FREQUENTLY ASKED QUESTIONS
Test you knowledge about Elder Law
ALERT!!
In February of 2006, President Bush signed the into law the Senate version of the Deficit Reduction Act of 2005. This legislation dramatically altered the rules under which middle class families can plan for the long-term care needs of their loved ones by utilizing Medicaid. Some of the biggest changes concern the length of the look-back period during which an applicant must report the transfer of assets for less than fair value, extending it from 36 to 60 months, as well as the beginning date for any period of ineligibility, or penalty period, that is generated by such transfers. Under the old rules that penalty began to run on the first day of the month in which the transfer was made during which no other penalty period existed. The applicant could therefore transfer an asset, figure out how long a penalty period would be generated, and then keep enough resources to pay for his care during the resulting period of ineligibility. Now the penalty period begins when the Medicaid applicant is both eligible for medical assistance and would otherwise receive benefits, but for the existence of any transfer penalties. This means that now the applicant must be both in the nursing home and out of money before the penalty period begins to run. The Medicaid applicant must either have enough resources to cover the cost of long-term care for the full look-back period (which can easily cost more than $300,000) or he must engage in some significant planning measures. He can no longer simply hang onto sufficient assets to cover the cost of nursing home care during the penalty period. The Deficit Reduction Act also put in place a cap on the value of the personal residence that can be exempted for Medicaid eligibility purposes and the tightened the rules regarding the use of annuities.
Since the Senate version of the Deficit Reduction Act that the President signed is different from the version that was passed by the House, several lawsuits have been filed challenging the constitutionality of this law. Until the critical question regarding the constitutionality is resolved by the courts, the Deficit Reduction Act is the law of the land. Any planning that is done in the meantime must take into consideration these new rules. It is now more important than ever to consult with a knowledgeable elder law attorney when considering Medicaid planning.
TEST YOUR KNOWLEDGE ABOUT ELDER LAW
Wyoming elder law attorney Kelly Davis has prepared the following questions and answers to assist you in understanding a few of the estate planning and Medicaid issues that effect the elderly and the disabled.
ANSWERS
- In order to be eligible for Medicaid benefits you can only have $2,000 in assets.
- You have to wait three years after giving away assets before becoming eligible for Medicaid benefits.
- You can give away $10,000 a year without suffering any penalty for Medicaid.
- The state will take your house when you apply for Medicaid.
- If you have someone's power of attorney you can transfer his or her assets to qualify for Medicaid.
- A parent does not have to "disinherit" a disabled child in order to maintain the child's eligibility for Medicaid or SSI.
- If a parent establishes a Supplemental Needs Trust for a disabled child, on the death of the child the trust must reimburse the State for everything paid out under Medicaid.
- A Supplemental Needs Trust, established by a parent for the benefit of a disabled child, can be revoked at a later date.
False - While an individual can only have $2000 worth of "countable" resources or assets to be eligible for Medicaid benefits, he can have an unlimited amount of "exempt" resources. Subject to rules and restrictions, some of the assets which are considered exempt include: the personal residence up to the value allowed under state and federal legislation, one motor vehicle, a prepaid funeral plan, $1,500 in life insurance, medical and physical health equipment used primarily by the applicant, and assets that cannot be converted into cash. To avoid impoverishing a spouse living at home, she is able to retain a greater portion of the countable assets, referred to as the Community Spouse Resource Allowance.
False - Medicaid planning often involves gifting assets to loved ones, but take care to do it properly. Transferring assets for less than fair market value will result in a period of Medicaid ineligibility equal to the length of time that the gift could have been used to pay for the applicant's care and support in a nursing home. The three-year waiting period that we often hear mentioned refers to the "look-back" period during which transfers of assets for less than fair value must be reported to the state Medicaid Office. Medicaid used to "look-back" 36 months from the date of application to determine whether any such transfers have been made; however, the actual penalty period began with the month the transfer is made. For transfers to or from a trust, that look-back period is five years. Under the provisions of the newly enacted Deficit Reduction Act of 2005, the state Medicaid Office will now apply this five-year look-back to any transfers for less than fair value made after February 2006 and the penalty period is delayed until the applicant is both in the nursing home and has spent down their resources to the eligibility level ($2,000).
False - The exemption of a $10,000 gift per person (actually the figure is $12,000) only applies to federal gift taxes, not to Medicaid. Making a gift of $10,000 can result in the imposition of a period of ineligibility of several months.
False - The principal residence is an exempt asset for determining Medicaid eligibility provided the person receiving benefits intends to return home, or their spouse or dependents continue to reside in the family home. The newly enacted Deficit Reduction Act of 2005 put a limit on the total equity value of the personal residence that can be protected. Upon the death of the latter of the Medicaid recipient or spouse, the state does have a right to recover the costs of care it has provided under the Medicaid program from the estate of the deceased. If any ownership interest in the home is included in the deceased's estate, the home may be lost to the state at that time.
False - Not just any power of attorney is sufficient for Medicaid planning purposes. It is not the name of the document that allows the attorney-in-fact to take necessary action, but rather the language that it uses. If, for example, the power of attorney does not authorize the making of gifts, or restricts the size of gift that can be made, transferring assets for less than fair value, even to a spouse, could result in criminal penalties.
True - While many parents still follow the old practice of punishing the disabled child by disinheriting them and allowing the State to provide for their needs, this is not necessary. The parents can establish a Third-Party Supplemental Needs Trust for the benefit of the child. The child's inheritance can be given to the trust and used to pay for those things that are not provided by Medicaid like cable t.v., telephone, hobbies, entertainment, travel, experimental treatments, special training and equipment, etc. For this reason this type of trust is sometimes referred to as a "Luxury Trust."
False - Self-Settled or First-Party Special Needs Trusts are created using assets that belong to the Medicaid recipient and by law must include a provision allowing the State to recover amounts it has paid under Medicaid. Third-Party Supplemental Trusts are created using other people's money, such as the parents, and are not subject to recovery. A parent can provide in the trust that upon the death of the disabled child the remaining trust principal can be paid out to other family members.
True - Self-Settled or First-Party Special Needs Trusts, which are created to hold assets that belong to the Medicaid recipient, are required by statute to be irrevocable. There is no similar requirement for a Third-Party Supplemental Needs Trust which does not contain any assets belonging to the recipient.
The above frequently asked questions related to elder law address only a few of the many issues that Wyoming elder law attorney Kelly Davis routinely handles in his practice. As an experienced elder law attorney, Kelly Davis has the knowledge and ability to handle the unique legal needs of the elderly and disabled residents of Wyoming.
Call our Wyoming office and ask for a free copy of our consumers guide to Medicaid planning entitled:
"Do You Qualify For Financial Assistance For Nursing Home Care?"
If you or someone you know in Wyoming needs the guidance of an experienced elder law attorney then contact Wyoming elder law attorney Kelly Davis anytime of the day or evening by phone at: (phone) 1-888-605-8091 or via the convenient contact form featured in the left column above.