Cohen & Oalican, LLP discuss: PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE Part 4 of 7
PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE
Irrevocable Trusts
One strategy our office uses to protect homes from the Medicaid lien is an irrevocable trust. In order for a trust to be protected from Medicaid it must meet three requirements. First, it has to be irrevocable. This means that neither the Medicaid applicant, nor their spouse, can be able to revoke or change the trust in any way. Second, neither the Medicaid applicant nor their spouse can serve as trustee. Keep in mind that when Medicaid reviews trusts they are looking to see whether the applicant or their spouse, retained too much control over the trust assets. If you have too much power over a trust, your home will not be protected. Lastly, the trust principal cannot be paid out to the Medicaid applicant or their spouse. The asset that is held in the trust is called the trust principal. The interest, dividends or rent earned on the trust is called the trust income. As an example, let’s assume you have your home deeded in an irrevocable trust and the house was then sold for $250,000. The trust could pay the interest earned on the funds to you but it cannot under any circumstances pay the $250,000 to you.
Consult with one of the attorneys at the offices of Cohen & Oalican, LLP to create your personalized Medicaid plan.
This has been Part 4 in a series of 7, brought to you by Cohen & Oalican LLP, Elder Law Attorneys Boston, Raynham, Andover
Monday, May 31, 2010
Thursday, May 27, 2010
PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE Part 3
Cohen & Oalican, LLP discuss: PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE Part 3 of 7
The Transfer Penalty and the Look-Back
If you give away your assets it will make you and your spouse ineligible for Medicaid benefits for up to five years. When you apply for benefits, Medicaid reviews five years of bank statements in order to identify any disqualifying transfers. This is known as the “look-back period.” Any transfers that happened before the five year period are protected and do not have to be reported to Medicaid. However, if you apply for benefits during the look-back period, Medicaid imposes one month of ineligibility for approximately every $8,000 you give away. In addition, the clock does not start “ticking” on the ineligibility period until you are in a nursing and have spent down your assets.
The easiest way to explain the transfer rules is by way of an example. Let’s assume Mrs. Smith transfers her condo worth $320,000 to her grandson on March 15, 2010. On April 15, 2011, Mrs. Smith suffers a stroke and is admitted to a nursing home. Assume she spends down her assets below $2,000 as of August 2011. Because she would be applying during the look-back period, Medicaid would impose thirty two (32) months of ineligibility ($320,000 ÷ $8,000 = 32 months). The transfer penalty would not start until August 1, 2011 and would end in April 2014.
Keep in mind, that the rules are different for married couples. If a husband is in a nursing home with a wife living in the community, Medicaid allows the husband to transfer their home to the healthy spouse, without imposing any ineligibility period. The house is then completely protected from the husband’s nursing home costs (even after the wife’s death.) Although, planning can be more complicated for a single person there are several options available to protect the house regardless of whether you are married or single.
Consult with one of the attorneys at the offices of Cohen & Oalican, LLP to create your personalized Medicaid plan.
This has been Part 3 in a series of 7, brought to you by Cohen & Oalican LLP, Elder Law Attorneys Boston, Raynham, Andover
The Transfer Penalty and the Look-Back
If you give away your assets it will make you and your spouse ineligible for Medicaid benefits for up to five years. When you apply for benefits, Medicaid reviews five years of bank statements in order to identify any disqualifying transfers. This is known as the “look-back period.” Any transfers that happened before the five year period are protected and do not have to be reported to Medicaid. However, if you apply for benefits during the look-back period, Medicaid imposes one month of ineligibility for approximately every $8,000 you give away. In addition, the clock does not start “ticking” on the ineligibility period until you are in a nursing and have spent down your assets.
The easiest way to explain the transfer rules is by way of an example. Let’s assume Mrs. Smith transfers her condo worth $320,000 to her grandson on March 15, 2010. On April 15, 2011, Mrs. Smith suffers a stroke and is admitted to a nursing home. Assume she spends down her assets below $2,000 as of August 2011. Because she would be applying during the look-back period, Medicaid would impose thirty two (32) months of ineligibility ($320,000 ÷ $8,000 = 32 months). The transfer penalty would not start until August 1, 2011 and would end in April 2014.
Keep in mind, that the rules are different for married couples. If a husband is in a nursing home with a wife living in the community, Medicaid allows the husband to transfer their home to the healthy spouse, without imposing any ineligibility period. The house is then completely protected from the husband’s nursing home costs (even after the wife’s death.) Although, planning can be more complicated for a single person there are several options available to protect the house regardless of whether you are married or single.
Consult with one of the attorneys at the offices of Cohen & Oalican, LLP to create your personalized Medicaid plan.
This has been Part 3 in a series of 7, brought to you by Cohen & Oalican LLP, Elder Law Attorneys Boston, Raynham, Andover
Monday, May 24, 2010
PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE Part 2
Cohen & Oalican, LLP discuss:
PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE
Part 2 of 7
Noncountable does not mean Protected
A home with equity of less than $750,000 is considered a noncountable asset. Without proper planning, at death the State will have a lien against your house and Medicaid will seek reimbursement for benefits provided. On the other hand, there are steps you can take to avoid a Medicaid lien and protect your home, saving hundreds of thousands of dollars.
Although the risk of a Medicaid lien is very real, the good news is that Medicaid will not force you to sell your house if you enter a nursing home. As long as a Medicaid applicant indicates on their application that they intend to return home, Medicaid will not force the sale of the house. This is a subjective question and it does not matter whether there is any realistic chance that the person actually will be able to return home.
Many people think the best way to protect their home is to give it outright to their children. Although this may sound like the simplest solution -- it may be the worst choice. Transferring a home outright to children can result in large capital gains taxes. Secondly, things can happen to children that can place the house at risk. What happens if a child gets divorced, is sued or has creditor problems? Seniors have been literally forced out of their own home as a result of ‘gifting’ their house to their children. There are several strategies available which will protect the house from Medicaid but also protect your right to live in the house. However, before you consider transferring your house, you have to understand the Medicaid transfer rules.
Be sure to consult with one of the attorneys at the offices of Cohen Oalican, LLP to create your Medicaid plan
This has been Part 2 in a series of 7, brought to you by Cohen & Oalican LLP, Elder Law Attorneys Boston, Raynham, Andover
PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE
Part 2 of 7
Noncountable does not mean Protected
A home with equity of less than $750,000 is considered a noncountable asset. Without proper planning, at death the State will have a lien against your house and Medicaid will seek reimbursement for benefits provided. On the other hand, there are steps you can take to avoid a Medicaid lien and protect your home, saving hundreds of thousands of dollars.
Although the risk of a Medicaid lien is very real, the good news is that Medicaid will not force you to sell your house if you enter a nursing home. As long as a Medicaid applicant indicates on their application that they intend to return home, Medicaid will not force the sale of the house. This is a subjective question and it does not matter whether there is any realistic chance that the person actually will be able to return home.
Many people think the best way to protect their home is to give it outright to their children. Although this may sound like the simplest solution -- it may be the worst choice. Transferring a home outright to children can result in large capital gains taxes. Secondly, things can happen to children that can place the house at risk. What happens if a child gets divorced, is sued or has creditor problems? Seniors have been literally forced out of their own home as a result of ‘gifting’ their house to their children. There are several strategies available which will protect the house from Medicaid but also protect your right to live in the house. However, before you consider transferring your house, you have to understand the Medicaid transfer rules.
Be sure to consult with one of the attorneys at the offices of Cohen Oalican, LLP to create your Medicaid plan
This has been Part 2 in a series of 7, brought to you by Cohen & Oalican LLP, Elder Law Attorneys Boston, Raynham, Andover
Friday, May 21, 2010
Protecting your house from the cost of nursing home care - Part 1
Cohen & Oalican discuss Part 1 of 7
PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE
Introduction
For must of us, our home is our most valuable asset. “Value” refers both to how much money you would receive if you sold your house but perhaps more importantly, value describes the emotional attachments we hold for the place we live and raise our families. When we first meet with our clients we typically ask what they are most worried about. The overwhelming majority tell us that they want to protect their home. “I don’t want to lose my house, if I go to a nursing home” is an often repeated refrain.
There is a great deal of confusion regarding what will happen to your house if you enter a nursing home. Some people have the good fortune of being wealthy enough to pay privately for their care. Although when nursing homes typically cost $100,000 a year, most of us are not that lucky. Others had the foresight to buy long-term care insurance. However, most of our clients are not wealthy enough to pay for their care and they either cannot afford insurance, or are not qualified. The remaining choice is Medicaid.
The first basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $2,000 in "countable" assets in his or her name. "Countable" assets generally include everything you own, except for your home (if it is located in Massachusetts and it has equity less than $750,000). Everything else,(second homes, retirement savings, life insurance) is counted and may have to be spent down before you can obtain eligibility. Although Medicaid will consider your home to be a noncountable asset it is important to understand that does not mean your home is protected.
This has been Part 1 in a series of 7, brought to you by Cohen & Oalican LLP, Elder Law Attorneys Boston, Raynham, Andover
PROTECTING YOUR HOUSE FROM THE COST OF NURSING HOME CARE
Introduction
For must of us, our home is our most valuable asset. “Value” refers both to how much money you would receive if you sold your house but perhaps more importantly, value describes the emotional attachments we hold for the place we live and raise our families. When we first meet with our clients we typically ask what they are most worried about. The overwhelming majority tell us that they want to protect their home. “I don’t want to lose my house, if I go to a nursing home” is an often repeated refrain.
There is a great deal of confusion regarding what will happen to your house if you enter a nursing home. Some people have the good fortune of being wealthy enough to pay privately for their care. Although when nursing homes typically cost $100,000 a year, most of us are not that lucky. Others had the foresight to buy long-term care insurance. However, most of our clients are not wealthy enough to pay for their care and they either cannot afford insurance, or are not qualified. The remaining choice is Medicaid.
The first basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $2,000 in "countable" assets in his or her name. "Countable" assets generally include everything you own, except for your home (if it is located in Massachusetts and it has equity less than $750,000). Everything else,(second homes, retirement savings, life insurance) is counted and may have to be spent down before you can obtain eligibility. Although Medicaid will consider your home to be a noncountable asset it is important to understand that does not mean your home is protected.
This has been Part 1 in a series of 7, brought to you by Cohen & Oalican LLP, Elder Law Attorneys Boston, Raynham, Andover
Monday, May 17, 2010
A Brave New World - The Affordable Care Act
A BRAVE NEW WORLD: This week, President Obama signed into law the main part of the
contentious health care reform legislation. Although some parliamentary problems still need to
be resolved, the entire bill will likely become law prior to Congress’ scheduled recess at the end
of this month.
The president’s signature will put into effect the Affordable Care Act as amended by the Health
Care Reconciliation Act. The impending new law imposes responsibilities on both citizens and
employers. Here are some of the highlights:
Citizen Responsibilities:
Citizens and legal residents must have “qualifying health coverage”. Penalties will be imposed
on individuals without coverage and phased in over several years. The tax penalty is the greater
of $695 annually up to a maximum of three times that amount ($2,085) per family or 2.5% of
household income. Either way, the new law imposes hefty penalties on individuals who fail to
comply. However, persons with incomes falling below the federal tax filing threshold ($9,350
for singles and $18,700 for couples in 2009) and anyone whose lowest cost plan exceeds 8% of
that person’s income are exempt from penalties.
Employer Responsibilities:
Beginning in 2014, employers with more than 50 employees will be assessed a penalty depending on whether health plans are offered and whether certain employees receive premium tax credits. Penalties will not be assessed on employers with 50 or less employees. Employers with more than 200 employees must enroll employees in plans offered by the employer and opting out will not be option.
Private Insurance:
Within 90 days of the enactment of the new law, a temporary national “high-risk” pool will be
established to provide coverage to individuals with pre-existing medical conditions. Within six
months, all policies must provide dependent coverage for children through age 26.
Other Provisions:
The new law increases payments to physicians and Medicare payments to providers in certain
rural areas. Access to Medicaid and types of services will expand. Medicaid will now additional
preventive and long-term care services. Medicaid eligibility will also now cover low-income
nonelderly, non-pregnant individuals who are not otherwise eligible for Medicare. The new law
also contains additional provisions to attack fraud in the federal healthcare programs.
The Invoice:
The Congressional Budget Office estimates the cost of the mandatory coverage will be $940
billion over ten years. This expense will be financed through a combination of savings from
Medicare and Medicaid, new taxes and fees, which the CBO estimates will raise $32 billion over
those ten years. It also estimates the proposal will reduce the deficit by approximately $143
billion during that period.
Is the new law a step closer to forced socialism or does it reflect a nation’s collective decision to
expand the benefits of its “social compact”? Whatever one’s political stance, health care reform,
for better or worse, is a new pillar in the structure of our government.
Brought to you by Cohen & Oalican, LLP
contentious health care reform legislation. Although some parliamentary problems still need to
be resolved, the entire bill will likely become law prior to Congress’ scheduled recess at the end
of this month.
The president’s signature will put into effect the Affordable Care Act as amended by the Health
Care Reconciliation Act. The impending new law imposes responsibilities on both citizens and
employers. Here are some of the highlights:
Citizen Responsibilities:
Citizens and legal residents must have “qualifying health coverage”. Penalties will be imposed
on individuals without coverage and phased in over several years. The tax penalty is the greater
of $695 annually up to a maximum of three times that amount ($2,085) per family or 2.5% of
household income. Either way, the new law imposes hefty penalties on individuals who fail to
comply. However, persons with incomes falling below the federal tax filing threshold ($9,350
for singles and $18,700 for couples in 2009) and anyone whose lowest cost plan exceeds 8% of
that person’s income are exempt from penalties.
Employer Responsibilities:
Beginning in 2014, employers with more than 50 employees will be assessed a penalty depending on whether health plans are offered and whether certain employees receive premium tax credits. Penalties will not be assessed on employers with 50 or less employees. Employers with more than 200 employees must enroll employees in plans offered by the employer and opting out will not be option.
Private Insurance:
Within 90 days of the enactment of the new law, a temporary national “high-risk” pool will be
established to provide coverage to individuals with pre-existing medical conditions. Within six
months, all policies must provide dependent coverage for children through age 26.
Other Provisions:
The new law increases payments to physicians and Medicare payments to providers in certain
rural areas. Access to Medicaid and types of services will expand. Medicaid will now additional
preventive and long-term care services. Medicaid eligibility will also now cover low-income
nonelderly, non-pregnant individuals who are not otherwise eligible for Medicare. The new law
also contains additional provisions to attack fraud in the federal healthcare programs.
The Invoice:
The Congressional Budget Office estimates the cost of the mandatory coverage will be $940
billion over ten years. This expense will be financed through a combination of savings from
Medicare and Medicaid, new taxes and fees, which the CBO estimates will raise $32 billion over
those ten years. It also estimates the proposal will reduce the deficit by approximately $143
billion during that period.
Is the new law a step closer to forced socialism or does it reflect a nation’s collective decision to
expand the benefits of its “social compact”? Whatever one’s political stance, health care reform,
for better or worse, is a new pillar in the structure of our government.
Brought to you by Cohen & Oalican, LLP
Thursday, May 13, 2010
Cohen & Oalican Answer: Can a Life Estate Still Protect Your House from Medicaid Part 2
Part 2
The three year look back period was the most important reason to choose a Life Estate deed instead of an irrevocable trust to protect a client’s house. That benefit has been eliminated. Now clients and attorneys must consider the limitations of Life Estates in relation to irrevocable trusts. Most importantly, the Life Estate only works if the house is not sold until after the Medicaid recipient’s death. If the house is sold during the person’s life a portion (this value is based on Medicaid’s actuarial tables) of the proceeds will pass to the Medicaid recipient and the funds will be taken by Medicaid. If a house is held in an irrevocable trust, all of the proceeds from sale stay in the trust and remain protected regardless of when its sold. Although families understand the issue when they create the Life Estate, this becomes a pressing issue when the client moves into a nursing home and the house is empty. At that point, families must either rent the house (taking on the aggravation of being a landlord) or leave the house empty and use their own funds to pay for the property taxes and insurance. Both options are not ideal.
There are also capital gains tax issues to consider when choosing between a Life Estate deed and an irrevocable trust. The tax questions are somewhat up in the air right now and many attorneys believe that unless Congress changes the tax laws, Life Estate deeds will no longer give clients a step-up in the tax basis resulting in children paying capital gains taxes on all of the gain accrued during the parents’ lives.
That all being said, a Life Estate deed does have one important benefit. Its simple. A Life Estate
deed is easy to put in place. Its just a deed. Also, if everyone on the deed is agreeable, its also
easy to unwind; everyone just deeds the house back to the original owners. Reversing an irrevocable trust is much more complicated (and sometimes not possible) with an irrevocable trust.
Everyone wants to protect their home. The question remains what is the best strategy to do the job. In weighing your options, consider, how much control you want to keep, when the house will be sold, your need to use the house equity and tax issues. Life Estate deeds do still work. However, irrevocable trusts are often a better option to protect your home.
Contact Cohen & Oalican to discuss a medicaid plan that works for you.
The three year look back period was the most important reason to choose a Life Estate deed instead of an irrevocable trust to protect a client’s house. That benefit has been eliminated. Now clients and attorneys must consider the limitations of Life Estates in relation to irrevocable trusts. Most importantly, the Life Estate only works if the house is not sold until after the Medicaid recipient’s death. If the house is sold during the person’s life a portion (this value is based on Medicaid’s actuarial tables) of the proceeds will pass to the Medicaid recipient and the funds will be taken by Medicaid. If a house is held in an irrevocable trust, all of the proceeds from sale stay in the trust and remain protected regardless of when its sold. Although families understand the issue when they create the Life Estate, this becomes a pressing issue when the client moves into a nursing home and the house is empty. At that point, families must either rent the house (taking on the aggravation of being a landlord) or leave the house empty and use their own funds to pay for the property taxes and insurance. Both options are not ideal.
There are also capital gains tax issues to consider when choosing between a Life Estate deed and an irrevocable trust. The tax questions are somewhat up in the air right now and many attorneys believe that unless Congress changes the tax laws, Life Estate deeds will no longer give clients a step-up in the tax basis resulting in children paying capital gains taxes on all of the gain accrued during the parents’ lives.
That all being said, a Life Estate deed does have one important benefit. Its simple. A Life Estate
deed is easy to put in place. Its just a deed. Also, if everyone on the deed is agreeable, its also
easy to unwind; everyone just deeds the house back to the original owners. Reversing an irrevocable trust is much more complicated (and sometimes not possible) with an irrevocable trust.
Everyone wants to protect their home. The question remains what is the best strategy to do the job. In weighing your options, consider, how much control you want to keep, when the house will be sold, your need to use the house equity and tax issues. Life Estate deeds do still work. However, irrevocable trusts are often a better option to protect your home.
Contact Cohen & Oalican to discuss a medicaid plan that works for you.
Monday, May 10, 2010
Cohen & Oalican Answer: Can a Life Estate Still Protect Your House from Medicaid Part 1
Part 1
Can a Life Estate Still Protect Your House from Medicaid?
We are often asked by clients and attorneys alike, whether Life Estates still “work”. In other words, can you protect your house from a Medicaid lien with a Life Estate deed. To cut to the chase, Life Estate deeds still work, but they may not be the best option. First, let’s clarify the question. If an individual applies for Medicaid (MassHealth in Massachusetts), their home is considered to be a noncountable asset. Although the regulations make it sound as if your home is a “protected” asset, that is far from true. As a noncountable asset, Medicaid cannot force you to sell your home to obtain eligibility (as long as the equity is less than $750,000). However, at the death of the Medicaid recipient, if the house is in that person’s sole name, the State will have a claim against the house for reimbursement for benefits provided during that person’s lifetime.
Frequently, our asset protection plans focus on a client’s home. Medicaid is only authorized to make a claim against an interest in a house that is in the sole name of the Medicaid recipient. These assets are referred to in legal jargon as “probate assets”. For example, a house that’s held as joint tenants passes to the survivor automatically by virtue of the deed and thus avoids probate and a Medicaid lien.
For many years a simple way to protect the house from Medicaid was by using a Life Estate deed. With a Life Estate deed a client is typically giving away their house to their children but they are retaining certain rights of ownership over the property. Most commonly, clients keep the right to live in the house and the rights to rental income. They also still have an obligation to pay the house expenses. However, the house cannot be sold or mortgaged without everyone’s consent. The parents retained interest in the house is called a Life Estate. The childrens’ rights to receive the property at death is called a remainder interest. Because a Life Estate deed passes automatically at death outside of probate, a Life Estate deed avoids Medicaid’s claim at death.
Prior to February, 2006 (when the federal Medicaid laws changed), Life Estates were quite common. At that time Medicaid imposed a three year “look-back” period for transfers to individuals and a five year “look-back for transfers to trusts. Consequently, clients and attorneys often preferred to use a Life Estate as part of their asset protection plan instead of an irrevocable trust because the house would be protected in only three years. That is no longer the case. Under current law, all transfers have a five year look-back period and in effect make the applicant and their spouse ineligible for five years.
Part 2 to follow
The experienced attorneys at Cohen & Oalican, LLP, can help you prepare for, and resolve, all of your medicaid planning and administration needs.
Can a Life Estate Still Protect Your House from Medicaid?
We are often asked by clients and attorneys alike, whether Life Estates still “work”. In other words, can you protect your house from a Medicaid lien with a Life Estate deed. To cut to the chase, Life Estate deeds still work, but they may not be the best option. First, let’s clarify the question. If an individual applies for Medicaid (MassHealth in Massachusetts), their home is considered to be a noncountable asset. Although the regulations make it sound as if your home is a “protected” asset, that is far from true. As a noncountable asset, Medicaid cannot force you to sell your home to obtain eligibility (as long as the equity is less than $750,000). However, at the death of the Medicaid recipient, if the house is in that person’s sole name, the State will have a claim against the house for reimbursement for benefits provided during that person’s lifetime.
Frequently, our asset protection plans focus on a client’s home. Medicaid is only authorized to make a claim against an interest in a house that is in the sole name of the Medicaid recipient. These assets are referred to in legal jargon as “probate assets”. For example, a house that’s held as joint tenants passes to the survivor automatically by virtue of the deed and thus avoids probate and a Medicaid lien.
For many years a simple way to protect the house from Medicaid was by using a Life Estate deed. With a Life Estate deed a client is typically giving away their house to their children but they are retaining certain rights of ownership over the property. Most commonly, clients keep the right to live in the house and the rights to rental income. They also still have an obligation to pay the house expenses. However, the house cannot be sold or mortgaged without everyone’s consent. The parents retained interest in the house is called a Life Estate. The childrens’ rights to receive the property at death is called a remainder interest. Because a Life Estate deed passes automatically at death outside of probate, a Life Estate deed avoids Medicaid’s claim at death.
Prior to February, 2006 (when the federal Medicaid laws changed), Life Estates were quite common. At that time Medicaid imposed a three year “look-back” period for transfers to individuals and a five year “look-back for transfers to trusts. Consequently, clients and attorneys often preferred to use a Life Estate as part of their asset protection plan instead of an irrevocable trust because the house would be protected in only three years. That is no longer the case. Under current law, all transfers have a five year look-back period and in effect make the applicant and their spouse ineligible for five years.
Part 2 to follow
The experienced attorneys at Cohen & Oalican, LLP, can help you prepare for, and resolve, all of your medicaid planning and administration needs.
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