FAQ: Medicaid Trusts

FAQ: Medicaid Trusts

We get questions all the time about our Medicaid qualifying Family Protection Trusts. Here is our Frequently Asked Questions guide to help you decide whether this planning is appropriate for you.

IS THE TRUST REVOCABLE OR IRREVOCABLE?
In order to assist you in qualifying for Medicaid, the trust must be irrevocable. However, in New York even an irrevocable trust can be altered or undone if necessary.

CAN I SERVE AS TRUSTEE OF MY TRUST AND RETAIN CONTROL?
Yes, for as long as you are able to manage your own affairs, there are no legal restrictions to serving as Trustee of your own Medicaid trust. You and your own spouse can serve as Co-Trustee together as well. There are some risks with serving as Trustee of your own Medicaid trust, and you really need to stick to the trust rules in order to make it work for Medicaid qualification purposes.

WHAT HAPPENS TO MY ASSETS ONCE THEY’RE IN THE TRUST?
As a general rule, you can manage your assets in the trust the same way you would outside of the trust. If you own a stock portfolio, you can continue buying and selling stock. If your house is in the Medicaid trust you will retain property tax exemptions and the ability to sell your house without requiring permission from anyone. The major restriction on the trust is that you cannot distribute principal to yourself. If you need a new roof on the house, principal can be used for that purpose (or anything connected to your residence), but you cannot simply cash $50,000 in principal out of the trust to purchase a new vehicle or go on a trip.
DO I RETAIN TRUST INCOME?
Yes. Any income, interest, rent, or dividends generated by the trust goes to the trust creator. This gives the trust creator cashflow to cover ongoing expenses that cannot be paid for by the trust. We usually draft the Medicaid trust so that the right to take this income lapses at a certain point if it is not withdrawn, to help qualify for Medicaid.

WILL MY TRUST AVOID INCOME TAXES?
Not exactly. Our Medicaid trust is designed to be income tax neutral. What this means is that you will continue to report trust income on your personal income tax return. You will not need to pay to have an extra income tax return prepared and you will continue to pay income tax at the lower bracketed rates for individuals rather than the higher rates at which trusts pay income taxes.

WHAT IF I WANT TO GET MONEY OUT OF THE TRUST?
If you want or need to withdraw principal from the trust, the Trustee can make a distribution of principal to a child/grandchild or other beneficiary of the trust specifically designated in the trust document. That person would then make a tax-free gift of the principal back to you. This has to be structured in a way to avoid gift tax reporting, and you need to consult with an attorney or CPA to do this properly.

WHO CAN BE A BENEFICIARY OF THE TRUST?
Once you pass away, the terms of the trust should mirror the terms of your Last Will and Testament and provide for distribution to the beneficiaries of your choosing, either outright or staying in trust for them for a period of time.

HOW MUCH ONGOING EXPENSE WILL I HAVE WITH THE TRUST?
Once your assets are re-titled to the trust, you do not need to have any ongoing expenses. Most of our clients choose to enroll in our Annual Maintenance Plan that provides annual meeting opportunities and other benefits, but there is no requirement to enroll. Also, there won’t be any added taxes or administrative expenses.

IS MY TRUST A LOOPHOLE THAT THE GOVERNMENT WILL CLOSE?
Medicaid trusts often come under scrutiny when the government is trying to save money on health expenses for the elderly. The amount of time you need to create a Medicaid trust in advance of needing care expanded from 36 months to 60 months. There is consistent talk in Congress to expand this period beyond 60 months. These Medicaid trusts will nonetheless remain a valuable planning tool, they just may need to be implemented even earlier in order to be as effective as possible.
WHAT ARE THE DISADVANTAGES?
The major hurdle for most people is the restriction not allowing principal to be distributed to the trust creator. We spend a lot of time with clients discussing trust funding and making sure they have enough money outside of the trust in order to not encounter this problem. The only other major disadvantage is for people who do not make the 60-month loopback period and potentially have to unravel the trust to complete the Medicaid qualification process.

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FAQ: Power Of Attorney

FAQ: Power Of Attorney

WHAT IS A POWER OF ATTORNEY?
A Power of Attorney is a legal document where you (the “Principal”) give authority to make financial decisions to someone you trust (the “Agent”). The Power of Attorney is often referred to as the POA.

WHO CAN SIGN A POWER OF ATTORNEY?
Anyone who is over eighteen (18) years of age in New York can sign a Power of Attorney if they understand the nature of what they are signing and have legal capacity.

DO I NEED A POWER OF ATTORNEY?
The Power of Attorney is the cheapest and most effective way to appoint someone to manage your financial affairs if you become unable to do so. If you do not have a Power of Attorney, your family may need to go to Court and ask a judge to appoint a guardian for you. This applies even if you are married because spouses do not have a right to access accounts owned by the other spouse individually and in their name alone.

WHO CAN I APPOINT TO BE MY AGENT?
Anyone who is over eighteen (18) years of age and that you trust implicitly to make responsible decisions that will consistently be in your best interest. Most often this is someone in your family. Lawyers, accountants and other professionals can also serve in this capacity if no one in your family is available to handle the responsibility.

WHEN WILL THE POWER OF ATTORNEY TAKE EFFECT?
The Power of Attorney takes effect in New York when it is signed by the Principal and the Agent. The requirement that the Agent signs is relatively new to the law and was designed to minimize the financial exploitation these documents were causing among the elderly population. Often we will have the Agent sign the document much later so that it is not in effect until the document needs to be used.

WILL THE POWER OF ATTORNEY WORK IF I RELOCATE?
Generally the Power of Attorney has to be honored in New York, but not in any other state. The document may be honored in another state, but it is best practice to contact an attorney in your new state to determine whether the document will be honored.

WHAT ARE THE DISADVANTAGES TO A POWER OF ATTORNEY?
The biggest disadvantage is not having a Power of Attorney! You should be careful with the person you select as Agent and how much authority you give to that person. There are mechanisms in the law that let you appoint someone to monitor the Agent and give your family the right to ask the Agent how they are managing your funds which helps to ease many people’s fears.

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FAQ: Health Care Proxy

FAQ: Health Care Proxy

WHAT IS A HEALTH CARE PROXY (HCP)?

A Health Care Proxy is a legally enforceable document in New York utilized to appoint someone (your Agent) to make health care decisions for you if you become unable, even temporarily, to make health care decisions for yourself. Appointing an Agent lets you control your future medical care and allows your agent to make health care decisions on your behalf as you would want them decided. Selecting your Agent could avoid conflict or confusion among family members and loved ones.

WHO CAN I APPOINT AS AGENT?

Anyone 18 years of age or older can be an Agent under your Health Care Proxy form. The person you are appointing as your agent or your alternate agent cannot sign as a witness on your Health Care Proxy, and it is not a good idea to select your treating physician because of conflict of interest policies that would require they stop treating you if they are your Agent.

WHEN DOES MY AGENT GET TO MAKE HEALTH CARE DECISIONS FOR ME?

Your health care agent would begin to make health care decisions after your doctor decides that you are not able to make your own health care decisions. As long as you are able to make health care decisions for yourself, you will have the right to do so.

WHAT HEALTH CARE DECISIONS CAN MY AGENT MAKE?
Your agent will be able to make any health care decision that you could have made if you were
able to decide on your own. Your agent can agree that you should receive treatment, choose among different treatments and decide that treatments should not be provided, in accordance with your wishes and interests.

WHEN DO I NEED A HEALTH CARE PROXY?

Even though you are not elderly or terminally ill, it is a good idea to sign a Health Care Proxy now. An Agent under a HCP  can act on your behalf if you become even temporarily unable to make your own health care decisions (i.e. during surgery or if you are incapacitated by an accident).  When you regain the ability make your own health care decisions, your health care agent will no longer be authorized to act.

HOW DOES MY AGENT MAKE DECISIONS FOR ME?

Your Agent must follow your wishes, as well as your moral and religious beliefs. You may write instructions on your Health Care Proxy form or simply discuss them with your agent. However, your agent can only make decisions about a feeding tube if the Agent knows your wishes from what you have said or what you have written. The Health Care Proxy form does not give your agent the power to make non-health care decisions for you, such as financial decisions, this is covered by your Power of Attorney.

WHAT IF MY NAMED AGENT IS NOT AVAILABLE OR IS NOT LOCAL?

You may appoint an alternate Agent to decide for you if your primary Agent is unavailable, unable or unwilling to act. Likewise, you can put the Agent’s cell phone number on the Health Care Proxy form to permit out-of-town Agents to still converse with your treating medical professionals. Otherwise, health care providers will make health care decisions for you that follow instructions you gave while you were still able to do so, if any. Any instructions that you write on your Health Care Proxy form will guide health care providers under these circumstances.

WHAT IS A LIVING WILL?

A living will is a document that is not legally enforceable and only  provides instructions about end-of-life treatment. As a best practice, we always include these instructions on the Health Care Proxy form. The Health Care Proxy allows you to choose someone you trust to make health care decisions on your behalf, and does not require that you know in advance all the decisions that may arise. If you want to indicate your end-of-life preferences in writing, the best method is to include them on your Health Care Proxy form.

WHAT ABOUT ORGAN DONATION?

Most Health Care Proxy forms have optional organ and tissue donation sections. You can specify and limit how and what organs and tissue may be donated. Failure to elect to become an organ donor on your Health Care Proxy form does not preclude you from using an optional method to enroll in organ donation (i.e. complying with the rules for becoming an organ donor on your Driver’s License or by registering in the NY Organ Donor Network.

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What To Do About My Long-Term Care Insurance?

What To Do About My Long-Term Care Insurance?

626213Recent news has been bad if you are an owner of long-term care insurance. Some companies have raised premiums significantly in the wake of an increasing number of claims made by policy owners and increasing cost of care.

For many policyholders, especially those on a fixed income, the raise in premiums may be academic and force them to let go of the insurance altogether, but we think there are three things to consider when deciding whether to continue on with your long-term care insurance:

  1. How Much Care Does the Policy Provide: This is a major area where people have no idea what their policy will even pay for. We had a client recently who only had $150 per day in nursing home coverage and no rider to provide for inflation. That client ended up being sued by the nursing home because there was a shortfall between what the policy would pay out and the nursing home’s bill. It is important to review the coverage amounts, the length of coverage, and what type of coverage (i.e. in-home, assisted living, nursing home) the policy will provide.
  2. How Much Longer Will I Likely Have to Pay: For folks who are in their early retirement years, the prospect of a major increase to premiums now does not bode well for the future. The average age of someone to enter into a nursing home in the U.S. is 79. Depending on your family history and current health situation, the average length of time you may have to continue to pay on a policy could be a major factor into whether you keep the coverage.
  3. Availability of Other Planning Tools: If you already have a secondary plan in place, including a Medicaid Trust, the cancellation of a long-term care insurance policy may not be the worst thing. By no means do we think that the Trust, in and of itself, is an all-encompassing solution. The Trust will not provide benefits like in-home care coverage and assisted living coverage that a long-term care insurance policy contains. However, for the right client, a Trust and other planning may be sufficient depending on your resources and income needs.

We know as long-term care insurance becomes more expensive and more difficult to get, many policyholders will be faced with the challenge of possibly abandoning their policies. We hope that those owners will examine these three areas before deciding how to proceed.


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Have You Had “The Talk” With Your Aging Parents?

Have You Had “The Talk” With Your Aging Parents?

6603119If you have tried to have a conversation with your parents about handling their affairs after they die, only to have them respond they’re not ready to have “the talk”, you might want to re-think approaching them to discuss the topic.

Before you even broach the topic, think about the information you are seeking. You need to know much more than whether a Will exists. Are there powers of attorney or health care proxies? Do they have life insurance? Have they made a list of every single account that they owe or collect money from?

When discussing these issues with parents, try to avoid placing blame on them and making “You” statements,. Don’t say “Why didn’t you take care of this sooner?” Instead try, “I am worried about honoring your wishes and doing the right thing after you pass away.”

Once the parent is on-board and willing to have the conversation, you can broach the idea of bringing in trusted people to the conversation — hopefully a professional. You might ask to tag along on a visit to your parents’ lawyer or financial advisor just so that you can get educated.

Hopefully, the process will bring about peace of mind for you and your parents, so that they can continue to enjoy their golden years, and you won’t spend sleepless nights worried about managing their affairs when they are gone.

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Problems With “Observation” Status And Medicare

Problems With “Observation” Status And Medicare

5744932One of the most frustrating things about trying to help someone get into a nursing home and figure out how to pay for it is Medicare coverage.

To recap, Medicare is the federal insurance program that pays for things like hospitalizations, doctor visits, and prescription drugs for seniors. As opposed to Medicaid, which we primarily discuss on this blog, which is the jointly-funded state/federal program that pays for long-term care admissions for seniors (among many other things).

The basic rule for nursing home planning is that if you are admitted into the hospital for 3 days, Medicare will cover up to your first 100 days if you are discharged to a nursing home. There are a slew of complicated technical rules about how you must be discharged and how you can use those 100 days, but I want to focus on what we think is a very basic prerequisite, the condition that you must be admitted to the hospital for 3 days.

For most of my clients, this used to be simple. You would have a triggering event requiring hospitalization and would spend the minimum 3 days recovering prior to discharge to a nursing home for more recovery. Recent changes in Medicare reimbursements to hospitals have triggered an increase in patients being held for “observation”.

Being held for observation rather than being admitted as a patient eliminates the possibility that Medicare will pay for up to the first 100 days if you are discharged to a nursing home. This really hurts patients and their families more than anyone else. If your family member is going to need Medicaid to fund the nursing home stay, this accelerates the requirement to file a Medicaid application.

Rather than encouraging clients to engage in an appeal of the Medicare process, which can be lengthy, expensive and not that rewarding, we suggest strong family advocacy to the hospital personnel and staff if your loved one is being held for observation instead of admitted, especially if you think discharge to a nursing home is a likely outcome.

The real solution, or at least one of them, would be to permit stays in the hospital under observation status to count toward your 3 midnights for Medicare coverage. There are several proposals in Congress to address this, but in the meantime, zealous advocacy on behalf of our clients is the only resolution short of litigation.

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Elder Abuse-Did You Know?

Elder Abuse-Did You Know?

Next month I’m presenting a national webinar entitled, “Recognizing and Reporting Elder Financial Abuse”. Here’s one of the slides I’m working on. I am continuously shocked when I read statistics about how infrequently elder financial exploitation is reported and acted on. I am hopeful that as this issue comes to light, we will all work to craft more robust remedies to this growing problem.

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Financial Exploitation & The Elderly

Financial Exploitation & The Elderly

Financial exploitation of the elderly is one of the most under-reported crimes, and is unfortunately growing more and more widespread. There are steps you can take if you think you know someone who is a victim of elder financial exploitation. Please view Attorney Marrone’s interview discussing this problem and some possible solutions.

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Organ Donation And The Law