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Archive for May, 2011

How Should I Protect My Home Against Nursing Home Costs?

Posted on: May 15th, 2011 by Lawrence A. Friedman

  Unless you have long term care insurance, you or your family must fund your long term care privately until you qualify for Medicaid.  As further explained at FriedmanLaw’s elder law page http://www.specialneedsnj.com/elder_law.php, to qualify for Medicaid, your Medicaid countable income and resources must be reduced to modest program limits although our Medicaid plans usually can help families preserve substantial amounts. 

 Titling your home to your children may protect against long term care costs but can be fraught with danger.  Once you give your home to your children, they own it and can sell the home out from under you or simply force you to leave.  Even if your children would never voluntarily do such a thing, your children may have no choice if they get into financial difficulties.  Similarly, a child’s spouse or other beneficiaries could evict you if your child passes away after taking title to your home.

 Gift your home and you give up equity you may want for purchases or to move to an adult community, warmer climate, or more accessible home.  Due to complexities in the Internal Revenue Code, gifting your home can lead to taxes on its eventual sale that otherwise might not arise.  Finally, most gifts temporarily disqualify the donor for Medicaid if made during the look back period (currently 60 months) although there are exceptions as further explained at FriedmanLaw’s elder law page  http://www.specialneedsnj.com/elder_law.php.

 A life estate deed can preserve your home even if you later require long term care but protect you against being thrown out of your own home.  A life estate deed gives you the right to live in your home or rent it, but transfers to the grantees (typically your children) all ownership rights once you pass away.  Like all Medicaid planning techniques, life estate deeds have both advantages and disadvantages and are effective only if properly designed and executed.  If you wish to discuss your Medicaid planning options, contact FriedmanLaw at 908-704-1900.

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Poorly Drafted Special Needs Trusts May Not Prove “Special”

Posted on: May 2nd, 2011 by Lawrence A. Friedman

Calling a trust special needs trust or supplemental needs trust doesn’t prevent it from disqualifying the trust beneficiary from government aid like SSI, Medicaid, and free group home placement.  So-called SNTs will prove disqualifying unless drafted and administered properly.  At a minimum, an SNT must not have any obligation to fund the beneficiary’s support or distribute at fixed times, and the trust beneficiary must not have the right to terminate the trust and capture the amounts in it.  Although not stated explicitly, such disqualifying obligations and rights can be implied from poorly drafted trust terms as sometimes arise when the person drafting a so-called SNT lacks expertise in this arcane area of the law.  In addition, a trust containing amounts attributable to the trust beneficiary (such as a personal injury recovery, outright inheritance, or divorce share) must contain numerous provisions mandated by complex Medicaid regulations.  Finally, even a well drafted trust can disqualify the beneficiary for government aid if it isn’t administered properly.

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Homepage photo: Cows grazing at Meadowbrook Farm, Bernardsville, NJ by Siddharth Mallya. October 23, 2012. http://en.wikipedia.org/wiki/File:Autumn_Leaves_13.jpg.
Interior photo: Somerset hills pastoral scene by Lawrence Friedman.