Archive for July, 2015

ABLE Act gets proposed Federal Regulations and NJ Bill

Posted on: July 27th, 2015 by Mark R. Friedman

Since I’ll be speaking about the ABLE Act next week at the New Jersey Institute for Continuing Legal Education’s 21st annual Sophisticated Elder Law Conference, now would be a good time to mention that there have been some recent developments with ABLE accounts.

For readers who don’t know, an ABLE account is a legal instrument made possibly by a new federal law signed in late 2014.  It’s sort of a hybrid between a special needs trust and a 529 college plan.

With an ABLE account, families set money aside in a special account to benefit a person with disabilities, who became disabled before age 26.  The money in the account is invested, and up to $100,000 in the account won’t disqualify the beneficiary (the person with disabilities) for SSI or Medicaid.  If the money in the account is withdrawn to pay for a “qualified disability expense,” then the gain on the investment is not subject to income tax.

Of course, ABLE isn’t as good as it sounds (what ever is?).  Contributions are limited to the federal gift tax exclusion amount, which is currently $14,000 per year.  And when the beneficiary dies, any remainder in the ABLE account has to repay Medicaid.  These limitations render the ABLE account useless in most cases for holding an inheritance or lawsuit recovery, so don’t change your will just yet.

While ABLE accounts were created by the federal ABLE Act of 2014, there had been few details on how ABLE will actually be implemented in New Jersey – until recently.  In June 2014, the U.S. Treasury Dept. and IRS issued joint proposed regulations on ABLE.  And recently, NJ Senate Majority leader Steve Sweeney introduced S2770, a bill implementing ABLE accounts in New Jersey.

From these two sources, the community can glean new guidance on how ABLE accounts will ultimately be administered in New Jersey.  I’ve closely reviewed the proposed regulations and NJ bill, and I think there are a few important take-aways.

First, the feds will be permissive / broad in interpreting what counts as a “qualified disability expense.”  (E.g., they’ve said: “expenses for common items such as smart phones could be considered qualified disability expenses if they are an effective and safe communication or navigation aid for a child with autism”.)  This is very good news for families, as it means they’ll have less trouble making tax-free withdrawals from ABLE accounts as the law intended.

That said, there will likely be some kind of bureaucratic procedure to making withdrawals from an ABLE account, since the NJ bill says that a guardian or power of attorney agent will have to apply to make withdrawals.  Presumably, application would be made to the New Jersey Division of Developmental Disabilities, which will serve as Trustee of New Jersey’s ABLE Trust.

Finally, under the NJ bill it looks like withdrawals can only be made by a beneficiary’s guardian or power of attorney agent.  This could be a problem, since many people with disabilities don’t have capacity to sign a power of attorney, and many family caretakers don’t yet have a guardianship.

While there are problems with ABLE accounts and their implementation, the creation of ABLE is clearly a good thing, and we look forward to using at as a new tool to help our clients ensure the best possible care for loved ones with disabilities.

For more information on ABLE accounts and providing for a loved one with special needs, please call or email us today.

As Medicaid turns 50, White House holds Conference on Aging

Posted on: July 14th, 2015 by Mark R. Friedman

This month, Medicare and Medicaid turn 50.

On July 30, 1965, President Lyndon Johnson signed the Social Security Act into law, which created the Medicare and Medicaid programs.  Today, these programs provide health coverage for tens of millions of Americans, including many seniors, disabled people and low-income families who would not otherwise have access to healthcare.

Against this backdrop, the White House yesterday held  its Conference on Aging, a conference that has been held every ten years since 1961.  President Obama addressed the conference, remarking that “One of the best measures of a country is how it treats its older citizens.  And by that measure, the United States has a lot to be proud of.”

We agree with that sentiment.  The United States has one of the best systems in the world for providing care to seniors and people with disabilities, and I encourage our readers to take advantage of the opportunities therein.  Make sure you sign up for the Medicare plan that’s right for you, and get the maximum Social Security benefit that you can.  See whether you may be eligible for disability benefits.  If a family member may soon need long term care, consider whether Medicaid planning is appropriate.  Make sure you have a healthcare directive and power of attorney.  If a loved one with disabilities is receiving an inheritance or lawsuit settlement, consider using a special needs trust.

That’s not to say the American system is perfect.  Seniors and people with disabilities who obtain healthcare face a number of glaring problems, some of which we help our clients ameliorate.  But at the end of the day, in America, we take care of our own.  For that we should all be proud.

Medicare Set-Asides: Make an Informed Decision

Posted on: July 6th, 2015 by Mark R. Friedman

If you’re a plaintiff in a personal injury lawsuit, and you get Medicare or expect to get it soon, then you need to be aware of your obligations to Medicare.

Under the Medicare Secondary Payer Act (MSPA), Medicare doesn’t pay for healthcare where someone else has primary responsibility, such as a defendant in a lawsuit.  For example, if you get into a car accident and need healthcare, and the other diver’s insurer is supposed to pay for your healthcare, Medicare will not pay for healthcare for which the insurer should pay.

The MSPA is complicated and confusing – probably too complicated to explain in a short blog post.  However, it’s extremely important that you understand your MSPA obligations, because if you don’t fulfill them, Medicare may refuse to fund some care for  you.  If Medicare decides that the defendant paid you damages (money) that was meant to cover your healthcare, and instead you spent it on something else, Medicare may refuse to pay for further accident related healthcare for you until you pay the damages for accident related care. If the money’s already spent, you might be stuck with no money, no Medicare, and no way to get Medicare.

The best way to fulfill the MSPA obligation is with a Medicare set-aside arrangement.  This is a legal instrument through which a portion of your settlement is set aside to pay for your healthcare.  The disadvantage is that once money is put into a Medicare set-aside arrangement, it can’t be used for anything other than healthcare.  For this reason, may people would rather not have a Medicare set-aside arrangement.  That is their decision, but in doing so, they risk losing their Medicare benefits and ending up with no way to pay for needed healthcare.

The Centers for Medicare and Medicaid Services (CMS), which administers Medicare, hasn’t yet issued rules for Medicare set-aside arrangements in personal injury / liability cases, so some lawyers and plaintiffs ignore MSPA obligations.  In my view, that’s a mistake that puts both the lawyer and plaintiff at risk.  At the very least, plaintiffs should be informed about how Medicare set-asides work, obligations under the MSPA, and the potential consequences of not fulfilling your obligations.  Plaintiffs should at least be able to make an informed decision about whether they want a Medicare set-aside.

At FriedmanLaw we do MSPA consulting on personal injury cases, advise clients whether a Medicare set-aside is necessary and help clients create Medicare set-asides where appropriate.  Call or email us today for information on how the MSPA applies to your case.

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Homepage photo: Cows grazing at Meadowbrook Farm, Bernardsville, NJ by Siddharth Mallya. October 23, 2012.
Interior photo: Somerset hills pastoral scene by Lawrence Friedman.