Protecting Assets While Qualifying for Medicaid

Transcription

1 Protecting Assets While Qualifying for Medicaid Amelia Crotwell, CELA Elder Law of East Tennessee 903 N. Hall of Fame Dr. Knoxville, TN

2 Pre-Need Asset Planning Amelia Crotwell, CELA Elder Law of East Tennessee 903 N. Hall of Fame Dr. Knoxville, TN

3 My Approach to Proactive Medicaid Planning Emphasize the importance of having a plan before a need arises Start with an exceptionally good questionnaire (downloadable from Forms tab) Guide and counsel about Medicare, Medigap, Social Security, qualified and non-qualified assets, long term care insurance and partnership plans, trusts and deeds Assess priorities and values of the clients; what are their objectives and how much control are they willing to give up?

4 Select 3 Options That Best Reflect Your Values and Priorities: Ensuring my loved one is safe Meeting medical needs Honoring promises I made in the past Keeping my loved one happy Avoiding conflict with other family members Protecting savings or assets to the greatest extent possible for my loved one and or spouse Staying at home Getting help with caregiving responsibilities Other

5 Planning for Single vs. Married Applicants Generate a Financial Assessment Report a one-page summary of all of the assets, income, liabilities, and medical costs Evaluate the estate planning options that are most suitable for the client s situation and goals Include contingent special needs trusts in the primary estate planning documents Prepare powers of attorney that permit gifting, changing right of survivorship, etc. so that the clients have the tools to implement Medicaid planning later

6 Transferring Real Property without Jeopordizing Medicaid Eligibility The homestead Primary residence and contiguous land exempt for duration of applicant s lifetime if he/she intends to return to home May be rented to produce income If applicant is single and has no child under age 21 or with disability living in home, equity value cannot exceed $552,000 (2016) and $560,000 (2017) Countable when no intent to return home or offered for sale Intent to return is subjective not objective Doesn t have to be rational or reasonable

7 Titling the Home and Basic Issues: Married Applicants Typically, transfer title to the healthier spouse For couples where it is not evident who is the healthy spouse, consider using a joint revocable trust pouring through the estate to a Special Needs Trust benefitting the surviving spouse For spouses where one is gravely ill but Medicaid is not likely needed for that spouse because death is imminent, transfer title and assets to the ill spouse and create for him/her a Last Will with SNT for surviving spouse

8 Titling the Home and Basic Issues: Single Applicants Gift or sell a remainder interest and retain a life estate Gift or sell a small interest, such as a three percent (3%), with a right of survivorship in the deed Child moves in with parent and provides care Child provides care under a written caregiver agreement with promissory note and deed of trust on home securing payment priority creditor

9 Life Estates Purchase of life estate in someone else s home exempt only if applicant resides in home minimum 1 year after date of purchase If reside there less than 1 year, it is considered a transfer Calculate value of life estate using Social Security life estate table POMS Avoids estate recovery because transfer by deed outside probate

10 Considerations with Use of Life Estates Loss of control for both owners Most helpful where family does not want to contemplate selling real estate If property must be sold, some cash will be attributable to each owner After sale of property, use a gift/cure strategy to spend down cash assets and prepare for qualification

11 Asset Valuation: Fair Market Value Under DRA Deficit Reduction Act of 2005 Fair market value is measured by the tax appraisal before adjustments for greenbelts, etc. If the tax appraisal is too high, Obtain opinions from 2 licensed real estate brokers or get an appraisal Provide photographs and estimates for repairs If the tax appraisal is too low, be grateful!

12 Promissory Notes and Loans DRA Repayment term actuarially sound Equal monthly payments with no balloon Prohibition against cancellation on death of lender Non-transferrable and non-assignable Not counted if: effort to sell to financial institution; evidence that best offer is >10% below actual value of principal (proof required by manual, but rarely requested)

13 Property for Sale: Inaccessible Resources Property offered for sale is excluded from counting Requires bona fide efforts to sell Advertisements in 2 places Stays on market until sold or until eligibility ends Property not exempt as homestead while offered for sale Know the conditional assistance policy, Manual For nonliquid resources that can t be converted to cash in 20 days Must repay TC for costs during conditional assistance period All joint owners must sign Agreement to Sell Property Form

14 Using Life Insurance to Spend Down Life insurance with a cash value can be sold to a relative to preserve the death benefit viatical settlements appropriate where it would otherwise be cashed in and where death benefit is appreciably higher than cash value Borrow from the life insurance policy to create liquidity; preserve enough cash value to maintain the death benefit (be careful of the $2k rule) Sell to Life Care Funding outfit (another form of viatical settlement) Purchase a Universal Life policy with LTC rider for community spouse Convert whole life with cash value to larger term policy with no cash value

15 Interstate Transfers Transferring property out of the state of Tennessee does not assist in eligibility Might have some effect on estate recovery as TennCare may not aggressively pursue estate recovery in a different forum

16 Protecting Veterans Benefits: Coordinating with VA Benefits? Before new rules: Differences in counting jointly owned assets Different treatment of the home if rented After new rules: Different look-back periods (after new VA rules take effect) See chart

17 Gifting Powers in POAs What is durable POA? Words to convey that the power shall not be affected by subsequent disability or incapacity of the principal Comprehensive POAs agent should have broad comprehensive powers to do anything and everything the principal can do for him/herself Practice tip: execute a short form POA for real estate transactions only

18 POAs: Agent Authority Name successors, demand accountings, & resign fiduciary positions Handle retirement plans Make unlimited gifts Change rights of survivorship designations Change beneficiary designations on life insurance & other types of assets

19 POAs: Agent Authority Create & fund trusts of all kinds Handle online accounts & digital assets Do estate planning and benefits planning (Medicaid or VA) Divest the principal of assets for the benefit of others that he/she wants to take care of Make spousal agreements including separation or divorce