Share

Medicaid Qualification

Thursday, July 23, 2015

Understanding the Unique Taxation Standards Applicable to IRA Distributions

I have most of my every-day checking and savings accounts titled in the name of my revocable trust. Should I take the same steps with my 401(k) and retirement investments? 


For clients with a single or joint revocable trust, retitling assets into the name of the trust not only accomplishes the goal of its creation, but ensures the seamless and effortless transition of personal and real property to beneficiaries when the time comes. However, trust creators (known as grantors) are highly cautioned to speak to an elder law attorney prior to retitling retirement accounts or transferring those assets into trust, as a hefty and unexpected tax bill may follow. 

Tax implications of retitling a retirement account

401(k) accounts and IRA’s can reap significant tax savings if withdrawn correctly and at the right time. By contrast, account holders can expect a massive tax penalty for withdrawing too early – or even inadvertently. 

Under current IRS rules, retitling a 401(k), 403(b), or Individual Retirement Account will be treated as an outright withdrawal of funds, even if the actual funds in the account are never actually spent. Therefore, the retitle will trigger a tax penalty congruent to the amount in the account for the transfer tax year, which can be especially significant for accountholder with high account balances. 

Safe ways to ensure the proper transfer of IRA assets

When it comes to leaving retirement account assets to a beneficiary, the easiest, simplest, and safest way to accomplish this task is to change the beneficiary designation on the account. This is accomplished by simply contacting the bank or investment firm and filling out a Change of Beneficiary form. Many accountholders choose an alternative beneficiary in the event the primary beneficiary predeceases the accountholder, but this is not always necessary. Then, when it comes time to distribute the assets upon the death of the accountholder, the funds will not only pass outside of probate, but will transfer directly to the beneficiary tax-free. 

If you have questions about proper estate planning or beneficiary designations, please do not hesitate to contact Andrew Byers, serving Auburn Hills, Rochester Hills and Troy, Michigan, by calling (248)301-1511. 

Thursday, July 16, 2015

Funeral Planning for Medicaid Eligibility

Are there any other less common ways to protect assets during the Medicaid planning process?

When it comes to planning for long-term care, many couples and individuals opt to pre-plan to eventually qualify for Medicaid coverage. While the thought of applying for need-based Medicaid coverage may seem unlikely for many middle-class individuals, the rising costs of long-term care – particularly for couples needing care together – is enough to deplete a sizable nest egg in just a few short years. 

The keystone of Medicaid planning is reducing one’s assets to the allowable threshold in order to reach the financial-need eligibility criteria. However, planners must be careful when transferring assets as Medicaid will impose a penalty period to address any transfers made during the five years immediately prior to the application for benefits. Fortunately, there are several other financial options to accomplish the “spend down” of assets other than outright transfers, sales or gifts, such as pre-planning for a memorial service, funeral, and/or burial plot. 

Earmarking assets for funeral costs

Pre-planning one’s funeral is hardly the most pleasant way to spend an afternoon. However, this important – and relatively simple – step can help avoid the hassle and inconvenience of “crisis planning,” or quickly planning for Medicaid eligibility at the last minute. 

Under the applicable rules, money spent on prepaid funeral arrangements and an irrevocable burial contract is not “counted” as either part of an applicant’s assets or as a penalty-inducing transfer. Taking this step can also help alleviate the financial burden for surviving family members who will be left to foot the final bill after all assets have been depleted by nursing home costs. 

When funeral planning, be sure to find a reputable entity to complete the task – and purchase a spectrum of services necessary to cover the service and burial – including the headstone and engraving costs. Be sure to pay the entire bill in full, as payment plans or credit arrangements will not allow for the maximum possible exemption for Medicaid applicants. Lastly, be sure to work with a reputable Michigan elder law attorney before making any purchases, as the timing of the prepaid funeral plan purchase is important, particularly for couples. 

If you are considering long-term care planning and would like to discuss your options with a reputable Auburn Hills, Rochester Hills and Troy, Michigan elder law attorney, please contact Andrew Byers today: (248)301-1511.


Wednesday, June 03, 2015

Recent Holding by Michigan Court of Appeals Upholds Medicaid Eligibility Penalty for Home Health Aides

How do payments to home health aides impact Medicaid eligibility in Michigan? 


In Michigan, as is the case elsewhere, eligibility for Medicaid enrollment is entirely needs-based, meaning an applicant must be financially unable to pay the costs and fees associated with his or her medical care. Currently, Medicaid is the only government-funded healthcare program that covers the costs of long-term care, as Medicare only covers a nursing facility stay up to 120 days. 

In order to qualify for Medicaid, an applicant must show a lack of personal assets and a total inability to pay for medical bills individually. Accordingly, state and federal authorities will closely scrutinize an applicant’s financial situation, primarily focusing on any transfers or divestments made over the past five years. If an asset transfer or divestment has occurred, and the applicant could have used those funds toward his or her stay in the long-term care facility, a penalty will apply congruent with the amount of time those funds could have covered daily nursing home costs. 

Home Health Aides and Medicaid 

A home health aide is someone who regularly visits an individual’s home for purposes of providing routine medical care and/or assists with the administration of medication or other treatments. Home health aides are generally not expected to provide round-the-clock care, and are usually only appropriate for those individuals who are still able to manage several daily care tasks on their own. 

In one recent case, an elderly Michigan woman with dementia paid over $19,000 for home health services prior to her admittance to a nursing home. Once her funds were depleted, her family applied for Medicaid to cover the costs of her stay. However, agents concluded that the money she spent for the home health aide did not meet the stringent test set forth by Medicaid regulations, and she was penalized for 7 months before her benefits would be accessible. In the interim, she passed away leaving her family with an enormous debt to cover from an already-depleted estate. 

Thereafter, the family’s elder law attorney appealed the decision to the local Circuit Court, which held that the burdensome five-part test for home health aide divestment eligibility only applied when the caretaker is a family member related by blood or marriage, as the risk is higher in these situations for fraud to occur. 

Unfortunately, the Court of Appeals was given an opportunity to review the case as well, and agreed with the original opinion by the administrative law judge tasked with deciding the applicability of the home health aide eligibility penalty. 

If you are concerned about Medicaid eligibility and would like to speak with a qualified and experienced elder law attorney that serves the Auburn Hills area, please contact Andrew Byers by calling (248)301-1511 today. 


Tuesday, June 02, 2015

Using the Michigan ‘Lady Bird’ Deed as a Medicaid Planning Tool

What is a ‘lady bird’ deed? And how can it help me with Medicaid eligibility? 


Under Michigan law, a ‘lady bird’ deed is an elegant-sounding designation for a relatively common type of real property interest formalized in a document.  This interest is that of an enhanced life estate interest. 

A life estate is a type of real property interest that may be granted to a person for the duration of a person’s life. For example, a parent might transfer a piece of lakefront property to his or her son that includes a life estate, allowing the parent to use the property exclusively until his or her natural death, at which point, the ownership would transfer directly to the son. However, a traditional life estate is incredibly limiting for the grantor, and essentially prohibits him from encumbering the property with a mortgage or allowing it to fall into disrepair without the threat of liability. Moreover, transferring a real property interest subject to a regular life estate to a loved one during the five-year Medicaid “look-back” period could trigger a temporary penalty congruent to the value of the property. 

By contrast, an enhanced life estate – known as a “lady bird deed” in states like Michigan, Florida or Texas – is far less restrictive. For instance, the party grating the life estate may encumber the property, sell the property, or otherwise maintain complete control over the asset for the duration of his natural life. Perhaps a confusing type of property interest transfer, the Lady Bird deed allows for a number of benefits, particularly with regard to Medicaid eligibility. 

Using the Lady Bird Deed as an Estate Planning Strategy


Under Medicaid guidelines, an applicant is only eligible upon a showing of true financial need. In other words, the applicant has no personal assets to sell in order to pay for medical benefits, and has essentially met the “needs-based” guidelines set forth by state and federal authorities. 

While financial need is the hallmark of eligibility, applicants are not expected to be without shelter in order to qualify. Accordingly, an applicant’s primary personal residence is generally not “counted” against him or her for purposes of receiving benefits. However, any other residence (i.e., second home or investment property) must be disposed of for market value prior to the five-year look-back period in order to avoid penalties. If an applicant transferred property to a friend or loved one and retained a traditional life estate, this transfer will likely result in penalties when the party with the life estate applies for Medicaid benefits. However, if the life estate is under the terms of a lady bird deed, Medicaid views the property as under the control of the applicant, and will consider the property as a primary residence.  


If you are considering Medicaid eligibility, or would like to discuss long-term care options with an experienced Auburn Hills elder law attorney, please contact Andrew Byers by calling (248)301-1511. 

Sunday, August 24, 2014

What is Estate Recovery?

What is Estate Recovery?

Medicaid is a federal health program for individuals with low income and financial resources that is administered by each state. Each state may call this program by a different name. In California, for example, it is referred to as Medi-Cal. This program is intended to help individuals and couples pay for the cost of health care and nursing home care.

Most people are surprised to learn that Medicare (the health insurance available to all people over the age of 65) does not cover nursing home care. The average cost of nursing home care, also called "skilled nursing" or "convalescent care," can be $8,000 to $10,000 per month. Most people do not have the resources to cover these steep costs over an extended period of time without some form of assistance.

Qualifying for Medicaid can be complicated; each state has its own rules and guidelines for eligibility. Once qualified for a Medicaid subsidy, Medicaid will assign you a co-pay (your Share of Cost) for the nursing home care, based on your monthly income and ability to pay.

At the end of the Medicaid recipient's life (and the spouse's life, if applicable), Medicaid will begin "estate recovery" for the total cost spent during the recipient's lifetime. Medicaid will issue a bill to the estate, and, in some states, may place a lien on the recipient's home in order to satisfy the debt. Many estate beneficiaries discover this debt only upon the death of a parent or loved one. In many cases, the Medicaid debt can consume most, if not all, estate assets.

There are estate planning strategies available that can help you accelerate qualification for a Medicaid subsidy, and also eliminate the possibility of a Medicaid lien at death. However, each state's laws are very specific, and this process is very complicated. It is very important to consult with an experienced elder law attorney in your jurisdiction.


Sunday, August 24, 2014

What is Estate Recovery?

What is Estate Recovery?

Medicaid is a federal health program for individuals with low income and financial resources that is administered by each state. Each state may call this program by a different name. In California, for example, it is referred to as Medi-Cal. This program is intended to help individuals and couples pay for the cost of health care and nursing home care.

Most people are surprised to learn that Medicare (the health insurance available to all people over the age of 65) does not cover nursing home care. The average cost of nursing home care, also called "skilled nursing" or "convalescent care," can be $8,000 to $10,000 per month. Most people do not have the resources to cover these steep costs over an extended period of time without some form of assistance.

Qualifying for Medicaid can be complicated; each state has its own rules and guidelines for eligibility. Once qualified for a Medicaid subsidy, Medicaid will assign you a co-pay (your Share of Cost) for the nursing home care, based on your monthly income and ability to pay.

At the end of the Medicaid recipient's life (and the spouse's life, if applicable), Medicaid will begin "estate recovery" for the total cost spent during the recipient's lifetime. Medicaid will issue a bill to the estate, and, in some states, may place a lien on the recipient's home in order to satisfy the debt. Many estate beneficiaries discover this debt only upon the death of a parent or loved one. In many cases, the Medicaid debt can consume most, if not all, estate assets.

There are estate planning strategies available that can help you accelerate qualification for a Medicaid subsidy, and also eliminate the possibility of a Medicaid lien at death. However, each state's laws are very specific, and this process is very complicated. It is very important to consult with an experienced elder law attorney in your jurisdiction.


Monday, May 19, 2014

Filial Responsibility Laws

Filial Responsibility Laws

Filial responsibility laws impose a legal obligation on adult children to take care of their parents’ basic needs and medical care. Although most people are not aware of them, 30 states in the U.S. have some type of filial responsibility laws in place. The states that have such laws on the books are Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia and West Virginia.

Filial responsibility laws and their enforcement vary greatly from state to state. Eleven states have never enforced their laws, and most other states rarely enforce the laws. Currently, Pennsylvania is the only state to aggressively enforce its filial responsibility laws.

One of the main reasons why filial responsibility laws are not widely enforced is due to the fact that in the context of needs-based government programs such as Medicaid, federal law has prohibited states from considering the financial responsibility of any person other than a spouse in determining whether an applicant is eligible. However, as many local programs aimed at helping the elderly continue to struggle with insolvency, many states may consider more aggressive enforcement of their filial responsibility laws.

Twenty-one states allow lawsuits to recover financial support. Parties who are allowed to bring such a lawsuit vary state by state. In some states, only the parents themselves can file a claim. In other states, the county, state public agencies or the parent’s creditors can file the lawsuit. In 12 states, criminal penalties may be imposed upon the adult children who fail to support their parents. Three states allow both civil and criminal penalties.

In some states, children are excused from their filial responsibility if they don’t have enough income to help out, or if they were abandoned as children by the parent. However, the abandonment defense can be difficult to prove, especially if the parent had a good reason to abandon the child, like serious financial difficulties. Sometimes, children’s filial responsibility can be reduced if prior bad behavior on the part of the parent can be proven.


Sunday, March 09, 2014

Should I Transfer My Home to My Children?

Should I Transfer My Home to My Children?

Most people are aware that probate should be avoided if at all possible. It is an expensive, time-consuming process that exposes your family’s private matters to public scrutiny via the judicial system. It sounds simple enough to just gift your property to your children while you are still alive, so it is not subject to probate upon your death, or to preserve the asset in the event of significant end-of-life medical expenses.

This strategy may offer some potential benefits, but those benefits are far outweighed by the risks. And with other probate-avoidance tools available, such as living trusts, it makes sense to view the risks and benefits of transferring title to your property through a very critical lens.

Potential Advantages:

  • Property titled in the names of your heirs, or with your heirs as joint tenants, is not subject to probate upon your death.
  • If you do not need nursing home care for the first 60 months after the transfer, but later do need such care, the property in question will not be considered for Medicaid eligibility purposes.
  • If you are named on the property’s title at the time of your death, creditors cannot make a claim against the property to satisfy the debt.
  • Your heirs may agree to pay a portion, or all, of the property’s expenses, including taxes, insurance and maintenance.


Potential Disadvantages:

  • It may jeopardize your ability to obtain nursing home care. If you need such care within 60 months of transferring the property, you can be penalized for the gift and may not be eligible for Medicaid for a period of months or years, or will have to find another source to cover the expenses.
  • You lose sole control over your property. Once you are no longer the legal owner, you must get approval from your children in order to sell or refinance the property.
  • If your child files for bankruptcy, or gets divorced, your child’s creditors or former spouse can obtain a legal ownership interest in the property.
  • If you outlive your child, the property may be transferred to your child’s heirs.
  • Potential negative tax consequences: If property is transferred to your child and is later sold, capital gains tax may be due, as your child will not be able to take advantage of the IRS’s primary residence exclusion. You may also lose property tax exemptions. Finally, when the child ultimately sells the property, he or she may pay a higher capital gains tax than if the property was inherited, since inherited property enjoys a stepped-up tax basis as of the date of death.

There is no one-size-fits-all approach to estate planning. Transferring ownership of your property to your children while you are still alive may be appropriate for your situation. However, for most this strategy is not recommended due to the significant risks. If your goal is to avoid probate, maximize tax benefits and provide for the seamless transfer of your property upon your death, a living trust is likely a far better option.


Monday, January 20, 2014

Medicare vs. Medicaid: Similarities and Differences

Medicare vs. Medicaid: Similarities and Differences

With such similar sounding names, many Americans mistake Medicare and Medicaid programs for one another, or presume the programs are as similar as their names. While both are government-run programs, there are many important differences. Medicare provides senior citizens, the disabled and the blind with medical benefits. Medicaid, on the other hand, provides healthcare benefits for those with little to no income.

Overview of Medicare
Medicare is a public health insurance program for Americans who are 65 or older. The program does not cover long-term care, but can cover payments for certain rehabilitation treatments. For example, if a Medicare patient is admitted to a hospital for at least three days and is subsequently admitted to a skilled nursing facility, Medicare may cover some of those payments. However, Medicare payments for such care and treatment will cease after 100 days.

In summary:

  • Medicare provides health insurance for those aged 65 and older
  • Medicare is regulated under federal law, and is applied uniformly throughout the United States
  • Medicare pays for up to 100 days of care in a skilled nursing facility
  • Medicare pays for hospital care and medically necessary treatments and services
  • Medicare does not pay for long-term care
  • To be eligible for Medicare, you generally must have paid into the system

Overview of Medicaid
Medicaid is a state-run program, funded by both the federal and state governments. Because Medicaid is administered by the state, the requirements and procedures vary across state lines and you must look to the law in your area for specific eligibility rules. The federal government issues Medicaid guidelines, but each state gets to determine how the guidelines will be implemented.

In summary:

  • Medicaid is a health care program based on financial need
  • Medicaid is regulated under state law, which varies from state to state
  • Medicaid will cover long-term care
     

Wednesday, November 27, 2013

Joint Bank Accounts and Medicaid Eligibility

Joint Bank Accounts and Medicaid Eligibility

Like most governmental benefit programs, there are many myths surrounding Medicaid and eligibility for benefits. One of the most common myths is the belief that only 50% of the funds in a jointly-owned bank account will be considered an asset for the purposes of calculating Medicaid eligibility.

Medicaid is a needs-based program that is administered by the state.  Therefore, many of its eligibility requirements and procedures vary across state lines.  Generally, when an applicant is an owner of a joint bank account the full amount in the account is presumed to belong to the applicant. Regardless of how many other names are listed on the account, 100% of the account balance is typically included when calculating the applicant’s eligibility for Medicaid benefits.    

Why would the state do this? Often, these jointly held bank accounts consist solely of funds contributed by the Medicaid applicant, with the second person added to the account for administrative or convenience purposes, such as writing checks or discussing matters with bank representatives. If a joint owner can document that both parties have contributed funds and the account is truly a “joint” account, the state may value the account differently. Absent clear and convincing evidence, however, the full balance of the joint bank account will be deemed to belong to the applicant.  


Monday, October 14, 2013

The Medicaid Asset Protection Trust

The irrevocable Medicaid Asset Protection Trust has proven to be a highly effective estate planning tool for many older Americans. There are many factors to consider when deciding whether a Medicaid Asset Protection Trust is right for you and your family.


Read more . . .


Archived Posts

2015
2014
December
November
October
September
August
July
June
May
April
March
February
January
2013
2012
2011
December
November
August
July
June
May
April
March
February

← Newer12 3 4 5 6 Older →


Estate Planning & Elder Law News

Elder Law attorney Andrew Byers assists clients in Auburn Hills, MI and throughout Oakland County, MI including Rochester Hills, Rochester, Troy, Bloomfield Township, Lake Orion, Oxford, Waterford, Clarkston, Independence Township, and Pontiac, as well as throughout the metropolitan Detroit area, including Macomb County and Wayne County, Michigan.



© 2015 Byers & Goulding, P.L.C. | Legal Advisory
2601 Cambridge Court, Suite 208, Auburn Hills, MI 48326
| Phone: 248-301-1511

Elder Law | Estate Planning | Probate & Estate Administration | Residential Real Estate | | About Us

Attorney Website Design by
Amicus Creative


© Byers & Goulding, P.L.C. | Disclaimer | Law Firm Website Design by Amicus Creative