Robert M. Freedman 11/3/2014. Intermediate Elder Law Update 2014 New York State Bar Association November 6, 2014

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1 Intermediate Elder Law Update 2014 New York State Bar Association November 6, 2014 Robert M. Freedman Schiff Hardin LLP 666 Fifth Avenue, Suite 1700 New York, NY

2 SOURCES OF LAW AND POLICY SSA POMS SI NY Social Services Regs 18 NYCRR and 4.10 DOH directives 98 GIS MA/024 and 06 MA/004 Medicaid Reference Guide pp Planning Tip Retirement Accounts can be exempt resources for Medicaid eligibility and are not subject to a right of recovery upon death. 2

3 GENERAL RULES: GIS 98MA/024 A retirement fund is an available resource if the A/R is able to make withdrawals from the account. The value is the amount that the A/R is able to withdraw after any penalty for early withdrawal. Taxes due as a result of the distribution are not deducted in the determination of the value of the available resource. If the A/R is unable to obtain any distributions from the retirement fund, the fund is an exempt resource. Example: 401(k) of currently employed worker. If the A/R has elected to receive periodic payments from the retirement fund, the fund is an exempt resource. Any payments received will be budgeted as income. What are periodic payments? The Medicaid applicant/recipient must take Periodic Payments for the account to be exempt. Periodic Payments must be regular and uniform monthly distributions. Non periodic distributions will cause the account to be considered available and are considered a conversion of a resource, not countable income. MRG p

4 HOW MUCH DOES THE PERIODIC PAYMENT HAVE TO BE? NYSDOH GIS 98 MA/024 provides that the individual must choose the maximum income payment that could be made available over the individual s lifetime. What does this mean? Counties throughout NY State disagree. All counties require the use of the Department of Social Services life expectancy table attached to 06 ADM 05 for applicants/recipients under age 70 ½. See GIS 12 MA/012 or the Social Security Administration Website. 4

5 Fair hearing decisions Matter of Arnold S. (2002 Monroe Co.) Married applicant taking distributions greater than the RMD but less than required by the Social Security table. Account held to be exempt. Matter of Kern: (2003 Monroe Co.) Married applicant taking RMD. Accounts held to be exempt. See also FH# Z (Suffolk Co. 2009). ADVOCACY TIPS Applicants who have recently taken distributions from their retirement accounts which were greater that the required periodic payment or have taken irregular and inconsistent distributions should arrange for prospective distributions in the amount of the required periodic payment. 5

6 ADVOCACY TIPS If taking RMD distributions, it is advisable to take them from each account although the IRS rules allow the RMD to come from any one or more accounts. For community Medicaid recipients, the required periodic payment may be placed in a self settled d4a or pooled income d4c trust so it is not counted for the determination of the surplus income amount. ADVOCACY TIPS Disabled individuals living in Congregate Housing who have retirement accounts should apply for Medicaid under the Medicaid Buy In Program for Working People with Disabilities which does not count assets in retirement accounts and does not require taking periodic payments. 6

7 ROTH AND BENEFICIARY IRAs NeitherthePOMSnortheMRGaddressRothIRAsor Beneficiary IRAs. The Deficit Reduction Act treats the Roth IRA the same as other retirement accounts. And, anecdotal evidence indicates that most county department of social services agencies treat Roth IRAs and Beneficiary IRAs the same as other retirement accounts. Retirement Funds of the Community Spouse 18 NYCRR (a)(9) (as amended Dec. 2005): pension funds belonging to a community spouse which are held in (IRA s) or in work related pension plans, including. Keogh plans, are countable resources of the community spouse for purposes of determining the institutionalized spouse s eligibility and calculating the amount of any community spouse resource allowance. 7

8 GIS 06 MA/004: If the CS IS taking periodic payments, the retirement account is NOT a countable resource for determining the eligibility of the IS. The payments are countable income of the CS. If the CS is NOT receiving periodic payments from a retirement fund, the fund IS considered a countable resource for purposes of determining the CSRA and the eligibility of the CS. Unanswered question: If the CS IS taking periodic payments, is the retirement fund considered an available resource for purposes of determining the CSRA? The GIS and MRG imply that the retirement account of the non applying spouse is exempt for both eligibility and spousal collection purposes if in periodic payment status. Advocates report differing treatment by County DSS offices in spousal collection matters. 8

9 Matter of Elizabeth: FH decision (Onandaga Co. 2003) The Community spouse was not required to increase distributions from a retirement account to more than the RMD in order to obtain the Minimum Monthly Maintenance Needs Allowance. Spouse was permitted an enhanced CSRA because income generated by RMD and other sources was below the MMMNA. ADVOCACY TIP If the local county DSS is counting the retirement account towards the CSRA, consider having the spouse take periodic payments to have the account treated as income not an excess resource. Consider applying for an enhanced CSRA. See Matter of Elizabeth. 9

10 ADVOCACY TIP If taking periodic payments does not solve the problem, consider doing a spousal refusal. The fact that the asset is in the spouse s retirement account strengthens an argument that is should not be considered in determining ability to pay. Annuities Purchased within an IRA account Section 6012 (c) of the DRA: the purchase of an annuity with funds in a retirement account is not a transfer of assets. Such annuities need not satisfy the DRA annuity requirements that the annuity must be irrevocable, non assignable and payout in equal payments within the life expectancy of the annuitant. Some local DSS offices have argued that if a Medicaid applicant or spouse purchased an annuity after 2/8/06 within a retirement account or with funds from a retirement account, the State must be named as the first remainder beneficiary after the death of the annuitant. However, wouldn t the beneficiary have to be the IRA account? 10

11 Matter of Entz v. Reed (Monroe. Co. 2009) Purchase of an annuity within the IRA of an institutionalized Medicaid recipient was held not to be a transfer of assets and the applicant was not required to name the State as the first remainder beneficiary. The annuity was purchased in 2005 (prior to the DRA). ESTATE RECOVERY NY Social Services Law Section 369 limits recovery of correctly paid Medicaid benefits to assets which pass by will or intestacy. Thus, retirement accounts with a named beneficiary will pass outside of probate and not be subject to Medicaid estate recovery. IfthespouseofaMedicaidrecipientdies,theMedicaid program may require the MA recipient to file for the elective share. Retirement accounts used to satisfy the elective share will be exempt assets if placed into appropriate periodic payment status. 11

12 ADVOCACY TIP If the Medicaid recipient has to elect the elective share, satisfy it with retirement accounts which can be exempt assets. NAMING A TRUST AS A BENEFICIARY OF A RETIREMENT ACCOUNT Drafting an estate plan for a client who wants to provide for a beneficiary who is disabled and is on or may need Medicaid poses special challenges. If a Supplemental Needs Trust is to be named as the beneficiary of a Retirement Account (other than a Roth IRA) then you want to qualify the Trust as a Designated Beneficiary in order to be able to stretch the distributions over the life expectancy of the beneficiary. 12

13 Qualifying a Trust as a Designated Beneficiary. Treasury regulations at Section (a)(9) 4, A 5(b) permit a trust to qualify as a designated beneficiary provided that it meets the following five pronged test: 1. The Trust is valid under State law; 2. The trust is irrevocable or will by its terms become irrevocable upon the death of the account owner; 3. The beneficiaries of the trust are identifiable from the trust s terms; 4. Required documentation is provided to the plan administrator by October 31 of the year after the year of death of the account owner/participant; and 5. All trust beneficiaries are individuals. 13

14 WARNINGS Naming a charitable beneficiary as a remainderman of the SNT (as is often desired by parents of disabled children) will fail prong 5. The IRS will use the life expectancy of the oldest beneficiary to determine the applicable length of the distribution period. This could potentially shorten the distribution period. A conduit trust is problematic but may be appropriate in some cases. ADVOCACY TIP Consider having the plan leave the retirement assets to a non disabled beneficiary and provide for the disabled beneficiary with other assets like life insurance or a larger percentage of other estate assets. 14

Medicaid Basics. Eligibility for Medicaid 10/27/2014. Categories of Medicaid Coverage. Patricia J. Shevy

Medicaid Basics. Eligibility for Medicaid 10/27/2014. Categories of Medicaid Coverage. Patricia J. Shevy Medicaid Basics Patricia J. Shevy www.shevylaw.com 518-456-6705 Categories of Medicaid Coverage Community Medicaid Doctors, dentists, prescriptions Clinical or outpatient basis Home Care Services Personal