable for those who are scheduled to undergo surgery or who are critically or terminally ill to consider making an advance directive.

When does an advance directive take effect?

In general, the provisions of your living will become applicable when you are unable to make or communicate decisions regarding your medical care.  Your health care agent has authority under your advance directive under the conditions specified in the document or under state law – usually when you are unable to make or communicate the decisions yourself.  So your doctors and your health care agent will refer to, and generally be bound by, the instructions in your living will.

Can I change an advance directive?

Your advance directive remains in effect from the time you sign it until and unless you change it, which you can do at any time.  You should review your advance directive periodically to make sure it still accurately reflects your wishes regarding your medical care. If you do want to modify an advance directive, it is often advisable to simply create a new one so there is no potential confusion created by conflicting changes.

Where should I store my advance directive?

You should make several copies of your advance directive. Keep the original in a safe place that is accessible to your health care agent and let someone know where it is.  You should provide copies to the person named in the document as your agent, your doctors, and anyone else you think may be involved in your medical care.

Conclusion.

Illness or old age eventually come to us all. The time will probably come when you will need an Advance Medical Directive.  An Advance Medical Directive should be included in every estate plan. Contact us if you have questions or want to make an Advance Medical Directive.

by Michael F. Callahan

A general power of attorney is an effective tool if you will be out of the country and need someone to handle certain matters, or when you are physically or mentally incapable of managing your affairs. A general POA is often included in an estate plan to make sure someone can handle your financial matters if you become unable to do so.

What is a Power of Attorney?

A power of attorney (POA) is a document that is used to appoint a person or institution to manage your affairs if you become unable to do so. The person or institution you appoint is called your agent or attorney-in-fact.

Powers

You can grant broad powers to your agent.  You can give your agent any power that you have to make financial decisions, including the power to handle financial and business transactions, buy life insurance, settle claims, operate business interests, make gifts, and employ professional help.

Competency to Sign a Power of attorney.

You must be mentally competent at the time you execute your POA in order for it to be effective.  If you think your mental capability may be questioned, have a doctor verify it in writing.  Do not delay making a POA until your competency is questionable.

Make Sure Your Power of Attorney is Durable.

Be sure that your POA is “durable”.  This means that it contains language specifying that your appointment of an agent is still valid if you become incapacitated. That’s when you want your agent to act on your behalf.  But you have to state so specifically in your POA or your agent’s power will lapse just when he or she is needed.

Selecting an Agent.

Your POA is only as good as the person you select as agent.  Trust is a key factor when choosing an agent for your power of attorney. Whether the agent selected is a friend, relative, organization, or attorney, you need someone who will look out for your best interests, respect your wishes, act with care, keep good records and won’t abuse the powers granted to him or her.

Naming a Successor Agent.

Have a backup. Agents can fall ill, be injured, or otherwise be unable to serve when the time comes. A successor agent takes over power of attorney duties from the original agent, if needed.

Executing Your Power of Attorney.

You must sign and notarize the original POA document.  Banks and other businesses may refuse to transact with your agent on your behalf unless they receive a certified copy of the POA.

Revoking Your Power of Attorney.

You can revoke a POA at any time. Simply notify your agent in writing and retrieve all copies of your POA. Notify any financial institutions you deal with that your agent’s power of attorney has been revoked.

Conclusion.

Illness, injury, old age, or daily life commitments happen to everyone. The time will come when you will need a Power of Attorney.  A POA should be included in every estate plan. That is why you should understand what a power of attorney is and how it can assist in taking care of your business, even when you can’t.  Contact us if you have questions or want to give someone your Power of Attorney.

by Michael F. Callahan

A Will directs the passage of property after the death of the maker of the Will and names the testator’s personal representative.  Wills are revocable – they can be modified or revoked by the testator so long as he or she is alive and has testamentary capacity.  Most of our divorce clients arrive in one of two situations – they have not made a Will or they have made a Will that leaves all their property to their spouse and names their spouse personal representative of their estate.  Most of our divorce clients have a lot going on – it’s not the best time for calm thoughtful reflection on how they want to take care of those they love in the event of their death.

If you are separated and contemplating or pursuing divorce, circumstances have certainly changed since you decided to leave all your property to your spouse and name him or her as your personal representative.  Divorce is a process, it takes time.  Unless there is an early settlement it can be years from separation to date of final divorce.  We recommend clients in this situation consider amending or revoking their Will.

What about those persons who are separated from their spouse and have not made a Will? If you die without a valid Will, the state has rules governing who gets your property and who has priority for appointment as your personal representative.  In most circumstances in the Washington, DC area, the state’s rules put the surviving spouse in charge of your estate.  If you have no children, your surviving spouse will receive all of your probate estate.  If you have children, his or her share will be one-third in DC and one-third in Virginia if your children are not the surviving spouse’s children, one-half in Maryland, or all in Virginia if all of your children are the surviving spouse’s children.  We recommend clients in this situation consider making a Will to avoid these outcomes.  Note, however, that statutory spousal protections usually make it impossible to ensure that your estranged spouse takes nothing from your estate.

 

 

A Will is a written document directing the passage of property after the death of the maker of the Will – the “testator.”  A valid Will must be executed by the testator with the requisite formalities – usually in the presence of two disinterested witnesses who also sign the document.

Among other things a Will addresses who will receive the testator’s property that does not pass “outside probate” by deed, deposit contract, beneficiary designation or other non-probate means.  A Will generally names the testator’s personal representative, trustee, if necessary, and back-ups.  A good Will should also name a guardian of any minor children and provide for the care and management of any property that passes to minors.  Most complete Wills have many other provisions addressing debts and taxes, simultaneous death, and administrative matters.

If you don’t make a Will before you die you leave an “intestate” estate.  Don’t worry, the state has rules governing who gets your property, who has priority for appointment as your personal representative and how any of your property received by minors will be managed.  If you are confident that you and your loved ones will be perfectly satisfied with the state’s choices about all this, you don’t need a Will.

Most married people want their surviving spouses taken care of when they die. The statutes of Maryland Virginia and DC reflect this. See a prior article here – Wills and Decedent Estates of Divorced and Divorcing Spouses.

Of course when the marriage breaks down, most people no longer want to provide for their estranged spouse. But divorce takes time. And the state statutes and federal statutes protect spouses. Is there a way to successfully disinherit your spouse before the divorce is final?

State law generally grants the surviving spouse all or part of the probate estate of the decedent by intestate succession when the decedent did not make a Will and by right of election against the Will when the decedent made a Will. Virginia, but not Maryland, expands the spousal protections to the “augmented” estate. The augmented estate includes certain non-probate assets and prior gifts.

Maryland case law suggests that Maryland’s statutory surviving spouse protections can be avoided by the common device of using a revocable trust instead of a Will as the primary estate planning document. Generally this requires executing a revocable trust which includes a clause stating who is to receive the grantor’s property at his or her death and transferring all or some of the grantor’s property to the trust. This keeps the property out of the probate estate and out of reach of the surviving spouse’s election against the Will.

The surviving spouse’s recourse is to seek to invalidate the trust. Karsenty v Shoukroun, 406 Md. 469 (2008) was a case where the decedent transferred property to a revocable trust with a disposition at death other than to his wife. The Court of Appeals of Maryland spent 40 pages discussing fraud on marital rights, unlawful frustration of marital rights and also legitimate estate planning. But the court stopped short of saying you cannot do by a revocable trust what you cannot do by Will. They sent the case back to the trial judge to consider the facts in light of the Court of Appeals 40 page discussion. So if you want to disinherit your spouse so that he or she doesn’t inherit in case you die before the divorce is final, a revocable trust is certainly worth a try in Maryland.

Not so in Virginia. The property transferred to the revocable trust is part of the “augmented estate” and the surviving spouse gets a share of that.
This sort of unilateral action to disinherit the spouse is appropriate only for protracted, contested divorces. In most divorce cases, estate planning is done by each spouse pursuant to an agreement with mutual waivers of estate rights. After all, your spouse doesn’t want you to inherit from him or her either.