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asset protection

What is the Caretaker Child Exception?

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Caretaker Child Exception

You can receive Medicaid coverage while still keeping an ownership interest in your home. However, at your death the state will have the right to recover from your probate estate—essentially your home—whatever it pays out for your care. Your home could escape this claim if it were transferred to one or more of your children. A problem with doing this is that under the general transfer penalty rule, you would be ineligible for Medicaid benefits for up to 60 months following the conveyance.

Children who care for their parents can take advantage of provisions in the Medicaid Regulations

The Caretaker Child Exception to the transfer penalty can be a valuable tool to preserve the home of parents.

However, an exception to the transfer penalty allows a Medicaid applicant to transfer his or her home to a qualified caregiver child. The law defines a caregiver-transferee as a child  of the Medicaid applicant “who was residing in the applicant’s…home for a period of at least two years immediately before the date of the applicant’s…admission to the institution, and who (as determined by the DHS) provided care to the applicant…that permitted him or her to reside at home rather than in an institution. “ In order to qualify under this exception, an applicant should be prepared to submit a certification by his or her attending physician which basically states that, but for the caregiver, the applicant would have had to move to a nursing home.

If you can get the necessary certification, and if you would feel comfortable with the property in your caretaker’s name solely, it is recommend that you transfer your interest in your home to your caretaker child. No transfer penalty would be triggered and, in addition, the unit would not be subject to any reimbursement claim by the state. Once the transfer is made, your caretaker child would be free to sell the house or simply rent it out. If you choose to transfer the house to your caretaker child, you should discuss the form of conveyance—trust, life estate, or outright ownership—and the tax consequences to each approach.

If you decide to make the transfer, you will have the option of doing so after you qualify for Medicaid, or before you submit the application. To make the transfer before you have qualified for Medicaid may prolong the application process. For that reason, it may be easier to make the transfer after you have been determined eligible for Medicaid. However, we have submitted applications where the home was transferred before and after and all were approved.

Want to discuss how to take advantage of the Caretaker Child Exception with your family? Call us to schedule a no obligation consultation.

FRAUD: The “F” Word of Estate Planning

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Fraud is a label to run from – not walk from

As an attorney that practices in areas of law that have both local and national scope – reading and reviewing scholarly writings and recent case decisions is critical to staying current. From these readings, we come to learn and respect the work done by other attorneys and how they are best representing their clients and their interest.

One such article came across my desk entitled “Medicaid Planning Technique Didn’t Work Exactly as Intended” a link to the full article can be found HERE.

The article examines what could be best described as a case study of one attorneys recommendations to a client who was retained to assist the family with Medicaid planning and qualification. As the title infers, the plan did not work out as explained and the clients goals and objectives were not carried out with the suggested plan proposed and enacted by the attorney. Fraud ruins any thought of a clever estate plan – and once that genie is let out of the bottle – it is hard to get it back in.

If it seems too good to be true – it probably is

The case is a lesson for both client and attorney. Just because you can do something – does not always mean you should. Deciding on an estate plan with the goal of qualifying for Medicaid benefits is something that must weigh all of the factors and rules. Knowledge of family dynamic, conflicts, tensions, and history are as important as understanding the rules of Medicaid eligibility, assets and income.

Fraud is a badge that does not wash off easily. Having to defend yourself or others from being accused of absconding with the assets of an elderly loved one is not something anyone wants to envision. There are legal consequences – which translate into strained relationships and possibly property and certainly financial penalties with the ultimate loss of liberty.

The author of the article makes the following suggestions when selecting an elder law attorney to work with:

  1. Be careful about selecting your lawyer. Do you want someone who really knows estate planning and/or Medicaid planning? Check out their reputation, their online information, and recommendations from friends and colleagues. Did you meet the lawyer at a promotional seminar at the public library or a local restaurant? Make sure you’re not being sold something you don’t really want or need.
  2. Does a particular Medicaid planning technique sound almost too good to be true? Be suspicious and ask for input from others.
  3. When a lawyer agrees to meet with you and your family member together, that suggests something troublesome. We are supposed to represent just one person, not a whole family. Recognize that your interests and those of your family member might differ, and respect the lawyer’s efforts to maintain that separation.
  4. Recognize that even though an idea — and particularly a Medicaid planning technique — might work, it might also have unintended secondary effects.

 

Medicaid Eligibility Update

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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.

Why Medicaid Planning should be on your mind!

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There are many reasons, but most are due to:

(1) Americans are living longer;thinking about medicaid

(2) it is costing a lot more than expected for them to live; and

(3) long term care is not solely a “senior” issue:

  • By 2025, for every 100 middle aged individuals, there will be 253 seniors;
  • There is a 70% probability that an individual over age 65 will become cognitively impaired or unable to complete at least two activities of daily living-including dressing, bathing or eating over his or her lifetime.
  • On the aggregate, of those who enter a nursing home, 50% will stay an average of 2.5 years; 10% will stay there five years or longer.
  • Currently, individuals over the age of 50 control 75% of the nation’s wealth and half the discretionary income.
  • 40% of people who need long term care are working-age adults between 18 and 64

Although we are living longer, “living longer” is not always synonymous with “living better.” The longer we live, the more likely it is that at some point in our lives, we will need someone to help take care of us.

Insurance and other financial services companies, following these trends, realize the enormous importance of the “senior” market. “Senior” is a difficult term to define since people polled at various points in their lives who were asked to define “senior” varied greatly in their response. Those in their 20’s and 30’s tend to define senior as an individual 65 or over. People in their 40’s and 50’s often describe seniors as those in their late 60’s or 70’s. The 60 and 70 year olds questioned defined seniors as those in their 80’s and 90’s.

In spite of the fact that many seniors would be considered by many as “wealthy,” long term care costs are enormous and a lifetime of savings can be quickly exhausted when long term health care becomes necessary.

  • 70% of single people who enter a nursing home are impoverished within one year.
  • 50% of all couples are impoverished within one year of one spouse entering a nursing home.
  • Private rooms in a nursing home in 2015 cost an average of $113,150 per year ($310 per day) from a high of $443 per day to $190 per day in the Providence-Warwick area.

THE WORST CASE SCENARIO

What would you do if you were suddenly faced with an additional yearly expense of $113,150 or more? (This could double for a couple both of whom needed care simultaneously) How would this impact on your retirement planning? How long could you afford these costs? How would this additional expense affect the estate you wish to leave behind? How can we assure that you maintain your financial security and independence?”

Medicaid Planning and possibly Long term care insurance for those who qualify and can afford the policies are a partial answer to some of these troubling questions. Although it is estimated that in 2010 seven to nine million people had already purchased private long term care insurance, that number comprises only about one quarter of the 37 million Americans over age 65. The reason few obtain this insurance links back to the cost associated with the policies, the ready availability of them and the overall concern with their long term existence, meaning, will the policy be there when I need it?

Medicaid Planning as this site is dedicated to discussing and explaining, is an option for those who do not qualify or cannot afford a Long Term Care Policy, yet still seek to protect the assets they have earned during their lifetime.

Schedule a free consultation with our office to discuss what Medicaid Planning would entail for you.  

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6 Major Reasons For Planning Your Estate

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Estate and asset protection planning provides solutions to the following types of concerns:

Estate_planning

How will I avoid the cost and inconvenience of probate for my spouse and children?

If you have ever been confronted with needing to administer an Estate for a loved one who died without a will or estate plan, they quickly realize the time and expense associated with the probate process.  For many clients, the best solution is a revocable trust, often referred to as a living trust. This document when funded will enable you to avoid the probate process.

 

If I can’t make legal, financial, or healthcare decisions for myself, how can I be sure my wishes are carried out?

Again, a revocable trust may provide the answer. In addition, every client needs a durable power of attorney and a health care proxy appointing a trusted individual to make financial and health care decisions for you when you no longer can yourself.

 

How can I make sure my wealth and possessions end up in the right hands when I’m gone?

Wills and trusts are vehicles for passing on your assets to those you choose. Many clients are concerned about funds they leave to their children being at risk of their children’s creditors, spouses upon divorce, or simply bad decisions their children may make. For them, a family protection trust can provide the protection they seek. In addition, proper planning will prevent the payment of unavoidable estate taxes upon your death.

 

My spouse needs more care than I can give. Will we lose everything to pay for care, or are there options?

Not if you plan properly, the earlier, the better. There are a number of planning options available to spouses of nursing home residents to protect their financial well-being while qualifying their ill spouse for Medicaid coverage of nursing home fees.

 

My child is disabled. How can I provide for her future?

We have helped many parents of children with special needs plan for their children through the creation of a special needs trust funded with life insurance.

 

What legacy will I leave?

Your greatest legacy of course is the children and grandchildren you raise, if any, and the memories you leave with your family, friends, and work colleagues. However, support of charities and an estate plan that provides for your family and smoothly passes on what you leave behind will also contribute greatly to the legacy you leave and your family’s welfare for decades to come.

Contact us today for more information (401) 274-0300

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