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COVID-19 Stimulus Checks and Medicaid

By Uncategorized

Will my COVID-19 Stimulus Check impact Medicaid Eligibility?

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act (passed on March 27, 2020) is a $2 trillion economic relief package intended to help offset the huge financial crisis caused by the Coronavirus (COVID-19) pandemic. As part of the CARES Act, the majority of Americans, including those who are elderly and on fixed income, will receive a one-time stimulus check from the Internal Revenue Service (IRS).

Many Medicaid beneficiaries who live at home, assisted living, adult foster care, or nursing homes are concerned the money will put them over the Medicaid income or asset limit, and therefore, disqualify them from Medicaid benefits. In addition, Medicaid applicants express the same concern that the additional money will cause them to have income or assets over Medicaid’s limits, and as a result, prevent them from becoming eligible for Medicaid.

Stimulus checks will not be counted as income and therefore will not impact Medicaid beneficiaries or applicants. However, should the stimulus money not be spent within 12 months, it may be counted as an asset, and therefore could impact eligibility in the year ahead. Therefore, make sure you spend the funds as soon as possible on eligible purchases in accordance with Medicaid regulations (DO NOT GIFT IT).

Nursing Home Residents

he receipt of a stimulus check by Medicaid beneficiaries who reside in nursing homes will not impact these individuals’ Medicaid benefits. Stated differently, the receipt of the check will not disqualify them from Medicaid nursing home care. This is because Medicaid will not count the money as income, which means it cannot push one over Medicaid’s income limit, and hence, result in the loss of Medicaid benefits.

United States Treasury stimulus payment for Coronavirus CoViD-19 outbreak disease.

While Medicaid-funded nursing home residents are required to surrender all of their income except for a personal needs allowance and a monthly maintenance needs allowance for a non-applicant spouse (if applicable) to Medicaid, the money from the stimulus check will not have to be surrendered to Medicaid. This is because, as mentioned above, the stimulus check is not considered as income by Medicaid. Rather, it can be thought of as a tax refund.

Furthermore, the stimulus check will not count as assets, given the money is spent within 12-months of receiving it. So, within this time frame, a nursing home Medicaid recipient can have possession of the money and it will not impact one’s Medicaid eligibility. However, it is imperative that the money, in its entirety, be spent within one year. If not, the money will count towards Medicaid’s asset limit and can potentially push one over the limit, resulting in Medicaid disqualification.

The money can be spent by nursing home residents in a number of ways. For example, one might buy new clothing, purchase a television for his / her room, stock up on extra snacks, or purchase an irrevocable funeral trust. What one does not want to do is to buy assets that are counted towards Medicaid’s asset limit. For instance, collectors coins would most likely be considered an investment and the value of them would be counted towards the asset limit, potentially causing one to be over the limit and lose Medicaid benefits.

The stimulus check will either be directed deposited in the nursing home resident’s bank account or be mailed to the address on one’s 2018 or 2019 tax return. To further clarify, if a refund was issued via direct deposit for one’s tax return, the stimulus check will be directed deposited in the same bank account. If not, the check will go in the mail. Persons who do not have to file tax returns, such as Social Security recipients, will receive stimulus checks in the same manner in which they receive their Social Security benefits. Therefore, if one receives his / her Social Security payment by direct deposit, the stimulus check will automatically be received via direct deposit also.

Spouses of Nursing Home Residents

Spouses of nursing home residents on Medicaid (called Community Spouses), who are not on Medicaid themselves will receive a stimulus check. The receipt of this check will not impact their spouses’ Medicaid eligibility in any manner. First, and foremost, the money from the stimulus check is not considered income by Medicaid, and even if it were, the income of a non-applicant spouse is not considered in the continuing Medicaid eligibility of his / her nursing home spouse.

For Medicaid beneficiaries, the entire check needs to be spent within 12-months of receiving it or the remaining funds will count as assets towards Medicaid’s eligibility. However, the same rule does not hold true for community spouses. To be clear, there is no time limit in which a spouse of a nursing resident must spend his / her stimulus check. Furthermore, non-applicant spouses can spend the stimulus check in any manner they choose, such as paying rent or mortgage, utility bills, food, or even on a splurge, such as a pricey piece of jewelry.

No matter how long it takes for the community spouse to spend the funds, and regardless of how they are spent, it will not impact the institutionalized spouse’s Medicaid eligibility. In other words, a community spouse can be rest assured that it will not cause the nursing home resident to lose his / her nursing home Medicaid benefits. This is because the assets of the non-applicant spouse are not considered for the continuing Medicaid eligibility of his / her Medicaid beneficiary spouse. (The community spouse’s assets are only considered when determining initial eligibility).

The community spouse will receive the stimulus check either via direct deposit or in the mail. Exactly the manner in which it will be received will be based on one’s 2018 or 2019 tax return and how a refund was issued. For instance, if one received a refund via the mail, the address on file will be used and the stimulus check will be mailed to that address. For those who are not required to file tax returns, such as recipients of Social Security, the check will be received in the same way in which their monthly Social Security benefit is received. This means that if it is deposited directly in one’s bank account, the stimulus check will also be directly deposited.

Please note that the institutionalized spouse will also receive a stimulus check. However, at this time, it is not known if the check will be issued separately from his / her community spouse’s check. It is our assumption that if 2018 or 2019 tax returns were filed jointly, the couple will receive one check (couples who filed joint tax returns are eligible for double the amount of a single filer), while if tax returns were filed separately, each spouse will receive an individual check. Again, for persons on Social Security, there is no need to file tax returns. In this case, checks will automatically be received in the same manner in which Social Security benefits are received.

How Much Will the Stimulus Check Be?
The amount of the stimulus check, also called an economic impact payment or recovery rebate, may be for as much as $1,200 / person.

• Individuals who earn up to $75,000 / year will receive a $1,200 check.
• Married couples, filing jointly who earn up to $150,000 / year, will receive a $2,400 check.
• Individuals who earn up to than $99,000 / year will receive a check, but it will be for less than $1,200.
• Married couples, filing jointly who earn up to $198,000 / year, will receive a check, but it will be for less than $2,400.

Payments will be based on one’s tax returns from 2018 or 2019. Please note that for disabled persons and seniors who receive Social Security payments, it is not necessary for a tax return to be filed. (Persons who receive Social Security benefits generally do not have to file a tax return). Rather, the IRS will automatically send out economic impact payments to these individuals.

Checks will be received either via direct deposit or in the mail.

SOURCE: American Council On Aging 

Annuity Ownership and Medicaid Qualification

By Uncategorized

How does the State of Rhode Island address owning an Annuity with Medicaid qualification?

Rhode Island DHS regulations as to owning or holding an Annuity states as follows:

0382.15.35 Annuities

REV: February 2014

An annuity is an investment of funds from which an individual is paid or promised regular payments over a lifetime or a fixed period of time. Generally, an annuity is established with a lump sum of money which is paid to a bank, insurance company, or other entity.

A deferred annuity is one under which payments begin at some date to be specified in the future. Once an individual selects a periodic payment option (frequency, amount, and duration of payments), and begins to receive income, the annuity has been annuitized.

An annuity may guarantee periodic payments for a stated period (termed period certain) or guarantee periodic payments for the remainder of the life of the individual, without regard to how long the individual lives (termed life annuity).

All applicants must disclose any interest in an annuity that the applicant or his/her spouse has at the time of application and/or recertification of eligibility. Under 42 U.S.C.1396p(e), as amended by the Deficit Reduction Act, the State becomes a remainder beneficiary of all of the couples’ annuities (or other similar financial document) which were purchased or transacted by either spouse on or after February 8, 2006 by virtue of the provision of such Medicaid up to the amount of Medicaid paid on behalf of the institutionalized spouse.

Upon the determination that an applicant is eligible for benefits under LTSS-Medicaid, the Medicaid agency will notify the issuer of any annuity disclosed for purposes of section 1917(c)(1)(F) of the State’s rights as a preferred remainder beneficiary.

The Medicaid agency will additionally require the issuer of the annuity to notify the Medicaid agency regarding any changes in a disbursement of income or principal from the annuity.

When determining eligibility for Medicaid,

Count as an Available Resource:

The cash value of an annuity which can be surrendered or “cashed in.” The cash value is equal to the amount of money used to establish the annuity, plus any earnings, minus any earlier withdrawals and surrender fees. No consideration in determining cash value is given for income tax withheld or tax penalties for early withdrawal.

Annuity contracts that do not allow for cash surrender but instead allow the owner to sell the annuity on the open market are assignable. Annuity contracts that are silent regarding assignability are presumed to be assignable. Assignable annuities are countable resources. The countable value of the resource is equal to the outstanding principal balance unless the individual can furnish evidence from a reliable source which shows that the annuity is worth a lesser amount. Reliable sources include banks, other financial institutions, insurance companies, brokers, viatical settlement companies, etc.

Charming senior man and woman reading an annuity contract at their house

Reading your annuity contract is important.

Count as Available Income:

Payments made to the individual from an annuity are counted as unearned income. Any change in the income from the annuity must be reported within ten (10) days to the agency and may affect eligibility and/or post-eligibility treatment of income.

Transfer of Asset Provisions for Institutionalized Individuals May Apply When:

A non-cashable, non-assignable annuity was purchased by the individual (or by the individual’s spouse):

  • Within thirty-six (36) months (if purchased prior to February 8, 2006), or OR
  • Within sixty (60) months (if purchased or after February 8, 2006)
  • Immediately prior to, or any time after, the date the individual was both institutionalized and applied for Medicaid. See Sec. 0384.10 for a description of how the 5-year look-back on resource transfers is phased in).

In this case, a determination must be made as to whether its purchase constitutes a transfer of assets for less than fair market value.

Determine Whether Any Annuities Create a Penalty Period of Ineligibility For LTSS Medicaid

A non-cashable, non-assignable annuity purchased by the individual (or by the individual’s spouse) may be determined to be a transfer of assets for less than fair market value, and therefore create a penalty period of ineligibility.

There are two situations in which this may occur:

  1. When the asset was literally converted, within certain time frames, into an annuity which does not meet the criteria for being a “VALID TRANSFER FOR FAIR MARKET VALUE” in return (See the remainder of this Section, along with Section 0356.15.35 AND 0384.35 for detailed discussions of these topics). and/or
  2. When the annuity (if purchased on or after February 8, 2006) does not name the “State as Beneficiary” of the annuity. When such an annuity does not comply with this requirement, it is defined as being a transfer for less than fair market value.

(This requirement to name the state as beneficiary is found in Section 1917(c)(1)(F)(i) of the Social Security Act (42 U.S.C.) 1396p(c)(1)(F)(i)), as added by section 6012(b) of the Deficit Reduction Act of 2005, and as amended by the Tax Relief and Health Care Act of 2006. (See the remainder of this Section, along with Section 0356.15.35 AND 0384.35 for detailed discussions of these topics).

Time-frames for evaluating the transfer of resources DHS may “look back” at resource transfers for the 36 months, or for the 60 months, immediately prior to the date that the individual was both institutionalized, and applied for LTSS-Medicaid.

(Transfers which occurred prior to February 8, 2006 are subject to the 36 month “look back”).

(Transfers which occurred on or after February 8, 2006 are subject to the 60 month “look back”).

Additionally, transfers which occur any time after the application are also evaluated to determine whether they generated a penalty period of ineligibility for LTSS-Medicaid.

(See Section 0356.15.35 and 0384.10 and 0384.35 for detailed discussions of these topics).

To be considered a valid transfer for fair market value, an annuity must:

  • Be irrevocable and non-assignable;
  • Provide regular payments in both frequency and amount, with no deferral and no balloon payments, to or for the sole benefit of the individual; and
  • Be actuarially sound. Scheduled payments must return at least the principal within the number of years of expected life remaining for the individual.

Life expectancy tables compiled from information by the Office of the Chief Actuary of the Social Security Administration for this purpose are used to determine the number of years of expected life remaining for the individual. (See MCAR Section 0382.15.35.05).

If based on life expectancy tables compiled by the Social Security Administration’s Office of the Actuary and published by HCFA CMS, the individual is not expected to live longer than the guaranteed period of the annuity, the guaranteed period of the annuity, the annuity is not actuarially sound, and a transfer of assets for less than fair market value has taken place. The transfer is considered to have taken place at the time the annuity was purchased. The uncompensated value of the transfer is based on the amount projected to be paid beyond the individual’s reasonable life expectancy. (See Section 0384- Resource Transfers).

If an annuity is purchased or transacted on or after February 8, 2006 whether by the applicant or by their spouse, the beneficiary clause of the annuity must provide that the beneficiary of the annuity is as follows:

  • Must, except as provided in this section, name the State of Rhode Island as the remainder beneficiary in the first position for at least the amount of Medicaid paid on behalf of the institutionalized individual.
  • If however, the institutionalized individual has a minor or disabled child, such child may be named as the beneficiary in the first position, provided the State of Rhode Island is named as a beneficiary of the annuity in the second position for at least the amount of Medicaid paid on behalf of the institutionalized individual.
  • In the event such child or his or her representative disposes of any such remainder for less than fair market value, the State of Rhode Island must be named in the first position.
  • Any change in the beneficiary clause must be reported to the Medicaid agency within ten (10) days of any change and may result in a transfer of assets penalty.

An institutionalized spouse, that is, an institutionalized individual who has a community spouse:

  • Must, except as provided in this section, name the State of Rhode Island as the remainder beneficiary in the first position for at least the amount of Medicaid paid on behalf of such institutionalized spouse.
  • However, the institutionalized spouse may name as the beneficiary in the first position his or her community spouse or his or her minor or disabled child, provided the State of Rhode Island is named as a beneficiary of the annuity in the second position for at least the amount of Medicaid paid on behalf of the institutionalized spouse.
  • In the event the community spouse or such child or his or her representative disposes of any such remainder for less than fair market values, the State of Rhode Island must be named in the first position.
  • Any change in the beneficiary clause must be reported to the Medicaid agency within ten (10) days of any change and may result in a transfer of assets penalty.

A community spouse:

  • Must name the State of Rhode Island as the remainder beneficiary in the first position for at least the amount of Medicaid paid on behalf of his or her institutionalized spouse.
  • The community spouse may not change the beneficiary of the annuity after the death of the institutionalized spouse.
  • Any change in the beneficiary clause, before or after the death of the institutionalized spouse, must be reported to the Medicaid agency within ten (10) days of any change and may result in a transfer of assets penalty.

In the event the community spouse becomes institutionalized and applies for Medicaid, the beneficiary clause must be amended to additionally name the State of Rhode Island as the remainder beneficiary in the first position for at least the amount of Medicaid paid on behalf of such community spouse who becomes institutionalized, at the time such spouse applies for Medicaid for himself or herself, if the annuity was purchased during the look-back period.

Cases involving annuities are referred by field staff to the LTSS Administrator (or his/her designee) for evaluation. The agency representative forwards a copy of the annuity document, including date of purchase to the LTSS Administrator.

The LTSS Administrator (or his/her designee) consults, as needed, with the Office of Legal Services, and determines:

  • Whether the annuity is an available or unavailable resource;
  • The countable amount of the resource (i.e., the cash surrender value and/or negotiable value of the annuity); and
  • Whether the State has been made a remainder beneficiary for at least the amount Medicaid paid on behalf of the institutionalized individual; and
  • Whether a transfer of assets for less than fair market value has occurred as well as the amount of the uncompensated value and date of the transfer.

MJL Blog Footnote

Why can’t I make gifts and still qualify for Medicaid?

By Gifting and Medicaid Eligibility, Uncategorized

I can gift up to $14,000 per year without jeopardizing my rights to Medicaid! Right?gifts wrapped in money with a red bow

Perhaps the most common-and dangerous-myth of all confuses the federal gift tax with Medicaid qualification. These are two distinct sets of rules, established for entirely different purposes. In 2016, a person may gift up to $14,000 per year, per beneficiary without having to file a gift tax return or incurring any tax liability.  But, Medicaid is concerned with any gifts of any amount if made within the 60 months preceding a Medicaid application. That period, often referred to as the “look-back period,” is inflexible, unless it can be proved that the gift was made exclusively for reasons other than hastening Medicaid eligibility.

Transfers of assets in exchange for sno giftsomething of equal value or transfers to a spouse do not affect Medicaid eligibility. Otherwise, the penalty for making gifts can be severe. The number of days that the penalty triggers may be reasonably modest (the penalty in days is calculated as the amount actually gifted divided by the average daily cost of local nursing homes). Since 2006, however, the penalty period does not begin to run until the applicant would otherwise be qualified for the program. Thus, the penalty does not begin to run at the time of the gift but much later, i.e., when the applicant has spent down all countable assets to $4,000 or less. 

Applicants can remedy imprudent gifts in two ways. They can, if possible, “cure” gifts by refunding them; in that case, the returned money must be spent down before a successful application can be made. Or, they can justify such gifts if they were made, exclusively, for purposes other than accelerating rights to Medicaid.

If making gifts is important to you there are other solutions, such as transferring assets to an Irrevocable Trust and then have the trust make distributions out to the beneficiaries, however, much care should be given to the drafting of the trust and to the distributions to ensure the distributions are not deemed disqualifying. Want to discuss further? Contact our office for a free consultation.

Source: Medicaid Myths: Clients’ Misconceptions Can Be Costly, Estate Planning Journal, Oct 2015, Estate Planning Journal (WG&L)

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