Archive for December, 2014

What’s your New Years Resolution?

Posted on: December 31st, 2014 by Mark R. Friedman

Happy New Year!  This is the time of year when people make resolutions, and a good one for 2015 may be to get your legal affairs in order.

The could mean creating an estate plan, or updating an old one.  Having a quality will, power of attorney and healthcare directive in place is important in case something happens to you in the coming year.  And having a well-crafted estate plan can bring you a certain peace of mind knowing that if something happens, your family will be protected.

A lot of people delay unpleasant things until after the holidays.  Perhaps you have a parent whose mental capacity or ability to care for herself is starting to slip.  Maybe that became clear when you visited for the holidays.

If a loved one may soon need long term care, now is right time to start planning for it.  We can help you figure out how to obtain proper care and how to pay for it.  With nursing home costs in New Jersey around $10,000 per month, long term care is exceedingly expensive.  But with Medicaid planning we can help you avoid impoverishment and keep assets within the family instead of losing them to care costs.

Perhaps you have a child with disabilities who is growing up.  At age 18, every child becomes an adult and has the legal authority to make decisions for himself, regardless of whether he’s disabled or lives with his parents.  Banks, hospitals, schools, government agencies and other institutions have to listen to your child’s instructions instead of yours.  If you want to continue caring for your child after age 18, it’s important to apply for guardianship.

Now is the perfect time to get your legal affairs in order, and FriedmanLaw is here to help.  If you’re interested in knowing more about any of the above or other legal matters, call or email us.

Congress Passes ABLE Act for People with Disabilities

Posted on: December 17th, 2014 by Mark R. Friedman

Congress Passes ABLE Act for People with Special Needs

The Senate just passed the Achieving a Better Life Experience (ABLE) Act. The House had previously passed the bill, and it will likely be signed by President Obama and become law.

ABLE creates a new way for people with disabilities to save and manage money. Under the act, a person who became disabled before age 26 can create an “ABLE” bank account and have up to $100,000 in it without losing eligibility for SSI and Medicaid.

Reportedly, contributions to an ABLE account will be limited to the federal gift tax exclusion amount, which in 2014 is $14,000.

ABLE account funds can be used to pay for “qualified disability expenses”, which according to the congressional summary includes “expenses for education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, and expenses for oversight and monitoring, funeral and burial expenses.”

If an ABLE account is used to pay for anything other than qualified disability expenses, a 10% penalty tax is imposed.

ABLE accounts will likely be an excellent new tool for people with disabilities and their families to manage finances. However, ABLE won’t replace special needs trust (SNT’s), because of key differences between the two.

ABLE and SNT’s both allow a person with disabilities to qualify for means-tested benefits like SSI and Medicaid, while money is set aside to meet that person’s special needs. However, unlike ABLE an SNT has no limit on contributions or the amount held. The most typical situations where someone needs an SNT involve either an inheritance or a personal injury settlement – lump sum payments.  These payments would conflict with ABLE’s $14,000 annual contribution limit, especially if money has already been contributed to the account that year.  They may also conflict with ABLE’s $100,000 total limit.

SNT’s also have a much higher age limit (65 for first-party SNT’s; no limit for third-party SNT’s), allowing more people to use SNT’s.  And SNT’s can be written to provide more flexibility in what the trust can pay for.

Where ABLE might be very helpful is if someone receives a small lump-sum payment, e.g., under $10,000 – a graduation gift from family, for example, or a small lawsuit recovery. ABLE would be perfect for such a payment. Also, while it’s unclear now what the final rules will be regarding ABLE, it may be great for someone with disabilities who works part-time and receives modest income. The income could be deposited into an ABLE account, with no disruption of benefits.

All in all, ABLE is a boon to people with special needs, and we at FriedmanLaw look forward to using it to better serve our clients.

Can You be Paid to Care for Your Parent?

Posted on: December 15th, 2014 by Lawrence A. Friedman

A parent who becomes frail or starts to develop dementia rarely can be alone full time even if not yet ready for long term care in a facility. While an elder law attorney may arrange for Medicaid to fund some care at home, an adult child may need to care for [and possibly live with] the parent. Should that child be paid, and if so, how?

There is no one size fits all answer because both needs and services vary from family to family. Where the parent only needs light assistance, the child may be able to continue to work and socialize, but in other situations, a child may give up career and social life to take care of mom or dad. So what should families do?

It may prove fair to base parent- child financial arrangements on what the child gives up to care for mom or dad. Thus, a child who just helps with shopping and paying bills might be reimbursed for out of pocket costs or receive a small stipend. Parents who need substantial care may give the caregiver child an hourly or weekly fee or an extra share under their wills.

Sometimes payment involves funding an addition to a child’s home or the child coming to live with mom. These kinds of arrangements can alleviate many concerns and save a lot of money but they require counsel to address tax concerns and head off major issues if a parent seeks Medicaid later. For instance, in paying for an addition to a child’s home or transferring dad’s home to a child, dad makes a valuable gift that can lead to Medicaid gift penalties. In contrast, an elder law attorney may avoid Medicaid gift penalties by designing the arrangement as a caregiver child transfer or purchase of a life estate. These kind of techniques likely will elude a lay person because they involve complex rules rather than common sense.

Like so many family situations, it is best for parents to discuss the options with all of the children and come to an agreement before embarking on the new arrangement. Reaching agreement on long term care compensation is just the first step. To avoid misunderstandings, arguments, and even law suits down the road, the agreement should be put to paper in language that will hold up in court. Care arrangements can impact tax and Medicaid planning. An elder law attorney also can help families develop defenses that will stand up in court should a disgruntled child later attack a care arrangement as unfair; improper; or the product of undue influence, over reaching, or even fraud.

What about taxes? When a child is paid and provides services to a parent, the payments can constitute either income or gifts.

Payments tied directly to the services [such as hourly or weekly pay] probably are taxable income to the child and subject to payroll tax and withholding. Unfortunately, the parent doesn’t get a corresponding deduction because individuals generally can’t deduct payments for personal services. This increases the after tax cost. However, not treating payments as taxable income can prove even more costly.

I’m often asked why families shouldn’t just ignore taxes; who would even know? First and foremost, the law requires compensation to be reported as taxable income and tax evasion can lead to criminal charges and civil penalties. In addition, payments from parent to child that aren’t income must be gifts.

Medicaid authorities typically treat as gifts payments from parent to child that parent and child don’t report as taxable income. As discussed throughout, most gifts made within the Medicaid look-back period trigger a penalty period, which depends on the amount given. The look-back period goes forward starting sixty months before applying for Medicaid. However, because the penalty doesn’t start until the donor applies for Medicaid and satisfies Medicaid income cap and resource cap, an application that isn’t timed correctly can delay the start of a penalty for years longer than necessary. Therefore, whenever gifts may occur it is essential to consult an elder law attorney before applying for Medicaid. This brings us back to the question why pay taxes on compensation from parent to child?

As unpleasant as taxes may be, it can be far cheaper for a child to pay tax on a parent’s compensation than for mom to incur Medicaid gift penalties. If the child doesn’t work beyond caring for mom, the tax rate probably will be modest. In addition, the child may be able to deduct expenditures to provide care, and possibly even take a home depreciation deduction. However, it is best to get legal advice on what may and may not be deductible.

Even if the family treats payments from parent to child as taxable income, Medicaid regulations may impose gift penalties unless the payments are pursuant to a legally binding written agreement. A well designed care compensation arrangement can dovetail nicely with traditional planning to qualify for Medicaid if dad eventually needs care in a nursing home or assisted living facility or home health aides. Payments per a binding care agreement should reduce resources toward Medicaid limits without triggering gift penalties. In addition, careful planning may even allow a parent to transfer a valuable home to a caregiver child but avoid Medicaid penalties.

Families should work with an elder law attorney to ensure smooth implementation of a family care agreement and take advantage of Medicaid planning opportunities. In addition to a written care agreement, a new will, trust, deed, or power of attorney may prove important to implement the agreement and allow for potential Medicaid planning. For instance, without a power of attorney that authorizes Medicaid planning, an expensive guardianship proceeding may be your only option whereas our firm often helps clients accomplish their goals with no need for guardianship.

If a family care arrangement in your future we’d be happy to help you “get it right.” Please call or email us today.

A Guide to Buying Health Insurance in New Jersey

Posted on: December 9th, 2014 by Mark R. Friedman

The Sentinel Project guide to buying health insurance in New Jersey, released by Seton Hall Law School, is an excellent resource for NJ consumers shopping for health insurance.

The guide is particularly salient now, since we’re in the midst of the 2015 open enrollment period for health insurance.  Consumers have from November 15 to February 15 to sign up for insurance.  New Jersey consumers use; New York consumers use NY State of Health.

As I’ve written previously, I believe private health insurance through the Affordable Care Act for people with special needs can be an attractive option in certain situations.  The ACA means insurers have to cover people with pre-existing conditions, which includes many people with special needs, and insurers must cover essential health benefits like mental health treatment, chronic disease management and habilitative care.

When compared with Medicaid, private insurance offers advantages and disadvantages for people with special needs.  Insurance is much more expensive.  You must pay premiums, co-pays, co-insurance and deductibles.  With Medicaid, most care is free or very low-cost.  But private insurance generally offers you more choice in what doctors you can see, and may pay for services that Medicaid won’t.  More choice can lead to both better health care, and more self dignity.

With private insurance, you also avoid having to repay Medicaid from your estate or special needs trust when you die.  This can be very attractive for someone with a large special needs trust who wants to leave the remainder to his spouse, children or other loved ones.

Private insurance won’t cover long term care, so it won’t pay for services like a nursing home or group housing.  You still need Medicaid to avoid paying for long term care out-of-pocket (with some nuances).  But private insurance covers acute medical care very well – routine care, doctor visits, hospital stays, surgery, medicine, etc.

If you are considering using private insurance as part of special needs planning, we’d be happy to talk with you; call or email us today.


Anti-Psychotics as Chemical Restraints in Nursing Homes

Posted on: December 9th, 2014 by Mark R. Friedman

“Chemical restraints” – the use of anti-psychotics in nursing homes to control resident behavior – may be dangerous, illegal, and widespread.

Today, NPR covered one family’s experience with chemical restraints in a nursing home. The practice involves facility doctors prescribing anti-psychotic drugs to sedate residents who create problems for the facility due to Alzheimer’s disesase, vascular dementia or other illnesses that affect behavior.

Many anti-psychotic drugs are not intended for use with dementia patients, but they can make unruly nursing home residents more pliable and easier for staff to manage. However, blunting the senses with anti-psychotic drugs can put residents at greater risk of injurious falls and bone fractures, and exacerbate health problems. And excessive anti-psychotic use can dull emotions, sap away personality and put the resident into a “stupor.”

The use of anti-psychotics as chemical restraints, without medical need and for the convenience of staff, is illegal under federal regulations. But according to a government investigation, questionable anti-psychotic use is widespread in nursing homes [link] across the country.

The NPR story linked above includes a tool that it says was drawn from data from the Centers for Medicare and Medicaid Services (CMS). Using the tool, you can look up data on the percentage of residents at a nursing home who receive anti-psychotic medication, and how that percentage compares to the state and national average. The New Jersey rate of 14.9% is lower than the national average of 19%.

It’s cliche to point out that in the United States we have an aging population. But as more people check their parents and spouses into nursing homes and enter facilities themselves, I believe the use of chemical restrains will have to recede. It’s a nightmarish practice, and as more people experience it and a brighter spotlight is shone, families won’t stand for it.

If you believe a facility may be using chemical restraints by prescribing anti-psychotic drugs inappropriately to your loved one, you should know about your rights and how to enforce them. FriedmanLaw is here to help; call or email us today.

New Jersey Medicaid begins allowing Miller Trusts / Qualified Income Trusts

Posted on: December 3rd, 2014 by Mark R. Friedman

As of December 1, New Jersey has begun allowing Miller trusts / Qualified Income Trusts (QIT’s) to be used to establish Medicaid eligibility.

With a Miller trust, income that would put Medicaid applicants over the long term care income limit (which in 2015 is $2,199) is deposited into a special bank account, where it is paid out in accordance with Medicaid rules.  Applicants accept restrictions on how the money can be used, and Medicaid does not count the trust money towards the applicant’s income limit, allowing the applicant to qualify for Medicaid.

Miller trusts are only used for long term care, in a nursing home, assisted living facility or with home care aides in the community.  Miller trusts cannot be used to qualify for non-long-term-care Medicaid.

The implementation of Miller trusts means that New Jersey is ending its Medically Needy program for long term care.  People who currently receive assistance under Medically Needy are “grandfathered” and will continue receiving assistance, but may have to establish a Miller trust if their circumstances change.  It’s not clear whether people with pending Medicaid applications, who qualified for Medically Needy when they applied, will have to establish a Miller trust to qualify.  My view on the matter: better safe than sorry.

The main advantage of Miller trusts / QIT’s is that they allow people with higher incomes to receive long term care outside of a nursing home.  Previously, folks with income above the limit could only qualify for Medically Needy assistance in a nursing home.  People who could have received care in an assisted living facility or at home with aides, couldn’t, because their incomes were too high to qualify for ordinary Medicaid (but too low to pay the exorbitant cost of long term care).  Now, these people can put their excess income in a Miller trust and receive care in the most appropriate setting.

New Jersey Medicaid officials seem to expect that initially, the use of Miller trusts will cost the state money.  Reportedly the state has set aside $90 million to cover the cost of new Medicaid enrollees who qualify for the first time using Miller trusts.  However, many people who work in this area, including me, believe that ultimately this program will save the state money.  It costs much more to provide care in a nursing home than in other settings, so allowing people to receive care in less restrictive environments makes economic sense for the state.

If you’re interested in using a Miller trust to qualify for Medicaid, we would be happy to speak with you.  Call or email us today.

As this website provides general information and isn’t tailored to your particular situation, it doesn’t constitute legal advice and may not take into account rules and exceptions that affect you. Although updated from time to time, this website may not take account of recent legal developments or differences in laws from state to state. For safety sake, obtain individual legal advice before you act! You assume all risk of acting on information contained in this website. This website doesn’t constitute legal advice, and no attorney-client relationship exists unless FriedmanLaw and you execute a written engagement agreement. Please contact us at 908-704-1900 to discuss engaging FriedmanLaw to help resolve your legal concerns.
Homepage photo: Cows grazing at Meadowbrook Farm, Bernardsville, NJ by Siddharth Mallya. October 23, 2012.
Interior photo: Somerset hills pastoral scene by Lawrence Friedman.