Louis and Matilda Olson of Tamarac, Florida are both 70 years old. Louis, who suffers from Parkinson’s disease, has just entered Heartland of Tamarac Nursing Home while Matilda still lives at home.

They are privately paying Heartland $6,500.00 per month in addition to paying for all their prescriptions. Their residence, which they own outright, is valued at $250,000. In addition, they recently purchased a new car (paid for in full with cash).

They also have an irrevocable prepaid final expense plan and $299,540 in certificates of deposit (CDs). Louis also has a life insurance policy with a cash surrender value of $1,500.

They both have a Plan F Medicaid supplemental policy (Medigap) which offers comprehensive benefits except for prescriptions. They pay $192 in premiums each month for the policies. Louis receives a Social Security check for $1,000 each month and Matilda has monthly income of $1,000.

Matilda is seeking your advice because she is concerned about provisions in the Deficit Reduction Act of 2005 (DRA) that President Bush signed on February 8, 2005.

She has been told that it dramatically limits the options for obtaining Medicaid when a family has assets similar to theirs.

You explain to Matilda which of their assets are considered “countable” in qualifying for Medicaid. The Olsons’ home is a non-countable asset. Louis intends to return once he regains his health. The car and the irrevocable final expense plan are also non-countable assets.

Louis, the patient, can own no more than 2,000 in countable assets. Matilda must own no more than $113,640 in countable assets.  Because the life insurance policy has a cash surrender value of less than $2,500, it is also a non-countable asset.

The problem for the Louis is that the $299,540 in CDs is $185,900 more than the couple can own and still qualify for Medicaid to pay for Louis’ care at Heartland of Tamarac. What should this famous couple do?

Louis and Matilda have the following options related to Medicaid planning:

• Spend the $185,900 for care, and then apply for Medicaid;

• Purchase a larger home, pay off debt, and pre-pay funeral expenses; or

• Buy a single premium immediate annuity (SPIA) with the extra $185,900 and put it in Matilda’s name, i.e., the name of the community spouse.

Louis and Matilda, with the guidance and advice of their son, Patrick Olson, elect to buy the annuity. Patrick convinces his parents to transfer all joint assets to Matilda, the community spouse.

This approach is acceptable because there is no provision prohibiting the transfer of assets from one spouse to another. However, it is imperative that the annuity does not offend Medicaid rules followed in Florida.

The annuity must not extend for a term beyond the anticipated lifetime of Matilda as determined by Social Security life expectancy tables. In addition, it must be irrevocable.

If these conditions are met, the annuity is   considered by Florida’s Department of Children and Families to be a stream of income, not an asset.

Louis and Matilda will be responsible for paying to Heartland Nursing Home what is known as the “patient responsibility amount” which is calculated as follows:

Louis’ gross monthly Social Security check ($1,000) less Louis’ personal needs allowance ($35) less Louis and Matilda’s premium credit for their Medigap policies ($192) yields $773 the Olsons will have to pay to Heartland Nursing Home.

The scenario described here will enable Matilda to have enough money to live at home. She will have her own Social Security income and a monthly check from the SPIA annuity.

Send to a friend | Trackback URL| Print This Post

Bookmarks:

 Status

The Deficit Reduction Act of 2005 (DRA) was signed by the President on February 8, 2006.

 Lengthening the “Look Back” Period

The law lengthens the look back period to five years from three years. The longer look back period will be gradually phased in as the change only affects transfers after the date of enactment. This pertains only to gifts.

 Change in Beginning Date of Period of Ineligibility

Prior to February 8, 2006, a penalty period for institutional (nursing home) care began the month after a transfer was made. The DRA changes this so the penalty does not start until a person is institutionalized and is otherwise eligible for Medicaid (in other words, has exhausted other funds). This means any transfers in the past five years will disqualify an applicant from receiving

Medicaid for nursing home care for a period of time — no more waiting out a penalty period at home or while private paying in a nursing home. This affects all transfers on or after the date of enactment.

 Annuities

Annuities, in order to avoid being counted as a resource, must be irrevocable and nonassignable; actuarially sound; and have equal payments with no deferral or balloon payments. The state has to be named as a remainder beneficiary, although it can be secondary after a spouse, minor, or disabled child.

 Home Equity

Equity in a home counts as a resource if it is over $525,000. An individual can take out a reverse mortgage or home equity loan to reduce the total equity.

 Loans

In order to avoid a loan or mortgage being treated as a transfer of assets, the repayment must be actuarially sound, and it cannot be canceled upon the death of the lender.

           Veteran Benefit Helps Applicants for Assisted Living Facilities

1. They don’t have to exhaust their assets before getting help from Medicaid with nursing home costs. A veteran may have up to $80,000; and a home, car and personal possessions aren’t counted.
2. Veterans can transfer assets, typically to their children, to reduce their net worth and qualify for the pension benefit. Anyone applying for Medicaid faces strict limits on asset transfers.
3. Applicants usually can prove a financial need by showing their expenses exceed their income. That’s a modest standard for people facing tens of thousands of dollars in long-term costs each year.

 The biggest drawback to the benefit, according to seniors and their families, is the application process. The government requires many documents including military discharge papers and a physician’s written evaluation.

 Applications generally take four to six months for the Department of Veterans Affairs to process. Maureen Mata, a Fort Lauderdale social worker, said some seniors are denied the aid-and-attendance assistance because they haven’t shown they need help with activities such as bathing, dressing, and preparing meals. “The physician’s evaluation must confirm they cannot live by themselves,” she said. Once a pension benefit is approved, it is retroactive to when the senior applied.

 Who can apply?

 To qualify, veterans must:

1. Have served in wartime, though they didn’t have to see combat.
2. Have no more than $80,000 in assets, not counting the family home, car, and personal possessions.
3. Prove financial need; usually by demonstrating expenses exceed their income.
4. Show they need someone to help them with basic activities of living such as bathing, grooming, or eating.

Send to a friend | Trackback URL| Print This Post

Bookmarks:

George and Esther Friedman are both 70 years old. George just entered Springtree Rehab. He has Parkinson’s disease.  Esther still lives at home. They are privately paying Springtree Rehab. $7,500.00 a month and they pay for all their prescriptions. They own a house which is their residence and it is paid for. The home is worth $250,000.

They own a new car, for which they paid cash. They also have an irrevocable prepaid final expense plan and $299,540 in C.D.’s. George also has a life insurance policy with a cash surrender value of $1,500.

They both have a Medicaid supplement policy plan “F” which offers comprehensive benefits except for prescriptions. They pay $192 each per month for the policies. George has monthly social security of $1,000; Esther has monthly income of $1,000.

The home is a non-countable asset. George intends to return once he regains his health. The car, the irrevocable final expense plan are also non-countable assets. George, the patient, can own no more than $2,000 in countable assets.

George must own no more than $113,640 in countable assets. Because the life insurance policy has a cash surrender value of less than $2,500, it is exempt.

The problem here is that the $299,540 in C.D.’s is $185,900 more than the couple can own and still get Medicaid to pay for George’s care at Springtree Rehab. What should this couple do?

George and Esther have these choices for Medicaid planning:

1. Spend the $185, 900 for care, and then apply for Medicaid.
2. Purchase a larger home; pay off debt, and pre-pay funeral expenses.
3. Buy a single premium immediate annuity with the extra $185,900 and put it into the name of Esther, the community spouse in this example. This will generate a significant monthly income for Esther!

George and Esther, with the guidance and advice of their son, Michel Friedman, elect to buy the annuity.  Michael convinces his parents to transfer all joint assets to Esther, the community spouse. This is okay because there is no prohibition to transfer of assets from one spouse to another.

It is imperative that the annuity does not offend Medicaid rules followed in Florida. The annuity must not extend for a term beyond the expected life of Esther as determined by social security tables. It must be irrevocable. It is considered by Florida’s Department of Children and Families to be a stream of income, not an asset. The State of Florida must be beneficiary of the annuity to receive any balance that is left upon the death of Esther.

What will George and Esther have to pay to the Springtree Rehab as their “patient responsibility amount”? They will need to pay as follows:

George’s gross monthly social security check ($1,000) less George’s personal needs allowance ($35) less George’s premium credit for his Medigap policy premium ($192) yields $773. The Friedmans will have to pay $773 to Springtree Rehab.

The scenario described here will enable Esther to live at home. She will have her own Social Security income and a monthly check from the SPIA annuity. If her monthly income is less than the minimum income allowance then she will also receive a portion of her husband’s income as spousal diversion.

How Mary Can Qualify for Medicaid Payment of Nursing Home Expenses Without Her Husband Gerhard Having to Give Up Assets He Needs for His Own Living Expenses

Gerhard is contemplating a nursing home for his wife Mary who has Alzheimer’s disease. It is certainly an unpleasant thought. On top of needing the care, Gerhard has the financial concern of having to pay the bill.

Because Gerhard didn’t purchase private long-term care insurance, he may be faced with depleting the family’s resources in order to pay the nursing home costs. Once the family’s moneys are spent, however, the government’s Medicaid program will cover the charges.

In the past, married couples were forced to spend most of their combined savings before either qualified for the program. This meant that the healthy spouse who was still at home was left essentially penniless.

Now Florida’s Medicaid rules include certain “spousal impoverishment” provisions. Under these provisions, the spouse at home gets to preserve certain resources when the other spouse enters a nursing facility.

In 2012, Mary can keep $2,000 in countable assets. Gerhard at home gets to retain $113,640 without affect the right to Medicaid.

In addition to the $113,640, Gerhard, the spouse at home, also gets to keep the couple’s residence and all other exempt assets. The resources in excess of the $113, 640 should   be spent on legitimate debts of the couple.

Or Gerhard can just refuse to pay any of his assets to support his wife in the nursing home. The community spouse must sign an affidavit refusing to support the patient’s spouse.

In 2012 Florida will permit this if the spouse who enters the nursing home assigns her right of spousal support to the Dept. of Children and Families.

Because Florida has abolished the doctrine of necessaries, there is little likelihood that Florida will actually sue Gerhard to force him to support Mary.

No Florida case to date has resulted in any spouse losing assets to the State of Florida as a consequence of Spousal refusal.

Send to a friend | Trackback URL| Print This Post

Bookmarks:

FLORIDA MEDICAID RESOURCE AND INCOME ALLOWANCES FOR 2012

Gross Monthly Income Limit For Medicaid Applicant:  $2,094.00

Gross Monthly Income Limit for Medicaid Couple: $4,188.00

Monthly Personal Needs Allowance:  $35.00

Asset Limit (Individual): $2,000.00

Asset Limit (Couple):  $3,000.00

Medicare Part B Premium: $99.90

Community Spouse Asset Allocation Standard: $113,640.00

Minimum Monthly Maintenance Income Allowance: $1,839.00

Maximum Monthly Maintenance Income Allowance: $2,841.00

Excess Shelter Standard: $552.00

Home Equity Interest Limit: $525,000.00

Send to a friend | Trackback URL| Print This Post

Bookmarks:

As if life isn’t difficult enough for many seniors, the Deficit Reduction Act of 2005 (DRA) — signed into law has further reduced senior citizens’ opportunities to reposition their assets. Among other issues, the DRA extends the look-back rule for prohibited gifts from 36 months to 60 months.

With the 2006 DRA, seniors can no longer give away or otherwise dispose of their financial assets during the 60-month window just prior to being admitted or confined to a long term care or nursing home facility.

Before the government will pay for medical and custodial care, the Medicaid authorities will investigate if the individual has the financial capability to pay for his or her own care.

If they do not have a spouse and if they own a home; an automobile; or a collection of jewelry or silverware; stocks, bonds, CDs, U.S. savings bonds, old paid-up insurance policies with a cash-in value in excess of $2,500, or any other valuable financial resources, these assets must first be liquidated — not necessarily at their fair market value — and the monies from these assets must be spent down for care and custodial expenses.

The Medicaid applicant can keep up to $2,000 in countable assets. Any income such as pension payments or Social Security monthly benefits must be signed over to the nursing home or assisted living facility.

Any assets gifted during that prior five-year period will delay eligibility for Medicaid.  $2,000 is hardly a sufficient amount to pay for a proper, dignified burial for the deceased, with current funeral expenses requiring $7,000 or more.

What’s a person — or their family — to do to plan ahead for funeral costs and still comply with the new terms of the DRA? One option is to obtain an irrevocable funeral trust (or IFT)* as soon as possible.

For seniors trying to plan ahead, five years can seem to be an eternity. Many seniors who start out with a minor medical condition often see it escalate quickly to become a catastrophic event within a short time, sometimes within a year.

Soon, dementia, Alzheimer’s disease, or a debilitating physical problem such as a fractured hip that will not properly heal can require the patient to utilize a nursing home for the remainder of their life. An individual who previously enjoyed relatively good health can deteriorate very quickly if diagnosed with certain conditions.

At that point, it is often too late for them or their guardians to take action. One way to quickly obtain eligibility for Medicaid is to create an irrevocable funeral trust.

An IFT is a tool that prevents an individual’s assets from being confiscated or forced to be spent down in order to receive government assistance in paying for care over an extended period in a nursing home or long term care facility.

An IFT also protects those monies from being sought out by doctors, lawyers, drug stores, or any other providers or entities that would seek payment for bills or for any other purpose. A person facing serious health or mental challenges hardly needs to have bill collectors harass them.

By placing any amount of money into an IFT, the money is preserved from those seeking reimbursement for bills or expenses. A good rule of thumb concerning IFTs is that if a person doesn’t have long term care insurance (LTCI) and cannot afford an LTCI policy, they should obtain an IFT.

It is estimated that more than 90 percent of all seniors do not have LTCI. Since an IFT is an irrevocable trust, no one — not even the insured — can access these monies until that person has passed away.

An IFT is issued by a select group of insurance carriers. The IFT is a single premium whole life policy that is wrapped into an irrevocable trust by the carrier immediately upon issue.

The carrier also creates and absorbs the costs for creating the actual trust document. This eliminates the complications, time, and costs of retaining an attorney.

The insurance carrier also assigns a company officer as a trustee of the IFT. Upon the insured’s passing and the trustee’s receipt of legal proof of the death, as well as an invoice for the expenses associated with the proper disposition of the deceased by a funeral home or other authorized agency, the carrier will issue a check, usually within 24 to 48 hours. If there are any remaining funds in the trust after all the final expenses are paid for, they are returned to the estate of the deceased.

Since the insured is paying the entire cost for the IFT in advance, there is no need for underwriting, further expediting the creation of the IFT. It is issued for individuals up to 99 years of age.

There is also a guaranteed issue provision for those applicants already in a custodial situation. In many states, seniors seeking to reposition additional assets can create IFTs for their children, helping them shield additional financial resources. A major benefit of the IFT is that it can be used for any final expenses.

IT IS PREFERABLE TO BUYING A FUNERAL AGREEMENT FROM YOUR LOCAL FUNERAL HOME FOR SEVERAL IMPORTANT REASONS. WHAT IF YOU DECIDE TO MOVE TO ANOTHER STATE AND WISH TO USE A FUNERAL HOME IN THE NEW STATE? WHAT IF THE FUNERAL HOME TO WHOM YOU PAY YOUR MONEY GOES BANKRUPT? A FUNERAL TRUST AVOIDS BOTH THESE PROBLEMS. YOUR MONEY CAN BE USED AT ANY FUNERAL HOME ANYWHERE. IT IS GUARANTEED TO BE ALWAYS AVAILABLE. CALL (954) 963 – 8719 FOR A FREE CONSULTATION!

Send to a friend | Trackback URL| Print This Post

Bookmarks:

Your irrevocable trust will protect the assets should you or your spouse ever apply for Medicaid for long term nursing home care.

The Dept. of Children and Families will only consider the trust assets to be “non-countable” if your access and rights to the trust property are limited.

Please read this newsletter carefully so you and the trustee understand how the trust will work and your obligations and rights to the trust property.

IRREVOCABLE

1. The trust is irrevocable, meaning that you cannot change it.
2. You have no right to demand that the trust assets be returned to you.
3. The trust does, however, contain language which allows you to appoint a new trustee.
4. The trust also gives you power of appointment. This means that you can change the interests of the beneficiaries upon your death by changing your will.
5. Once you place an asset into your irrevocable trust you no longer own it, the trust does.
6. However, you can still benefit from the trust assets in many ways.

PRINCIPAL AND INCOME

1. The interest and dividends earned on the trust property or rental income can be paid out to you.
2. By the terms of the trust, none of the trust principal can be paid to you under any circumstances.
3. This is critical in order to make sure that the trust assets are protected from Medicaid.
4. Think of your trust as a locked safe.
5. Although assets placed into the trust must remain in the trust, they can be sold.
6. For example, if real estate is placed in the trust, and it is subsequently sold, the proceeds from the sale must remain in the trust.
7. Likewise, the trustee could use the proceeds to purchase a new home for you. However, the new home would be titled in the name of the trust.
8. You also have a continuing right to live in real estate owned by the trust.
9. Because you no longer own the property held in the trust, you will most likely not be able to mortgage or take out an equity loan on the property.

MEDICAID ELIGIBILITY

1. By transferring assets into this trust, you have made yourself and your spouse ineligible for Medicaid for the next five years.
2. It is crucial that you not file a Medicaid application until the five-year “look back period” has passed.
3. If you apply too soon, you make yourself and your spouse ineligible for Medicaid benefits for a period exceeding five years.
4. Should you or your spouse require nursing home care within the next five years, you should contact my office Elder and Asset Protection Law Offices of Mark A. Roseman specializing in Medicaid Planning and Irrevocable Trusts so we can advice you how best to proceed.

TAXES

1. IF THE TRUST’S ONLY ASSET IS ANNUITIES, NO TAXABLE INCOME, SO NO INCOME TAX RETURN.
2. The trust is written so that if your home or other appreciated assets are sold after your death, your heirs will receive what is called a “step-up” in the tax basis.
3. This means that the ultimate beneficiaries of the trust will pay little or no capital gains
4. If your primary residence is owned by the trust and it is sold while you are alive, you will be able to utilize your $250,000, or $500,000 in the case of couples, capital gains exclusion.
5. The trust property will be included in your taxable estate.
6. If you have only placed real estate into your irrevocable trust, you can continue to file your annual income taxes as you have in the past.
7. Accordingly, you will not need a new tax identification number for the trust.
8. Further, you will still be able to claim any deductions related to your home on your taxes.
9. If you placed liquid assets into your trust, you will need to apply for a new tax identification number (EIN) and file annual trust tax return.
10. The trust must be drafted so that all the income earned on the trust assets will be a taxable to you.
11. You should contact your accountant who will need to complete the necessary tax forms for the trust.

PROBATE

1. Any property held in the trust will avoid the probate process and pass directly to the beneficiaries named in your trust.
2. Should you ever wish to change the beneficiaries of the trust, please contact our office so we can assist you further.

OTHER IMPLICATIONS

1. Placing your home into an irrevocable trust may cause you to lose any tax abatements you may currently receive.
2. If you have recorded a homestead on your primary residence and then subsequently transfer your home into the trust, you may or may not lose the protection afforded by the homestead.
3. If you currently have a mortgage on your property, it may technically become due upon transferring the property into an irrevocable trust.
4. I recommend that you inform your insurance company that your trust is the owner of your home.
5. Your insurance company should change the home owner’s policy to reflect that the trust is the new owner.

Send to a friend | Trackback URL| Print This Post

Bookmarks:

Deciding how to leave your assets to your kids is tricky enough. If your adult child has a chronic disability, the task is much more complicated.

Strapped state and local governments are tightening income restrictions for medical benefits and supportive services, which are typically paid for by Social Security and Medicaid. Those services are tough to find, or afford, in the private sector for many adults with disabilities so severe that they can’t live alone.

As a result, it’s increasingly important to structure an inheritance in a way that won’t disqualify a child for such benefits down the road.

A Special Needs Trust is a vehicle in which parents can put assets for the child’s benefit without endangering government benefits. That can be a better bet.

Since the requirements for government-supported benefits are so exacting, it is important to have your attorney research the specific income and asset requirements when you draft such a trust.  It is recommended to name co-trustees: One professional, such as a lawyer or a financial institution, along with a family member.

Special Needs Trusts are particularly helpful if a parent requires long-term care and the child is younger than 65. The parent can shelter assets and qualify for Medicaid coverage by putting everything in the trust for the child with special needs.

When older adults who need long-term care seek Medicaid to help pay for it, there is a “look back” period, meaning officials count any gifts made by the person within the previous five years as assets that can be counted when calculating he or she can pay for long-term care before Medicaid kicks in.  But assets in a Special Needs Trust aren’t counted as being available to the parent.

To avoid disqualifying an adult child from getting services, some parents simply leave another child all their assets in their will. If there are three children, they might leave two-thirds to the child whom lives closest to the one with special needs.

Still, problems could fester. The local child might grow resentful of the sibling who isn’t pitching in.   What’s more, if the care-giver gets divorced or dies, that money could go to the ex-spouse or their children.

There is one fix: Give each child an equal share and put the special-needs child’s share in a trust.  But giving the increasingly unpredictable nature of most investments, you could further fund the trust with a permanent life-insurance policy.

WHAT IS A SINGLE PREMIUM ANNUITY (SPIA)?

A SPIA is a single premium immediate annuity issued by an insurance company. It permits a person to turn a lump sum of money into a regular payment that is guaranteed for a certain period.

The payout phase of the SPIA could be as short as 2 months or as long as the rest of the annuitant’s life and his spouse’s life, and even for a term of years not dependent on the annuitant’s life. It is exempt from creditors under the Florida law.

Single Premium Immediate Annuities have become more popular over recent years because of the decline of defined benefit plans (or pensions) in the workplace.

Today, however, defined benefit plans are few and far between. Retirees seeking the stability of pension-like guarantees can lean on SPIAs, take some or all of their retirement savings and turn those savings into a private pension plan.

SPIA options are just about as numerous as the companies who offer them. The annuitant can choose a payment for the rest of his life and of his spouse’s life is he chooses.

However, if the annuitant wants a payout over a shorter period, a higher payout will be made available because the insurance company is taking less risk. The longer the guarantee, the less the insurance company will pay because the company is taking more of the risk.

Send to a friend | Trackback URL| Print This Post

Bookmarks:

Q. Do you still need 2 subscribing witnesses and a notary?

A. Yes

Q. Is a Power of Attorney durable if the document does not explicitly designate that it is durable? 

A. No.

Q. Is Springing Power of Attorney eliminated?

A. Yes, unless executed before October 1, 2011.

Q. Can each Co-Agent act independently of the others?

A. Yes, unless the document indicates otherwise.

Q. Is attorney-in-fact obligated to handle banking and investment matters for principal if he does not specifically consent to do so?

A. No.

Q. Must authority of agent to amend trust of principal be specifically enumerated in the trust?

A. Yes. Principal must sign or initial this provision.

Q. What if the trust itself does not permit for modification by attorney-in-fact?

A. Your attorney must amend trust to permit this.

Q. What happens with the Power of Attorney documents signed prior to October 1, 2011?

A. They are okay, but banks will be hesitant to work with the old law. So it is better to have new documents prepared.

Q. Must authority to conduct banking transactions be initialed or signed by principal?

A. Yes. This could lead to delays.

Q. Which powers must be specifically initialed by principal for these powers to be effectively given to the attorney-in-fact?

A. Attorney-in-fact’s authority to conduct banking transactions must be initialed or signed.

Q. Are there new mandatory fiduciary duties for agents that cannot be eliminated by agreement as well as default duties that can be waived by written agreement?

A. Yes

Q. If Co-Agent has actual knowledge of a fiduciary breach by another co-agent does he have affirmative duty to take appropriate action to protect principal?

A. Yes.

Q. Does failure to take action by one co-agent for the action of another co-agent make the first co-agent the agent liable to the principal for the reasonably foreseeable loss caused by the second co-agent?

A. Yes.

Q. Are global provisions such as those attempt to grant the agent authority to do all acts the principal can do, are ineffective?

A. They are ineffective.

Q. Which powers require they be specifically granted in the power of attorney document?

A. These powers must be specifically stated in the document itself.

1. Create intervivos trust

2. Modify an intervivos trust

3. Make a gift

4. Create or change rights of survivorship

5. Create or change a beneficiary designation

6. Waive principal’s right to be a beneficiary of a joint and survivor annuity (including under a retirement plan)

7. Disclaim property and powers of appointment

Q. Agents are specifically prohibited from performing which acts on behalf of the principal?

A. Agents are specifically prohibited from performing these acts for the principal:

1.Perform duties that require the exercise of personal services of the principal.

2.Vote in election

3.Execute or revoke any will or codicil

4.Exercise powers of authority granted by Principal as trustee or court – appointed fiduciary

Q. Is Attorney-in-Fact authorized to make gifts limited to annual gift tax exclusion per gift recipient? 

A. Yes, unless exception to this authority is specifically included in the Durable Power of Attorney document?

Q. Is the new law the exclusive method of interpretation of a durable power of attorney document?

A. No. Common law of agency and principles of equity can be used, in addition to the new law, for interpretation of a durable power of attorney document.

Q. Are remedies in new law exclusive?

A. No. The new law does not eliminate any other

remedy.

Q. When does the Power of Attorney terminate?

A. It terminates in any of the following situations:

1.When guardianship begins

2 Death of Principal

3.Incapacity of Principal when the Power of Attorney is not durable

4. Adjudication of incapacity by Court

5. Revocation of Power of attorney by Principal

6. Termination by its terms

7. Accomplishment of Power of Attorney purpose

Q. Is it better to make attorney-in-fact accept all terms of agency?

A. Yes. Have him sign consent in writing in front of two witnesses and a notary agreeing to accept all terms of the agency.

Q. Are all attorneys-in-fact entitled to compensation?

A. Only qualified spouse’s, heirs of principal’s and financial institutions with Trust powers and a place of business in Florida, attorney or accountant, or a person who can have up to 3 principals can automatically be entitled to compensation. Others can be compensated if the document specifically so provides. 

HAVING A WILL IS NOT ENOUGH

Unless you take extra steps, much of your net worth may not end up where you want it. It is crucial that you get the full picture of who really stands to cash in on your estate.

In preparing and revising your Last Will and Testament and other estate planning documents you must be careful to review and revise the following significant documents:

1.Enhanced Life Estates (Lady-Bird Deed) – The remainder beneficiary is your wife now suing you for divorce or support. You might want to remove her as the remainder person to automatically acquire the realty upon your death.  Execute deed from you to you and state in such deed that the specific purpose is to terminate the remainder interest.

2. Beneficiary of SEP IRA account. Change the beneficiary, perhaps to make the estate your beneficiary, or to make a trust for someone the beneficiary of the SEP IRA account.

3.Beneficiary of life insurance policy.  Same options as for the beneficiary of a SEP IRA account.

Send to a friend | Trackback URL| Print This Post

Bookmarks:

Some people try to plan for Medicaid without the aid of an attorney experienced in Medicaid planning. This can cause them to make one or more of the following mistakes. Interviews with new clients in South Florida made me realize these are common mistakes.

#10. Improper establishment or maintenance of a Qualified Income Trust (QIT). A QIT is necessary to hold the patient’s income when his gross income is $2,022, or more. Only the excess over $2,022 needs to go into the Trust.

Sometimes a relative agrees to enter into such a trust, but does not create it and fund it during the first month for which eligibility is sought. This disqualifies the Medicaid applicant for that month.

Another common mistake is executing the Trust on behalf of the patient without having a durable power of attorney, defeating the trust’s purposes. If the patient is declared to be incompetent, the circuit court judge must approve the trust’s creation.

#9. Failing to determine if the nursing home accepts Medicaid benefits. If you apply for a nursing home which does not accept Medicaid, getting Medicaid approved will do you no good. Others require as much as a 12 month period during which you must pay privately.

#8. Thinking the $13,000 gift tax exclusion applies to Medicaid planning. Estate planning attorneys frequently remind clients that they can gift up to $13,000 per recipient for each year without paying federal tax gift. This is true, but it has nothing to do with establishing eligibility for Medicaid. Such gifts will cause a loss of Medicaid for one ore more months.

#7. Believing that Medicare pays for long term nursing home costs. Medicare is easily confused with Medicaid. Both provide health benefits. Only Medicaid pays for long-term nursing care. Medicare pays up to a maximum of 100 days, and frequently less than that.

#6. Failing to list all assets, income, and gifts within a 60 month period prior to filing the Request For Assistance for Medicaid. This is a serious crime. There is a 60 month look back period which might include gifts that would delay eligibility for Medicaid benefits. Failing to notify Florida’s Department of Children and Families (D-CAF) within 10 days following any changes in assets or income is also a violation of law.

#5. Failing to include all gross income of an applicant when applying for benefits. The test is the gross income. For example, listing the amount of Social Security direct deposited into your checking account will not include the $96.40 automatically deducted (in 2011) for the Medicaid part B premium.

Private pensions sometimes also have a gross income different from the net that is direct-deposited. You need to prove the gross amount to Dept. of Children and Families (D-CAF) by getting a letter from the provider of the private pension. D-CAF will not approve the case without such written proof.

#4. Failing to plan for the possibility that the community spouse might predecease the institutionalized spouse.  Many people have wills leaving all assets to the surviving spouse. Such a will would cause the institutionalized spouse to lose eligibility for Medicaid if the community spouse dies first, leaving the patient’s assets in excess of the $2,000 asset limit.

#3. Relying on out-dated or poorly drafted durable powers of attorney or other estate planning documents. A durable power of attorney that does not include the right to access all medical information of the patient is a mistake. Otherwise, access to medical records will be denied because of “HIPAA”, which became effective after most present day durable powers of attorney were drafted.

Failing to include the specific authority to give gifts to a family member and to enter in to a personal service contract with the holder of the power of attorney are other mistakes. Such omissions can limit your Medicaid planning options.

#2. Transferring assets without taking into account the transfer rules and penalties. Any gift within 60 months of seeking   Medicaid benefits can potentially delay the eligibility for Medicaid. Any transfer made without fair market value can become a problem. For example, selling a home to a relative for less than fair market value can be a gift, to the extent of the difference between the fair value and the actual price paid.

#1. Transferring the homestead realty to children or others by way of a quit-claim deed. This is one of the worst and most common mistakes made in planning for Medicaid. Because the homestead is a non-countable asset if the owner intends to return, doing nothing is sometimes the best policy. Quit-claiming the home to a relative can cause a delay in eligibility. For example gifting a $100,000 home to a non-spouse will delay eligibility for almost 2 years!

Mistakes can be expensive. If you lose one month’s eligibility, you must pay for that month out of your pocket. This can cost $6,000 to $7,000 in nursing home expenses for each month that you do not meet Medicaid’s requirements!

Send to a friend | Trackback URL| Print This Post

Bookmarks:

How Helen Reiter Can Use a Personal Services Contract to Secure Medicaid for Her Mother for Long-Term Nursing Care and Preserve Her Mother’s Assets?

 Helen Reiter has come to our office to discuss long-term care for her mother, Elizabeth. The family just learned Elizabeth has an illness that will require herto enter a nursing home.

The family is aware of the $2,000 limit in countable assets to qualify for Medicaid. However, Elizabeth has $168,920. Helen Reiter wants your advice.

You advise Helen Reiter that she can enter into a Personal Services Contract naming her as the “Provider” and Elizabeth as her “Client”. This is a written contract in which Helen Reiter agrees to take care of Elizabeth for the rest of Elizabeth’s life.

The term of care is based on Social Security actuarial tables. According to these tables, Elizabeth, who is 85, is expected to live another 6.42 years, therefore the term of the Personal Services Contract cannot exceed 6.42 years.

Assume that Helen Reiter will earn $25 per hour, will work 20 hours per week, and will work for the entire 6.42 years. Based on this scenario, Helen Reiter will be able to take $166,920 as a lump sum payment from Elizabeth now; it will not be considered a prohibited gift.

Such a contract cannot be for services that the nursing home will provide. It must be for services above and beyond what the nursing home would provide such as monitoring the nursing home care of Elizabeth, bringing Elizabeth’s friends to visit her, taking Elizabeth on trips to Disney World, and taking Elizabeth to visit her friends.

Helen Reiter may provide the financial and personal services the nursing home is not providing.

Helen Reiter must determine how many hours per week she can provide services for Elizabeth and determine a reasonable hourly rate. To decide on a rate, she must research what professional guardians and geriatric care managers would charge for similar services.

As long as Helen Reiter’s hourly rate is substantially below a professional’s rate, the Department of Children and Families will approve the contract. As the attorney, you, of course, can assist her in gathering this information, drafting the contract, and presenting it to the Department of Children and Families. This is part of the Medicaid application process.

You advise Helen Reiter that she can take the expected future income immediately as a lump sum: it will deplete the monies in Elizabeth’s account. She does not have to have provided any services yet. But when she begins providing services, she must keep a detailed log of services she performs.

Helen Reiter is glad she has come to your office. She decides to proceed and asks you to draft the Personal Services Contract, instruct her regarding the maintenance of the Log, and prepare her mother’s Medicaid application.

Send to a friend | Trackback URL| Print This Post

Bookmarks: