The seniors I serve in my practice all voice a very similar concern. They are terrified that they will need the services of a nursing home in their old age. For people who are fiercely independent, a nursing home represents not only a loss of personal freedom, but also a massive financial burden that can quickly erase the fruits of a lifetime of productive labor. Nursing homes around the country vary in terms of quality and price, but a recent industry wide study found that the typical price of a nursing home’s semi-private room was $222 per day and that the typical senior stayed in a nursing home for 835 days. For those requiring Alzheimer’s care and higher levels of individualized attention, nursing home costs can easily exceed $90,000 per year. That is going to scramble a nest egg of almost any size. This is when our Medicaid Planning services are most needed.
Deliberate advanced planning can help you preserve your estate and care for your spouse in the event that you need expensive long term care. If long term care insurance is out of the question and you anticipate relying at least in part on Medicaid to fund your long term care, you should speak to an elder law attorney to see what options are available to protect your assets while guaranteeing your care. Still not convinced? Here are five things an elder law attorney can help you accomplish while protecting your assets:
Qualify for Medicaid and Pre-Pay Expenses
For those who are on the cusp of qualifying for Medicaid, pre-paying certain expenses has the dual benefit of reducing qualified assets and paying off known expenses. Pre-paying for known expenses, like funerals, burial plots, and other long term home care expenses permits you to “spend down” the assets that are stopping you from qualifying for Medicaid now while making sure you are not burdening your loved ones when you do pass. An elder law attorney can help you identify what you can pre-pay and retain Medicaid eligibility.
Guaranty Financial Support for Surviving Spouses
Federal law ensures that you can provide for the “monthly maintenance needs” of your spouse while preserving Medicaid eligibility. It creates an allowance that ranges from approximately $2,000 to nearly $3,000 a month. This allowance lets you shelter income that Medicaid would rely on to deny your benefits when those assets are used to provide for your spouse’s long term financial care.
Determining which assets can be sheltered by this allowance and which will stop you from claiming Medicaid benefits is a challenging task and it depends on the nature of your family and a slew of other questions. An elder law attorney providing Medicaid planning services for you can help you take basic steps, like moving cash from a savings account to an annuity that names your spouse as a beneficiary, that will reduce your current financial strain and preserve your wealth over the long haul.
Elder law attorneys can also help you identify which assets are totally exempt from Medicaid’s qualification calculation. Assets like some cash value life insurance plans, personal property, a primary automobile, and certain jewelry are not held against a person who is applying for Medicaid. Knowing what assets are holding you back and which you can safely hold on to ensures both your eligibility and ability to leave a wonderful gift to your heirs.
Provide for Special Needs Family Members While Protecting Your Final Wishes
Irrevocable trusts are powerful tools that can help you qualify for Medicaid and preserve your assets. When created early on in the estate planning process, an irrevocable trust can shelter your assets, provide for the long term needs of your spouse, and create a legacy that will pass to your heirs. That it does all of these things without compromising Medicaid eligibility is what makes them such a profound long term care planning tool.
A Medicaid Qualifying Trust has to be created before the applicable look back period begins and it must comply with specific Medicaid eligibility, tax, and trust guidelines. The complexity of these instruments is worth it for some and is just another reason why an elder law attorney deserves a seat at your planning table.
For people planning for long term care while providing support for special needs children, the prospect of moving to a nursing home is especially daunting. If you are in this situation you can still provide for your family’s unique needs by funding a special needs trust to make sure your children are cared for when you are gone. Like Medicaid Qualifying Trusts, these special needs trusts can be complex and have major consequences if formed or maintained improperly.
Stay in Your House Longer
By taking an early and critical look at your assets and making some early changes, you could stay in your house longer – especially through programs like the CDPAP. States are increasingly allowing Medicaid funding to go to providing home health care. For many, the difference between years in a nursing home and years at home is the presence of a qualified home health aid. Because Medicaid does not consider your primary residence’s value in considering eligibility and will not go after your home’s value once you pass, this exemption means that you can likely leave a gift of equity to your heirs if things are handled properly.
Protect Your Heirs from Lawsuits
If qualifying for Medicaid was as simple as giving your family members and close friends all of your assets or selling things off for $1, everyone would do it! To stop people who would not otherwise qualify for Medicaid from claiming benefits, the system reserves the right to deny people who give away assets benefits and can sue an estate when benefits are improperly paid out. This could result in your heirs getting less of an inheritance and the government taking more of your money.
49 of the 50 states look at transfers made within 60 months of applying for Medicaid. California, the sole exception to this lookback period, only considers transfers made within the past 30 months. An experienced elder law attorney can add value to the gifts you give by ensuring that transfers are properly detailed and are structured to avoid Medicaid disqualification. While there are many techniques one could use to avoid disqualification, your attorney may advise you to make use of an exemption that allows Medicaid recipients to give their homes to adult children who provide substantial home care to their ailing parents. Simply adding your child’s name to the deed could have major tax and Medicaid eligibility consequences, but if done properly it would be smooth sailing.
Contact an Elder Law Attorney Today
While there are a few hard and fast rules concerning Medicaid eligibility planning, every client’s situation is unique and requires deliberate consideration. To create an individualized action plan with one of our qualified attorneys, click here to contact us and make an appointment.
As you approach age 65, you’re probably starting to think about your future – including your health care. Perhaps you’ve had employer-sponsored health insurance in the past and will need Medicare coverage once you retire. Alternatively, you may have individual health insurance, but are soon Medicare-eligible thanks to your age.
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Attorneys can help you and give you legal advice, but unless they focus in that particular area, they can only give general counsel. Senior issues tend to be very complicated and involve more than one aspect. Your decision on one thing, like Medicaid benefits, can be directly tied to other issues like your assets and estate plans. When it comes to these things, you don’t want general counsel, you want an attorney that knows everything about these topics.
Elder law attorneys can lead you through these complex issues and make sure that your wishes are respected and taken care of. They are also usually very involved in the senior community and can help tend to the emotional needs of seniors during these times by providing access to resources and support in the area.
The Importance of Estate Planning for Young Families
As an attorney who works with many parents in their 30s and 40s, I find most are focused on building their careers, accumulating assets, and making decisions that affect them in the here and now. While an increasing number are planning for retirement, very few give much thought to their estate plan and the potential problems that could arise without one. What they fail to realize is that their avoidance of these critical issues can have serious, if not devastating consequences for the people they love, and that a minimal amount of time and effort can prevent a tremendous amount of potential hardship.
Let’s look at an example to get a better understanding of the necessity of planning. Charles (36) and Sarah (33) are a married couple with two young children living in New York. Both are employed in professional jobs. Aside from some basic financial necessities, like enrolling in their 401(k)s and purchasing $500,000 term life insurance policies, they have put all other planning on their “to-do” list for when they can get around to it.
Unfortunately, Charles and Sarah are ill prepared for an unexpected tragedy that would leave their children without parents. Drawing up wills has sat uncompleted on their to-do list since their first child was born. Charles incorrectly believes that, should something happen to him, everything would simply pass on to Sarah. He also thinks that his parents would automatically take custody of the children if anything happened to both of them. And, because they both named their children as contingent beneficiaries on their retirement and life insurance plans, they feel assured their children’s finances are secure.
No Will? No problem. The state will write one for you: What Charles and Sarah don’t understand is that they actually do have an “estate plan,” except, instead of reflecting their own wishes for the disposition of their assets and guardianship for their kids, the plan reflects the laws of their state (in this case, New York).
Who will take care of the children? Without specific instructions as to who will take care of the children, the court picks a guardian. Each side of the family will most likely have different views on who should take the kids. Should it be Sarah’s sister who lives in New York or Charles’ brother, who is better off, but lives in Florida? This can become an ugly fight, and instead of families focusing on grieving, they can be torn apart fighting over who will take care of the children.
Who will control the children’s assets? The person whom the court designates as the guardian will likely be the person who manages and controls the assets left to the children. That person may be the best person to raise the children, but not necessarily the best one to manage finances. (A will can specify a different guardian for each role, if desired.) Also, naming minor children as contingent beneficiaries instead of having the assets being placed in a trust for the benefit of the children is fraught with hazard. Unless otherwise specified, the children will automatically control the assets when they turn 18. Imagine that $500,000 life insurance policy and the house being transferred to your child when s/he turns 18. Will s/he know how best to oversee the assets?
All assets may not go to Sarah: If Charles should predecease Sarah, or vice-versa, any assets that are subject to probate, such as savings accounts, non-qualified investments, or separate property, will be split evenly between the spouse and the children. That means that the spouse owns half and the children own half. If the surviving spouse wants to sell or make use of the children’s assets, it must be for the benefit of the children.
Incapacity: If either or both of them survive the tragedy, but are incapacitated and unable to make financial or health decisions, without a power of attorney, a member of the family will not be able to take over the finances of the household without court intervention. If there is an end of life decision to be made, then without a designated health care proxy or a living will, the family must once again go seek the court’s permission to act.
Estate Planning for the Expected
Estate planning is not just for the wealthy, nor is it limited to the process of distributing assets after you die. It also provides certainty for you and your family when the unexpected occurs during your lifetime. While estate planning can be expensive and complex when dealing with mega-estates and multi-generational families, it also offers some very straightforward and inexpensive legal protections for the average American family.
In the case of Charles and Sarah, they could protect their estate and their family with the following 4 documents:
A Will would become the guiding document for the court, naming an executor and a guardian. A will also specifies how assets are to be distributed. A trust for the benefit of the children can be created in this will, and can control when and how the children receive assets.
Powers of Attorney would ensure that financial and business needs can be handled, without delay.
Health Care Proxies and Health Care Directives (Living Will): A Health Care Proxy designates who can make medical decisions for you in the event you become incapacitated. A Living Will allows you to state your end of life preferences and your view on life support and artificial nutrition and hydration.
Seeking Estate Planning Guidance
You may be young now, but the best time to begin arranging your estate is the moment you begin to think about it. If you chose to use some of the legal platforms such as LegalZoom.com, Nolo.com, and RocketLawyer.com, keep in mind that estate laws are complex. When planning an estate, no matter the size, the stakes are high, and it can be prudent to seek the advice of a qualified estate planning professional. With the national average cost for these four important documents being $1,000, its almost irresponsible to not take these steps. (Forbes “Rites of Passages” July 16, 2012).
Elisha Wellerstein, Esq. is the founding principal of Wellerstein Law Group, P.C. with offices in Queens, Nassau, Suffolk and Manhattan. Elisha can be reached at (718) 473-0699 or [email protected]