THE MEDICAID PROGRAM’S EFFECT ON ESTATE
PLANNING FOR THE ELDERLY
THE MEDICAID PROGRAM’S EFFECT ON ESTATE
PLANNING FOR THE ELDERLY
Michael A. Fuerst
BUCKLEY & ZOPF
Michael A. Fuerst
BUCKLEY & ZOPF
OBJECTIVES OF MEDICAID ESTATE
PLANNING
OBJECTIVES OF MEDICAID ESTATE
PLANNING
Protection of community spouse 1. adequate income, resources 2. prevent impoverishment
Assure care for institutionalized spouse Maximize estate for heirs
Protection of community spouse 1. adequate income, resources 2. prevent impoverishment
Assure care for institutionalized spouse Maximize estate for heirs
DIFFERS FROM STANDARD ESTATE PLANNING
DIFFERS FROM STANDARD ESTATE PLANNING
A. Standard estate planning techniques will not work
B. Gifts are problematic C. Grantor trusts mostly ineffective D. Traditional ownership concepts do not
necessarily apply
A. Standard estate planning techniques will not work
B. Gifts are problematic C. Grantor trusts mostly ineffective D. Traditional ownership concepts do not
necessarily apply
MEDICAID PROGRAMMEDICAID PROGRAM
Needs based health insurance program Income and resource limitations Only health insurance which pays for
nursing home care
Needs based health insurance program Income and resource limitations Only health insurance which pays for
nursing home care
MedicareMedicare
Health insurance for Social Security retirees Does not cover long term care in a nursing
home Covers skilled/rehabilatative care in nursing
home
Health insurance for Social Security retirees Does not cover long term care in a nursing
home Covers skilled/rehabilatative care in nursing
home
ELIGIBILITY FOR MEDICAIDELIGIBILITY FOR MEDICAID
$2500 assets. Income below State reimbursement rate for
nursing home.(approximately $4300/mo)
$2500 assets. Income below State reimbursement rate for
nursing home.(approximately $4300/mo)
Spousal Impoverishment RulesSpousal Impoverishment Rules
1.Income Rules
2.Resource Rules
1.Income Rules
2.Resource Rules
INCOME RULESINCOME RULES
Community (healthy) spouse may protect up to $1822/mo of ill spouse’s income.
If high shelter (housing) expenses up to $2739. None of healthy spouse’s income attributable to ill
spouse. Ownership- “name on the check” concept If no document, 1/2 of income attributable to each
spouse.
Community (healthy) spouse may protect up to $1822/mo of ill spouse’s income.
If high shelter (housing) expenses up to $2739. None of healthy spouse’s income attributable to ill
spouse. Ownership- “name on the check” concept If no document, 1/2 of income attributable to each
spouse.
IncomeIncome
An immediate payment annuity is treated as income of the owner/annuitant.
Social Security or a pension is treated as the income of the individual who is entitled to receive it
Wages Interest/Dividends Loan
An immediate payment annuity is treated as income of the owner/annuitant.
Social Security or a pension is treated as the income of the individual who is entitled to receive it
Wages Interest/Dividends Loan
ExampleExample
Ill spouse- social security and pension-$3000;
Healthy spouse- $750 social security Healthy spouse entitled to keep at least
$1072 of ill spouses income. If shelter expenses are high may keep
additional $917(750+1072+917=$2739)
Ill spouse- social security and pension-$3000;
Healthy spouse- $750 social security Healthy spouse entitled to keep at least
$1072 of ill spouses income. If shelter expenses are high may keep
additional $917(750+1072+917=$2739)
ExampleExample
Healthy spouse- social security and pension-$3000;
Ill spouse- $750 social security Healthy spouse entitled to keep all $3000 Healthy spouse entitled to an unlimited
amount of income if in his/her name
Healthy spouse- social security and pension-$3000;
Ill spouse- $750 social security Healthy spouse entitled to keep all $3000 Healthy spouse entitled to an unlimited
amount of income if in his/her name
RESOURCE RULES:RESOURCE RULES:
All resources are countable regardless of which spouse holds title or jointly owned.
The “marital pie”
All resources are countable regardless of which spouse holds title or jointly owned.
The “marital pie”
Countable ResourcesCountable Resources
Stocks, bonds, savings and checking accounts;
IRA and 401K accounts
Annuity and insurance policies
Real estate-other than the principal residence
Stocks, bonds, savings and checking accounts;
IRA and 401K accounts
Annuity and insurance policies
Real estate-other than the principal residence
Resource Assessment.Resource Assessment.
“Snapshot” of countable resources. As of date of first continuous period of
institutionalization. Even if application for Medicaid is later.
“Snapshot” of countable resources. As of date of first continuous period of
institutionalization. Even if application for Medicaid is later.
• Maximum countable resources
protected level for community
spouse - $109,560.
• All other resources to benefit institutionalized spouse
Spousal Share
Spousal ShareSpousal Share
One half of total countable resources to a maximum of $109,560.
If total assets $300,000 healthy spouse only entitled to protect $109,560, not $150,000.
If total assets $100,000 healthy spouse only entitled to $50,000.
Minimum protected amount is $21,912. If total assets $40,000 healthy spouse
keeps $21,912. Although community spouse may use the
remaining assets for his/her benefit as well.
One half of total countable resources to a maximum of $109,560.
If total assets $300,000 healthy spouse only entitled to protect $109,560, not $150,000.
If total assets $100,000 healthy spouse only entitled to $50,000.
Minimum protected amount is $21,912. If total assets $40,000 healthy spouse
keeps $21,912. Although community spouse may use the
remaining assets for his/her benefit as well.
Spousal ShareSpousal Share
Assets less than $43,824- $21,912 Assets between $43,824 and $219,120 -
One-half Assets more than $219,120 -$109,560
Assets less than $43,824- $21,912 Assets between $43,824 and $219,120 -
One-half Assets more than $219,120 -$109,560
The family home is an excluded resource
The family home is an excluded resource As long as it is used as
the residence of the community spouse
Up to a maximum equity value of $500,000 for ill spouse.
As long as it is used as the residence of the community spouse
Up to a maximum equity value of $500,000 for ill spouse.
Other Excluded Resources:Other Excluded Resources:
motor vehicle furniture and personal possessions prepaid funeral irrevocable burial trust
motor vehicle furniture and personal possessions prepaid funeral irrevocable burial trust
Deeming of Resources Stops as of Date of Eligibility for
Medicaid
Deeming of Resources Stops as of Date of Eligibility for
Medicaid timing is crucial no restrictions on what community spouse
does with these resources sale of home-no claim by Medicaid
timing is crucial no restrictions on what community spouse
does with these resources sale of home-no claim by Medicaid
TRANSFER OF ASSET RULES
TRANSFER OF ASSET RULES
Transfers between spouses are not disqualifying.
Gifts/transfers for less than adequate consideration are potentially disqualifying
Transfers between spouses are not disqualifying.
Gifts/transfers for less than adequate consideration are potentially disqualifying
Transfers After February 7, 2006Transfers After February 7, 2006
“Look Back” Period:
5 years from first date individual is both institutionalized and applies for Medicaid
applies to all gifts, including trusts.
“Look Back” Period:
5 years from first date individual is both institutionalized and applies for Medicaid
applies to all gifts, including trusts.
. Period of Disqualification:. Period of Disqualification:
Equal to the total uncompensated value of all gifted assets
Divided by state average nursing home cost ($8,421.11)
Commencing on the date of application for Medicaid for nursing home care.
All gifts disqualify regardless of size.
Equal to the total uncompensated value of all gifted assets
Divided by state average nursing home cost ($8,421.11)
Commencing on the date of application for Medicaid for nursing home care.
All gifts disqualify regardless of size.
ExampleExample
Gift of $84,211 to pay for college for grandchild made on Jan 1, 2010
Apply for Medicaid Jan 1, 2014 Disqualification period-10 months
($84,211 divided by $8,421/mo) Disqualification period commences on date
of application for Medicaid:1-1-20114
Gift of $84,211 to pay for college for grandchild made on Jan 1, 2010
Apply for Medicaid Jan 1, 2014 Disqualification period-10 months
($84,211 divided by $8,421/mo) Disqualification period commences on date
of application for Medicaid:1-1-20114
Exempt TransfersExempt Transfers
To spouse To sibling who has “equity interest” and has
resided in home for 1 year To child who has resided in home for 2
years and provided care enabling recipient to stay out of nursing home
To disabled or minor child
To spouse To sibling who has “equity interest” and has
resided in home for 1 year To child who has resided in home for 2
years and provided care enabling recipient to stay out of nursing home
To disabled or minor child
TrustsTrusts
3 types of trust recognized:
Revocable Irrevocable/grantor retained interest Irrevocable/no grantor retained interest
3 types of trust recognized:
Revocable Irrevocable/grantor retained interest Irrevocable/no grantor retained interest
RevocableRevocable
Countable resource Residence will be countable Subject to lien recovery
Countable resource Residence will be countable Subject to lien recovery
Irrevocable -Retained InterestIrrevocable -Retained Interest
Income only Right to principal-available asset regardless of
trustee’s discretion Grantor’s residence considered countable asset Risk of inclusion if Grantor retains incidents of
ownership ( right to borrow, power of appointment, Grantor as trustee)
No clause or requirement in trust precludes it from being considered under Medicaid program.
Income only Right to principal-available asset regardless of
trustee’s discretion Grantor’s residence considered countable asset Risk of inclusion if Grantor retains incidents of
ownership ( right to borrow, power of appointment, Grantor as trustee)
No clause or requirement in trust precludes it from being considered under Medicaid program.
Irrevocable-No Retained InterestIrrevocable-No Retained Interest
Transfer-must cover 5 year disqualification Not treated as income or asset. Congress and State have tried to make the
use of trusts more difficult.Rules do not apply to trusts created on or before August 10, 1993.
Transfer-must cover 5 year disqualification Not treated as income or asset. Congress and State have tried to make the
use of trusts more difficult.Rules do not apply to trusts created on or before August 10, 1993.
ESTATE RECOVERIESESTATE RECOVERIES
New Hampshire has an expanded definition of “Estate” for recovery purposes
New Hampshire has an expanded definition of “Estate” for recovery purposes
“Estate”“Estate”
“Estate” includes not only probate assets but also property held by the recipient as a joint tenant, tenant in common or holder of a life estate. RSA 167;14-A
Property in a revocable trust is subject to recovery as well Possible recovery against irrevocable “income only” trust
to the extent of the life interest in the income
“Estate” includes not only probate assets but also property held by the recipient as a joint tenant, tenant in common or holder of a life estate. RSA 167;14-A
Property in a revocable trust is subject to recovery as well Possible recovery against irrevocable “income only” trust
to the extent of the life interest in the income
“Estate”“Estate”
Enforceable only against the estate of the recipient/institutionalized spouse-55 or older; not against estate of surviving spouse
Not enforceable against estate if child under age of 21 or disabled
Enforceable only against the estate of the recipient/institutionalized spouse-55 or older; not against estate of surviving spouse
Not enforceable against estate if child under age of 21 or disabled
Life Estate/Joint TenancyLife Estate/Joint Tenancy
Joint ownership and life estate which avoid probate, will not now avoid the lien.
Life estate valued as of one minute before date of death based upon actuarial tables
Joint tenancy valued as percentage of the total value (e.g. 50%).
Joint ownership and life estate which avoid probate, will not now avoid the lien.
Life estate valued as of one minute before date of death based upon actuarial tables
Joint tenancy valued as percentage of the total value (e.g. 50%).
Lien on HomeLien on Home Not enforceable against home of surviving spouse ( or
minor or disabled child of recipient) Not enforceable if: sibling has resided with recipient for 1 year and has equity
interest; or, child has resided for 2 years and provided care to keep
recipient out of nursing home
Not enforceable against home of surviving spouse ( or minor or disabled child of recipient)
Not enforceable if: sibling has resided with recipient for 1 year and has equity
interest; or, child has resided for 2 years and provided care to keep
recipient out of nursing home
Estate Recoveries-Annuities
Estate Recoveries-Annuities
Annuities require the State to be the primary beneficiary for Medicaid payments made to annuitant or spouse.
If State not named then purchase of annuity will be deemed a transfer for less than adequate consideration
Annuities require the State to be the primary beneficiary for Medicaid payments made to annuitant or spouse.
If State not named then purchase of annuity will be deemed a transfer for less than adequate consideration
Planning: Protection of Community SpousePlanning: Protection of Community Spouse
Re-title assets in healthy spouse’s name. Apply for Resource Assessment as soon as
possible. Do not need to be eligible for Medicaid to
apply for resource assessment
Re-title assets in healthy spouse’s name. Apply for Resource Assessment as soon as
possible. Do not need to be eligible for Medicaid to
apply for resource assessment
Planning: Protection of Community SpousePlanning: Protection of Community Spouse Convert countable resources to excluded
resources. (payoff mortgage, make improvements to home,buy car).
Insure greatest amount of income in healthy spouse’s name.
After institutionalization spend down ill spouse’s share - for benefit of healthy spouse.(pre-pay taxes, purchase annuity).
After Medicaid eligibility, convert excluded resources to liquid resources.
Convert countable resources to excluded resources. (payoff mortgage, make improvements to home,buy car).
Insure greatest amount of income in healthy spouse’s name.
After institutionalization spend down ill spouse’s share - for benefit of healthy spouse.(pre-pay taxes, purchase annuity).
After Medicaid eligibility, convert excluded resources to liquid resources.
ANNUITIESANNUITIES
Countable asset unless immediate annuity Convert from countable asset to income Convert after Resource Assessment Not a transfer for less than adequate consideration Annuitization for “period certain”cannot exceed life
expectancy pursuant to CMS standards The State must be primary beneficiary for any Medicaid
provided to annuitant or spouse
Countable asset unless immediate annuity Convert from countable asset to income Convert after Resource Assessment Not a transfer for less than adequate consideration Annuitization for “period certain”cannot exceed life
expectancy pursuant to CMS standards The State must be primary beneficiary for any Medicaid
provided to annuitant or spouse
Maximizing Estate for HeirsMaximizing Estate for Heirs
Transfers before 60 months Long-term care insurance Irrevocable Trusts - are they of any use? Life estates Change will of healthy spouse All assets in name of healthy spouse
Transfers before 60 months Long-term care insurance Irrevocable Trusts - are they of any use? Life estates Change will of healthy spouse All assets in name of healthy spouse
Risks of GiftingRisks of Gifting
Unable to pay for care for entire 5 years Gifts made to children no longer available Spent by kids Divorce or death of child Bankruptcy of or lawsuit against child
Unable to pay for care for entire 5 years Gifts made to children no longer available Spent by kids Divorce or death of child Bankruptcy of or lawsuit against child
Choice of LawChoice of Law
The location of the Nursing Home controls which State’s Medicaid rules apply.
Legal residence is irrelevant
The location of the Nursing Home controls which State’s Medicaid rules apply.
Legal residence is irrelevant
VIII. RULES OF THUMBVIII. RULES OF THUMB
A. Property transferred more than 60 months before institutionalization will be protected
B. Property transferred within 60 months of institutionalization will cause disqualification.
C. The rules will change
A. Property transferred more than 60 months before institutionalization will be protected
B. Property transferred within 60 months of institutionalization will cause disqualification.
C. The rules will change
1. IS THERE A DIFFERENCE BETWEEN MEDICARE AND
MEDICAID OR IS THE FEDERAL GOVERNMENT TRYING TO
CONFUSE ME?
1. IS THERE A DIFFERENCE BETWEEN MEDICARE AND
MEDICAID OR IS THE FEDERAL GOVERNMENT TRYING TO
CONFUSE ME?
2. WHO IS ELIGIBLE FOR MEDICAID FOR NURSING HOME CARE?
2. WHO IS ELIGIBLE FOR MEDICAID FOR NURSING HOME CARE?
3. IF A SPOUSE GOES INTO A NURSING HOME DOES THE
NURSING HOME OR MEDICAID TAKE CONTROL OF OUR
SAVINGS?
3. IF A SPOUSE GOES INTO A NURSING HOME DOES THE
NURSING HOME OR MEDICAID TAKE CONTROL OF OUR
SAVINGS?
4. IF A SPOUSE HAS TO GO INTO A NURSING HOME DOES THE HEALTHY SPOUSE HAVE
TO SPEND ALL OF HIS/HER ASSETS FOR THE CARE OF
THE ILL SPOUSE?
4. IF A SPOUSE HAS TO GO INTO A NURSING HOME DOES THE HEALTHY SPOUSE HAVE
TO SPEND ALL OF HIS/HER ASSETS FOR THE CARE OF
THE ILL SPOUSE?
5. IF MY ILL SPOUSE HAS TO GO INTO A NURSING HOME WILL HIS MUCH LARGER RETIREMENT INCOME HAVE TO GO WITH HIM?
5. IF MY ILL SPOUSE HAS TO GO INTO A NURSING HOME WILL HIS MUCH LARGER RETIREMENT INCOME HAVE TO GO WITH HIM?
6. DO WE HAVE TO SELL OUR HOME IF ONE OF US MUST GO INTO A NURSING HOME TO BE ELIGIBLE FOR MEDICAID?
6. DO WE HAVE TO SELL OUR HOME IF ONE OF US MUST GO INTO A NURSING HOME TO BE ELIGIBLE FOR MEDICAID?
7. DOES IT MATTER IN WHOSE NAME THE ASSETS ARE TITLED WHEN DETERMING WHAT MUST BE PAID TO THE NURSING HOME.
7. DOES IT MATTER IN WHOSE NAME THE ASSETS ARE TITLED WHEN DETERMING WHAT MUST BE PAID TO THE NURSING HOME.
8. WHEN DOES THE MEDICAID PROGRAM DETERMINE WHAT AMOUNT OF ASSETS MUST BE USED FOR NURSING HOME CARE?
8. WHEN DOES THE MEDICAID PROGRAM DETERMINE WHAT AMOUNT OF ASSETS MUST BE USED FOR NURSING HOME CARE?
9. IS A LIEN PLACED ON THE HOME OF A HEALTHY SPOUSE BY THE MEDICAID PROGRAM?
9. IS A LIEN PLACED ON THE HOME OF A HEALTHY SPOUSE BY THE MEDICAID PROGRAM?
10. IF MY CHILDREN OWN PROPERTY JOINTLY WITH ME WILL THEY BE REQUIRED TO PAY OFF THE LIEN?
10. IF MY CHILDREN OWN PROPERTY JOINTLY WITH ME WILL THEY BE REQUIRED TO PAY OFF THE LIEN?
11. CAN THE HEALTHY SPOUSE SELL THE HOME?.
11. CAN THE HEALTHY SPOUSE SELL THE HOME?.
12. IS THERE A 5 YEAR DISQUALIFICATION FROM MEDICAID FOR ANY GIFTS I MAKE?
12. IS THERE A 5 YEAR DISQUALIFICATION FROM MEDICAID FOR ANY GIFTS I MAKE?
13. CAN AN INDIVIDUAL GIVE AWAY HIS/HER ASSETS TO
BECOME ELIGIBLE FOR MEDICAID?
13. CAN AN INDIVIDUAL GIVE AWAY HIS/HER ASSETS TO
BECOME ELIGIBLE FOR MEDICAID?
14. IF A SPOUSE IS JUST ABOUT TO GO INTO A NURSING HOME IS IT TOO LATE TO PROTECT ASSETS?
14. IF A SPOUSE IS JUST ABOUT TO GO INTO A NURSING HOME IS IT TOO LATE TO PROTECT ASSETS?
15. IF IT LOOKS LIKE A SPOUSE MIGHT HAVE TO GO INTO A NURSING HOME, WHAT SHOULD WE DO?
15. IF IT LOOKS LIKE A SPOUSE MIGHT HAVE TO GO INTO A NURSING HOME, WHAT SHOULD WE DO?
Michael A. Fuerst, Esq.Buckley & Zopf
Michael A. Fuerst, Esq.Buckley & Zopf
PO Box 1485, 233 Broad St
Claremont, NH 03743 603 542 5114 603 543 1570 fax [email protected] November 2011
PO Box 1485, 233 Broad St
Claremont, NH 03743 603 542 5114 603 543 1570 fax [email protected] November 2011