Annapolis, Maryland Wills, Trusts & Estate Planning

Work Requirements from Medicaid May Harm Some Seniors - Annapolis Estate Planning

States that have opted to require Medicaid recipients to work, will put some seniors at risk of losing healthcare coverage.

A recent article from US News & World Report, “How Medicaid Work Requirements Could Hurt Older Americans,” explains how the new requirements for Medicaid recipients to work or meet “community engagement” requirements may create hardships for some seniors. Many lower income Americans depend on Medicaid for healthcare, including adults age 50 to 64, who often suffer from chronic health conditions.

The Centers for Medicare & Medicaid Services announced in January that states can apply for waivers to implement work requirements for people who receive Medicaid benefits. The waivers have been approved in three states and are pending approval in others. Age limits vary for who might have to fulfill work or "community engagement" requirements for up to 80 hours a month. In Kentucky, Medicaid recipients are exempt at 64. In Indiana, it’s 60, and in Arkansas, 50 is the threshold. Some other states are looking to implement work requirements. They include Arizona, Kansas, Maine, Mississippi, New Hampshire, Utah and Wisconsin.

Beth Kuhn, commissioner of the Kentucky Department of Workforce Investment, notes that most people on Medicaid also receive Supplemental Nutrition Assistance Program (SNAP) benefits—also known as food stamps. For those 80% of Medicaid recipients, she says, work requirements don't apply after age 49.

Community engagement is the prime focus of the new requirements, which entails four facets: volunteering, training and education, work, and caregiving of a family or community member in need.

There are many who are excluded from the requirement, and one group is the medically frail. Medical frailty would be determined by an eligibility specialist.  However, it’s not clear now how chronic medical conditions impacting many beneficiaries, like asthma, diabetes, heart disease, high cholesterol, and hypertension, will be considered.

A group of Kentucky residents receiving Medicaid, are now being represented in a federal class action lawsuit by The Southern Poverty Law Center, National Health Law Program, and Kentucky Equal Justice Center. A joint brief was filed by the National Academy of Elder Law Attorneys (NAELA), AARP, AARP Foundation, Justice in Aging and the Disability Rights Education and Defense Fund.

According to a spokesperson with Justice in Aging, the brief focuses on the elimination of pre-application coverage, elimination of non-emergency medical transportation and the imposition of lockout penalties for various transgressions. With no pre-application coverage, an individual could easily become liable for thousands of dollars of health care costs, if an illness or injury prevented them from filing a Medicaid application.

Reference: US News & World Report (April 20, 2018) “How Medicaid Work Requirements Could Hurt Older Americans”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Can a Revocable Land Trust Shield Assets from Medicaid? - Annapolis Estate Planning

Control of an asset is a key element, when Medicaid considers an individual’s eligibility.

A recent article from nj.com, “What revocable land trusts mean to Medicaid eligibility,” starts with what sounds almost like a warning: it’s not easy to protect or hide assets from Medicaid. A revocable land trust won't help to protect an asset from Medicaid's spend down requirements, because a trust that’s revocable can be revoked or terminated at any time by the grantor.

A land trust is a private agreement with the trustee agreeing to hold title to property for the benefit of the beneficiary or beneficiaries. The creator of the trust is called the settlor or trustor. This person is usually the titleholder to the property, before it’s transferred into the trust.

The settlor frequently remains the beneficiary of the trust for his lifetime. In effect, the trustee holds the title to the property and must follow the instructions of the beneficiary. The beneficiary typically has the absolute right to direct and control the trustee and receive all income from the trust. The trust agreement, at the creation of the trust, dictates the relationship between the trustee and beneficiary. As a result, the trustee often has no more power than the settlor gives him. In addition, he doesn’t have any other function, other than to do as the trust deed instructs.

Medicaid sees the assets in a revocable trust as countable because the Medicaid applicant who places the home in the trust she created has total control.  It means that she can take back the asset at any point in time.

In such a case, Medicaid will deny the application. They’re effectively telling the applicant to sell the home, spend down the assets, and then reapply when they have no more than $2,000 in assets in her name and in the revocable trust combined.

Assets in an irrevocable trust may be excluded from Medicaid spend down rules, based on the terms of the trust.  However, even if the home was placed in an irrevocable trust that would exclude it from Medicaid, the transfer to the trust must be completed more than five years, before applying for Medicaid to avoid the five-year lookback and Medicaid penalty provisions.

An experienced elder law attorney, with current knowledge of Medicaid regulations, will know what trusts or other strategies will work best to enable an individual to become eligible for Medicaid.

Reference: nj.com (April 9, 2018) “What revocable land trusts mean to Medicaid eligibility”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Medicaid Planning Can Help with Long-Term Care Services – Annapolis Estate Planning

The idea of willingly becoming impoverished, in order to qualify for long-term care, is an unfortunate necessity for many, as illnesses strike in their later years.

Sometimes it takes a village to plan for Medicaid and, as reported by CNBC recently, in “Here’s a surprise source you can tap for long-term care services,” this village is made up of an elder law attorney, your CPA and financial advisor to help pay for nursing home care and protect your family at the same time.

Medicaid covers a range of long-term services for eligible applicants. States generally require that individual applicants have no more than $2,000 in assets ($3,000 to $6,000 for couples). State income requirements vary by jurisdiction.

Medicaid planning is a strategy to work with attorneys, accountants, and advisors to shift wealth to trusts or annuities to qualify.

Those who should be thinking about this are seniors who aren't insurable for some reason. If they have some assets but needed care in a nursing home, their savings would quickly be drained.

To qualify for Medicaid and pass the means test, older individuals must transfer their wealth at least five years before they apply. There’s what is called a "five-year lookback." An applicant may be subject to penalties and be ineligible for Medicaid for a period of time. They’d have to pay out of pocket.

However, a transfer of assets can be risky in Medicaid planning. That’s because an outright gift of assets to a relative, could mean that the recipient doesn't get a step-up in basis. They could wind up with hefty capital gains taxes, if they try to sell the asset immediately.

In addition, leaving money to a child can be reached in a divorce or by creditors.

One option may be an irrevocable trust. This is because those assets aren’t under the control of the senior and are protected from creditors. Another choice is a single-premium income. The applicant would use some assets to buy an annuity that will begin distributing income to that person's spouse.

Make certain to work with experienced professionals, especially an elder law attorney, because the plan will likely include tax planning, trusts and asset management.

Reference: CNBC (February 27, 2018) “Here’s a surprise source you can tap for long-term care services”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Should You Consider a Reverse Mortgage for Retirement Costs? - Annapolis Estate Planning

If circumstances did not permit you to save as much as you wanted, or unexpected costs dented your retirement accounts, a reverse mortgage may be an option to consider.

Reverse mortgages can be very attractive solutions for retirees who find themselves short of funds, since a reverse mortgage will not impact Social Security or Medicare benefits. A reverse mortgage is exactly what it sounds like—a way to take tax-free cash equity out of your home, while you retain ownership.

But, as The Observer News warns in the recent article, “Reverse mortgages can be a key component in retirement planning,” there are pros and cons.

Many people like reverse mortgages because it’s really a loan option that can help homeowners ages 62 and older with equity in their homes enjoy a more comfortable retirement. You’re still able to live in your home and retain the title.

You can also receive cash at the closing and open a line of credit to access the rest, as needed, after a year. You receive monthly payments for a set period or for your lifetime. You can  also choose any combination of these options.

Even if you have an existing mortgage, you may still qualify.

 However, there are some disadvantages.  Since you’re not making payments and receiving income, the loan balance increases as interest and fees accumulate. In addition, because your equity is decreasing, there’ll be less of an inheritance to leave your heirs. While they can still inherit your home, they must first pay any outstanding balance that you owe.

The reverse mortgage must be for your primary residence, and if you permanently move away or no one on the title is living in the home, the reverse mortgage is due immediately.

Bear in mind that closing costs and fees on reverse mortgages are higher than on traditional mortgages. Costs and fees are deducted from the loan proceeds, so you’ll be getting less money overall. On the other hand, you are no longer making mortgage payments. You’ll need to do a careful cost-analysis before signing the papers.

Reference: The Observer News (February 15, 2018) “Reverse mortgages can be a key component in retirement planning”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Are You Saving Enough for the High Cost of Assisted Living? – Annapolis Estate Planning

If you haven’t been saving for retirement, maybe you’ll do better if you are focused on saving for assisted living. One well known survey, 2017 Genworth Cost of Care Survey, reports that you’ll need $1,517 a month for adult day health care. Those fees are only going in one direction—up!

Adult health day care is not inexpensive in our country. If all you need is adult day health care, consider yourself lucky. It’s a bargain at more than $1500 a month, compared to $3,750 for an assisted living facility, $3,994 for home care services, and $4,099 for home health aides.

If you want some privacy, the median cost is $7,148 for a semiprivate room at a nursing home and $8,121 for a private room. Will you be able afford it? Wealth Advisor poses this question in its recent article, “Have Clients Planned For Long-Term Care?”

These alarming figures should get you thinking. If you don’t think about the possibility that you may require some form of long-term care services—either a home health aide, an assisted living facility, or a nursing home—then you run the risk of wiping out your entire life’s savings to pay for it, even if it’s a only a short period of time when you or a spouse needs such care.

So, how do you avoid that?

Medicaid isn’t a viable option for most people, because of the relatively low state income thresholds to qualify for the program. One option is to purchase long-term care insurance (LTCi) through a reputable broker or agent. LTC insurance policies typically provide coverage in these situations:

• Home care
• Assisted living facilities
• Nursing homes
• Adult day care
• Hospice care

However, getting a policy isn’t as easy as it may at first appear.

LTC policies can vary quite a bit, based on factors like the insurer, area of the country and your health status. Find out what benefits will be provided and for what duration. You should also determine the tax implications for your circumstances. Finally, your out-of-pocket cost is a big factor.

Your best course of action –in addition to saving for retirement—is to start shopping for an LTC policy for you and your spouse long before you need it. Once you know your available options, you’ll be able to make an informed decision.

Reference: Wealth Advisor (February 16, 2018) “Have Clients Planned For Long-Term Care?”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

How to Boost Your Retirement Plan’s Chance of Survival - Annapolis Estate Planning

You can’t avoid disasters, but you can prepare for them. For retirements, the top two threats are the cost of long-term care and bear markets.

Recent headlines have brought a steady stream of calamity, on a major scale: earthquakes, hurricanes, floods, ice storms, mud slides and forest fires.

Kiplinger’s recent article “Disaster-Proof Your Retirement Plan” says that many people who prepared still lost their homes and, in some instances, family. Others who did nothing were fortunate to escape peril. Because misfortune can work haphazardly, people can become complacent.

Many pre-retirees understand the importance of planning, but it’s just not a priority for them “just yet.” Now they’re healthy, making money on their investments and enjoying a steady paycheck. They know they’ll have to buckle down and get on it, but not right now.

However, like any type of disaster preparation, the sooner you solve your vulnerabilities, the more security you’ll have. Here’s a closer look at some of the issues and some solutions.

Many people have long lives, but don’t enjoy them due to health issues. If you’re 65, there’s better than a 50-50 chance you’ll need long-term care at some point in the future, according to the U.S. Department of Health and Human Services. An illness could wipe out your assets quickly. It could leave your surviving spouse with little to live on when you pass away.

 It is essential to plan ahead. This is because an extended health care crisis can cost as much as $10,000 per month, even for home care. Medicare doesn’t cover long-term care costs. Without a financial plan to deal with this, retires may be forced to spend down their assets.

There are several financial strategies that can be applied to address long-term care. Traditional long-term care insurance is a good choice, if you’re in your 40s or 50s and still healthy. For those in their 60s, or those who don’t want to pay ongoing premiums, you might buy a single premium annuity or life insurance policy with a long-term care rider. Another option is an income-based annuity, which is typically much easier to qualify for, health-wise.

If your retirement income plan relies heavily on your investments, poor market performance early in retirement can have a disastrous impact on how long your money will last. A simple strategy for this problem is the "bucket” approach. Calculate your required annual expenses and, if possible, move four years’ worth into safer investments like money-market funds, very short-term bonds or an annuity. When we see the next market correction, you’ll be able to weather the storm and use these safe assets to cover your living expenses.

When it comes to retirement, knowing that there are real threats is a start.  However, taking action to prepare for these possibilities now, will help you in years to come.

Reference: Kiplinger (January 29, 2018) “Disaster-Proof Your Retirement Plan”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Has New York State’s First Unsealed Qui Tam Estate Tax Case Been Filed? - Annapolis Estate Planning

It’s not yet confirmed, but the case of a woman who is claiming that her former boss, a deceased county pathologist, did not pay state income or estate taxes, might be the state’s first unsealed qui tam estate tax case.

According to a suit filed in New York, a Westchester County pathologist, now deceased, is being accused by his former employee of evading payment of income and estate taxes. The New York Law Journal reports that Myron Melamed misrepresented that he was living and working full time in New York, as detailed in its article, “Suit Is Filed in NY's First Unsealed Qui Tam Estate Tax Case.”

Melamed died in 2013. The qui tam case against him was filed in 2014, but was kept under seal until January 16, while the case was under government investigation.

A qui tam lawsuit is a kind of whistleblower lawsuit brought under the False Claims Act. The law rewards whistleblowers in successful cases, where the government recovers funds lost to fraud.

Light brought her claims as a plaintiff-relator for the state, alleging that New York is entitled to roughly $2 million in damages. That amount could be trebled under the FCA, plus $12,000 in civil penalties per violation.

“As alleged in the amended complaint, the fraud here is stark and the doctor’s weak attempts to cover it up won’t survive the scrutiny that justice will bring to bear,” Pollock said.

New York State Attorney General Eric Schneiderman’s office didn’t file to intervene in the case. Pollock didn’t say if the office gave a reason as to why it’s not joining the action.

Most FCA claims involve health care spending, like Medicare or Medicaid fraud. There are numerous reasons why a state attorney general wouldn’t intervene in a case, aside from thinking it won’t prove successful.

One attorney, who is not associated with the case but focuses his practice on FCA cases, remarked that he has never heard of an unsealed estate tax whistleblower case in New York.

Melamed’s son David Melamed, who is also a defendant in the case, said that he had not yet learned about the lawsuit and declined comment.

Reference: New York Law Journal (January 19, 2018) “Suit Is Filed in NY's First Unsealed Qui Tam Estate Tax Case”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Adding a Child to a Deed Seems Simple, But Might Have Negative Consequences – Annapolis Estate Planning

People like to try to solve problems in a simple manner, but like do-it-yourself dentistry, things that sound like simple solutions to estate planning situations could lead to problems.

People who own their own homes, especially when the mortgage is paid off, often think they should add their adult child or children to the deed so the asset passes to their heir(s) without going through probate. However, this seemingly simple step could lead to a few issues, one of which is making you ineligible for Medicaid for a period of time. That’s just for starters, as reported in a recent article from nj.com, “The risks of changing your home's deed.”

If the home has unrealized capital gains when he passes away, only his half of the value of the home would be eligible for a step-up in basis. If a senior goes ahead and sells the home while he’s still alive, he can exclude up to $250,000 of capital gains from tax, if it was his primary residence in two of the five years directly preceding the year it was sold.

However, if the daughter lives out of state, adding her to the deed will mean that her half won't be eligible for the exclusion because her primary residence is in another state.

In addition, if the daughter has creditors to whom she owes money, those creditors could attach a lien to her half of the senior’s home.

One other thought is whether the senior owns other assets or has long-term care insurance or other resources to pay for long-term care, should it become necessary.

If the senior in our scenario transfers half of his home to the daughter, it could be an issue if he needs long-term care and needs to qualify for Medicaid. Medicaid has a five-year lookback to determine if you gave assets away within five years of your application for benefits. Transferring the home could make the widow here ineligible for a time.

This sort of decision is best made with the guidance of an experienced elder law attorney who can address the specific circumstances and make sure that all parties concerned understand the implications of the decision. It could be costly for you or your heirs, so you’ll want to be fully informed.

Reference: nj.com (January 29, 2018) “The risks of changing your home's deed”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Not Perfect, but Better Than Nothing: Long-Term Care Insurance – Annapolis Estate Planning

Having long-term care insurance in place can provide peace of mind to seniors who are concerned about what their future may hold. Even the healthiest person, could find themselves needing care.

About 70% of people over age 65 will require long-term care services at some point and 40% will require nursing home care, according to a September 2008 report from the U.S. Department of Health and Human Services. Long term care (LTC) services includes a broad range of services to assist those with chronic conditions, known as ADLs—essential “Activities of Daily Life.” Long-term care insurance is a way to pay for parts of that care, if you are not wealthy enough to self-pay, or don’t qualify for Medicaid.

Yes, it's expensive, saysnj.com, in the recent article, “Should we get long-term care insurance?” but it’s your only alternative.

Data from Genworth's 2017 Cost of Care Survey found the national median cost of an assisted living facility is $3,750 per month. A nursing home costs $8,010 per month. The cost is also typically more for those with dementia. According to the American Association for Long-term Care 2008 Sourcebook, more than half of people needing nursing home care require a stay of more than 12 months, with almost 25% staying more than three years. Those in the latter group, can really wreck a family's finances.

In addition, most people don’t know that Medicare only covers a very narrow set of LTC costs. Similarly, Medicaid only covers those with very limited financial resources. For all but the extremely wealthy, long-term care insurance (LTCI) is the best solution to defray the expense of home healthcare, assisted living, or nursing home care. Yes, it can be pricey.

Getting coverage when you are relatively young and still in good health helps to keep the costs down.

Some people are worried that they’ll be paying LTCI premiums for many years and die before they ever use the benefit. However, we do the same type of thing for auto or homeowners insurance. Everyone gets this coverage because the financial risk of doing without is too great.

Insurance companies have combination life insurance/LTCI policies, called "hybrids," that address the fear of wasted premiums. With these hybrid policies, provided that the premium is paid for your lifetime, you or your heirs will receive the full policy benefit, as the life insurance death benefit, the LTC benefit, or a combination.

These are complex policies with many options and reviewing them can be challenging for the layperson. Before you sign anything, review the policies with an estate planning attorney, or a trusted financial advisor who is familiar with LTCI policies.

Reference: nj.com (January 12, 2018) “Should we get long-term care insurance?”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Special Needs Families Require Careful Financial and Estate Planning - Annapolis Estate Planning

Government benefits for special needs individuals are needs-based, so any change in their financial situation could make them ineligible for benefits.

Grandparents who want to be generous to their special needs grandchildren, are often surprised when the child’s parents tell them not to. With number of disabled individuals five years and older numbering nearly 58 million, that’s a lot of disappointed grandparents. But it’s important to respect their parent’s wishes. Here’s why.

Giving money directly to a special needs child or adult—especially if they're already receiving government benefits—can create big problems, as CBS News reports in “’Special needs’ people need special financial planning.”

If a person with special needs has more than $2,000 in their own name, he or she risks the loss of the government benefits that he or she already receives. It’s a major headache to get them back.  Instead of giving a lump sum of cash to a special needs person, the money should be structured in a way that doesn't violate government benefit requirements.

This is important because children with disabilities, like Down syndrome, now have a much longer life expectancy. As a result, the dependent person will probably outlive the parents.  However, they will still require care throughout their life. Now, many special needs adults live independently or in homes with little assistance. However, this doesn't mean that their government program benefits can cover their everyday needs. Therefore, it’s crucial to plan ahead.

There are several ways to have your money benefit people with special needs throughout their lives, without the loss of their federal benefits. One way is to create a special needs trust. This is a trust with the explicit purpose to "supplement, not supplant" federal and state assistance programs and to create a better quality of life for this person. A special needs trust can provide for special medical equipment, eyeglasses, and vacations.

Work with an experienced estate planning attorney to create a special needs trust, because there are  many rules and regulations involved. For example, the beneficiary (the individual with special needs) can't own the trust—there must be a designated trustee or "third-party provider" who dispenses the money.

Another important part of an estate plan for the future of a dependent with special needs is a "letter of intent." These are instructions that state what the guardian wants to happen in the future. It sets out everything a person with special needs requires, their history and what you and the person want in the future.

Another alternative is an ABLE (Achieving Better Life Experience) account. This allows contributions to a maximum of $15,000 annually, provided the person is diagnosed as disabled prior to age 26. There is a maximum of $100,000 that can be in this account, before the disabled person loses his or her government benefits. An ABLE account can be used for expenses like education, employment training, health, legal fees and funeral expenses.

Avoid these common mistakes that parents and caregivers make when planning:

• Disinheriting the child with special needs. Government benefits help provide food, shelter, and medical care, but remember it’s no more than bare bones necessities.
• Placing assets in your child's name. To qualify for government benefits like SSI or Medicaid, a person can’t have more than $2,000 in assets. If you leave funds or convertible assets directly to your child with special needs, they’ll need to be "spent down" to qualify for benefits.
• Relying on your other children to take care of their special needs sibling. This is a lot to ask of a brother or a sister, and it can cause resentment.
• Leaving money to your other children to support their sibling with special needs. This isn’t a good idea because the funds could be lost if the caregiving sibling dies, gets divorced or is sued, goes bankrupt, or just spends the funds. There's also no accountability.
• Savings bonds or 529 College Savings accounts in the child’s name. These are treated like any other asset: if the value is more than $2,000, a special needs individual could lose government benefits.

Reference: CBS News (December 25, 2017) “’Special needs’ people need special financial planning”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys