Presenting a live 90-minute webinar with interactive Q&A Asset Spend-Down for Medicaid Qualification Navigating the Complexities of Classifying Assets, Individuals vs. Married Couples, and Appeals Process 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific THURSDAY, MARCH 10, 2016 The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Michael J. Keenan, Attorney, Keenan Law, South Glastonbury, Conn. Kyla G. Kelim, Esq., Aging in Alabama, Fairhope, Ala.
Transcript
Presenting a live 90-minute webinar with interactive Q&A
Asset Spend-Down forMedicaid QualificationNavigating the Complexities of Classifying Assets,Individuals vs. Married Couples, and Appeals Process
The audio portion of the conference may be accessed via the telephone or by using your computer'sspeakers. Please refer to the instructions emailed to registrants for additional information. If youhave any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
Michael J. Keenan, Attorney, Keenan Law, South Glastonbury, Conn.
Kyla G. Kelim, Esq., Aging in Alabama, Fairhope, Ala.
Tips for Optimal Quality
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If the sound quality is not satisfactory, you may listen via the phone: dial1-866-961-9091 and enter your PIN when prompted. Otherwise, pleasesend us a chat or e-mail [email protected] immediately so we canaddress the problem.
If you dialed in and have any difficulties during the call, press *0 for assistance.
Viewing QualityTo maximize your screen, press the F11 key on your keyboard. To exit full screen,press the F11 key again.
FOR LIVE EVENT ONLY
Sound QualityIf you are listening via your computer speakers, please note that the qualityof your sound will vary depending on the speed and quality of your internetconnection.
If the sound quality is not satisfactory, you may listen via the phone: dial1-866-961-9091 and enter your PIN when prompted. Otherwise, pleasesend us a chat or e-mail [email protected] immediately so we canaddress the problem.
If you dialed in and have any difficulties during the call, press *0 for assistance.
Viewing QualityTo maximize your screen, press the F11 key on your keyboard. To exit full screen,press the F11 key again.
Continuing Education Credits
In order for us to process your continuing education credit, you must confirm yourparticipation in this webinar by completing and submitting the AttendanceAffirmation/Evaluation after the webinar.
A link to the Attendance Affirmation/Evaluation will be in the thank you emailthat you will receive immediately following the program.
For additional information about continuing education, call us at 1-800-926-7926ext. 35.
FOR LIVE EVENT ONLY
In order for us to process your continuing education credit, you must confirm yourparticipation in this webinar by completing and submitting the AttendanceAffirmation/Evaluation after the webinar.
A link to the Attendance Affirmation/Evaluation will be in the thank you emailthat you will receive immediately following the program.
For additional information about continuing education, call us at 1-800-926-7926ext. 35.
Program Materials
If you have not printed the conference materials for this program, pleasecomplete the following steps:
• Click on the ^ symbol next to “Conference Materials” in the middle of the left-hand column on your screen.
• Click on the tab labeled “Handouts” that appears, and there you will see aPDF of the slides for today's program.
• Double click on the PDF and a separate page will open.
• Print the slides by clicking on the printer icon.
FOR LIVE EVENT ONLY
If you have not printed the conference materials for this program, pleasecomplete the following steps:
• Click on the ^ symbol next to “Conference Materials” in the middle of the left-hand column on your screen.
• Click on the tab labeled “Handouts” that appears, and there you will see aPDF of the slides for today's program.
• Double click on the PDF and a separate page will open.
• Print the slides by clicking on the printer icon.
Qualifying for Medicaid
South Glastonbury, CTwww.keenan-law.com
Michael J. Keenan, EsqMichael J. Keenan, Esq..michael@[email protected]
Unlike Medicare & Social Security, Medicaid is a federal programUnlike Medicare & Social Security, Medicaid is a federal programrun by departments of state governments;run by departments of state governments;
States can differ widely in how they manage the MedicaidStates can differ widely in how they manage the Medicaidprogram;program;
The figures used (income limits, asset limits, penalty calculations,The figures used (income limits, asset limits, penalty calculations,etc.) vary stateetc.) vary state--toto--state;state;
Be mindful of this unique federalBe mindful of this unique federal--state dynamic during thestate dynamic during thepresentation.presentation.
www.keenanwww.keenan--law.comlaw.com
Unlike Medicare & Social Security, Medicaid is a federal programUnlike Medicare & Social Security, Medicaid is a federal programrun by departments of state governments;run by departments of state governments;
States can differ widely in how they manage the MedicaidStates can differ widely in how they manage the Medicaidprogram;program;
The figures used (income limits, asset limits, penalty calculations,The figures used (income limits, asset limits, penalty calculations,etc.) vary stateetc.) vary state--toto--state;state;
Be mindful of this unique federalBe mindful of this unique federal--state dynamic during thestate dynamic during thepresentation.presentation.
66
Medicaid IntroductionMedicaid Introduction
Established in 1965, Title XIX of the SSI Program;Established in 1965, Title XIX of the SSI Program;
Federal government sets minimum coverage standards, statesFederal government sets minimum coverage standards, statesmay expand their programs beyond the minimum requirements;may expand their programs beyond the minimum requirements;
Available to anyone who is disabled and has exhausted theirAvailable to anyone who is disabled and has exhausted theirfinancial resources;financial resources;
SSI beneficiaries are automatically eligible for Medicaid in mostSSI beneficiaries are automatically eligible for Medicaid in moststates;states;
Nursing home care and community care.Nursing home care and community care.www.keenanwww.keenan--law.comlaw.com
Established in 1965, Title XIX of the SSI Program;Established in 1965, Title XIX of the SSI Program;
Federal government sets minimum coverage standards, statesFederal government sets minimum coverage standards, statesmay expand their programs beyond the minimum requirements;may expand their programs beyond the minimum requirements;
Available to anyone who is disabled and has exhausted theirAvailable to anyone who is disabled and has exhausted theirfinancial resources;financial resources;
SSI beneficiaries are automatically eligible for Medicaid in mostSSI beneficiaries are automatically eligible for Medicaid in moststates;states;
Nursing home care and community care.Nursing home care and community care.77
Countable AssetsCountable Assets
State sets a limit on “countable” resourcesState sets a limit on “countable” resources –– assets that can beassets that can beconverted to cash and used to pay for care;converted to cash and used to pay for care;
Joint accounts are generally considered 100% owned by theJoint accounts are generally considered 100% owned by theapplicant, regardless of how many joint owners there are;applicant, regardless of how many joint owners there are;
Real estate solely owned by an applicant is considered countableReal estate solely owned by an applicant is considered countableeven though it is illiquid;even though it is illiquid;
Trusts for which the applicant is a beneficiary is generallyTrusts for which the applicant is a beneficiary is generallycountable;countable;
“Availability” is a key concept in Medicaid.“Availability” is a key concept in Medicaid.
www.keenanwww.keenan--law.comlaw.com
State sets a limit on “countable” resourcesState sets a limit on “countable” resources –– assets that can beassets that can beconverted to cash and used to pay for care;converted to cash and used to pay for care;
Joint accounts are generally considered 100% owned by theJoint accounts are generally considered 100% owned by theapplicant, regardless of how many joint owners there are;applicant, regardless of how many joint owners there are;
Real estate solely owned by an applicant is considered countableReal estate solely owned by an applicant is considered countableeven though it is illiquid;even though it is illiquid;
Trusts for which the applicant is a beneficiary is generallyTrusts for which the applicant is a beneficiary is generallycountable;countable;
“Availability” is a key concept in Medicaid.“Availability” is a key concept in Medicaid.
88
NonNon--Countable AssetsCountable Assets
A nursing home resident can keep very little in liquid assets (up to $2,000 inA nursing home resident can keep very little in liquid assets (up to $2,000 inmost SSI states);most SSI states);
Healthy community spouse can keep ½ of the joint assets up to $119,200 withHealthy community spouse can keep ½ of the joint assets up to $119,200 witha “floor” of $23,844 (2016 figures). These figures can vary statea “floor” of $23,844 (2016 figures). These figures can vary state--toto--state;state;
The home if occupied by a spouse, disabled/blind child or child under age 21,The home if occupied by a spouse, disabled/blind child or child under age 21,or if applicant plans to return home;or if applicant plans to return home;
Personal effects;Personal effects; One car for the healthy community spouse;One car for the healthy community spouse; Term life insurance;Term life insurance; A small amount of cashA small amount of cash--value life insurance;value life insurance; “Partnership Policy” long term care insurance payout equivalent.“Partnership Policy” long term care insurance payout equivalent. Certain annuities;Certain annuities; Certain types of trusts;Certain types of trusts; Retirement accounts in some states.Retirement accounts in some states.
www.keenanwww.keenan--law.comlaw.com
A nursing home resident can keep very little in liquid assets (up to $2,000 inA nursing home resident can keep very little in liquid assets (up to $2,000 inmost SSI states);most SSI states);
Healthy community spouse can keep ½ of the joint assets up to $119,200 withHealthy community spouse can keep ½ of the joint assets up to $119,200 witha “floor” of $23,844 (2016 figures). These figures can vary statea “floor” of $23,844 (2016 figures). These figures can vary state--toto--state;state;
The home if occupied by a spouse, disabled/blind child or child under age 21,The home if occupied by a spouse, disabled/blind child or child under age 21,or if applicant plans to return home;or if applicant plans to return home;
Personal effects;Personal effects; One car for the healthy community spouse;One car for the healthy community spouse; Term life insurance;Term life insurance; A small amount of cashA small amount of cash--value life insurance;value life insurance; “Partnership Policy” long term care insurance payout equivalent.“Partnership Policy” long term care insurance payout equivalent. Certain annuities;Certain annuities; Certain types of trusts;Certain types of trusts; Retirement accounts in some states.Retirement accounts in some states.
99
GiftingGifting
The applicant’s finances are audited for the 5The applicant’s finances are audited for the 5--year period leading up toyear period leading up tothe Medicaid application;the Medicaid application;
Any transfers of assets out of the applicant’s name that does notAny transfers of assets out of the applicant’s name that does notbenefit the applicant is a “gift” and a disqualifying transfer;benefit the applicant is a “gift” and a disqualifying transfer;
The size of the transfer/gift will determine the length of the period ofThe size of the transfer/gift will determine the length of the period ofineligibility for Medicaid (the “penalty period”);ineligibility for Medicaid (the “penalty period”);
The penalty period begins to run once the applicant is otherwiseThe penalty period begins to run once the applicant is otherwiseeligible for Medicaid;eligible for Medicaid;
Beware of clients’ confusion with the gift tax exemption (currentlyBeware of clients’ confusion with the gift tax exemption (currently$14,000).$14,000).
www.keenanwww.keenan--law.comlaw.com
The applicant’s finances are audited for the 5The applicant’s finances are audited for the 5--year period leading up toyear period leading up tothe Medicaid application;the Medicaid application;
Any transfers of assets out of the applicant’s name that does notAny transfers of assets out of the applicant’s name that does notbenefit the applicant is a “gift” and a disqualifying transfer;benefit the applicant is a “gift” and a disqualifying transfer;
The size of the transfer/gift will determine the length of the period ofThe size of the transfer/gift will determine the length of the period ofineligibility for Medicaid (the “penalty period”);ineligibility for Medicaid (the “penalty period”);
The penalty period begins to run once the applicant is otherwiseThe penalty period begins to run once the applicant is otherwiseeligible for Medicaid;eligible for Medicaid;
Beware of clients’ confusion with the gift tax exemption (currentlyBeware of clients’ confusion with the gift tax exemption (currently$14,000).$14,000).
1010
Permitted TransfersPermitted Transfers
To a spouse;To a spouse;
To a disabled or blind child;To a disabled or blind child;
To a trust for a disabled individual who is under age 65;To a trust for a disabled individual who is under age 65;
The house may be transferred to (besides those above):The house may be transferred to (besides those above):-- Child under age 21Child under age 21-- Child who has lived in the house for 2 years prior to theChild who has lived in the house for 2 years prior to theapplicant moving to a nursing home and provided care to keep theapplicant moving to a nursing home and provided care to keep theapplicant out of the home during that time.applicant out of the home during that time.-- Sibling with an equity interest in the house and who has livedSibling with an equity interest in the house and who has livedthere for one year prior to applicant’s nursing home placement.there for one year prior to applicant’s nursing home placement.
www.keenanwww.keenan--law.comlaw.com
To a spouse;To a spouse;
To a disabled or blind child;To a disabled or blind child;
To a trust for a disabled individual who is under age 65;To a trust for a disabled individual who is under age 65;
The house may be transferred to (besides those above):The house may be transferred to (besides those above):-- Child under age 21Child under age 21-- Child who has lived in the house for 2 years prior to theChild who has lived in the house for 2 years prior to theapplicant moving to a nursing home and provided care to keep theapplicant moving to a nursing home and provided care to keep theapplicant out of the home during that time.applicant out of the home during that time.-- Sibling with an equity interest in the house and who has livedSibling with an equity interest in the house and who has livedthere for one year prior to applicant’s nursing home placement.there for one year prior to applicant’s nursing home placement.
1111
Income TreatmentIncome Treatment
Generally, all of the applicant’s income must go to theGenerally, all of the applicant’s income must go to thenursing home.nursing home.
The applicant can keep a small amount each month forThe applicant can keep a small amount each month fortheir personal needs account at the nursing home;their personal needs account at the nursing home;
Deduction for uncovered medical costs (includingDeduction for uncovered medical costs (includingmedical insurance premiums);medical insurance premiums);
An allowance can be allocated to the community spouseAn allowance can be allocated to the community spouseif a need can be demonstrated;if a need can be demonstrated;
Some states have income caps, but the excess can go toSome states have income caps, but the excess can go toa “D4B” or “Miller” trust;a “D4B” or “Miller” trust;
The income of the community spouse is ignored.The income of the community spouse is ignored.
www.keenanwww.keenan--law.comlaw.com
Generally, all of the applicant’s income must go to theGenerally, all of the applicant’s income must go to thenursing home.nursing home.
The applicant can keep a small amount each month forThe applicant can keep a small amount each month fortheir personal needs account at the nursing home;their personal needs account at the nursing home;
Deduction for uncovered medical costs (includingDeduction for uncovered medical costs (includingmedical insurance premiums);medical insurance premiums);
An allowance can be allocated to the community spouseAn allowance can be allocated to the community spouseif a need can be demonstrated;if a need can be demonstrated;
Some states have income caps, but the excess can go toSome states have income caps, but the excess can go toa “D4B” or “Miller” trust;a “D4B” or “Miller” trust;
The income of the community spouse is ignored.The income of the community spouse is ignored.
1212
Spend-Down Rules
South Glastonbury, CTwww.keenan-law.com
Michael J. Keenan, Esq.Michael J. Keenan, Esq.michael@[email protected]
The starting point for the spendThe starting point for the spend--down analysis is understandingdown analysis is understandingthe asset limitation;the asset limitation;
Once the asset limitation is determined, the applicant mustOnce the asset limitation is determined, the applicant must“spend down” his countable assets until his asset level falls below“spend down” his countable assets until his asset level falls belowthe asset limitation;the asset limitation;
The asset limitation for a single applicant is a very low amountThe asset limitation for a single applicant is a very low amount($2,000 in most SSI states).($2,000 in most SSI states).
www.keenanwww.keenan--law.comlaw.com
The starting point for the spendThe starting point for the spend--down analysis is understandingdown analysis is understandingthe asset limitation;the asset limitation;
Once the asset limitation is determined, the applicant mustOnce the asset limitation is determined, the applicant must“spend down” his countable assets until his asset level falls below“spend down” his countable assets until his asset level falls belowthe asset limitation;the asset limitation;
The asset limitation for a single applicant is a very low amountThe asset limitation for a single applicant is a very low amount($2,000 in most SSI states).($2,000 in most SSI states).
1414
Asset LimitationAsset Limitationfor a Married Applicantfor a Married Applicant
The state will take a “snap shot” look at the countable maritalThe state will take a “snap shot” look at the countable maritalassets on the first day of institutionalization for the sick spouse;assets on the first day of institutionalization for the sick spouse;
All of the couple’s countable assets will be lumped together inAll of the couple’s countable assets will be lumped together inone figure (regardless of which spouse owns which assets);one figure (regardless of which spouse owns which assets);
That figure will be split in half with ½ attributable to theThat figure will be split in half with ½ attributable to theinstitutionalized spouse, ½ attributable to the community spouse;institutionalized spouse, ½ attributable to the community spouse;
The institutionalized spouse will be able to keep a very lowThe institutionalized spouse will be able to keep a very lowamount ($2,000 in most SSI states);amount ($2,000 in most SSI states);
The community spouse can keep up to $119,200 with a “floor” ofThe community spouse can keep up to $119,200 with a “floor” of$23,844 (2016 figures). These figures can vary state$23,844 (2016 figures). These figures can vary state--toto--state.state.
www.keenanwww.keenan--law.comlaw.com
The state will take a “snap shot” look at the countable maritalThe state will take a “snap shot” look at the countable maritalassets on the first day of institutionalization for the sick spouse;assets on the first day of institutionalization for the sick spouse;
All of the couple’s countable assets will be lumped together inAll of the couple’s countable assets will be lumped together inone figure (regardless of which spouse owns which assets);one figure (regardless of which spouse owns which assets);
That figure will be split in half with ½ attributable to theThat figure will be split in half with ½ attributable to theinstitutionalized spouse, ½ attributable to the community spouse;institutionalized spouse, ½ attributable to the community spouse;
The institutionalized spouse will be able to keep a very lowThe institutionalized spouse will be able to keep a very lowamount ($2,000 in most SSI states);amount ($2,000 in most SSI states);
The community spouse can keep up to $119,200 with a “floor” ofThe community spouse can keep up to $119,200 with a “floor” of$23,844 (2016 figures). These figures can vary state$23,844 (2016 figures). These figures can vary state--toto--state.state.
1515
Spending DownSpending Down
“Spending Down” generally means spending assets on products or services“Spending Down” generally means spending assets on products or servicesthat will benefit the institutionalized spousethat will benefit the institutionalized spouse oror the community spouse;the community spouse;
Paying the nursing home bill and buying items for the institutionalizedPaying the nursing home bill and buying items for the institutionalizedspouse’s room at the nursing home are valid spendspouse’s room at the nursing home are valid spend--down items;down items;
The costs of fixing or sprucing up the home for the community spouse areThe costs of fixing or sprucing up the home for the community spouse arevalid spendvalid spend--down items;down items;
Paying off the debts (mortgage, credit card bills, medical bills, etc.) ofPaying off the debts (mortgage, credit card bills, medical bills, etc.) ofeither spouse is permitted;either spouse is permitted;
Purchasing prepaid funeral contracts for both spouses is permitted.Purchasing prepaid funeral contracts for both spouses is permitted.
www.keenanwww.keenan--law.comlaw.com
“Spending Down” generally means spending assets on products or services“Spending Down” generally means spending assets on products or servicesthat will benefit the institutionalized spousethat will benefit the institutionalized spouse oror the community spouse;the community spouse;
Paying the nursing home bill and buying items for the institutionalizedPaying the nursing home bill and buying items for the institutionalizedspouse’s room at the nursing home are valid spendspouse’s room at the nursing home are valid spend--down items;down items;
The costs of fixing or sprucing up the home for the community spouse areThe costs of fixing or sprucing up the home for the community spouse arevalid spendvalid spend--down items;down items;
Paying off the debts (mortgage, credit card bills, medical bills, etc.) ofPaying off the debts (mortgage, credit card bills, medical bills, etc.) ofeither spouse is permitted;either spouse is permitted;
Purchasing prepaid funeral contracts for both spouses is permitted.Purchasing prepaid funeral contracts for both spouses is permitted.
1616
Spending DownSpending Down
The spendThe spend--down should cease as soon as the asset limitation isdown should cease as soon as the asset limitation isrealized;realized;
Gifting assets to third parties is not spending down. Gifts areGifting assets to third parties is not spending down. Gifts aredisqualifying transfers of assets;disqualifying transfers of assets;
Adding children as joint owners on accounts or real estate is notAdding children as joint owners on accounts or real estate is notspending down;spending down;
You should retain written verification of all spendYou should retain written verification of all spend--down itemsdown items(cashed checks, receipts, paid bills, etc.).(cashed checks, receipts, paid bills, etc.).
www.keenanwww.keenan--law.comlaw.com
The spendThe spend--down should cease as soon as the asset limitation isdown should cease as soon as the asset limitation isrealized;realized;
Gifting assets to third parties is not spending down. Gifts areGifting assets to third parties is not spending down. Gifts aredisqualifying transfers of assets;disqualifying transfers of assets;
Adding children as joint owners on accounts or real estate is notAdding children as joint owners on accounts or real estate is notspending down;spending down;
You should retain written verification of all spendYou should retain written verification of all spend--down itemsdown items(cashed checks, receipts, paid bills, etc.).(cashed checks, receipts, paid bills, etc.).
• Income below $ 2199• Single – Countable Resources below
$2000• Life insurance/burial funds less than $
1500 (or $5000)
• Income below $ 2199• Single – Countable Resources below
$2000• Life insurance/burial funds less than $
1500 (or $5000)
20
1. EXEMPT PURCHASES
• Funeral/Burial• Car• Pay debt (mortgage) but remember you are
probably clearing a debt that will ultimately benefitMedicaid
• Supplies/clothing/sundries
• Funeral/Burial• Car• Pay debt (mortgage) but remember you are
probably clearing a debt that will ultimately benefitMedicaid
• Supplies/clothing/sundries
21
EXAMPLE: EXEMPT PURCHASES
• SINGLE CLIENT IS GOING IN NURSING HOME, HAS$25,000.00.
• HAS NO LIFE INSURANCE, NO FUNERAL POLICY• OPTION 1: do nothing, spenddown on the nursing home,
once below $2000 then client qualifies for Medicaid. Whenclient passes away, heirs pay for funeral out of their ownpocket
• OPTION 2: buy a prepaid policy that complies with yourstate's regulations, spenddown on nursing home. At death,funeral is paid from policy. THIS IS BETTER.
• SINGLE CLIENT IS GOING IN NURSING HOME, HAS$25,000.00.
• HAS NO LIFE INSURANCE, NO FUNERAL POLICY• OPTION 1: do nothing, spenddown on the nursing home,
once below $2000 then client qualifies for Medicaid. Whenclient passes away, heirs pay for funeral out of their ownpocket
• OPTION 2: buy a prepaid policy that complies with yourstate's regulations, spenddown on nursing home. At death,funeral is paid from policy. THIS IS BETTER.
22
2. EXEMPT TRANSFERS
• To disabled child (everything)• To caretaker child (house)• To sibling with an equity interest (house)• To minor child (house)• To special needs trust (for disabled child or self
settled if under age 65)• To special needs trust (pooled for over age 65)
• To disabled child (everything)• To caretaker child (house)• To sibling with an equity interest (house)• To minor child (house)• To special needs trust (for disabled child or self
settled if under age 65)• To special needs trust (pooled for over age 65)
23
EXAMPLE: EXEMPT TRANSFER
• SINGLE CLIENT IS GOING IN NURSING HOME, HAS $25,000.00.• HAS NO RESOURCES FOR ITEMS SHE/HE MAY NEED• OPTION 1: do nothing, spenddown on the nursing home, once
below $2000 then client qualifies for Medicaid. When clientneeds something (lift chair, uncovered therapy, maybe privateroom fees (but maybe not), property taxes, insurance, cellphone, eyeglasses), family pays out of their own pocket
• OPTION 2: open a special needs trust, you are spentdown onnursing home. The client's trust pays for uncovered needs. Atdeath, Medicaid gets what is left. THIS IS BETTER.
• SINGLE CLIENT IS GOING IN NURSING HOME, HAS $25,000.00.• HAS NO RESOURCES FOR ITEMS SHE/HE MAY NEED• OPTION 1: do nothing, spenddown on the nursing home, once
below $2000 then client qualifies for Medicaid. When clientneeds something (lift chair, uncovered therapy, maybe privateroom fees (but maybe not), property taxes, insurance, cellphone, eyeglasses), family pays out of their own pocket
• OPTION 2: open a special needs trust, you are spentdown onnursing home. The client's trust pays for uncovered needs. Atdeath, Medicaid gets what is left. THIS IS BETTER.
24
3. NON EXEMPT TRANSFERS
• For those with enough to get through look-back period or who can get through it athome, maximize income, transfer toirrevocable trust
• For those without enough to get throughlook-back period, start penalty period, gohome (or to lower level of care) to continuethe penalty period running then go back
• For those with enough to get through look-back period or who can get through it athome, maximize income, transfer toirrevocable trust
• For those without enough to get throughlook-back period, start penalty period, gohome (or to lower level of care) to continuethe penalty period running then go back
25
EXAMPLE: NON-EXEMPT TRANSFERS
• SAME SINGLE CLIENT TO GO TO NURSING HOME, HAS$500,000 in cds, $3,000 monthly income
• TRANSFER 1/2 (or whatever will pay for the nursing homeduring five year period)
• Assume nursing home costs $7500 per month, then youhave 60 months to pay for the nursing home, $4,000 permonth shortfall (or whatever), costs $240,000.00, at endof 5 years, pay until down to $2,000, go on Medicaid,$250,000 is preserved
• SAME SINGLE CLIENT TO GO TO NURSING HOME, HAS$500,000 in cds, $3,000 monthly income
• TRANSFER 1/2 (or whatever will pay for the nursing homeduring five year period)
• Assume nursing home costs $7500 per month, then youhave 60 months to pay for the nursing home, $4,000 permonth shortfall (or whatever), costs $240,000.00, at endof 5 years, pay until down to $2,000, go on Medicaid,$250,000 is preserved
26
4. FANCY STUFF
• Consider resetting the snapshot date if theplanning has not been done
• For example: Client has child who will buy home(not disabled, not caretaker, not minor), has$40,000.00 and is admitted to nursing home. Houseneeds work. Consider having client go home withcare, perform repairs, then have child buy home(for fair market value)
• Consider resetting the snapshot date if theplanning has not been done
• For example: Client has child who will buy home(not disabled, not caretaker, not minor), has$40,000.00 and is admitted to nursing home. Houseneeds work. Consider having client go home withcare, perform repairs, then have child buy home(for fair market value)
27
EASY RIGHT?
• HIRE A CPA OR TAX IRACONTRIBUTIONS
• HIRE A CPA OR TAX IRACONTRIBUTIONS
28
5 (A). MAXIMIZE INCOME:WHAT ABOUT YOUR SERVICE?• You must apply to qualify for Medicaid• Veterans of a war• No service connected disability required• Get up to 2120/1149 for care• 1 day of wartime, arena of war not necessary• VA putting in a 3 year lookback period with a 10
year penalty
• You must apply to qualify for Medicaid• Veterans of a war• No service connected disability required• Get up to 2120/1149 for care• 1 day of wartime, arena of war not necessary• VA putting in a 3 year lookback period with a 10
year penalty
29
5(B) MAXIMIZE INCOME: MEDICARESAVINGS PROGRAM
• QMB/SLMB/QI• Income driven: 1010/1208/1357• Married 1355/1622/1823• Most states limit assets (federal limit: single:
7280, married: 10,930)• Several states (including AL) do not count
assets
• QMB/SLMB/QI• Income driven: 1010/1208/1357• Married 1355/1622/1823• Most states limit assets (federal limit: single:
7280, married: 10,930)• Several states (including AL) do not count
assets
30
6. IF YOU HAVE TIME TO PLAN• Long term care insurance• Irrevocable Trust• Correct problems with spending (paying for
family member obligations, gifting)• Transfer home, reserve life estate (some
states may seek recovery)• CCRC buy in
• Long term care insurance• Irrevocable Trust• Correct problems with spending (paying for
family member obligations, gifting)• Transfer home, reserve life estate (some
states may seek recovery)• CCRC buy in
31
SPEND-DOWN STRATEGIES FOR MARRIEDAPPLICANTS
32
INCOME AND RESOURCES• Income below $ 2199 for applicant,
some states count couples’ income• Single – Countable Resources below
$2000• Married -- Countable Resources
below $238,440• Life insurance/burial funds less than
$ 1500 (or $5000) each
• Income below $ 2199 for applicant,some states count couples’ income
• Single – Countable Resources below$2000
• Married -- Countable Resourcesbelow $238,440
• Life insurance/burial funds less than$ 1500 (or $5000) each
33
1. EXEMPT PURCHASES
• Funeral/Burial• House• Car• Pay debt (mortgage, minimize debt for
community spouse)• Work on home
• Funeral/Burial• House• Car• Pay debt (mortgage, minimize debt for
community spouse)• Work on home
34
EXAMPLE: EXEMPT PURCHASES
• MARRIED CLIENT IS GOING IN NURSING HOME, HAS$65,000.00.
• COUPLE HAS NO LIFE INSURANCE, NO FUNERAL POLICY• OPTION 1: do nothing, spenddown on the nursing home,
give spouse 1/2 (or may have to spenddown to $25,000),once below $2000 then client qualifies for Medicaid. Whenclient passes away, spouse pays for funeral out of thatspouse's 1/2
• OPTION 2: buy a prepaid policy that complies with yourstate's regulations, spouse gets a minimum of 23,844,spenddown on nursing home. At death, funeral is paid frompolicy. THIS IS BETTER.
• MARRIED CLIENT IS GOING IN NURSING HOME, HAS$65,000.00.
• COUPLE HAS NO LIFE INSURANCE, NO FUNERAL POLICY• OPTION 1: do nothing, spenddown on the nursing home,
give spouse 1/2 (or may have to spenddown to $25,000),once below $2000 then client qualifies for Medicaid. Whenclient passes away, spouse pays for funeral out of thatspouse's 1/2
• OPTION 2: buy a prepaid policy that complies with yourstate's regulations, spouse gets a minimum of 23,844,spenddown on nursing home. At death, funeral is paid frompolicy. THIS IS BETTER.
35
2. EXEMPT TRANSFERS
• To spouse (but if spouse is sick…)• To disabled child (everything)• To caretaker child (house)• To sibling with an equity interest (house)• To minor child (house)• To special needs trust (for disabled child or self
settled if under age 65)• To special needs trust (pooled for over age 65)
• To spouse (but if spouse is sick…)• To disabled child (everything)• To caretaker child (house)• To sibling with an equity interest (house)• To minor child (house)• To special needs trust (for disabled child or self
settled if under age 65)• To special needs trust (pooled for over age 65)
36
EXAMPLE: EXEMPT TRANSFER• MARRIED CLIENT IS GOING IN NURSING HOME, HAS $50,000*.• HAS NO RESOURCES FOR ITEMS SHE/HE MAY NEED• OPTION 1: do nothing, give spouse 1/2*, spenddown rest on the
nursing home, once below $2000 then client qualifies forMedicaid. When client needs something (lift chair, uncoveredtherapy, maybe private room fees (but maybe not), property taxes,insurance, cell phone, eyeglasses), spouse pays out of their$25,000.
• OPTION 2: give spouse 1/2, open a special needs trust for theother 1/2, you are spentdown on nursing home. The client's trustpays for uncovered needs. At death, Medicaid gets what is left.THIS IS BETTER.
• *Some states permit the spouse to keep up to $119,220 withoutspending any on the nursing home, like Florida
• MARRIED CLIENT IS GOING IN NURSING HOME, HAS $50,000*.• HAS NO RESOURCES FOR ITEMS SHE/HE MAY NEED• OPTION 1: do nothing, give spouse 1/2*, spenddown rest on the
nursing home, once below $2000 then client qualifies forMedicaid. When client needs something (lift chair, uncoveredtherapy, maybe private room fees (but maybe not), property taxes,insurance, cell phone, eyeglasses), spouse pays out of their$25,000.
• OPTION 2: give spouse 1/2, open a special needs trust for theother 1/2, you are spentdown on nursing home. The client's trustpays for uncovered needs. At death, Medicaid gets what is left.THIS IS BETTER.
• *Some states permit the spouse to keep up to $119,220 withoutspending any on the nursing home, like Florida
37
3(A). COMMUNITY SPOUSE INCOME• In most states, community spouse can keep all
of his income (if over the MMMNA)• The MMMNA (Minimum Monthly Maintenance
Needs Allowance) changes each July: it is$1,991.25 per month ($2490 Alaska)($2291.25Hawaii)(minimum) $2980.50 (maximum) $597.38for excess shelter resource ($747Alaska)($687.38 Hawaii)
• So for spouses that will need MMMNA avoidstrategies that maximize income of spouse
• In most states, community spouse can keep allof his income (if over the MMMNA)
• The MMMNA (Minimum Monthly MaintenanceNeeds Allowance) changes each July: it is$1,991.25 per month ($2490 Alaska)($2291.25Hawaii)(minimum) $2980.50 (maximum) $597.38for excess shelter resource ($747Alaska)($687.38 Hawaii)
• So for spouses that will need MMMNA avoidstrategies that maximize income of spouse
38
3(B) COMMUNITY SPOUSE ASSETS• CSRA – community spouse resource
allowance – spouse may keep up to ½ of theresource amount ($119,220)
• Some states permit up to half• Some states require s “spenddown” – must
spend ½ to keep ½• Spouses may keep a minimum of $23844
without spenddown)
• CSRA – community spouse resourceallowance – spouse may keep up to ½ of theresource amount ($119,220)
• Some states permit up to half• Some states require s “spenddown” – must
spend ½ to keep ½• Spouses may keep a minimum of $23844
without spenddown)
39
4. FANCY STUFF• Consider resetting the snapshot date if the
planning has not been done• For example: Client has spouse who will keep
home, has $40,000.00 and is admitted to nursinghome. House needs work (or has mortgage).Consider having client go home with care, performrepairs (or pay mortgage), then transfer home tospouse
• Consider resetting the snapshot date if theplanning has not been done
• For example: Client has spouse who will keephome, has $40,000.00 and is admitted to nursinghome. House needs work (or has mortgage).Consider having client go home with care, performrepairs (or pay mortgage), then transfer home tospouse
40
5 (A). ANNUITIES• MUST BE CAUTIOUS!• Annuity must be Medicaid compliant• Use to maximize spousal income
(particularly if already over MMMNA)• Must be actuarially sound• Must have Medicaid as beneficiary
• MUST BE CAUTIOUS!• Annuity must be Medicaid compliant• Use to maximize spousal income
(particularly if already over MMMNA)• Must be actuarially sound• Must have Medicaid as beneficiary
41
5(B) INCOME ONLY TRUSTS• Beware trust language• Effective if done correctly• Still subject to 5 year lookback
period for planning
• Beware trust language• Effective if done correctly• Still subject to 5 year lookback
period for planning
42
6. IF YOU HAVE TIME TO PLAN
• Long term care insurance• Irrevocable Trust• Correct problems with spending (paying for family
member obligations, gifting)• Transfer home, reserve life estate (some states may
seek recovery)• CCRC buy in
• Long term care insurance• Irrevocable Trust• Correct problems with spending (paying for family
member obligations, gifting)• Transfer home, reserve life estate (some states may
seek recovery)• CCRC buy in
43
7. WHAT’S YOURS IS MINE, WHAT’S MINE ISMINE, WHAT’S OURS IS MINE
• Medicaid will count couple as one person• Spouse at home can generate further
penalties by transferring assets• Beware the “caretaker” at home, once assets
are split, Medicaid will still monitor thoseassets, must strictly comply with rules
• Medicaid will count couple as one person• Spouse at home can generate further
penalties by transferring assets• Beware the “caretaker” at home, once assets
are split, Medicaid will still monitor thoseassets, must strictly comply with rules
44
Common Mistakes & Pitfalls
South Glastonbury, CTwww.keenan-law.com
Michael J. Keenan, EsqMichael J. Keenan, Esq..michael@[email protected]
It’s possible to begin the spendIt’s possible to begin the spend--downdown tootoo earlyearly;;
In many cases the goal is to maximize the amount that theIn many cases the goal is to maximize the amount that thecommunity spouse is allowed to keep;community spouse is allowed to keep;
The community spouse can keep ½ of the countable assets on theThe community spouse can keep ½ of the countable assets on thesnapsnap--shot date (1shot date (1stst day of institutionalization) up to $119,200day of institutionalization) up to $119,200(2016);(2016);
If the couple begins the spendIf the couple begins the spend--downdown beforebefore the snapthe snap--shot dateshot datethen it will lower the amount the community spouse can keep.then it will lower the amount the community spouse can keep.
It’s possible to begin the spendIt’s possible to begin the spend--downdown tootoo earlyearly;;
In many cases the goal is to maximize the amount that theIn many cases the goal is to maximize the amount that thecommunity spouse is allowed to keep;community spouse is allowed to keep;
The community spouse can keep ½ of the countable assets on theThe community spouse can keep ½ of the countable assets on thesnapsnap--shot date (1shot date (1stst day of institutionalization) up to $119,200day of institutionalization) up to $119,200(2016);(2016);
If the couple begins the spendIf the couple begins the spend--downdown beforebefore the snapthe snap--shot dateshot datethen it will lower the amount the community spouse can keep.then it will lower the amount the community spouse can keep.
4646
Gift Tax ConfusionGift Tax Confusion
Many (most?) clients mistakenly believe that they are allowed to gift upMany (most?) clients mistakenly believe that they are allowed to gift upto the gift tax exclusion amount ($14,000 in 2016) without a Medicaidto the gift tax exclusion amount ($14,000 in 2016) without a Medicaidproblem;problem;
The IRS will not care about gifting below $14,000 per person per year,The IRS will not care about gifting below $14,000 per person per year,but the Medicaid programbut the Medicaid program doesdoes care;care;
Make sure clients understand the difference between IRS gift tax rulesMake sure clients understand the difference between IRS gift tax rulesand Medicaid gifting rules;and Medicaid gifting rules;
Gifting up to the exclusion amount is not spending down, although itGifting up to the exclusion amount is not spending down, although itmaymay be a component of a strategic gifting strategy for Medicaid planningbe a component of a strategic gifting strategy for Medicaid planningpurposes;purposes;
A related misconception: that you are not allowed to gift more thanA related misconception: that you are not allowed to gift more than$14,000 per person, per year.$14,000 per person, per year.
Many (most?) clients mistakenly believe that they are allowed to gift upMany (most?) clients mistakenly believe that they are allowed to gift upto the gift tax exclusion amount ($14,000 in 2016) without a Medicaidto the gift tax exclusion amount ($14,000 in 2016) without a Medicaidproblem;problem;
The IRS will not care about gifting below $14,000 per person per year,The IRS will not care about gifting below $14,000 per person per year,but the Medicaid programbut the Medicaid program doesdoes care;care;
Make sure clients understand the difference between IRS gift tax rulesMake sure clients understand the difference between IRS gift tax rulesand Medicaid gifting rules;and Medicaid gifting rules;
Gifting up to the exclusion amount is not spending down, although itGifting up to the exclusion amount is not spending down, although itmaymay be a component of a strategic gifting strategy for Medicaid planningbe a component of a strategic gifting strategy for Medicaid planningpurposes;purposes;
A related misconception: that you are not allowed to gift more thanA related misconception: that you are not allowed to gift more than$14,000 per person, per year.$14,000 per person, per year.
4747
Not Paying Family Members for CareNot Paying Family Members for Care
Family members sometimes devote extraordinary amounts of timeFamily members sometimes devote extraordinary amounts of timeand effort toward providing care and services for the client;and effort toward providing care and services for the client;
Paying family members for their care services is often a viablePaying family members for their care services is often a viablespendspend--down option;down option;
Payment for services rendered, not a disqualifying gift;Payment for services rendered, not a disqualifying gift;
Check your state agency to see how such an arrangement would beCheck your state agency to see how such an arrangement would betreated when the Medicaid application is processed;treated when the Medicaid application is processed;
Best practices: have a written and notarized agreement signed byBest practices: have a written and notarized agreement signed byall parties, keep logs/journals of services provided, keep the hourlyall parties, keep logs/journals of services provided, keep the hourlyrate reasonable.rate reasonable.
Family members sometimes devote extraordinary amounts of timeFamily members sometimes devote extraordinary amounts of timeand effort toward providing care and services for the client;and effort toward providing care and services for the client;
Paying family members for their care services is often a viablePaying family members for their care services is often a viablespendspend--down option;down option;
Payment for services rendered, not a disqualifying gift;Payment for services rendered, not a disqualifying gift;
Check your state agency to see how such an arrangement would beCheck your state agency to see how such an arrangement would betreated when the Medicaid application is processed;treated when the Medicaid application is processed;
Best practices: have a written and notarized agreement signed byBest practices: have a written and notarized agreement signed byall parties, keep logs/journals of services provided, keep the hourlyall parties, keep logs/journals of services provided, keep the hourlyrate reasonable.rate reasonable.
4848
Relying on SpendRelying on Spend--Down AdviceDown Advicefrom the Nursing Homefrom the Nursing Home
Clients will often rely on advice from billing departmentsClients will often rely on advice from billing departmentsand social workers at the nursing home;and social workers at the nursing home;
In most cases, the nursing home will only mentionIn most cases, the nursing home will only mentionpaying the nursing home bills as a spendpaying the nursing home bills as a spend--down item;down item;
No legal obligation for a nursing home to walk a familyNo legal obligation for a nursing home to walk a familythroughthrough allall of the spendof the spend--down options;down options;
The nursing home is a business and their “client” is theThe nursing home is a business and their “client” is thenursing home, not the residents and their families.nursing home, not the residents and their families.
Clients will often rely on advice from billing departmentsClients will often rely on advice from billing departmentsand social workers at the nursing home;and social workers at the nursing home;
In most cases, the nursing home will only mentionIn most cases, the nursing home will only mentionpaying the nursing home bills as a spendpaying the nursing home bills as a spend--down item;down item;
No legal obligation for a nursing home to walk a familyNo legal obligation for a nursing home to walk a familythroughthrough allall of the spendof the spend--down options;down options;
The nursing home is a business and their “client” is theThe nursing home is a business and their “client” is thenursing home, not the residents and their families.nursing home, not the residents and their families.
4949
Life Insurance PoliciesLife Insurance Policies
Small, longSmall, long--forgotten life insurance policies often create bigforgotten life insurance policies often create bigMedicaid eligibility problems;Medicaid eligibility problems;
Clients often forget they have certain policies;Clients often forget they have certain policies;
Clients are often unclear as to whether or not their policies have aClients are often unclear as to whether or not their policies have acash value;cash value;
Life insurance policies with cash values may need to be spent downLife insurance policies with cash values may need to be spent downto obtain Medicaid eligibility;to obtain Medicaid eligibility;
Make sure you are absolutely clear on your clients’ life insuranceMake sure you are absolutely clear on your clients’ life insurancesituation and obtain verifying documentation.situation and obtain verifying documentation.
Small, longSmall, long--forgotten life insurance policies often create bigforgotten life insurance policies often create bigMedicaid eligibility problems;Medicaid eligibility problems;
Clients often forget they have certain policies;Clients often forget they have certain policies;
Clients are often unclear as to whether or not their policies have aClients are often unclear as to whether or not their policies have acash value;cash value;
Life insurance policies with cash values may need to be spent downLife insurance policies with cash values may need to be spent downto obtain Medicaid eligibility;to obtain Medicaid eligibility;
Make sure you are absolutely clear on your clients’ life insuranceMake sure you are absolutely clear on your clients’ life insurancesituation and obtain verifying documentation.situation and obtain verifying documentation.
5050
Spending Down More than NecessarySpending Down More than Necessary
Make sure you are certain about the asset limitation;Make sure you are certain about the asset limitation;
The state should issue a written notice indicating yourThe state should issue a written notice indicating yourclient’s asset limitation;client’s asset limitation;
Make sure your client stops their spendMake sure your client stops their spend--down as soondown as soonas possible.as possible.
Make sure you are certain about the asset limitation;Make sure you are certain about the asset limitation;
The state should issue a written notice indicating yourThe state should issue a written notice indicating yourclient’s asset limitation;client’s asset limitation;
Make sure your client stops their spendMake sure your client stops their spend--down as soondown as soonas possible.as possible.
5151
Spending Down Exempt ResourcesSpending Down Exempt Resources
Become absolutely clear on what your state treats asBecome absolutely clear on what your state treats as“exempt” assets;“exempt” assets;
Example: Individual Retirement Accounts (IRA’s) areExample: Individual Retirement Accounts (IRA’s) areexempt in many states, but these accounts are oftenexempt in many states, but these accounts are oftenmistakenly included in a spendmistakenly included in a spend--down.down.
Become absolutely clear on what your state treats asBecome absolutely clear on what your state treats as“exempt” assets;“exempt” assets;
Example: Individual Retirement Accounts (IRA’s) areExample: Individual Retirement Accounts (IRA’s) areexempt in many states, but these accounts are oftenexempt in many states, but these accounts are oftenmistakenly included in a spendmistakenly included in a spend--down.down.
There are several exceptions to the general rule thatThere are several exceptions to the general rule thatgifting is not allowed;gifting is not allowed;
Transfers to disabled children (or trusts for suchTransfers to disabled children (or trusts for suchchildren);children);
Transfer of the house to a caregiver child;Transfer of the house to a caregiver child;
Pose questions to clients that may uncoverPose questions to clients that may uncoveropportunities to make exempt transfers andopportunities to make exempt transfers andreducing/eliminating the need for a spendreducing/eliminating the need for a spend--down.down.
There are several exceptions to the general rule thatThere are several exceptions to the general rule thatgifting is not allowed;gifting is not allowed;
Transfers to disabled children (or trusts for suchTransfers to disabled children (or trusts for suchchildren);children);
Transfer of the house to a caregiver child;Transfer of the house to a caregiver child;
Pose questions to clients that may uncoverPose questions to clients that may uncoveropportunities to make exempt transfers andopportunities to make exempt transfers andreducing/eliminating the need for a spendreducing/eliminating the need for a spend--down.down.
