Year: 2018

Four Reasons Why Giving Your Home to Your Children Isn’t the Best Way to Protect It From Medicaid

Protect your home from State of Florida Medicaid estate recovery and the nursing home with an experienced elder law attorney and Medicaid planning, perhaps with a lady bird deedYou may be afraid of losing your house to the nursing home, the State, or otherwise, if you must enter a nursing home and apply for Medicaid benefits to pay for the nursing home. While this fear may be well-founded in the vast majority of states, transferring the home to your children is usually not the best way to protect it, and that’s especially true in Florida.

Although you generally do not have to sell your home in order to qualify for Medicaid coverage of nursing home care, the state could file a claim in your probate estate against the house after you die. If you get help from Medicaid to pay for the nursing home, the state must attempt to recoup from your estate whatever benefits it paid for your care. This is called Medicaid “estate recovery.” If you want to protect your home from Medicaid estate recovery, you may be tempted to give it to your children. In Florida, that could be a costly mistake.  Even for states other than Florida, there are at least three reasons not to transfer your home to your children.

Reason No. 1:  Florida Homestead Protection.

The first reason you probably will not want to transfer your home to your children in Florida, is that in Florida your homestead property is protected from claims of creditors, including Medicaid estate recovery. The Florida Constitution specifically provides that creditors (including Medicaid) cannot attach a lien to your homestead property. In Florida, even if you go into a nursing home, there is a presumption that you have an “intent to return” to your homestead property which continues the protection from creditors even if you move into a nursing home. Medicaid estate recovery, therefore, is not an issue in Florida for your homestead property, so long as it retains its homestead character.

The homestead protection from creditors continues through the probate estate in Florida, unless you have no legal heirs at the time of your death.  “Legal heirs” are defined in the Florida Statutes, Chapter 732.  If there is a chance that you won’t have legal heirs, or if you want certain specified heirs to receive your homestead property at your death, an enhanced life estate deed (sometimes called a “lady bird” deed), can be used to provide for the automatic transfer of your homestead immediately upon your death.  The transfer of the ownership of the home will not be subject to probate or to the claims of your creditors (including the State of Florida Medicaid estate recovery). Florida is one of just a few states that recognize the enhanced life estate deed. The transfer by an enhanced life estate deed also avoids the other three reasons for not transferring your home to your children that are listed below.

Reason No. 2:  Medicaid ineligibility.

Most people do not realize that transferring your house to your children (or someone else) may make you ineligible for Medicaid for a period of time. The Florida Medicaid agency looks at any transfers made within five years of the Medicaid application. If you made a transfer for less than market value within that time period, the Florida Medicaid agency will impose a penalty period during which you will not be eligible for any Medicaid benefits. Depending on the house’s value, the period of Medicaid ineligibility could stretch for years. The right to receive Medicaid benefits would not begin until the Medicaid applicant has almost completely spent down all of their money and other assets.

There are certain circumstances which can allow you to transfer a home without penalty. You should consult a qualified and experienced elder law attorney before making any transfers. The exceptions that might allow you may freely transfer your home to the following individuals without incurring a transfer penalty include:

(a) to your spouse;

(b) to a child who is under age 21 or who is blind or disabled;

(c) into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances);

(d)  a sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home;

(e)  a “caretaker child,” who is defined as a child of the person applying for Medicaid benefits, who lived in the house for at least two years prior to the applicant’s institutionalization in a nursing home, and who during that period provided care that allowed the applicant to avoid or delay moving into a nursing home stay.

Reason No. 3:  Loss of Control.

In addition to the potential loss of Medicaid benefits to pay for nursing home care caused by a transfer to your children, after transferring your house to your children, you will no longer own the house.  That means you will not have control of it. Your children can do what they want with the house. In addition, if your children are sued or get divorced or die, the house will be vulnerable to their creditors.

Reason No. 4:  Adverse Tax Consequences.

Adverse tax consequences. Inherited property receives a “step up” in tax basis when you die, which means the tax basis is the current value of the property. However, when you give property to a child, the tax basis for the property is the same price that you purchased the property for. If your child sells the house after you die, he or she would have to pay capital gains taxes on the difference between the tax basis and the selling price. The only way to avoid some or all of the tax is for the child to live in the house for at least two years before selling it. In that case, the child can exclude up to $250,000 ($500,000 for a couple) of capital gains from taxes.

There are several other ways to protect your house, and other assets, from Medicaid estate recovery, including putting the home in a trust. To find out the best option for your circumstances, consult with an experienced elder law attorney. We can help you make the best decision for your family and circumstances, preserve the value of your home for your loved ones, and otherwise help you qualify for Medicaid benefits to pay for your nursing home stay.  Call us and schedule an appointment to see how we can help you.

What Financial Protections Are Available for My Spouse When I Enter a Nursing Home and Receive Medicaid Benefits?

medicaid planning attorney lawyer in Jacksonville, Florida to assist with obtaining Medicaid benefits for nursing home careOften our clients seeking Medicaid benefits to help pay for nursing home care, or other long term care, are concerned about financial protections available to the stay at home spouse. They want to know how many assets or how much income the healthy spouse will be allowed to keep to ensure the financial well-being of the non-Medicaid spouse.  Medicaid rules allow the healthy spouse to retain a certain level of assets, as well as provide for the healthy spouse to receive sufficient income, to maintain basic financial protections for the healthy spouse.

Medicaid Protections for Financial Assets for the Healthy Spouse

Medicaid law provides special protections for the spouses of Medicaid applicants to make sure the spouses have the minimum support needed to continue to live in the community while their husband or wife is receiving long-term care Medicaid benefits, usually in a nursing home.

One of the most important protections is the “community spouse resource allowance” or CSRA. It works this way: if the Medicaid applicant is married, the countable assets of both the community spouse and the institutionalized spouse are totaled as of the date of “institutionalization,” the day on which the ill spouse enters either a hospital or a long-term care facility in which he or she then stays for at least 30 days. (This is sometimes called the “snapshot” date because Medicaid is taking a picture of the couple’s assets as of this date.)

In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in assets (an amount may be somewhat higher in some states). In general, the community spouse may keep one-half of the couple’s total “countable” assets up to a maximum of $123,600 (in 2018). This is the community spouse resource allowance (CSRA), the most that a state may allow a community spouse to retain without a hearing or a court order. The least that a state may allow a community spouse to retain is $24,720 (in 2018).

Example: If a couple has $100,000 in countable assets on the date the applicant enters a nursing home, he or she will be eligible for Medicaid once the couple’s assets have been reduced to a combined figure of $52,000 — $2,000 for the applicant and $50,000 for the community spouse.

Some states, including Florida, however, are more generous toward the community spouse. In these states, the community spouse may keep up to $123,600 (in 2018)regardless of whether or not this represents half the couple’s assets. For example, if the couple had $100,000 in countable assets on the “snapshot” date, the community spouse could keep the entire amount, instead of being limited to half.

Medicaid Income Protection for the Healthy Spouse

Although Medicaid limits the assets that the spouse of a Medicaid applicant can retain, the income of the “community spouse” is not counted in determining the Medicaid applicant’s eligibility. Only income in the applicant’s name is counted. Thus, even if the community spouse is still working and earning, say, $5,000 a month, she will not have to contribute to the cost of caring for her spouse in a nursing home if he is covered by Medicaid. In some states, however (not including Florida), if the community spouse’s income exceeds certain levels, he or she does have to make a monetary contribution towards the cost of the institutionalized spouse’s care. The community spouse’s income is not considered in determining eligibility, but there is a subsequent contribution requirement.

But what if most of the couple’s income is in the name of the institutionalized spouse and the community spouse’s income is not enough to live on? In such cases, the community spouse is entitled to some or all of the monthly income of the institutionalized spouse. How much the community spouse is entitled to depends on what the local Medicaid agency determines to be a minimum income level for the community spouse. This figure, known as the minimum monthly maintenance needs allowance or MMMNA, is calculated for each community spouse according to a complicated formula based on his or her housing costs. The MMMNA may range from a low of $2,030 to a high of $3,090 a month (in 2018). If the community spouse’s own income falls below his or her MMMNA, the shortfall is made up from the nursing home spouse’s income.

Example: Joe and Sally Smith have a joint income of $2,400 a month, $1,700 of which is in Mr. Smith’s name and $700 is in Ms. Smith’s name. Mr. Smith enters a nursing home and applies for Medicaid. The Medicaid agency determines that Ms. Smith’s MMMNA is $2,000 (based on her housing costs). Since Ms. Smith’s own income is only $700 a month, the Medicaid agency allocates $1,300 of Mr. Smith’s income to her support. Since Mr. Smith also may keep a $105-a-month personal needs allowance, his obligation to pay the nursing home is only $295 a month ($1,700 – $1,300 – $105 = $295).

In exceptional circumstances, community spouses may seek an increase in their MMMNAs either by appealing to the state Medicaid agency or by obtaining a court order of spousal support.  Your elder law attorney can explain these options to you.

elder law attorney explains medicaid rulesMedicaid Exempt Assets

Medicaid also provides for certain assets to be exempt, or non-countable resources. Exempt assets vary from state to state.  In Florida, exempt assets include the homestead that is used as the primary residence of the community spouse; an automobile, certain types of real estate, and other assets with special circumstances. The exempt assets are not counted in determining Medicaid eligibility, and typically the stay at home spouse can retain these assets to provide financial support for him or her.

Conclusion

There are many financial protections built into the Medicaid rules and statutes that help to ensure the community spouse who remains in the home has sufficient assets and income to avoid impoverishment.  We can help you determine what assets are exempt and can be retained, as well as how many other assets can be protected from nursing home spend down, and how to ensure that the healthy spouse has the maximum income allowed by law.

 

If  you, your spouse or loved one, needs only a Qualified Income Trust to qualify for Medicaid benefits to help pay for nursing home care, you can prepare a qualified income trust, online, by clicking this button:

Prepare My QIT Now - Click Here

Home Health Care Patients With Chronic Conditions Are Having Trouble Getting Medicare

Medicare is supposed to provide up to 35 hours a week of home care to those who qualify, but many Medicare patients with chronic conditions are being wrongly denied such care, according to Kaiser Health News. For a variety of reasons, many home health care agencies are simply telling patients they are not covered.

Medicare is mandated to cover home health benefits indefinitely. In addition, Medicare is required to cover skilled nursing and home care even if a patient has a chronic condition. Unfortunately, many home health providers are not aware of the law and tell home health care patients that they must show improvement in order to receive benefits.

According to a Kaiser Health News article, confusion over whether or not improvement is required (it is not) is one part of the problem. Another issue is that home health care workers are afraid they will not get paid if they take on long-term care patients. In an effort to crack down on fraud, Medicare is more likely to audit providers who provide long-term care. This encourages providers to favor patients who need short-term care.

If you are a Medicare beneficiary receiving skilled care for a chronic condition, you no longer have to show improvement in order to have the care covered, but your provider (such as a doctor, home care agency, or nursing home) may not know this. Even though a recent lawsuit settlement mandated a nationwide educational campaign for providers, many are still refusing to provide needed treatment, claiming that Medicare will not cover it.

For about 30 years, home health agencies and nursing homes that contract with Medicare have routinely terminated the Medicare coverage of a beneficiary who has stopped improving, even though nothing in the Medicare statute or its regulations says improvement is required for continued skilled care. Under a settlement agreement in Jimmo v. Sebelius,  the federal government agreed to update Medicare rules to require that Medicare cover skilled care as long as the beneficiary needs skilled care, even if it would simply maintain the beneficiary’s current condition or slow further deterioration.

The policy shift affects beneficiaries with conditions like multiple sclerosis, Alzheimer’s disease, Parkinson’s disease, ALS (Lou Gehrig’s disease), diabetes, hypertension, arthritis, heart disease, and stroke. In addition, under the settlement Medicare beneficiaries who received a final denial of Medicare coverage after January 18, 2011 (the date the lawsuit was filed) are entitled to a review of their claim denial.

In addition, Medicare’s Home Health Compare ratings website may be having a negative effect on home health care agencies’ willingness to provide for long-term care patients. One measure of care qualification is whether a patient is improving. Because patients with chronic conditions don’t necessarily improve, they could lower an agency’s rating. Also, under a rule that just went into effect, home health care agencies cannot dismiss a patient without a doctor’s note. This may make agencies even more reluctant to take on long-term care patients.

The government launched an educational campaign in January 2018 to explain the settlement and the new rules to Medicare providers like home care agencies and nursing homes, but according to a Reuters article, many providers remain unaware of what is covered or how to bill Medicare for the services. The campaign was not aimed at beneficiaries, so not all Medicare beneficiaries are aware of the rules and that they can fight a denial of coverage.

Reuters focuses on one beneficiary, Robert Kleiber, 78, who receives weekly visits from a physical therapist to alleviate symptoms of his Parkinson’s disease. Kleiber’s wife recently learned that the treatments should be covered under Medicare’s new rules but so far she has been unable to convince the home health care provider of this.

If you experience problems with a Medicare provider, the Center for Medicare Advocacy has several self-help packets explaining how to appeal improvement standard denials.

For the Reuters article, click here.

 

How Will Tax Reform Impact Seniors and Persons with Disabilities?

estate planning lawyer to assist with the effect of new tax law, and estate planning for tax purposes compared to estate planning goals and objectivesThe Tax Cut and Jobs Act (TCJA) is now officially law. Both the House and Senate passed the new tax reform bill in December with straight party-line votes and no support from Democrats. President Trump signed it into law right before Christmas. It is the first overhaul of the tax code in more than 30 years.

It’s Good News for Most Americans

Retirees, most of whom are on relatively fixed incomes, are probably the most concerned about what the new tax law will mean for them. But, generally, they will be less affected than others because the changes do not affect how Social Security and investment income are taxed. In fact, many will benefit from the doubling of the standard deduction and, with the new individual tax brackets and rates, will be paying less in taxes when they file their tax returns in April, 2019. (Most of the changes will apply to 2018 income, not 2017 income.)

Key Individual Provisions to Know

Here are main provisions in the tax law that could particularly affect retirees and persons with disabilities. These individual provisions are set to expire at the end of 2025 so Congress will need to act before then if they are to continue.

(Mostly) Lower Individual Income Tax Rates and Brackets

There are still seven individual tax brackets and rates, but most are lower. Current rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Here are the new rates and how much income will apply to each:

Rate                 Individuals                               Married, filing jointly

10%                 Up to $9,525                           Up to $19,050
12%                 $9,526 to $38,700                   $19,051 to $77,400
22%                 $38,701 to $82,500                 $77,401 to $165,000
24%                 $82,501 to $157,500               $165,001 to $315,000
32%                 $157,501 to $200,000             $315,001 to $400,000
35%                 $200,001 to $500,000             $400,001 to $600,000
37%                 $500,001 and over                  $600,001 and over

Standard Deduction is Almost Doubled

For single filers, the standard deduction is increased from $6,350 to $12,000. For married couples filing jointly, it increases from $12,700 to $24,000. Under the new law, fewer filers would choose to itemize, as the only reason to continue to itemize is if deductions exceed the standard deduction.

 

Personal and Elderly Exemptions

Currently, you can claim a $4,050 personal exemption for yourself, your spouse and each dependent, which lowers your taxable income and resulting taxes. The new law eliminates these personal exemptions, replacing them with the increased standard deduction.

The blind and elderly deduction has been retained in the new law. People age 65 and over (or blind) can claim an additional $1,550 deduction if they file as single or head-of-household. Married couples filing jointly can claim $1,250 if one meets the requirement and $2,500 if both do.

Medical Expenses Deduction

Currently, people with high medical expenses can deduct the portion of those expenses that exceeds 10% of their income. For example, a couple with $50,000 in income and $10,000 in medical expenses can deduct $5,000 of those medical expenses.

The new law increases this to medical expenses that exceed 7.5% of income. In the example above, the couple would be able to deduct $6,250 of their expenses. Note that this part of the new law applies to medical expenses for 2017 and 2018.

State and Local Tax (SALT) Deduction

The amount you pay in state and local property taxes, income and sales taxes can be deducted from your Federal income taxes—and the amount you can currently deduct is unlimited. The new law limits the deduction for these local and state taxes to $10,000.

Residents in the vast majority of counties in the U.S. claim an average SALT deduction below $10,000. Most low- and middle-income families who currently itemize because of their SALT deduction will likely take the much higher standard deduction unless their total itemized deductions (including SALT) are more than $12,000 if single and $24,000 if married filing jointly.

Originally lawmakers in the House and Senate wanted to repeal SALT entirely, to help pay for the tax cuts, but lawmakers in high-tax states (specifically CA, IL, NY and NJ) fought to keep it in. Those in higher income households in high-tax states will benefit from the SALT deduction.

Lower Cap on Mortgage Interest Deduction

Currently, if you take out a new mortgage on a first or second home, you can deduct the interest on up to $1 million of debt. The new law puts the cap at $750,000 of debt. (If you already have a mortgage, you would not be affected.) The new law also eliminates the deduction for interest on home equity loans, which is currently allowed on loans up to $100,000.

Temporary Credit for Non-Child Dependents

Under the new law, parents will be able to take a $500 credit for each non-child dependent they are supporting. This would include a child age 17 or older, an ailing elderly parent or an adult child with a disability. It is temporary because it is set to expire at the end of 2025 along with the other individual provisions.

Higher Exemptions for Alternative Minimum Tax (AMT)

The AMT was created almost 50 years ago to prevent the very rich from taking so many deductions that they paid no income taxes. It requires high-income earners to run their numbers twice (under regular tax rules and under the stricter AMT rules) and pay the higher amount in taxes. But because the AMT wasn’t tied to inflation, it has gradually been affecting a growing number of middle-class earners. The new tax law reduces the number of filers who would be affected by the AMT by increasing the current income exemption levels for individuals from $54,300 to $70,300 and for married couples from $84,500 to $109,400.

Federal Estate Tax Exemptions Doubled

The new law does not repeal the Federal estate tax, but it eliminates it for almost everyone by doubling the estate tax exemption to $11.2 million for individuals and $22.4 million for married couples. Amounts over these exemptions will be taxed at 40%. The new rates are effective starting January 1, 2018 through December 31, 2025.

Eliminates Individual Mandate to Buy Health Insurance

With the elimination of the individual mandate to purchase health insurance, there will no longer be a penalty for not buying insurance. This is expected to help offset the cost of the tax bill and save money by reducing the amount the federal government spends on insurance subsidies and Medicaid.

The Congressional Budget Office expects that fewer consumers who qualify for subsidies are expected to enroll on Obama Care exchanges and fewer people who are eligible for Medicaid will seek coverage and learn they can sign up for the program. (Estimates of those who are expected to have no health insurance by 2027 are all over the place, ranging from 3-5 million to 13 million.)

Critics, including AARP, claim that eliminating the individual mandate will drive up health care premiums, result in more uninsured Americans and add $1.46 trillion to the deficit over the next ten years, which could trigger automatic spending cuts to Medicare, Medicaid, and other entitlement programs unless Congress votes to stop them.

Some claim the individual mandate helps to encourage younger and healthier Americans to sign up for coverage. Without it, the individual market might lean more toward sicker and older consumers, which might lead some insurers to drop out of the market. 29% of current enrollees on the federal exchange already have only one option in 2018. Others maintain that the mandate is not a key driver for obtaining insurance. About 4 million taxpayers paid the penalty in 2016.

Inflation Adjustments Slowed

The new tax law uses “chained CPI” to measure inflation, which is a slower measure than that currently used. This means that deductions, credits and exemptions will be worth less over time because the inflation-adjusted dollars that determine eligibility and maximum value would grow more slowly. It would also subject more of your income to higher rates in the future.

529 Plans Expanded

529 plans have been a tax-advantaged way to save for college costs. The new tax law expands the use of tax-free distributions from these plans, including paying for elementary and secondary school expenses for private, public and religious school, as well as some home schooling expenses. Educational therapies for children with disabilities are also included. There is a $10,000 annual limit per student.

ABLE Accounts Adjusted

ABLE accounts, established under Section 529A of the Internal Revenue Code, allow some individuals with disabilities to retain higher amounts of savings without losing their Social Security and Medicaid benefits. The new tax law allows money in a 529 education plan to be rolled over to a 529A ABLE account, but rollovers may count toward the annual contribution limit for ABLE accounts ($15,000 in 2018). The new law also changes the rules on contributions to ABLE accounts by designated beneficiaries who have earned income from employment.

What to Watch

Expect some clarifications and strategies as the experts weigh in. There will also undoubtedly be some adjustments as the new tax bill goes into effect.  Please don’t hesitate to reach out if you have questions about these new provisions and how they may impact you or those you work with.

If you would like to have professional assistance determining how the provisions of the TCJA might affect you, then you should consult with an experienced estate planning attorney to help you evaluate the impact on you and your loved ones, as well as how you can plan around the TCJA to maximize the benefit to you and your family.