February, 2016, Friedman Law

Archive for February, 2016

Be Careful when Signing Nursing Home Contracts

Posted on: February 29th, 2016 by Mark R. Friedman

Take care when signing a contract, and always know what you’re signing.

That’s advice that leapt to mind when I read the recent New York Times article on a nursing home killing. According to the Times, an elderly woman in a nursing home was suffocated to death by her roommate, an elderly woman with mental health issues. Per the article, nursing home workers had previously reported that the roommate may pose a danger to others. The victim’s son has been trying to hold the nursing home accountable for years, but has faced an obstacle: the nursing home admission agreement.

According to the Times, the agreement included a mandatory arbitration clause, requiring that any dispute with the nursing home would be resolved through arbitration rather than a lawsuit in the courts. Arbitration is perceived as being more favorable to companies in disputes with consumers, because, as the article says, “there is no judge or jury and the proceedings are hidden from public scrutiny.” While arbitration clauses are sometimes struck down as unconscionable or unenforceable, normally the clause is upheld and disputes must go to arbitration.

It drives home the point that you should know what you’re signing. If a loved one is going into a facility, it’s often a tiring and emotionally draining process. Family members often sign contracts on behalf of a resident with little knowledge of what they’re signing. That can be a costly mistake.

In addition to arbitration clauses, admission contracts may include provisions that subject family members to liability if the resident can’t pay. Nursing homes and assisted living facilities have sued people who signed contracts on behalf of a relative, seeking the relative’s unpaid bills. While it’s not clear whether the facility would be successful in that situation, it’s a lot cheaper to not agree to that portion of the contract than to litigate the issue. Admission contracts can also limit Medicaid planning opportunities and include other unfavorable provisions.

If you or a loved one is going into a nursing home or assisted living facility, it would be very wise to have a lawyer review the admission agreement to make sure you understand what you’re signing, and if appropriate, negotiate on unfavorable provisions. For more information, call or email FriedmanLaw.

Do You Need an ABLE Account or a Special Needs Trust [a.k.a. Supplemental Needs Trust]?

Posted on: February 15th, 2016 by Lawrence A. Friedman

As a parent or other loved one of a person with special needs you probably have heard of ABLE, but maybe you aren’t sure how it affects you. The ABLE (Achieving a Better Life Experience) Act passed Congress in 2014 while New Jersey enacted ABLE implementing legislation January 11, 2016. So, what does the ABLE Act do anyway? [For more detail on the ABLE Act, see our blog posts of January 11, 2016 and July 27, 2015.]

Essentially, the ABLE Act permits a disabled person or his/her friends and loved ones to set aside amounts for the disabled person without knocking the disabled person off Supplemental Security Income (“SSI”) and Medicaid. But, a special needs trust [also called supplemental needs trust] (“SNT”) can do the same thing. [For more detail on SNTs, see the Special Needs tab and Articles tab at the top of this page]. So, which is right for you– an ABLE account or an SNT?

Let’s start with ABLE’s virtues. When properly funded and administered, an ABLE account can be tax free and avoid disqualifying the disabled beneficiary for SSI and Medicaid. A well drawn and managed SNT also avoids disqualifying the disabled beneficiary for SSI and Medicaid, but it isn’t tax exempt.

So far ABLE sounds like the clear winner, right? Well, wait until you see the fine print. Like most government programs, ABLE has limitations and traps for the unwary.

Why might you be better off with an SNT than an ABLE account? Only $14,000 per year (subject to inflation adjustment after 2016) may be contributed to an ABLE account. This makes ABLE accounts impractical in many situations such as to preserve benefits when settling a personal injury claim or in a divorce. By the same token, ABLE’s limitation that each individual may be beneficiary of only one ABLE account can spell trouble if more than one person wants to provide for a person with special needs. Of similar concern, only the first $100,000 in an ABLE account doesn’t count against SSI resource limits (although the entire ABLE account is Medicaid exempt). And possibly most troubling, an ABLE account must repay Medicaid when the disabled beneficiary dies. In contrast, an SNT that doesn’t contain the beneficiary’s own money isn’t subject to Medicaid payback. Also a properly drafted SNT is not Medicaid or SSI countable even if it exceeds $100,000. However, establishing an SNT will entail legal fees while an ABLE account might avoid them.

What is the bottom line? ABLE accounts are great where a friend or loved one wants to give a disabled person less than $14,000, whether by lifetime gift or via a will. In that case, the contribution limit won’t be an issue and Medicaid payback is likely to be only a minor concern. ABLE accounts also can be useful when a disabled person is disqualified from Medicaid or SSI due to less than $14,000 in excess savings. However, that’s about it. Where more than $14,000 must be sheltered, an SNT is the way to go. SNTs face no contribution limits and don’t have to repay Medicaid unless funded by the beneficiary (such as via a personal injury claim).

How do you establish an ABLE account? Once state programs are up and running, you should be able to enroll in similar manner to a 529 plan. FriedmanLaw can help you establish an SNT whether in conjunction with wills and estate planning, guardianship, or settlement of a personal injury claim.

Medicaid Gifts and the Simplified Application

Posted on: February 11th, 2016 by Mark R. Friedman

Last week, New Jersey Medicaid announced a simplified process for applying for Medicaid for people with income below the federal poverty level who haven’t made gifts. We wrote about that in a blog post last week.

This simplified process for some applicants is a welcome development. Unfortunately, however, as is often the case with Medicaid, it’s not as simple as it appears.

The process involves applicants being able to use an affidavit to attest that no gifts were made, instead of having to submit five years of financial records for the Medicaid agency to review. However, it’s not always clear what’s a gift, and transfers that wouldn’t be gifts in other contexts are gifts for Medicaid.

Under Medicaid rules, a gift is a transfer of assets for less than fair market value. A gift can be any amount and to any recipient. Unlike with tax, there is no $14,000 exemption, and charitable donations can be counted as gifts.

For example, if Jane gives a $10,000 wedding present to her son, it’s a gift. If she transfers $50,000 in stocks to her daughter, it’s a gift. If she makes a donation of $5,000 to her church, it’s a gift. If she sells her car to her sister for $4,000, when the car is worth $10,000, it’s a $6,000 gift.

Gifts incur a Medicaid penalty – in the long term care context, for every $10,000 you give away, you lose roughly one month, during which Medicaid will not pay for your care. However, some gifts are exempted from incurring a penalty, including certain gifts to your spouse, a child with disabilities, and others in certain specific situations, as well as gifts outside the Look Back Period. (Since exempt gifts are very technical, you should consult with a lawyer on specific questions.)

It’s not clear whether someone who has made an exempt gift can use the affidavit. It’s a technical question, and hopefully the answer will become clear as this simplified process sees more use. However, you certainly don’t want to be in the position of unintentionally lying to the government in an affidavit, so if you have any questions about whether you’ve made gifts, you should speak with elder law attorneys like FriedmanLaw about your specific situation.

Medicaid simplifies Application Process for Some Applicants

Posted on: February 4th, 2016 by Mark R. Friedman

Today, New Jersey Medicaid issued a MedComm (Medicaid Communication) saying that applicants with incomes under the federal poverty level (currently $983 / month) can use an affidavit in lieu of the lookback review.

When applying for long term care Medicaid benefits, the Medicaid agency usually requires you to submit five years’ worth of statements for all financial accounts. A Medicaid worker reviews these statements to determine whether you’ve made any gifts in the past five years. Gifts incur a penalty, a period of time during which you lose Medicaid benefits.

This review of financial records is very burdensome for all involved. It’s onerous for applicants, who must gather five years of records and explain their entire financial life to a stranger. And it’s arduous for the Medicaid worker, who has to review all the statements and verify each significant deposit and withdrawal.

According to the new MedComm, applicants with income under the federal poverty level who haven’t made any gifts in the past sixty months will now be able to submit an affidavit attesting so. In doing that, the applicant will avoid having to submit financial records for the past sixty months. This will make the Medicaid application process worlds easier for applicants with modest income who haven’t made gifts. This is especially true where a third party is trying to assemble the records, for example, a child-caretaker trying to piece together their parent’s financial records.

The affidavit can only be completed by the individual, or his or her spouse, guardian or agent under a power of attorney. So for a widow who lacks capacity to sign the affidavit herself and never created a power of attorney, her children (or others) would have to apply for guardianship in order to use the affidavit. This drives home the need to have a well-drafted power of attorney, especially if you may need long term care.

We have yet to see how this shakes out, but if things go as stated in this MedComm, then we at FriedmanLaw are excited to be able to offer some of our clients a simpler way to apply for Medicaid.

For specific information on Medicaid or long term care, please call or email us today.