Since the enactment of the Employee Retirement Income Security Act of 1974 (ERISA), major changes to the rules governing Individual Retirement Accounts (IRAs) and 401(k) and other retirement plans have been relatively few and far between. That may be changing soon.
First the Treasury Department announced in March 2019 that employers could offer to buy out long term pension obligations in exchange for lump sum payments. However, many critics claim the lump sum payments can be far less valuable than the surrendered pensions.
Then just yesterday (May 22, 2019), the House of Representatives did the unimaginable. It passed a bipartisan bill. What legislation was so popular it won support from both Democrats and Republicans and generated only 3 no votes (out of 420 votes cast)? It’s called the Setting Every Community Up for Retirement Enhancement Act abbreviated as the Secure Act.
If enacted the Secure Act would make sweeping changes to annuity rules, benefit distribution options, small business retirement plans, and required minimum distribution calculus as well as other revisions. So, will the Secure Act become law? Well, it still must pass the Senate and avoid veto by the president. However, commentators expect it to be enacted later this year.
IRAs and employer sponsored saving or retirement plans (“Plans”) are a great way to save for retirement. Typically, they defer income tax for many years and Plans often include employer contributions and other benefits. While IRAs and Plans can be corner stones of a successful retirement, they are subject to complex required minimum distribution (“RMD”) rules.
Required minimum distributions or RMDs are based on the account balance at December 31 of the prior year. RMDs equal the applicable account balance multiplied by a fraction based on age and life expectancy statistics. Thus required minimum distributions change each year. The IRS and most major investment firms publish guidelines and tables you can use to help calculate your RMD.
The required minimum distribution RMD rules generally require an IRA owner or Plan participant to take distributions from IRAs and Plans starting with the year in which he or she reaches age seventy and a half (i.e. 70.5 years old). RMDs are not required from Roth IRAs and Roth Plans until the Roth owner dies. Sometimes Plan RMDs can be deferred until retirement after age seventy and a half.
The first RMD is due by April 1 (not April 15) of the year after the year in which an IRA owner or Plan participant reaches age 70.5. The second and subsequent RMDs are due by Dec. 31 of the year. Failing to take required minimum distributions on time can lead to a large penalty tax.
You must calculate RMDs separately for each IRA and Plan. While you must take a Plan RMD from the Plan that generates the RMD, you may take IRA RMDs from any or all of your IRAs.
The required minimum distribution rules may be illustrated by the following example. John is born August 20, 1948 and has two IRAs and Plan benefits from three businesses of which John owns 6%.
1 John turned 70.5 years old Feb. 20, 2019 so his first RMD is for 2019;
2 Even though John is not retired, John must take Plan required minimum distributions starting with the year in which he reached age 70.5 (2019) because John owns at least 5% of each Plan sponsor business;
3 Normally, RMDs are due by December 31 but John may defer his first required minimum distributions to April 1, 2020. Even if deferred to April 1, 2020, John’s 2019 RMDs will be based on John’s Dec. 31, 2018 IRA and Plan balances;
4 John must also take RMDs for 2020 by Dec. 31, 2020 based on Dec. 31, 2019 balances;
5 John must take RMDs for 2021 and subsequent years by December 31 of each year based on balances as of December 31 of the prior year.
The Choice is Yours
You have a choice whether to stick with Original Medicare or sign up for a Medicare Advantage Plan. Both Original Medicare and Medicare Advantage Plans cover most kinds of mainstream medical care like hospitalizations, speech therapy, physical therapy, occupational therapy, professional fees, and common preventive health care such as colonoscopies and certain screenings for heart disease or cancer. Also, prescription coverage is available whether you choose Original Medicare or a Medicare Advantage Plan.
What is the Difference?
If both Original Medicare and Medicare Advantage Plans cover mainstream health care, how do they differ? Original Medicare is single payer indemnity health insurance as was typical in the United States before managed care became popular with employers in the late twentieth century. As you probably can guess, Medicare Advantage Plans provide managed care similar to that offered in many employee benefit plans.
Indemnity and managed care are dramatically different approaches to funding health care. Indemnity plans pay a percentage of reasonable and customary charges for covered care. For instance Medicare Part B pays only 80% of most professional fees leaving you to pay the rest either directly or by purchasing Medicare supplement (also called Medigap) insurance. In contrast a Medicare Advantage Plan pays the full cost of covered care other than a (typically small) co-payment and perhaps an annual deductible. Some Medicare Advantage Plans also provide additional benefits like dental care, vision care, or gym membership subsidies.
Which Is Better?
If Original Medicare only covers 80% or so of many health care costs and can have hefty per diem charges for other care unless you buy costly Medigap supplemental insurance while Medicare Advantage Plans fund nearly the full cost of covered care and may even include extra benefits, why wouldn’t everybody choose a Medicare Advantage Plan? It all boils down to the age old tension between cost and quality.
There is little doubt that Medicare Advantage Plans typically offer lower cost health care than original Medicare. However, Medicare Advantage Plans bring with them the features of managed care that bother many people.
Many participants in Original Medicare also purchase Medicare Supplement (a.k.a. Medigap) insurance policies to cover Original Medicare’s deductibles and co-payments and expand coverage for blood and international travel. Unlike Original Medicare, Medicare Advantage Plans are sold by private insurers and are managed care plans (along the line of the employee benefit group health care plans provided by many employers). Medicare Advantage Plans provide the benefits of Original Medicare and sometimes add additional benefits (like vision care or gym subsidies).
Medicare Advantage Plans can cost less and include greater benefits than Original Medicare. But as usually is the case, the cost savings come at a price. While Original Medicare plus a Medigap policy may cost more than a Medicare Advantage Plan that provides comparable benefits, Medicare Advantage Plans have all the detriments of managed care.
Medicare Advantage Plans usually have networks and require referrals to see a specialist. Although strictly anecdotal, I sense that Medicare Advantage Plans are more likely than Original Medicare to try to avoid covering costly care like new cancer treatments that arguably are more effective than older less expensive kinds of care. Original Medicare has no networks or referral requirements.
The principal advantage to Original Medicare is greater control over your own care. You don’t have to convince a managed care organization to approve costly surgery or other care and can choose facilities and providers without worrying whether they are in-network. However, you also have to buy a Medigap supplemental policy unless you are willing to self insure. The principal advantages to Medicare Advantage Plans are lower total cost and avoidance of high deductibles and co-pays.
Medical Underwriting– the Hidden Danger
If you initially choose a Medicare Advantage Plan, you may not be able to buy a Medigap supplemental policy if you later switch to Original Medicare. If you are under Original Medicare but don’t have a Medigap supplemental policy, you may face potential high hospitalization deductibles, additional high costs for hospital stays beyond 61 days, Part B co-payments, and other costs.
During your Medigap open enrollment period (usually, but not always, when you first enroll in Medicare), insurers must offer to sell you a Medigap supplemental policy at standard premiums even if you have major pre-existing conditions. Thereafter, typically, insurers may refuse to sell you a Medigap policy or charge higher premiums if your health is bad. Provided you buy a Medigap supplemental policy during your Medigap open enrollment period, you can keep it at standard rates for the rest of your life even if your health becomes precarious.
If you switch from a Medicare Advantage Plan to Original Medicare, you risk medical underwriting when buying a Medigap policy. This can be a catastrophe for a Medicare Advantage Plan participant who becomes dissatisfied with his/her Plan.
So, are you better off with Original Medicare or a Medicare Advantage Plan? It depends which is more important to you cost or choice. While a Medicare Advantage Plan may cost less than Original Medicare plus a Medigap supplemental policy, do you want Medicare Advantage Plan administrators to decide what health care you can and can’t have? FriedmanLaw can apply our extensive knowledge of Medicare to help you choose coverage that is right for you.
The Social Security Administration administers several programs. Supplemental Security Income or SSI is a financial need based benefit to help people who can’t earn enough to get by due to disabilities or old age. Old age, survivors, and disability insurance (OASDI) is the official name for Social Security’s insurance programs. This article discusses options to increase benefits under the Social Security Administration’s OASDI program, which often is called simply Social Security.
OASDI is a comprehensive program that provides benefits to retirees, disabled people, spouses, divorced former spouses, surviving spouses, and children. Unlike Supplemental Security Income, Social Security is an insurance program that bases Social Security benefits on your work history or the work history of your spouse, divorced spouse, deceased spouse, parent, or deceased parent.
Social Security OASDI benefits are based on a primary insurance amount (PIA). The Social Security primary insurance amount is based on age, work history, and earnings that were taxed to fund Social Security or Railroad Retirement Benefits.
When an individual elects to start Social Security at his or her full retirement age (also called normal retirement age), Social Security Administration pays a monthly Social Security benefit equal to the PIA rounded down to a whole dollar amount. An individual who starts Social Security before or after reaching normal retirement age receives an adjusted PIA. Your benefit may be further reduced if it is based on the work history of a parent or current or former spouse rather than your own work history.
Originally, Social Security started at age 65. Eventually, Congress provided options to start an adjusted Social Security benefit anywhere from age 62 on up. However, Social Security benefits that start before normal retirement age are reduced while benefits that start after full retirement age increase up to age 70.
Originally age 65, Congress eventually increased Social Security normal retirement age to preserve the Social Security trust fund. For people born before 1938, Social Security full retirement age is still 65. However, full retirement age of folks born after 1937 ranges from 65 and two months to 67.
When benefits start before reaching full retirement age, the PIA is reduced 5/9 of one percent for each of the first 36 months before full retirement age plus 5/12 of one percent for each of the remaining months until normal retirement age. For example, where benefits start 60 months before reaching full retirement age, the benefit is reduced by 30 percent– 36 months times 5/9 of 1 percent plus 24 months times 5/12 of 1 percent.
On the other hand, when starting benefits after full retirement age, the monthly benefit equals the PIA plus delayed retirement credits of 8% per year if born after 1942. The delayed retirement credit is lower for folks born before 1943.
Obviously, Social Security benefits can vary dramatically depending on when you choose to start benefits. In addition, you may have options to take Social Security benefits on the work record of a current or former spouse rather than your own record. Your choice of Social Security start date also can affect how much Social Security your young or disabled children can receive because children also may be entitled to Social Security based on the work record of a parent who is receiving Social Security. Furthermore, Social Security benefits taken before full retirement age may be recaptured when earnings are high, and high earners also may pay more tax on Social Security.
You have the option to start Social Security anytime from age 62 on, but starting before full retirement age triggers reductions in Social Security. By the same token, delaying Social Security until after reaching Social Security normal retirement age results in a larger benefit. (However, there is no point to delaying Social Security beyond age 70 because the monthly Social Security benefit does not increase beyond age 70.)
Waiting until age 70 to start Social Security can result in substantially more lifetime Social Security benefits if you live a long time. However, for people who die comparatively young overall benefits will be higher if you start Social Security at age 62. In addition to life expectancy, spousal Social Security options, tax brackets, and other factors can impact when to start Social Security in order to maximize lifetime Social Security benefits. Depending on when spouses were born, it can make sense for one spouse to collect a spousal benefit while delaying his or her own benefit to age 70, but this may not be an option for younger people due to recent law.
Clearly, many factors play into the decision of when to start Social Security, and errors can leave thousands of dollars (or more) on the table. With so many variables at play it is hard to imagine seat of the pants evaluations being very accurate. Working with a nationally recognized Social Security expert and sophisticated software, FriedmanLaw can evaluate options and help you develop a Social Security benefit strategy that meets your needs.
New Jersey’s Department of Human Services, Division of Medical Assistance and Health Services (DMAHS), the state agency that administers Medicaid, released 2019 NJ Medicaid income eligibility standards today.
The new standards raise the income limits for a variety of Medicaid programs. Managed Long Term Services and Supports (MLTSS) is the program that can pay for long term care, whether with home health aides, or in a nursing home or assisted living facility. The MLTSS income “cap” was raised to $2,313. People with gross monthly income over this figure may still qualify for Medicaid using a Qualified Income Trust (QIT).
In addition, the limits for other aspects of MLTSS were revised as well. If one spouse needs long term care but the other does not, the healthy spouse is allowed to keep part of the couple’s assets, within certain limits. The amount the healthy spouse can keep is called a Community Spousal Resource Allowance, or CSRA, by many elder law attorneys.
The CSRA is calculated using a complicated formula, and you should contact FriedmanLaw to find out more information about your specific situation. That said, New Jersey has a minimum and maximum figure for the CSRA. In 2019, the minimum is $25,284.00, and the maximum is $126,420.00. This is a significant increase, and should be welcomed by Medicaid applicants.
Finally, when one spouse needs long term care but the other does not, the healthy spouse may be able to keep part of the ill spouse’s income. This also is subject to a complex formula, and the numbers that govern that formula were revised upward with the other 2019 changes, in line with the rising cost of living.
If you or a loved one is interested in Medicaid, long term care, asset protection planning or other elder care law needs, please call or email FriedmanLaw today.
Original Medicare covers hospitalization, professional fees and other common health care costs. Many participants in Original Medicare also purchase Medicare Supplement (a.k.a. Medigap) insurance policies to cover Original Medicare’s deductibles and co-payments and expand coverage for blood and international travel. Unlike Original Medicare, Medicare Advantage Plans are sold by private insurers and are managed care plans (along the line of the employee benefit group health care plans provided by many employers). Medicare Advantage Plans provide the benefits of Original Medicare and sometimes add additional benefits (like vision care or gym subsidies).
Medicare Advantage Plans can cost less and include greater benefits than Original Medicare. But as usually is the case, the cost savings come at a price. While Original Medicare plus a Medigap policy may cost more than a Medicare Advantage Plan that provides comparable benefits, Medicare Advantage Plans have all the detriments of managed care.
The principal advantage to Original Medicare is greater control over your own care. You don’t have to convince a managed care organization to approve costly surgery or other care and can choose facilities and providers without worrying whether they are in-network. The principal advantages to Medicare Advantage Plans are lower premiums and avoidance of high deductibles and co-pays.
Advantage to Original Medicare
Original Medicare is available everywhere in the United States whereas Medicare Advantage Plans may have limited coverage areas and availability. You may be forced to switch plans or return to Original Medicare if you move or your Medicare Advantage Plan ceases to serve a locale or goes out of business.
Original Medicare covers all providers and facilities that accept Medicare with no networks and no referrals required. Medicare Advantage Plans may limit providers and facilities to networks and require referrals and to see a specialist or obtain certain kinds of care.
Medicare Advantage Plans manage care. Therefore, they sometimes refuse to cover treatments that would be eligible for coverage by Original Medicare.
Advantage to Medicare Advantage Plans
Medicare Advantage Plans typically have lower costs than Original Medicare. Original Medicare has co-payments such as 20% for most Part B benefits and over $300 per day for hospital stays after 61 days. There also is a Part A deductible of over $1,000 for each hospital admission and relatively small deductibles for Parts B and D as well.
Original Medicare participants must purchase Medicare Supplements (a.k.a. Medigap insurance) if they want to avoid costly deductibles and co-payments. Participants in Medicare Advantage Plans don’t need (and can’t buy) Medigap policies.
Except for very limited situations, Original Medicare does not cover care outside the United States. Medicare Advantage Plans can (but don’t have to) cover care outside the U.S.
Medigap Underwriting– Hidden Risk in Medicare Advantage Plans
If you initially choose a Medicare Advantage Plan, you risk an unpleasant surprise on later switching to Original Medicare. Many people initially choose Medicare Advantage Plans to save money, but as health declines with age, the limitations of managed care may prove more of a concern. Therefore, some participants in Medicare Advantage Plans may want to switch to Original Medicare during the general Medicare open enrollment period or the separate Medicare Advantage open enrollment period.
When switching from a Medicare Advantage Plan to Original Medicare you also must buy a Medigap policy (a.k.a. Medicare Supplement) or face potential high hospitalization deductibles, additional high costs for hospital stays beyond 61 days, Part B co-payments, and other costs.
During a Medigap open enrollment period (typically but not always when you first enroll in Medicare), you may buy a Medicare Supplement policy at standard premiums regardless of health or pre-existing conditions. Except in limited circumstances, beyond your Medigap open enrollment period, insurers may refuse to sell you a Medigap policy or charge higher premiums if your health is bad.
Once you have a Medigap policy, the insurer can’t charge more because your health declines. Therefore, provided you buy a Medicare Supplement policy during your Medigap open enrollment period, you can keep it at standard rates for the rest of your life even if your health becomes precarious.
If you switch from a Medicare Advantage Plan to Original Medicare, you risk medical underwriting when buying a Medigap policy. This can be a catastrophe for a Medicare Advantage Plan participant who becomes dissatisfied with his/her Plan.
For instance, Medicare Advantage Plans’ lower premiums or broader benefits may seem attractive while healthy, but networks, referral requirements, and limitations on costly care may lead a Medicare Advantage participant to switch back to Original Medicare if he/she becomes seriously ill. But the very illness that causes an individual to switch from an Advantage Plan to Original Medicare may make it impossible or too expensive to obtain a Medigap policy. In that case, there can be hefty deductibles and co-payments such as 20% of many Part B charges.
As with so much of elder law, there is no obvious one size fits all choice between Original Medicare or Medicare Advantage Plan. No question that you can save some money by buying a Medicare Advantage Plan. But are you willing to let strangers who administer a Medicare Advantage Plan decide what care you can and can’t have? FriedmanLaw can apply our extensive knowledge of Medicare to help you choose coverage that is right for you.
Governor Murphy’s Administration announced that the Affordable Care Act’s open enrollment period runs through Dec. 15, and http://www.GetCovered.NJ.gov provides a portal for New Jersey residents seeking health insurance coverage. The site addresses plan options, financial assistance and contact information for New Jersey residents seeking health insurance. The New Jersey Department of Human Services also announced that it is working with the following five community organizations to support enrollment efforts:
New Jersey residents can also call 877-96w-8448 to talk about health insurance options and get help enrolling.
While FriedmanLaw does not endorse any particular plan, we encourage readers in need of health insurance to take advantage of all the Affordable Care Act offers both through the new New Jersey portal, http://HealthCare.gov and local resources. In addition lots of information about Medicaid, Medicare, and Social Security is available throughout http://SpecialNeedsNJ.com.
New Jersey Medicaid recently changed the way it calculates penalties for gifts.
New Jersey residents can qualify for New Jersey Medicaid, a government program that can pay for long term care in a nursing home, assisted living facility, or with home health aides. However, when you apply for long term care Medicaid, the Medicaid agency reviews your finances for the past five years, and looks to see if you’ve made any gifts.
If you have made gifts, Medicaid imposes a penalty based on the value of the gift. The penalty is a length of time (the penalty period) during which Medicaid will not pay for your long term care. During that time, you have to pay for your own care. However, the penalty period doesn’t start running until you’re eligible for Medicaid – until your resources are spent down below $2,000 and you’ve met Medicaid’s other requirements. In other words, during the penalty period people typically will have no money to pay for their long term care. So it’s a problem.
Medicaid calculates the penalty period based on a formula. Under the old penalty divisor formula from recent years, applicants lost roughly one month of Medicaid for every $13,000 in gifts. So if an applicant made a gift of approximately $100,000, the applicant would get a penalty period of roughly eight months.
Medicaid recently changed that formula, to the detriment of applicants who’ve made gifts. Under the new penalty divisor formula, applicants lose one month of Medicaid for roughly every $10,000 in gifts. So that same $100,000 gift would now result in a penalty period closer to ten months.
Some elder law attorneys are making efforts to get this change reversed, but it’s not clear whether those efforts will yield results.
All the same, if you need Medicaid to pay for long term care, or you have questions about gifts and Medicaid, FriedmanLaw is available to help. Call or email us today.
New Jersey’s Department of Human Services, Division of Medical Assistance and Health Services (DMAHS), recently posted notice that it will issue new regulations on how Medicaid laws and rules apply to trusts, including special needs trusts and qualified income trusts.
Why does this matter to you?
Well, if you have a loved one with disabilities or a loved one who may need long term care in the future, or receives long term care now, odds are good that you’ll eventually be seeking Medicaid. You might already be on Medicaid.
There’s also a chance that you’ll be using a trust to do so. In New Jersey, people with high incomes (currently over $2,250 per month gross) have to use a Qualified Income Trust (aka Miller Trust) in order to qualify for long term care Medicaid.
And if a person with disabilities inherits money from family or receives proceeds from a lawsuit or other significant funds, often it makes sense for those funds to be held in trust with a special needs trust.
These new regulations are going to create new rules for how qualified income trusts (QIT’s) and special needs trusts (SNT’s) are treated. If you are seeking Medicaid, or you’re on Medicaid, it’s important to understand how these new rules affect eligibility. Or better yet, to work with a lawyer who understands that.
The regulations have yet to be issued, but you can bet that FriedmanLaw will be following this matter. In addition, I (Mark Friedman) serve as roundtable coordinator for the New Jersey State Bar Association’s Elder and Disability Law Section, and we’ll likely be doing a program on the new regulations in February 2019. For other attorneys who are members of the NJSBA, it would be very helpful to attend that program.
If you think you may need long term care in the future, and are interested in doing asset protection planning or Medicaid planning to protect your assets for your spouse or children, one of the best things you can do now is make sure you have a well-drafted power of attorney document.
That’s because Medicaid planning often involves making gifts. In order for Medicaid to pay for long term care (in a nursing home or other setting), applicants must spend down their assets below $2,000. Medicaid planning seeks to spend those assets in a way that provides benefit or value to family members, instead of spending everything on nursing home bills or other long term care. That often involves making gifts in a structured, planned way, working with New Jersey elder law attorneys like FriedmanLaw to do planned Medicaid gifts.
However, people who need long term care often lack capacity to manage their affairs, due to conditions that affect mental capacity such as dementia, Alzheimer’s disease or severe stroke. If you can’t make gifts yourself, it limits your ability to do Medicaid planning.
With a power of attorney, you can appoint someone you trust to manage your financial affairs. That person is called your attorney-in-fact. You can give your attorney-in-fact broad powers over your finances – buying and selling property, paying for things, moving money between accounts, signing contracts and starting or ending lawsuits, etc. However, your attorney-in-fact cannot make gifts of your assets unless you explicitly authorize him or her to do so. (That is because of a law, N.J.S.A. 46:2B-8.13A, which Larry Friedman helped draft.) A blanket grant of authority is not enough.
Often, power of attorney documents that are not prepared by attorneys familiar with elder law do not include this gift provision, and if you don’t have a power of attorney with the right language, your family will have to apply to court for guardianship to get this authority, which may or may not be granted.
So if you may need long term care in the future, and you may want to do Medicaid planning to protect assets, it’s worth talking with an elder law attorney to make sure you have the right power of attorney. FriedmanLaw is available to help, call or email us today.
Lately we’ve been hearing a lot from people with questions about Qualified Income Trusts (QIT’s) – aka Miller Trusts.
We have a whole page on our website devoted to QIT’s, with lots of information. But all the same, I’m going to take this opportunity to give anyone who’s reading this some basic information about how QIT’s work.
In New Jersey, if you want Medicaid to pay for your long term care, you have to have income within the income limit. In 2018, that limit is $2,250. And what counts is your gross income – your income before deductions, such as Medicare premium or tax withholdings.
If your income is above that figure, you may need a Qualified Income Trust (QIT), aka Miller Trust, to get New Jersey Medicaid to pay for a nursing home, assisted living facility, home health aide or other long term care.
An NJ elder law / elder care attorney like FriedmanLaw can help you set up a QIT. Once it’s established, the QIT is managed by a trustee – usually a family member (especially spouse or child) of the person who needs long term care. The person who needs long term care is the beneficiary.
The trustee opens a bank account in the name of the QIT (i.e., owned by the QIT, not by the trustee or by the beneficiary). The beneficiary’s income is deposited into the QIT each month, and paid out according to QIT rules. The income must be paid out in a certain order, depending on the situation. An example of that order might be first for the beneficiary’s personal needs allowance, then to the beneficiary’s spouse for spousal maintenance, then for the beneficiary’s health insurance premium, then to the nursing home for the beneficiary’s cost share.
If the QIT is set up and administered correctly, then the income that gets paid into the QIT every month should not count towards that Medicaid income limit, and the beneficiary can get Medicaid despite high income (provided, of course, that the beneficiary meets Medicaid’s other requirements).
If you think you may need a QIT, it’s worth talking to an elder law attorney. You may not know whether or not you need one, Medicaid staff may not tell you, and you may set it up wrong if you try to do it yourself. In all these situations, if Medicaid is denied as a result, you could end up with a big nursing home bill and no way to pay it.
If you have more questions about a qualified income trust, call (908-704-1900) or email FriedmanLaw today.
We get asked this question a lot. And the answer is maybe.
New Jersey Medicaid can pay for home health aides to come to your home and provide care to you. However, there are two caveats to that.
First, you may not get as many hours of home health care as you think you need. New Jersey has privatized its Medicaid program to some degree – instead of the state paying providers directly, the state makes payments to managed care organizations (MCO’s), which are health insurance companies like United Healthcare and Horizon NJ Health.
If you qualify for Medicaid and seek aides at home, the MCO will send out staff to evaluate your needs. It will award you a number of hours based on that assessment.
Here’s the thing. These are private insurance companies, and they are seeking a profit. They get a fixed payment from the state for each Medicaid beneficiary. So they make more money when they pay for fewer aide hours, and they lose money when they pay for more hours. The MCO has a natural incentive to award you as few hours as possible.
Typically, we see people get between twenty and fifty hours per week, with maybe thirty or forty being typical. That works out to around four to six hours per day, seven days a week. Or maybe seven or eight hours a day, five days a week. If that’s enough to meet your needs, then you may be a good candidate for home care with Medicaid.
To get it, you’ll have to qualify for Medicaid’s long term care (LTC) program. The LTC program has strict eligibility requirements. You must have less than $2,000 in assets. In addition, you’re required to submit five years’ worth of records for all financial accounts, and Medicaid staff will review those records to see if any gifts have been made. Any gifts that were made affect eligibility. Likewise, Medicaid will look to see if there are any hidden accounts. You also must meed medical eligibility requirements for the LTC program, and various other requirements.
There are a lot of moving parts to obtaining Medicaid. You may have to spend down your assets to get below $2,000, and you may want to do that in a way that’s least unfavorable to your spouse and children.
If you’re interested in having long term care Medicaid pay for home health aides, you may have questions regarding the Medicaid spend-down, and you may need help applying for Medicaid. FriedmanLaw is available for these issues. Call or email us today.
Medicare is a health insurance program sponsored by the federal government. Medicare is available to most people at age 65, but younger people may qualify for Medicare when collecting Social Security Disability Insurance (SSDI) or due to contracting end stage renal disease or Lou Gehrig’s Disease (ALS).
If you become eligible for Medicare at age 65, you can enroll in Medicare during your initial Medicare enrollment period of 3 months before to 3 months after the month in which you reach age 65. After receiving Social Security Disability Insurance (SSDI) for 24 months you should automatically receive Medicare. If you have group health insurance through your current employment or your spouse’s current employment, you may be eligible for a Medicare Special Enrollment Period.
As discussed in greater detail in the Medicare section of specialneedsnj.com, you also can enroll in Medicare late. However, delaying Medicare can lead to Medicare late enrollment penalties and may leave you without sufficient health insurance (especially if Medicare would provide primary health insurance coverage).
While you may be tempted to save on premiums by deferring Medicare, over a long lifetime, Medicare late enrollment penalties can dwarf Medicare premium savings from deferring Medicare. Your Medicare Part B premium may go up 10% for each full 12-month period that you could have had Part B, but didn’t sign up for it. In addition, you may have to wait until the Medicare General Enrollment Period (from January 1 to March 31) to enroll in Medicare Part B, but Medicare coverage won’t start until July 1 of that year.
You also may face a Medicare prescription late enrollment penalty if, for any continuous period of 63 days or more after your initial enrollment period is over, you go without Medicare prescription insurance or other creditable drug coverage. Large employer drug plans typically are creditable but check with your employer to make sure.
A Medicare late enrollment penalty should not apply if you are covered by an employer or union group health plan based on your own or a spouse’s current employment. Because COBRA and retiree health plans are based on former employment, Medicare late enrollment penalties apply if you delay enrolling in Medicare Part B because you have COBRA or retiree health coverage but not current active employment coverage.
Finally, delaying Medicare enrollment can leave you uninsured. Medicare may be primary or secondary depending on various factors. If Medicare is primary, Medicare rather than other health insurance (such as COBRA or retiree coverage) pays first. Where Medicare normally would be primary but you don’t sign up for full Medicare coverage, other health insurance typically won’t pay costs Medicare normally covers. When through no fault of the secondary insurer, you fail to obtain Medicare that would be primary insurance, the secondary coverage may pay little or nothing on your claim leaving you liable for costs Medicare normally would cover!
Medicare usually is primary to small employer health plans, retiree health plans, COBRA, Medigap insurance, and some other coverages. For instance, if you are eligible for Medicare but don’t take Medicare because you are covered by your spouse’s retiree health insurance, your spouse’s plan may not cover you for most costs.
For further information on Medicare, see the elder law section of SpecialNeedsNJ.com. However, Medicare rules are extremely complex and errors can prove catastrophic. Since, this site provides only general information on Medicare, it is important to obtain individual legal counsel on your own issues
Not to get political here, but…
I’ve been following President Trump and Republicans’ proposed tax reform with interest. If you’re also interested, you can read all about it elsewhere, including how it affects the estate tax, state and local tax deductions for people in high-tax states like New Jersey, etc. But there’s one provision that should be of particular concern to our clients – the medical expenses deduction.
The tax reform bill eliminates the deduction for medical expenses. That’s a big deal for people in nursing homes, especially people in nursing homes on Medicaid with relatively high incomes.
That is because once you go on Medicaid, your income must be spent according to Medicaid rules. When you apply for Medicaid, the agency gives you a breakdown at the end that shows how you have to spend your income each month. For people without a spouse, usually all of your income must go to pay the nursing home or assisted living facility, with perhaps a small amount allowed to pay for health insurance.
There is no allowance to pay for taxes.
Usually that’s not an issue, because Medicaid beneficiaries typically have low income. And if their income is not low, usually their medical expenses (which are almost all of their income) are high enough that the medical expense deduction is high enough to result in no tax.
But if the medical expense deduction goes away, people in nursing homes with high incomes may end up owing tax. In that case, they would be in a very difficult situation. They would owe money to the IRS, but also owe money to the nursing home. They would have to decide whether to follow tax law, or Medicaid rules. Either way, they could end up with obligations that they cannot pay.
I hope that lawmakers will take this into account as tax reform progresses.
Why should you pay a lawyer to do something that you could do yourself for free?
I get asked that question from time to time. And my answer is, you shouldn’t. I certainly wouldn’t. However, there may be good reasons you haven’t considered why you can’t really do it yourself.
Some things are worth paying for, and people regularly find that out the hard way. I had a genius friend who wanted a “floating television” – a TV mounted on the wall, with the power cable hidden in the wall (i.e., running through the wall). An electrician quoted him a fee he considered too high, so he decided to run the cable through the wall himself. He was a pretty handy guy, and it was just a matter of drilling some holes. Right?
Wrong. His amateur electrical work started a fire, and also voided his insurance coverage, so he had to pay for the damage himself.
I know a little about cars and do some basic maintenance myself. But for serious problems, I take my car to a mechanic, because I don’t want to find out that I fixed my brakes wrong when I’m going 70mph on the highway and my car won’t stop.
In the same way, people who write their own wills or trusts, or do their own Medicaid planning, may be setting themselves up for problems down the road. The classic example is someone who reads about Medicaid on the internet and then deeds their house away to their kids to protect against future nursing home costs. Three years later they go into a nursing home and apply for Medicaid, only to find out that there’s now a three-year gift penalty because of the house.
Likewise, if you write your will yourself or download it off the internet, it may not do what you think it does. And no one may realize that until it’s too late to change it – because you’ve already passed away or lost capacity. Your DIY will might result in thousands in taxes that could have been avoided, or in your property being distributed in a way you wouldn’t want, or to someone who can’t manage it responsibly.
That’s not to say you can never do certain things yourself. For a truly simple and straightforward will, you may be okay with something you got online, and for a simple and straightforward Medicaid application you may be okay doing it yourself. However, in our experience, “simple and straightforward” is rare – there usually is some kind of complicating factor in each situation, and you probably won’t recognize it without seeing an experienced lawyer.
Making sure your affairs can be taken care of if you become incapacitated, taking care of your loved ones after you die, making sure you are able to pay for long term care and don’t leave your family impoverished or riddled with debt – these are all important concerns, and in my view, it’s worth paying to get done right. To me, the right question isn’t whether a lawyer is worth the money. It’s whether your family and your peace of mind are worth the money.
The New York Times recently published a thought-provoking article by Ron Lieber on the ethics of Medicaid planning. The article posed the question of whether it’s ethical to engage in Medicaid planning, to preserve assets for other family members while qualifying for Medicaid to pay for long term care.
As NJ elder care attorneys, Medicaid and long term care planning are a large part of our practice here at FriedmanLaw. I have helped dozens of clients save tens or hundreds of thousands of dollars against long term care costs. Larry has helped hundreds, perhaps thousands of clients with Medicaid planning over the years.
So we know a thing or two about it.
Sometimes friends or colleagues ask me in a social setting whether I’m comfortable with the ethics of Medicaid planning or whether I think it’s good for society to help people avoid paying long term care costs and instead shift the cost to the government. My response is that every technique we use is perfectly legal, and indeed provided for in Medicaid laws. But it can’t be denied that long term care Medicaid costs society a lot of money and increases the state and federal budget deficit.
That said… I’ve never had a client question me on the ethics of Medicaid planning. It’s fine to question the practices of others, or the practices of society. But when it comes to your own money, even the staunchest fiscal hawks tend to suddenly recognize the ethical rightness of Medicaid planning.
Long term care is incredibly expensive. In our area of central and northern New Jersey, nursing homes typically cost more than $120,000 per year. Faced with those kinds of overwhelming costs, it’s easy to see why people want to engage in Medicaid planning – because all of their money will be wiped out afterwards. When it’s your spouse who might be left impoverished, or you face the prospect of losing an inheritance you were counting on to pay for your children’s education, I find that for most people, ethical concerns about society and the deficit usually evaporate.
That’s not to say that the cost of long term care isn’t an important issue. It is. As our population ages, funding long term care for everyone who needs it is going to become a larger and larger share of our federal and state budgets. If we still want to fund education, infrastructure, law enforcement, the environment, the military, etc. (which we should), then we need to come up with better and more efficient ways to provide custodial care to seniors and people with disabilities.
I always keep my ears open for “creative” proposals, and one of the most interesting I’ve heard is robot caretakers. It may sound far-fetched, but robots are being developed now to do things like administer medication, assist with mobility, and provide supervision and even companionship. If we could have five robot caretakers, remotely controlled by one human monitoring each one on a staggered schedule (say, one for five minutes, then the next, etc.), we could multiple the effectiveness of each caretaker. That would allow more people to stay in their homes longer, saving money and leading to happier and healthier citizens.
In the meantime, if you or a loved one may need long term care and you’re interested in preserving assets for other family members, please call FriedmanLaw at 908-704-1900.
As New Jersey elder care lawyers, we often meet with families that include a loved one who needs long term care, such as in a nursing home. Nursing home are is incredibly expensive, typically ranging between $6,000 per month in lower-cost parts of the country, to as much as $15,000 per month in northern New Jersey where we are.
Usually, families we see want to protect their assets against those enormous long term care costs. They want to preserve their life savings for their spouse, so she won’t end up impoverished, or for their kids, to pay for their grandkids’ education or the like, instead of spending their life savings on nursing home costs.
The best way to preserve assets is to qualify for Medicaid, a government program that pays for nursing home care. Often, if you meet with an elder law attorney, the attorney can come up with a custom plan to preserve your family’s assets while you qualify for Medicaid, and save those assets within your family rather than losing them all to long term care costs.
However, there is unfortunately a lot of misinformation floating around on this subject. Sometimes we see people who have taken steps before we met with them, that have set them back in terms of asset protection and qualifying for Medicaid. One of the most common is people who have made large gifts without considering the consequences.
For example, some people read on the internet that they should just put their house in their kids’ name, and it will be protected against nursing home costs. However, there are a lot of reasons why that is often a very bad idea.
First, by putting your house in your kids’ name, you no longer own your house. Your kids own it, and they can do whatever they want with it. They can kick you out, sell it and pocket the money. Even if you trust your kids to never do that, they may not have a choice. If your child goes through a nasty divorce, the house could be awarded to their ex-spouse, or the court might order the house sold to raise funds for the divorce. If your child gets into a car accident, a plaintiff could sue your child and a court might order the seizure of your former house, which your child now owns. There are risks to having someone else own your home.
Second, Medicaid penalizes gifts. If you make gifts within five years before you apply for Medicaid, you have to disclose those gifts to the Medicaid agency during the application process. The agency also reviews your financial records (which you must submit) to verify whether gifts were made. If you have made gifts within the five years before you apply, Medicaid imposes a “penalty period” – a period of time during which Medicaid will not pay for your nursing home. Currently in New Jersey, you lose roughly one month of Medicaid for every $12,000 you give away. (The numbers differ in other states.) So if you give away a house worth $280,000, you would lose Medicaid for two years.
The kicker is, this penalty period doesn’t begin until you are otherwise eligible for Medicaid. That involves spending your assets down to under $2,000 (with some nuances that I can’t cover here). So imagine someone gives away her house, and then two years later needs nursing home care. She spends down her funds to below $2,000, then applies for Medicaid. The Medicaid agency tells her that because she gave away her house, Medicaid will not pay for her care for another two years. She has a quickly rising nursing home bill (thousands of dollars per month), and no way to pay it, with no money and no Medicaid. In this scenario, depending on state rules, likely no nursing home would take her, and if she’s already in a nursing home, the home might try to remove her, or come after other family members for unpaid bills.
There are a lot of potential pitfalls to trying to do Medicaid planning yourself without advice from counsel. In some cases, gifts make sense, but they should only be made with guidance from an experienced elder law attorney. Trying to do it yourself is the legal / financial equivalent to trying to do heart surgery on yourself. Which we recommend against.
We’ll occasionally be posting blog articles from other attorneys on topics that may be relevant to our clients. This one is from a Phoenix-area law firm on nursing home abuse and neglect, a topic we get asked about. We hope you find it helpful!
The long-term care industry is an essential part of the American healthcare industry. Many institutions within the long-term care industry are committed to providing compassionate care to elderly patients. There are some exceptions, however. Some organizations fail to provide a reasonable standard of care for their patients — many of whom could be very vulnerable, and all of whom deserve the utmost respect. Nursing home negligence and nursing home abuse are two types of personal injury cases that involve the exploitation of residents living in long-term care facilities.
Nursing Home Abuse
Abuse implies some level of intent. This could mean the blatant intention of causing physical harm or it could mean clear indifference to the consequences of one’s actions. Nursing home abuse may be prosecuted in criminal court because it could be considered a criminal offense.
Some cases of elder abuse don’t involve the staff members of the long-term care facility; rather, a family member of the injured individual could be to blame. This may be particularly evident if a relative is attempting to take advantage of the elder’s financial situation.
In a nursing home setting, abuse may manifest itself in many forms. Residents may be physically, sexually, and/or emotionally abused. They might be financially abused by someone who wants to take advantage of their vulnerability.
Nursing Home Negligence
Negligence, on the other hand, is legally defined as the failure to perform some duty that is owed to another person. If someone is negligent, it doesn’t necessarily mean that they acted deliberately. It simply means that the individual failed to act in a reasonable way, and this failure led to another person’s injury.
In a nursing home environment, it could be easy for staff members to become distracted and fail to perform their regular duties to a reasonable standard. It’s possible for staff members to forget to provide the correct medication to patients or fail to pay attention to basic hygienic needs. The staff members in these situations might not be considered abusive because they did not intend physical or emotional harm to residents.
As a Phoenix nursing home negligence lawyer might explain, extreme cases of negligence could potentially be prosecuted as criminal charges. Depending on the jurisdiction where the act occurs, if an act of negligence is done in a manner that would suggest “willful disregard” for the safety of another, or is done “with reckless abandon,” such an act could be prosecuted in a criminal court.
Taking Action in a Nursing Home Negligence or Abuse Case
If you suspect that your elderly relative is being abused in a nursing home facility — by a staff member, by another resident, or even by a family member — don’t hesitate to contact a personal injury lawyer today.
Thanks to our friends and contributors from Alex & Saavedra, P.C. for their insight into nursing home negligence and elder abuse cases.
Today, New Jersey Medicaid increased the penalty divisor for applicants who make gifts. This is a very good thing for people who need Medicaid to pay for long term care.
If you apply for Medicaid to pay for long term care (in a nursing home, assisted living facility or with home health aides), you must submit five years of financial records and disclose any gifts made in the past five years. If you or your spouse has made any gifts, then Medicaid imposes a gift penalty.
The penalty is a period of time (called a “penalty period”) for which you will not receive Medicaid, and will have to pay for your own long term care. Let’s say you’ve made gifts and Medicaid assigns you a two-month penalty period. If you meet Medicaid’s requirements on June 1, and Medicaid would have started paying for your nursing home care then, this means that instead Medicaid will start on August 1, and you’ll have to pay for an extra two months of nursing home care.
The length of the penalty period is based on the amount you have made in gifts, and is determined using the penalty divisor. Effective April 1, 2017, New Jersey Medicaid increased the penalty divisor from $332.50 / day to $423.95 / day. If you make $10,000 in gifts, you would incur a 24-day penalty. If you make a $30,000 gift, you could incur a 70 day penalty, a little over two months.
The penalty divisor is based on a survey the state conduct of the average cost of nursing home care in New Jersey. That the divisor is higher is a good thing for FriedmanLaw and its clients. It means clients will be penalized less for gifts already made, and it potentially opens new planning opportunities that FriedmanLaw can use to help our clients preserve assets when they need long term care.
If you or a loved one may need long term care in the future, we encourage you to call or email FriedmanLaw for information about your options.
People occasionally ask me: What should we do now to protect ourselves against nursing home costs and other long term care costs?
My answer is, it depends entirely on your circumstances right now.
If your spouse had a stroke and is already in a nursing home, then you should strongly consider immediate Medicaid planning to protect assets against long term care costs.
If your mother is starting to show early signs of dementia and may need long term care in the future, it’s worth meeting with an elder law attorney to get information on paying for long term care, and it may make sense to do some Medicaid planning.
If you’re fairly healthy with no warning signs, and you may never need long term care, it may not make sense to do any kind of Medicaid planning now.
That’s because Medicaid planning usually involves giving up control of your assets in one form or another. It may involve transferring part of your assets, or converting your assets into income, or making purchases that wouldn’t normally be economical. These techniques are incredibly valuable if you’re going to have to spend your assets on long term care costs anyway, but if you don’t have that sword hanging over your head, most people would prefer to retain control over their own assets.
So I can’t say that everyone should do Medicaid planning now. And you should be skeptical towards anyone who tells you otherwise, regardless of what you hear from friends or read on the internet. One size does not fit all – each situation is different and calls for a different approach.
However, there is one thing I would recommend immediately to anyone thinking about long term care – to have in place a well-drafted estate plan.
Everyone should have a will, power of attorney and advance directive for healthcare, but especially older people or people with health concerns who may need long term care. That’s because you can only execute these documents while you have mental capacity to understand what you’re doing. Once you lose capacity (which often happens with progressive diseases like dementia and Alzheimer’s), it’s too late to do these documents, which can create problems.
For example, a healthcare directive and power of attorney allow you to appoint someone you trust to manage your healthcare and finances. If you haven’t appointed an agent under these documents, and you lose capacity, there may be no one who can pay your bills. It may be necessary for your family, or the government, to apply for court for guardianship over you, a process that’s more expensive and difficult than executing a document ahead of time.
In addition, if you’re concerned about long term care, it’s important to have estate documents drafted by a lawyer familiar with elder law. For example, Medicaid planning often involves making gifts, and if you’ve lost capacity, the gifts would have to be made by your power of attorney agent. However, in order for the agent to make gifts, the power of attorney document must explicitly authorize that. We often see power of attorney documents that do not include that crucial gift language.
Likewise, if one spouse is healthy and the other is ill, it may make sense for the healthy spouse to leave a minimal inheritance to the ill spouse. That is because if the ill spouse is likely to be on Medicaid in the future, leaving a large inheritance to the ill spouse may end up wasting the inheritance. It depends on the situation, but it may make sense to have a will that deviates very much from the typical will that leaves everything to the spouse.
In sum, there is no one-size-fits-all approach to Medicaid planning, but everyone should have an estate plan, and it’s smart for your estate plan to be prepared by attorneys familiar with elder law.
For more information on Medicaid, long term care, Medicaid planning, and crafting a custom estate plan, please call or email FriedmanLaw.
Special needs trusts (also called supplemental needs trusts, supplemental benefits trusts, and SNTs) are used to set aside money for a disabled person to supplement rather than supplant government disability programs like Medicaid and Supplemental Security Income (also called SSI). Many attorneys create special needs trusts, but not all lawyers who draft SNTs have expertise in special needs.
So why does it matter? Several reasons. A lawyer who is learning on the job may not produce a special needs trust that meets your needs. In fact a poorly drafted trust may even disqualify the beneficiary for SSI and Medicaid.
Generic form “one size fits all” special needs trusts may be unnecessarily inflexible and may not satisfy requirements of agencies like the Division of Developmental Disabilities and Board of Social Services. A special needs trust must comply with applicable program rules, which can differ from program to program such as Medicaid, Supplemental Security Income, Section 8 housing, and SNAP (formerly called food stamps).
An inflexible SNT may not meet your loved one’s special needs. For instance, a form SNT may prohibit expenditures for support– in which case the special needs trust can’t help with rent. This may lead to your disabled loved one losing his/her home or an expensive court proceeding to reform the special needs trust. The likely cost would far exceed legal fees to draft the SNT properly in the first place.
Unfortunately, we at FriedmanLaw have seen SNTs drawn by attorneys without special needs experience make the costly mistake of including a Medicaid pay-back provision even though pay-back is not required because the trust will be funded entirely by parents and grandparents. (A special needs trust is required to repay Medicaid when the disabled beneficiary dies only if the trust contains amounts attributable to the disabled beneficiary such as a law suit recovery.) The effect is to require payment to Medicaid of money that could go to loved ones instead.
We could go on and on about the issues inherent in drafting a special needs trust that meets your needs, but by now you probably get the idea. It is penny wise and pound foolish to have your special needs trust drafted by a lawyer without expertise in SNTs.
The United States is rethinking how it pays for healthcare.
There has been a lot of public discussion about the fate of the Affordable Care Act – whether it will be repealed, and if so, what its replacement (if any) will look like. There has been less discussion about something related that may have an even greater impact on Americans – Medicaid reform.
Medicaid is a joint federal and state program that pays for healthcare for people who meet its eligibility requirements. That means that Medicaid is paid for by both the federal government and the individual states that administer it. For example in New Jersey, Medicaid is regulated and managed by the state Department of Human Services, and the funding comes partially from the New Jersey state budget, and partially from the federal government.
Since its inception in the 1960’s, funding Medicaid has been an open-ended commitment from the federal government. Federal and state governments set rules on who was eligible for Medicaid, and the United States committed to provide enough funding to pay for every Medicaid beneficiary’s cost. There is no limit on how much the federal government will spend on Medicaid, it simply pays (with states) for everyone who qualifies.
Now, that may change. There is a proposal circulating now to change Medicaid funding to “block grants,” where the federal government would provide a fixed amount to each state based on that state’s Medicaid spending in 2016. This would almost surely result in the federal government providing less money to states to fund Medicaid.
If that happens, states would either have to raise taxes, cut spending elsewhere (like schools and roads), or cut spending on Medicaid. Or maybe all three. If the cuts to Medicaid spending get drastic, the government may impose drastic measures, making it more difficult to qualify for Medicaid or preserve assets for other family members. There is already a bill in congress to limit lucrative Medicaid annuity planning.
Point being, if you or a loved one may need Medicaid, and also want to preserve assets within your family, it may become harder to do so in the future, so it would be wise to start thinking about that now.
For more information on Medicaid planning and your specific situation, call or email FriedmanLaw today.
America has an aging population. As the baby boomer generation grows older (and wiser) and lifespans continue to increase, more and more people are going to need long term care. Today, long term care is invariably provided by humans – by family members, home health aides, and staff at nursing homes and assisted living facilities.
But how much long term care can be provided in this manner? Taking care of a family member is difficult, and often takes a toll on the caregiver’s own health and productivity. Professional caregivers are expensive – home health aides often cost around $25 / hour, and nursing homes commonly cost more than $10,000 per month. At FriedmanLaw, we often help families figure out how to pay for long term care, with Medicaid and other resources. But as the population of people who need long term care grows, there may come a point where there simply aren’t enough caregivers.
Providing long term care to everyone who needs it will require creativity. One of the more interesting solutions is robotic caregivers, which are being developed by companies across the world. It may sound like something from a bizarre science fiction movie, but in the near future, robot caregivers in people’s homes may be able to administer medication, check vital signs, teleconference doctor and family visits, assist with mobility, perform household chores, and even provide companionship. Robots may replace human caregivers, or allow human caregivers to care for more patients in less time. Robots may allow people to stay in their homes longer instead of going into long term care facilities.
I’ll leave the technical aspects to other people. But from a legal and financial standpoint, an obvious question arises: Who’s going to pay for all these robots?
If a robot caregiver prevented someone from going into a nursing home, it would save tens of thousands of dollars per year. Often, much of that cost ultimately falls to the government, through the Medicaid program. So the government may determine that it’s cheaper to provide robot caregivers to people, and include robot caregivers as a benefit under Medicare. Perhaps insurers also would pick up the tab, if robot caregivers prevented emergency room visits. It’s a potential gold mine for a company that can develop a practical, useful robotic caregiver, with a huge market and a deep-pocketed buyer.
Robots certainly can’t take care of everyone. Some people have demanding, constant medical and safety needs, and the only safe setting is a nursing home or assisted living facility. And of course, people are scared of robots. Robot caregivers would have to be developed with whom people feel comfortable. But if robots can be created that alleviate some of the need for human caregivers, that would be a major step towards solving a looming problem.
In the mean time, if you or a loved one may need long term care in the future, contact FriedmanLaw to discuss care options and how to pay for them.
People who seek New Jersey Medicaid for long term care (in a nursing home, assisted living facility or with home health aides) are often told they should use a Qualified Income Trust (QIT, aka Miller Trust). However, I’ve heard a lot of misconceptions lately about what a QIT is, and what it’s used for. There appears to be some misinformation floating around, so with this blog post, I’ll try to clear it up.
A QIT is a trust that allows a person to become eligible for Medicaid despite their income being higher than the Medicaid limit. To be eligible for Medicaid, applicants must have income within the “income cap,” the income eligibility limit. (There is also a resource cap, medical eligibility and other requirements.) The current income cap in New Jersey is $2,205 per month.
Anyone with total gross monthly income over $2,205 must use a QIT to be eligible for long term care Medicaid. A QIT can be created by a lawyer (including FriedmanLaw), and the trustee (who manages the QIT) should open a bank account for the QIT. Then, income should be direct deposited to the QIT bank account, or transferred every month, and spent every month according to QIT rules. If everything is done correctly, then the income in the QIT won’t disqualify the person for Medicaid.
So a QIT is used to establish Medicaid eligibility for people with high incomes who need long term care. A QIT is not used to shelter excess resources or assets. You can’t put your house in a QIT, or your bank account balance or investments. You can’t use a QIT to hide your assets and then go on Medicaid.
If someone is facing substantial long term care costs and wants to preserve their assets for their family, there may very well be ways to do that through Medicaid planning. If you’re interested in that, feel free to call or email FriedmanLaw for more information. But a QIT isn’t the way to do it.
If a person applies for long term care Medicaid (such as in a nursing home or assisted living facility), and his spouse still lives independently in the community, then even though the Medicaid applicant must have assets under $2,000, the community spouse may be able to keep some of the couple’s assets. The idea is to avoid impoverishing the community spouse, and forcing that spouse to go on Medicaid as well.
Generally, the community spouse is allowed to keep one home that she lives in, one vehicle that she uses, and half of the assets the couple owned when the other spouse became institutionalized (e.g., entered care in a nursing home). However, there are limits on the “half of the assets” prong – a ceiling and a floor. That ceiling and floor gets changed occasionally, based on the federal poverty rate.
The Centers for Medicare and Medicaid Services just updated those figures for 2017. Under Community Spouse Resource Standards, you can see that the new minimum is $24,180, and the new maximum is $120,900. In other words, if one spouse goes into long term care and applies for Medicaid, the other spouse should be able to keep a minimum of $24,180, and may be able to keep up to a maximum of $120,900 (depending on assets when the other spouse became institutionalized).
This is an increase from 2016’s standards, and a positive development for our clients.
In addition, the SSI maximum benefit is increasing slightly to $735 (which New Jersey also increases slightly). The substantial gainful activity limit is also increasing modestly, which will make it easier for folks to qualify for disability benefits. The community spousal housing allowance has increased modestly as well, which means community spouses are able to keep more of their institutionalized spouse’s income.
Overall, these figures are an improvement for our clients who seek Medicaid and other benefits. If you’re interested in Medicaid or other benefits, we can explain how they apply to your situation if you call or email us.
Long term care can be provided in a nursing home, assisted living facility, or at home with aides. While each setting has its advantages and drawbacks, they all have high cost in common. With care often costing over $10,000 per month long term care could wipe out your life savings. However, we often help clients qualify for Medicaid to fund care in all three settings without going broke.
While New Jersey Medicaid can fund long term care in all three settings, qualifying for Medicaid is not easy. Because eligibility is governed by complex rules that sometimes defy common sense, individuals who don’t work with an elder law attorney are not likely to protect much. Fortunately, FriedmanLaw’s elder law team can help you use gifts, prepaid funerals, qualified income trusts, annuities, and other tools to qualify for Medicaid without impoverishing your family.
You may have heard that once you need long term care it is too late for Medicaid planning, but that simply is not true. Even though Medicaid may impose penalties for most gifts made within five years before applying for Medicaid, in many cases, gifts, annuities, maximizing family allowances, and other Medicaid planning techniques can save a lot despite the five year look back period. However, planning must take account of complicated Medicaid laws and regulations. Gifting too much or too little or applying for Medicaid too soon can be very costly.
For Medicaid purposes, a gift is any transfer for less than market value to friend, family, charity, religious organization, school, etc. Most gifts (whether or not taxable) made within five years of applying for Medicaid trigger a penalty period that delays Medicaid eligibility. However, some gifts are exempt– such as certain gifts for a spouse or disabled person and some gifts of a home– provided the gift meets various technicalities. For instance, a gift of mom’s house to a child avoids penalties where the child qualifies as a caregiver child but may trigger penalties otherwise.
Perhaps the biggest Medicaid planning issue is timing. To minimize the impact of Medicaid gift penalties, it usually is important to start the penalty period as soon as possible unless gifts are extremely large. For instance, your $120,000 gift to your grandchildren in January 2017 would trigger a roughly 12 month penalty period so you might assumes the penalty would end January 2018. However because a penalty doesn’t start until you otherwise are eligible for Medicaid and apply, the penalty period might not even begin until 2018 or later unless you work with elder law attorneys like FriedmanLaw to accelerate the penalty start date.
Sometimes we help clients protect assets by funding long term care in a nursing home, assisted living facility, or at home without incurring a Medicaid penalty period. This may involve gifts to or in trust for a disabled child, spousal annuities, prepaid funeral accounts or other techniques. Yet savings won’t occur unless these techniques follow Medicaid law, which can be tricky. In addition, unless wills and powers of attorney are coordinated with Medicaid planning, anticipated savings may never arise. Therefore, like other elder law attorneys, FriedmanLaw strongly advises against do it yourself Medicaid planning especially since technicalities and exceptions apply to all the planning techniques discussed in this post.
Other complex issues that can arise in Medicaid planning include minimizing estate recovery, maximizing spousal allowances, qualifying as a caregiver child, placing excess income in a qualified income trust (also called Miller Trust), and using special needs trusts to protect settlements and inheritances. Space limitations prevent us from addressing these topics here but we do discuss them in other blog posts or elsewhere on SpecialNeedsNJ.com, and check our blog frequently for more timely articles on Medicaid planning.
Recently, I had to take a family member to the hospital for what turned out to be a long-term stay. From there, my family member was transferred to in-patient rehabilitative care, for an even longer stay.
Eventually, my family member was discharged and returned home. Many of my clients experience a similar sequence of events, except that often, instead of going home, their family members are transferred into nursing homes or other long term care facilities. I didn’t experience that. But nonetheless, this experience made me realize how important it is to have a professional advisor to guide you.
This series of events was completely unexpected, and we were not prepared for it. My family member was scared and in pain, and I was stressed and exhausted. Under these conditions, it’s very difficult to make a rational, calm decision.
As an elder law attorney, part of my job is to view my clients’ situations through a clinical lens and make a logical assessment based on my legal knowledge. But what this situation drove home, is that when you’re on the other side of the table, facing fear, stress and uncertainty, it’s very hard to perform that logical analysis and evaluate your options. I’ve seen this plenty of times, people making rash decisions when they’re scared and upset. But I now realize how easy it is to make a rash decision when you’re thrust unprepared into a difficult situation.
So, I’ve come to the conclusion that the advantages of working with an elder law attorney or other professional advisor are two-fold. First, we have knowledge that you probably don’t, about Medicaid regulations, healthcare laws, trusts and estate planning considerations, etc. Second (and this is what I just realized), we can view your situation through a distance. We can advise you and help you analyze your options. And we can do it in a way that may be difficult to do when you’re scared, stressed and exhausted.
It’s not often that you can save a great deal later by spending a little now. Yet that is the case when it comes to wills, trusts, and estate and long term care planning. To understand why, you need to know a few basic concepts.
Your estate will generate tax when you pass away if the net estate exceeds a threshold estate tax exemption. A net estate equals a decedent’s assets less debts and deductions like charitable contributions, allowable estate settlement costs, and marital deduction. The estate tax exemption or threshold shelters from tax net estates smaller than the exemption.
While the federal estate tax threshold is greater than $5,000,000, New Jersey estate tax applies to net estates of more than $675,000. However, the Legislature and Governor just agreed to raise New Jersey’s estate tax exemption to $2,000,000 in 2017 and eliminate the estate tax in 2018.
Nevertheless, New Jersey retains a hefty inheritance tax for many recipients of transfers at or after death other than certain non-profits, grandparents, parents, spouses, civil union or domestic partners, step children, and descendants. Inheritance tax rates and exemptions vary depending on the amount of a gratuitous transfer at death and the relationship of the recipient to the decedent.
As New Jersey inheritance tax rates can be as high as 16%, we at FriedmanLaw work hard to help our estate planning clients minimize or avoid inheritance tax. We do so by drafting wills that include disclaimer trusts and other tax planning provisions, and counseling clients on gift planning and other options. However, it is important to take into account the impact of inheritance tax and other estate planning on future capital gains.
Because capital gain tax rates far exceed inheritance tax rates, faulty inheritance tax planning actually can increase over all taxes. Thus, sometimes it is better to pay a modest inheritance tax now to minimize future capital gain tax.
New York doesn’t have an inheritance tax, but its estate tax is far more complex than New Jersey’s. New York’s estate tax exemption will rise to $5,250,000 in spring 2017 but only for estates that don’t exceed the exemption. The $5,250,000 exemption quickly phases out so that many estates that exceed the $5,250,000 threshold by a modest amount will get little or no exemption and instead will face a large New York estate tax bill. Thus, New York estate tax planning can yield astronomical savings (even after taking account of legal fees and other planning costs).
Many couples have simple estate plans that leave everything to the surviving spouse. While that may be appropriate for modest estates, it can cause wealthier couples to incur otherwise avoidable tax. Therefore, FriedmanLaw typically employs various more sophisticated estate planning techniques to minimize our clients’ tax exposures. In many cases, sophisticated estate planning can save substantial tax with little or no down side.
Long Term Care Planning
Long term care can cost well over $100,000 per year. That’s a lot of money so it’s worth taking some simple steps now that may save substantial amounts later.
In many cases, this involves qualifying for Medicaid. Medicare pays for up to 100 days of rehabilitation (with co-payments after 20 days), but doesn’t fund long term care costs like assisted living, nursing home, and home health aide chronic care. Thus, Medicaid often is essential.
Various techniques that are both lawful and ethical are available to shelter some savings when seeking Medicaid. These range from gifts to annuity planning and even home improvements or purchases. In depth discussion is beyond the scope of a blog post, but FriedmanLaw can develop detailed advice based on your particular circumstances.
An important point is that the sooner you start, the more you potentially can protect and sometimes waiting can foreclose planning opportunities. For instance, some trusts can be created only while under age 65. New wills and powers of attorney often are needed to maximize savings but they can be adopted only while competent. Thus, it pays to start sooner than later.
At FriedmanLaw, we look forward to guiding you through the estate/inheritance and long term care planning mazes. First and foremost, we try to meet your realistic goals. Typically, we will discuss your circumstances with you and then develop detailed options based on your situation. We understand that tax planning is important but it must be compatible with your overall goals. Finally, we will work with you to help you reach your realistic goals. We hope to hear from you.
The New York Times today reported that the Centers for Medicare and Medicaid Services, the federal agency that administers Medicaid, issued a new rule today barring nursing homes and assisted living facilities that accept Medicaid from requiring residents to resolve disputes through arbitration.
This is big news, because it lets seniors and people with disabilities quite literally have their day in court.
Arbitration is a forum for dispute resolution that’s used as an alternative to the judiciary. With arbitration, instead of filing a lawsuit, going to court and arguing before a judge, you argue your case before a private arbitrator or panel of arbitrators. There is less due process, no right to an appeal, and the proceedings are usually kept confidential. Arbitration is generally considered more favorable to businesses, and less favorable to consumers.
Chances are good that you are subject to arbitration clauses now. Your credit card agreement probably includes one, as do many licensing agreements for software, and other product agreements.
A previous New York Times investigation found serious problems where nursing homes required residents to sign arbitration clauses. In one case, a 100-year-old woman was strangled to death by her roommate. Her son alleges that the nursing home knew his mother’s roommate was a risk, yet his efforts to hold the nursing home accountable went nowhere because they went to arbitration.
Now, this rule from the Centers for Medicare and Medicaid Services will severely tamper the use of arbitration clauses. Most long term care facilities in New Jersey accept Medicaid and will be subject to this rule. This is a win for consumers, for seniors and people with disabilities, and will allow some of our most vulnerable citizens and their families to literally have their day in court.
New Jersey Medicaid has reduced the penalty divisor for 2016, from $332.59 / day to $332.50 / day.
Let’s back up a bit. If you apply for long term care Medicaid, to pay for long term care in a nursing home, assisted living facility or at home with aides, you have to disclose to Medicaid any gifts that were made in the past five years. You also have to submit five years worth of records for any financial accounts you owned during that time. Medicaid will review the records to verify whether any gifts were made.
If you have made gifts in the past five years, Medicaid will assign a gift penalty. Medicaid uses the penalty divisor to determine the penalty. You lose Medicaid for a period of time, based on the size of the gift. If the penalty divisor is $332.50, you lose one day of Medicaid for every $332.50 you give away (roughly one month lost for every $10,000 gifted). During the penalty period, Medicaid will not pay for your long term care, and you’ll have to pay for it yourself. The penalty period doesn’t begin until you’re otherwise eligible for Medicaid (you’re medically eligible, your Resources are below $2,000, etc.) and you’ve applied.
The penalty divisor is based on the cost of nursing home care in New Jersey. The cost usually increases, so Medicaid usually increases the penalty divisor. When Medicaid decreases the divisor, that’s bad for applicants, as it means gift penalty periods will be longer.
There are a few different theories on why the penalty divisor was reduced this year. One is that Medicaid has switched from a raw average calculation to a weighted average calculation. Another is that Medicaid is more accurately counting the cost of care, figuring in less expensive nursing homes from outside New Jersey’s urban core.
Whatever the answer is, we’ll continue to help clients preserve live savings within their families rather than losing it all to long term care costs.
The New York Times today reported that the US Department of Justice will investigate whether the state of South Dakota is unnecessarily moving people into nursing homes.
The government has launched a number of these investigations in recent years, driven by advocates who claim that thousands of Americans with disabilities are unnecessarily living in nursing homes. According to advocates, many working-age people with less severe disabilities are driven into nursing homes because that’s all that these states’ Medicaid programs will pay for. Instead, some of these Americans could be living in a less restrictive environment with the right support, which often costs a fraction of what nursing homes cost.
It’s part and parcel of a broader debate on how much the government should pay for institutional care vs. home and community based care services (HCBS), and the answer varies with each state. In the past, New Jersey had more restrictions on Medicaid paying for long term care in the community. It was easier to get Medicaid funding for care in a nursing home than in an assisted living facility or at home with aides. Some people went into nursing homes simply because it was the only care option they could afford; even though nursing homes are generally the most expensive setting, they couldn’t get Medicaid elsewhere.
Fortunately, New Jersey has a number of programs now that can help people who need less robust care stay in their homes, including MLTSS, JACC, PACE, DDD services and more. There are also fewer restrictions on getting Medicaid to pay for an assisted living facility.
People who need long term care generally prefer to get it in the least restrictive environment possible. Remaining at home may be the most comfortable setting, while an assisted living facility, group home or other alternative institution may provide a more independent and social lifestyle than a nursing home. There are a lot of folks with severe medical needs for whom a nursing home is the only setting that can provide appropriate care. But for people who can get the care they need in a more independent setting, it’s good that our state has some programs in place to help them.
If you’re interested in how Medicaid, disability benefits and other programs can provide care for you or a loved one, call or email FriedmanLaw today.
We try to make our clients as comfortable as possible, but nonetheless, meeting an attorney for the first time can be intimidating. Often, people don’t know what to expect. So in this post I’ll set down a few questions that we’ll typically ask elder law clients (or their families) who are interested in Medicaid and long term care planning. If you have a loved one who may need long term care, it would be helpful for you to bear these questions in mind.
Questions We’ll Ask You:
What are you looking to accomplish by seeing a lawyer? From a legal / financial standpoint, if we could wave a magic wand and fix everything, what would you want us to do?
Are you married? How many children do you have? Are your children married? Do they have children? Are any family members helping you? Do you have good relations with everyone in your family? Does everyone in your family have good relations with each other? Is anyone in your family disabled?
Your care needs?
Why do you need care? Are your medical issues physical, mental, or both? Do you use a wheelchair? Are you able to live at home with aides? If so, how much help do you need from aides? Can anyone else help with your care? If you have to go into a facility, can you get the care you need in an assisted living facility, or is a nursing home necessary?
What are your finances? Do you own your home? If so, what is the value, and is there a mortgage on it? What are your assets – bank, investment and retirement accounts, insurance and annuities, etc.? What is your monthly income, and what are your monthly expenses? How much do you expect your care needs will cost? Have you made any gifts in the past five years? Do you expect to get any windfall money (lawsuit, inheritance, etc.)?
Documents and Insurance?
Have you ever executed a will? Have you given anyone power of attorney? Do you have an advance directive for healthcare (aka medical power of attorney)? Do you have long term care insurance?
There are many more specific questions we’ll ask in particular situations, but these are some of the broader general questions that folks should keep in mind when working with an elder law attorney. If you’re interested in Medicaid and long term care planning, FriedmanLaw is here to help, call or email us today.
If you or a loved one is entering a long term care facility, you should be aware that the admission agreement may impose onerous obligations. Nursing home agreements may include liability waivers and binding arbitration clauses that limit your ability to sue if the nursing home injures you. Admission agreements may also include provisions that expose family members to liability if the resident can’t pay. If your parent, spouse or other loved one is entering a nursing home and you sign as responsible party, the nursing home may try to collect against you if your parent has an unpaid bill.
In addition, one particular issue arises with admission agreements to assisted living facilities. Assisted living facilities often require new residents to show they have enough funds to pay privately for a number of years before going on Medicaid (as Medicaid pays a lower rate than the private pay rate) – often two years. In admission agreements, new residents are often required to disclose assets to prove that the resident can fund their care at the assisted living facility for two years. The problem is these contracts also often include provisions to the effect that any assets disclosed on the application will be used to pay for the assisted living facility. If you disclose more than you have to on the contract, this may limit your opportunities to do Medicaid planning.
Medicaid will pay for long term care, but only if you meet the various eligibility requirements. One is that applicants must have less than $2,000 in Resources. A major goal of Medicaid planning is to employ your savings to meet that $2,000 limit, without wasting your savings. In other words, to spend the money in a way that meets your goals, meeting your needs and saving any excess for your family. However, if your money is already committed to an assisted living facility, you may not be able to save that money through Medicaid planning, and may lose money to long term care costs that otherwise could have been saved.
All of this emphasizes the importance that before you sign an admission agreement to a nursing home or assisted living facility, you should review it with an attorney to make sure you understand what you’re signing, since the contract may affect your rights.
The federal government will issue a new rule holding financial professionals who manage retirement accounts to a fiduciary standard.
This means that advisers will have to put clients’ interests before their own. For example, if there were a choice between two identical funds, and one had a higher fee for the client and higher commission for the broker, while the other offered a lower fee for the client and lower fee for the broker, the adviser would have to recommend the lower-cost fund.
The New York Times quotes Department of Labor secretary Thomas E. Perez saying: “The marketing material I see from many firms is, ‘We put our customers first.’ That is no longer a marketing slogan. It’s the law.”
This rule will have a big impact on the $14 trillion Americans have invested in retirement accounts. The government expects the rule will save Americans $17 billion per year in fees, and analysts expect to see a shift in retirement accounts to lower-cost investments.
Also expected is upheaval in the financial services industry. The new rule is expected to make operating more difficult for smaller advisory firms, because of new reporting requirements that will require more overhead costs. There is also some confusion on whether the fiduciary standard will apply before a client invests with a firm – e.g., in an initial meeting.
Despite these issues, I think this is a positive development both for financial advisers and for their clients. Millions of Americans have the bulk of their savings invested in their retirement accounts. Many of these folks have no idea how their money is invested and rely on their advisers for guidance. The best advisers already put their clients’ interests before their own, and with this new rule, the rest of the industry will have to follow suit.
As a segue into what we do… a lot of retirement accounts pass outside a will, directly to designated beneficiaries. It’s important to make sure that your retirement account is invested wisely, and that it’s coordinated with the rest of your estate plan. For guidance on estate planning and retirement account, call or email FriedmanLaw today.
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.
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.
Happy New Year! Welcome to 2016. It’s the season for new year resolutions, and in addition to losing weight and quitting smoking, we have a suggestion: getting your legal affairs in order.
That could mean creating an estate plan for the first time. Having a quality will, power of attorney and healthcare directive is important, and makes things much easier for your family if something happens to you in the coming year. It might also mean updating an old estate plan. We suggest that clients update their estate plan once every ten years or so. It may also be wise to update documents when circumstances change – for example a marriage, birth or death in the family, or if a loved one becomes disabled or contracts a serious illness.
It could also mean considering long term care planning. A lot of people try to delay unpleasant matters until after the holidays. Perhaps while your family was gathered, it became clear that an elderly parent might soon be unable to care for herself independently. If that’s the case, now would be a good time to consider options for long term care, such as home care aides, an assisted living facility or a nursing home.
If long term care may be on the horizon, then it’s also a good time to think about 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 and long term care planning, we can often help people pay for long term care without impoverishing family members.
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.
Seniors (and some disabled people) are a natural target for people up to financial no-good. Seniors and disabled people may be more dependent on others, which can make them easy targets.
Some defenses are just a matter of common sense. Don’t disclose passwords or account personal identification numbers/words and don’t make them easy to guess. Thus, you never should use your name or birthday as your password. Be skeptical. If it sounds too good to be true it probably is. Are you really very likely to have won a sweepstakes you don’t remember entering and never even heard of? Why would a stranger contact you out of the blue to give you millions of dollars? If an email claims to be from a major company, check whether it comes from that company’s website or one with only a similar name.
Don’t sign a contract until a lawyer has reviewed it. It’s particularly risky to sign a care facility contract for a relative. As discussed in other entries on this blog, signing a care facility agreement can make you liable for bills if the facility doesn’t get paid. Sure there are defenses to such claims, but do you really want that headache? Besides, at the end of the day, you could be found liable despite your defenses.
Finally, protect yourself against financial abuse. Only give power of attorney to loved ones who are trustworthy. An unrelated caregiver never should have control of your finances. Authorize your financial institutions to share information with trustworthy loved ones. Current privacy laws can preclude a bank or brokerage firm from sharing information about your finances with your family or even anti-abuse watchdogs. While proposed regulations may lessen such limitations, at this point, it is up to you to be proactive.
While anyone can become a victim of financial abuse, there are steps you can take to protect yourself. FriedmanLaw is here to help you get your legal affairs in order. We look forward to hearing from you.
Over the 30+ years I’ve represented families of people with serious disabilities, many clients have asked how how to make gifts or leave an estate for a child/grandchild/other loved one with special needs without disqualifying the child for Supplemental Security Income, Medicaid, and other means tested government programs. If an individual with Medicaid or other means tested aid receives more than nominal amounts directly, she probably will be disqualified. While we often can help restore benefits eventually, there could be a substantial cost such as eventual Medicaid payback or loss of benefits for several months or more.
Obviously, therefore, outright gifts/inheritances are not an attractive option to benefit a loved one with special needs. A far better choice is to provide in will, payable on death designations, IRA/401 plan beneficiary forms, and other gift and estate plans that amounts to benefit a child with special needs shall be paid into a special needs trust (also called supplemental needs trust or SNT). Extensive discussions of SNTs appear under the Special Needs drop down menu tab above and throughout SpecialNeedsNJ.com. To summarize, a properly drafted SNT can supplement many kinds of means tested benefits without risking disqualificatiion.
Sometimes parents won’t do SNT planning because they think they can reach the same result at lower cost by giving a child who isn’t disabled a gift or inheritance intended to benefit a special needs child. The Wisconsin Court of Appeals’ Sept. 3, 2015 decision in Robins v. Foseid and Walters illustrates the risk. A parent’s estate plan left a double share to not disabled child A and no share to disabled child B. While the parent’s intent likely was that A would spend the second share for B, the court ruled that A had no such obligation and could spend the share as A chooses.
Even if you are convinced that your child would always look out for a disabled sibling, it still is risky to leave a disabled child’s share to a sibling rather than an SNT. The not disabled child could surprise you and keep the money and creditor issues, divorce, college funding and other circumstances could prevent the money from benefiting your disabled child. In short, a special needs trust usually is the best way to provide for a loved one with a serious disability
Medicare as of January 1, 2016 will start paying for patients to have conversations with their doctors about how they would like to die.
In a thought-provoking New York Times article, Pulitzer Prize-winning journalist Tina Rosenberg makes a powerful argument for why people should take advantage of this new provision.
I’ve written about advance care planning before, and it bears repeating. We all have to die eventually, and most people say they want to do it at home, in their own bed surrounded by friends and family. Yet in reality, most Americans die in a hospital bed surrounded by doctors and nurses, often being poked and prodded with machines.
One of the most intimate decisions in life is how it should end, yet far too many people never get the chance to make it.
The law does offer all of us the chance to have some input into how we die, by creating an advance directive for health care. A healthcare directive is a legal document in which you can appoint an agent to make health care decisions when you’re unable to. You can also set forth your wishes regarding medical treatment, including end of life care, which healthcare providers must follow.
However, Rosenberg argues that creating a healthcare directive is only the start of advance care planning, and I agree with her. People on Medicare should take advantage of the new program and talk to their doctors about what end-of-life care really entails. (Insurers will probably start paying for these conversations as well, so soon everyone will be able to talk to their doctors about end-of-life care.)
Most importantly, everyone should talk to their family about their wishes regarding end-of-life care. The conversation may be daunting or seem morbid, but if your family has to make a decision for you, it will be vastly easier for them to make peace with that decision if they can follow your wishes, instead of wondering ever after what your wishes were.
If your spouse is losing the ability to care for himself / herself and needs long term care, in a nursing home, assisted living facility or with home care aides, there are a lot of steps to take, like Medicaid planning and changing your estate plan. We’ve written extensively about those steps on this blog, and today I want to focus on one particular and often overlooked step: changing title to joint property.
For many people, the only way to pay for the high costs of long term care is through Medicaid. If your spouse is on Medicaid and you are not, it’s very important that you don’t own assets jointly with your spouse, for two reasons.
First, when someone is on Medicaid, they can’t have more than $2,000 worth of assets (Resources). If they have more than $2,000 in any month, they lose Medicaid. If you own property jointly with your spouse, and you die, the property passes entirely to your spouse, and he will lose Medicaid. Instead, in many cases that property could go to your children or other family members without causing your spouse to lose Medicaid.
Second, people over age 55 who receive Medicaid (called “beneficiaries”) are subject to Medicaid estate recovery. That means that when a Medicaid beneficiary dies, any property they own goes to the government, in order to repay the government for the Medicaid assistance it provided to the beneficiary. If you own property jointly with your spouse (or parent, child, sibling, etc.) on Medicaid, and your spouse dies, that joint property may become subject to Medicaid estate recovery and may have to be sold to repay the government.
If your spouse needs long term care and will go on Medicaid, it may be wise to change title to joint property. That may involve doing a new deed to your house, changing bank account ownership, designating new beneficiaries for life insurance or retirement accounts, etc.
To learn more about what to do if your spouse is going on Medicaid, call or email FriedmanLaw.
Women bear the majority of costs for Alzheimer’s disease, according to a new study from researchers at Emory University. As reported by Pacific Standard, women bear six times as much of the cost for caring for Alzheimer’s patients.
The study’s authors look at direct costs – spending money on fees for home care aides or long-term care facilities – as well as indirect costs, like lost productivity due to serving as caretaker for a spouse or parent with Alzheimer’s disease.
Women bear so much more of the costs for a variety of reasons. First, women are likely to contract Alzheimer’s disease, both because women live longer, and because women appear more susceptible to the disease for reasons unknown. Second, women are more likely than men to serve as a caretaker for a loved one who has Alzheimer’s.
As the baby boomer generation ages and more people suffer from Alzheimer’s, lost productivity of caretakers could become a significant drain on the economy. This is particularly true when caretakers are adult children taking care of their parents. These caretakers are often in their working years, and may also be taking care of their own children. Taking care of an Alzheimer’s patient is a draining role to which family-caretakers often devote more than twenty unpaid hours per week. If more women are forced to shoulder this burden during their peak working years, it could have an impact on the economy.
The study raises an interesting and provocative question: If men bore as much of the cost of Alzheimer’s as women, would there be more effort and resources put into finding a cure? Alzheimer’s is the sixth leading cause of death in the United States, according to the CDC. At any given time, there are five million people in the country suffering from Alzheimer’s. Yet research efforts on the disease receive a fraction of the resources of other diseases, and much less than researchers say is needed to make meaningful progress towards a cure.
In any event, it’s certainly true that Alzheimer’s disease imposes significant costs on patients and their families, but government programs are available to help, including the Medicaid long term care benefit. For more information on coping with the costs of Alzheimer’s, call or email FriedmanLaw today.
In New Jersey, if your spouse dies, you have a legal right to take what is called an “elective share” from his estate.
The elective share is the minimal amount that a spouse is entitled to by law. It’s meant to prevent someone from disinheriting his or her spouse and leaving the spouse destitute. For example, the elective share would prevent a man in a second marriage from leaving everything to his children from a prior marriage, and leaving his second wife bereft.
The amount of the elective share is determined through a complicated formula, per N.J.S.A. 3B:8-1 et seq. Essentially, the elective share is equal to one-third of the deceased spouse’s estate, plus certain property the decedent gave away while he was alive, minus the property the surviving spouse owns.
In short, the elective share is the minimum that one spouse can leave to the other when he or she dies. This is great for scorned spouses, but not as good for Medicaid beneficiaries.
To qualify for Medicaid, you generally must have less than $2,000 in assets. So if you are on Medicaid, and your spouse isn’t, and your spouse dies and leaves an elective share to you, then that property will disqualify you from Medicaid until it’s spent down (or otherwise disposed). If you’re receiving long term care Medicaid, that property will likely be lost to long term care costs.
However that’s a lot better than the alternative. Most people in first marriages leave all of their property to their spouses, not just the elective share. That means all the property will be lost to long term care costs. Instead, if your spouse is on Medicaid and you aren’t, you can create a new estate plan that leaves the minimum elective share to your spouse, and the rest of your property to your children, siblings or other heirs.
For information about your specific circumstances, call or email FriedmanLaw today.
We have written a lot on this blog about the benefits of the Medicaid program, which is a lifeline for many poor families and people with disabilities and is the only program that pays for long term care, in a nursing home, assisted living facility, etc.
But all things come with a price tag, including Medicaid.
Medicaid keeps a running tally of all of the money it spends on each beneficiary. (A beneficiary is a person who receives Medicaid.) When a beneficiary dies, their estate must repay Medicaid for all expenditures made after the beneficiary reached age 55. In other words, if you receive Medicaid, then when you die, you have to repay Medicaid for anything it spent on you when you were 55 or older. Medicaid has to be repaid before your estate can distribute your assets to anyone else, such as family or other creditors.
With a first-party special needs trust, the trust must repay Medicaid from the remainder when the beneficiary dies. However a trust has to repay Medicaid for the beneficiary’s entire lifetime Medicaid costs, not just costs after age 55.
Of course, you can’t get blood from a stone. Most Medicaid beneficiaries have no assets (since you must have less than $2,000 to qualify for Medicaid), and many trusts spend their full assets during the beneficiary’s lifetime. Medicaid can’t collect if there’s nothing to collect against.
However, Medicaid repayment is often an issue in certain situations, like real estate. You can own one home that you live in and still get Medicaid, since a principal residence is exempt. Likewise a special needs trust will often purchase real estate for the beneficiary to live in.
It’s problematic if a Medicaid beneficiary or special needs trust owns real estate, since the house may have to be used to repay Medicaid when the beneficiary dies. If the beneficiary’s family was living at the house with him, then the family may lose their home.
It’s important to be aware of Medicaid repayment issues, and to plan for them where appropriate. For more information on Medicaid, repayment, real estate, etc., call or email FriedmanLaw today.
A prepaid funeral fund may seem morbid or distasteful to some. But for people who need long term care, a prepaid funeral trust may be an attractive way to put money to use that would otherwise be lost.
Long term care in a nursing home, assisted living facility or with home care aides, can cost more than $10,000 per month. Medicaid will pay for long term care, but only if applicants have less than $2,000 in resources (assets that are available to pay for food or shelter).
Money in an irrevocable account in the New Jersey prepaid funeral trust fund does not count towards Medicaid’s $2,000 resource limit. In other words, money put towards a prepaid funeral will not disqualify you from Medicaid or SSI, making it a very useful planning option.
There are a few catches. First, to qualify for Medicaid, the prepaid funeral account must be irrevocable. That means you can’t take money out after you’ve put it in. Second, any remainder left after the funeral goes to Medicaid. You use it or lose it, so it doesn’t pay to overfund the account.
Still, it’s better to put money to use in a prepaid funeral than to lose it to long term care costs.
The human mortality rate remains stubbornly fixed at 100%. Sooner or later everyone will need a funeral, and the cost can easily reach $10,000 or more. Once you go on Medicaid you can’t have more than $2,000, so if a Medicaid beneficiary dies without a prepaid funeral, it falls on family members to pay the funeral cost. That’s why prepaid funerals are important. And since there are few restrictions, prepaid funerals are a useful and versatile tool for Medicaid planning.
To learn more about creating a prepaid funeral account, you can visit the NJ Funeral Directors Association or talk with a funeral home of your choice. To learn more about Medicaid planning and long term care, call or email us at FriedmanLaw.
The federal government has proposed new regulations that govern how nursing homes, assisted living facilities and other long term care facilities treat their residents.
The Centers for Medicare and Medicaid Services (CMS) published the proposed regulations in the federal register in July 2015, and is taking public comments.
Many of the new provisions pertain to quality of life for facility residents. The regulations create new minimal standards for nursing staff – to – resident ratio, for example. It also strengthens requirements that facilities prevent infections, which according to CMS cause an estimated 388,000 deaths per year among the general populace. The regulations include a provision entitled “Freedom from Abuse, Neglect and Exploitation” that among other things prohibits facilities from employing staff who have been disciplined by a state for mistreating residents.
In one interesting provision, the regulations propose that residents who receive psychotropic drugs (which includes anti-psychotics) gradually have their doses reduced, probably as an attempt to reduce the use of chemical restraints in facilities.
These new proposed regulations aren’t yet binding rules, but they probably will be in the near future. By and large, the regulations protect facility residents and should be a welcome development for residents and their families. CMS has faced criticism of its regulations, enforcement and reporting in the past, and it is good that they are issuing new regulations.
Nota bene: For specific information on nursing home violations, families who are choosing a nursing home may find it helpful to view ProPublica’s nursing home violations database, including ProPublica’s New Jersey nursing home violations chart.
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.
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 obligation, because if you don’t fulfill it, it’s possible that you could lose your Medicare benefits. 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 healthcare for you until you spend the money from the defendant on healthcare. 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.
A nursing home debt is subject to the Fair Debt Collection Practices Act (FDCPA), according to the Second Circuit federal appeals court in New York.
In Eades v. Kennedy, PC, a Pennsylvania nursing home resident died with an unpaid bill owed to the nursing home. The nursing home hired a debt collection law firm, which contacted the resident’s daughter in New York and put pressure on her to pay her mother’s debt, claiming that her wages could be garnished and a lien could be put on her father’s home.
As a sidenote, the nursing home’s claim rested on Pennsylvania’s “filial responsibility” laws, and on the fact that the resident’s husband signed an admission agreement as responsible party. We’ve written about attempts to hold children liable previously, and it bears repeating that you should approach admission agreements with great caution. It’s worth having your own attorney review the admission agreement before you sign.
The Second Circuit held that law firm’s attempt to collect the nursing home debt was subject to the federal FDCPA law. This is significant because the FDCPA provides important protections to consumers. The FDCPA forbids debts collectors from making misrepresentations, making unrealistic threats of legal action, making harassing phonecalls, calling outside reasonable hours, using profanity, etc. It creates a procedure that debt collectors are required to follow.
While the Second Circuit decision isn’t controlling in New Jersey (since New Jersey is within the Third Circuit), this decision is a strong indication that the FDCPA does apply to efforts to collect nursing home debts. That is good news for anyone with a close relative in a long term care facility. These days, it seems that attempts to collect unpaid facility fees against family members are becoming more common. The FDCPA grants consumers valuable protections in collection attempts.