Fredrick P. Niemann, Esq.
Medicaid Changes
The Approaching Storm
FREDRICK P. NIEMANN, ESQ.
Hanlon Niemann, PC
ELDER LAW AN...
Fredrick P. Niemann, Esq.
Fredrick P. Niemann offers his clients nearly 30 years of
accomplished practice in law. He is a ...
Legal Wit
A curious passerby stopped before a grave in a
cemetery, containing the tombstone declaring:
“Here lies a lawyer...
Legal Wit
It was so cold one day last February that I saw a lawyer with his hands in
his own pockets.
Robert Peterson, com...
Cold Hard Facts
• 60% will require long-term care
• 43% of people over 65 require nursing home care
• It costs per month
–...
The Greatest Threat
• The greatest threat to the financial security
of middle and upper middle class
Americans is the cost...
5 Ways to Pay for
Long Term Care
• Private pay
• Long-term care insurance
• Medicare (for up to a maximum of 100
days of s...
Goals of Planning
for Long Term Care
GOAL 1
Asset and Income Protection
– Provide Economic Security for the Community
Spou...
WHAT IS MEDICAID?
IT IS A :
• Federal program
• Administered by the State of NJ under
contract with each County Board of S...
Programs Continued
• Traditional Medicaid Long Term Care (Strict
Medicaid) is for:
– Nursing Home
– Assisted Living
– Home...
Medicaid Eligibility is Based on
1.Medical Eligibility
A. The importance of the “PAS”
B. The requirement of a nursing home...
Income and Resource Limits
Under Medicaid Programs
Program
Income
Cap
Resource
Cap
Medicaid
Only
$2,130
$2,000
Medically
N...
Cost to Client for Medicaid
Single Person
• Global Options
– No cost to individual
– “Estate recovery” on principal reside...
(Cont’d.)
• Nursing Home
– Institutionalized resident turns over all income to the
nursing home except $35 for personal ne...
Married Couples
2012 – 2013 INCOME
Minimum Monthly Needs Allowance
MMNA $1,891.25 + utility allowance of $365
RESOURCES
Co...
Non-Countable Resources
• Home with conditions and limitations
– Community Spouse exemption only, not a
single person
• Au...
Non-Countable Resources
(continued)
• Term Life Insurance
• Life Insurance With Cash Surrender Value
of $1,500 or Less
• $...
BEWARE OF THE MEDICAID “BOOBY
TRAP”, THE LOOK BACK PERIOD
for Gifts & Uncompensated Transfers
• What is the Look Back Peri...
Here’s an Example of the “Look
Back Period” Under the DRA
Mom transfers $200,000 4 ½ years ago to
children and now needs a...
What Strategies Are Available to
Preserve Resources?
• The Medicaid Landscape is Changing on
a DAILY BASIS
• There are mul...
Convert Countable Resources to
Non-Countable Resources
• This process can be complicated and
requires financial calculatio...
Example:
Our Clients and Spend Down
• Assets to Spend Down $118,440
• Pay Down Mortgage - 10,000
• Prepay Funeral - 8,000
...
Whenever Appropriate, Start the
5 Year Clock, Pre Plan
• Use of Trusts
1.Irrevocable trusts
A. Grantor trusts for income a...
(Cont’d)
• No access to income
• No access to principal
• 5 year lookback
• Keep in mind family issues, tax
consequences, ...
More Advanced Concepts
The Purchase of a Life Estate
in Child’s Home
• 1 Year Residency required
• Based on actuarial life...
(Cont’d.)
• Regulations define method of calculating
value of Life Estate
• Transfers to disabled child(ren)
– Age does no...
Purchase Remainder Interest
in Parent’s Home
• Parent sells interest in their home to child
• Opposite concept of parent p...
Care Agreement(s)
• Must be in writing
• Can not be for past services
– Prospective services only
• Reasonable Compensatio...
Care Agreement
• What is “Reasonable Compensation?”
– can include rent, utilities
• Care in Parent’s Home
• Care in Child’...
Care Agreement… (continued)
• Taxable Income to Caregiver
• Withholdings Required by Parent
– FUTA
– FICA
– Income Tax (op...
Life Insurance
• Convert Cash Value to Additional Paid Up
Insurance
• Assign ownership & beneficiary
designation on term p...
Medicaid Qualifying Annuity
(MQA)
• A little known and understood type of
annuity
• NOT! A commercial annuity
• Must have ...
Strategies for
Protecting Your Home
• Timing and Contents of Transfer Critical
• Transfer to Community Spouse
• Transfer t...
What About the Transfer of
the Home Outright to Children
• Gift Tax Issue
• Carry Over Basis
• Loss of $250,000/$500,000 P...
Other Options to Protect the Home:
Transfer Home/Retain Life Estate
• Retain Control
• Gift Tax
• Step Up in Basis
• Retai...
Summary of Seminar by
Use of a Case Example
You Be the Lawyer
Bill Smith Age 88 (early onset Alzheimer’s)
Sofia Smith Age ...
(Cont’d)
Money Market (jointly owned) $30,000
Checking Account $14,000
Vacation condo in Florida
(jointly owned) $150,000
...
(Cont’d)
Income
• Bill
– Social Security $1,200 per month
• Pension $1,300 per month
• LTC Insurance $5,000 per month
Tota...
As You Develop a Plan, Here
Are a List of Considerations
• Income Requirements and Limitations Under
Medicaid
• Resource R...
(Cont’d)
• Beneficiary Designations of Existing
Accounts and Assets
• Estate Recovery
• Fair Hearing Appeals
• Documents
A Final Thought
Long Term Care Insurance (LTCI)
• 5 Year Policy
• Inflation Factor
• Transfer of Assets Prior to Start of ...
Hanlon Niemann, PC
Attorneys at Law
3499 Route 9 North, Suite 1-F
Freehold, NJ 07728
(732) 863-9900
fniemann@hnlawfirm.com...
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Medicaid New Jersey 2013 version

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Medicaid Changes - A Brewing Storm

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Medicaid New Jersey 2013 version

  1. 1. Fredrick P. Niemann, Esq. Medicaid Changes The Approaching Storm FREDRICK P. NIEMANN, ESQ. Hanlon Niemann, PC ELDER LAW AND LIFE CARE PLANNING 3499 ROUTE 9 NORTH, SUITE 1-F FREEHOLD, NJ 07728 (732) 863-9900 www.njelderlawcenter.com www.njmedicaidattorney.com www.applyingformedicaidinnj.com www.appealingmedicaiddenialinnj.com
  2. 2. Fredrick P. Niemann, Esq. Fredrick P. Niemann offers his clients nearly 30 years of accomplished practice in law. He is a member of the National Academy of Elder Law Attorneys, the Guardianship and Conservatorship Committee of NAELA, the Special Needs Trust and Estate Tax Committees of NAELA, the Monmouth County Chancery Practice Committee, New Jersey State Bar Association Elder Law Section, and the Monmouth County Chancery Practice Committee. Mr. Niemann is one of the few attorneys in New Jersey to be accredited by the Veteran’s Administration to file applications for the Aid and Attendance pension on behalf of Veterans and or their spouses.
  3. 3. Legal Wit A curious passerby stopped before a grave in a cemetery, containing the tombstone declaring: “Here lies a lawyer and an honest man.” “An who’d ever think,” he murmured, “there would be room for two men in that one little grave!” From the World’s Best Jokes edited by Lewis Copeland
  4. 4. Legal Wit It was so cold one day last February that I saw a lawyer with his hands in his own pockets. Robert Peterson, comedian A lawyer is a man who helps you get what is coming to him. Laurence J. Peter, educator/writer The first thing we do, let’s kill all the lawyers. Shakespeare
  5. 5. Cold Hard Facts • 60% will require long-term care • 43% of people over 65 require nursing home care • It costs per month – $4,000-$5,000 for home care – $4,000-$8,500 for assisted living – $9,000-$12,000 for nursing home – $18-$22 per hour minimum 3 hours for home health aid – $120-$150 for a 12 hour shift for home health aid – $175-$230 for a 24 hour shift for home health aid with 8 hours of sleep
  6. 6. The Greatest Threat • The greatest threat to the financial security of middle and upper middle class Americans is the cost of long term convalescent care!
  7. 7. 5 Ways to Pay for Long Term Care • Private pay • Long-term care insurance • Medicare (for up to a maximum of 100 days of skilled care, the first 20 days are covered 100% then there is a co pay for the additional 80 days) • Veterans Administration Pension Benefits (Aid & Attendance) • Medicaid
  8. 8. Goals of Planning for Long Term Care GOAL 1 Asset and Income Protection – Provide Economic Security for the Community Spouse – Preserve Inheritance for Children – Avoid Medicaid Liens on Family Assets and Income GOAL 2 Lifecare Planning – Best Quality Care for Aging Person – Avoid Being a Burden on Kids
  9. 9. WHAT IS MEDICAID? IT IS A : • Federal program • Administered by the State of NJ under contract with each County Board of Social Services (ie., Monmouth, Ocean, Middlesex, Mercer, Bergen) (cont’d.)
  10. 10. Programs Continued • Traditional Medicaid Long Term Care (Strict Medicaid) is for: – Nursing Home – Assisted Living – Home based programs (Global Options) • Medically Needy Medicaid is for: – Nursing Home Care only
  11. 11. Medicaid Eligibility is Based on 1.Medical Eligibility A. The importance of the “PAS” B. The requirement of a nursing home level of care regardless of program being applied for: 1.Income Eligibility 2.Asset / Resource Eligibility
  12. 12. Income and Resource Limits Under Medicaid Programs Program Income Cap Resource Cap Medicaid Only $2,130 $2,000 Medically Needy* Floating $4,000 Global Options+ $2,130 $2,000 *Nursing Home placement only, not Assisted Living, Global Options +Primarily Home Based Care but can include Assisted Living Medicaid (See next slide)
  13. 13. Cost to Client for Medicaid Single Person • Global Options – No cost to individual – “Estate recovery” on principal residence – Care is limited to approved “Care Plan” • Seldom (Never) 24/7 Care Services • Can Include Medical Equipment, Supplies, Drugs • Assisted Living – There is a cost share for the applicant for their room and board – Resident keeps $100 per month for their personal needs allowance (cont’d)
  14. 14. (Cont’d.) • Nursing Home – Institutionalized resident turns over all income to the nursing home except $35 for personal needs each month • Practical Tip – All income but personal need allowance goes to nursing home and assisted living residence (except Global Options)
  15. 15. Married Couples 2012 – 2013 INCOME Minimum Monthly Needs Allowance MMNA $1,891.25 + utility allowance of $365 RESOURCES Community Spouse Resource Allowance Minimum $ 23,312 Maximum $ 115,920 The 50% Formula
  16. 16. Non-Countable Resources • Home with conditions and limitations – Community Spouse exemption only, not a single person • Automobile (unlimited value for community spouse only) • Household Goods • Personal Effects • Irrevocable Prepaid Funeral ( Trust or Insurance Policy)
  17. 17. Non-Countable Resources (continued) • Term Life Insurance • Life Insurance With Cash Surrender Value of $1,500 or Less • $2,000/$4,000 Personal Needs Allowance • For single person there are practical ways to possibly minimize but not eliminate spend down
  18. 18. BEWARE OF THE MEDICAID “BOOBY TRAP”, THE LOOK BACK PERIOD for Gifts & Uncompensated Transfers • What is the Look Back Period? • The Deficit Reduction Act of 2005 – Increased look back to 5 years – Look back period begins date applicant requires a nursing home level of care (Medicaid eligibility) and the application is filed with the County Board of Social Services
  19. 19. Here’s an Example of the “Look Back Period” Under the DRA Mom transfers $200,000 4 ½ years ago to children and now needs a nursing home level of care • Because transfer was made within 5 years, the penalty will be for the full $200,000 transferred • Penalty period is for the full value of the gift if application filed within 5 years of gift • Results: the $200,000 transfer will have to be spent down to $2,000-$4,000
  20. 20. What Strategies Are Available to Preserve Resources? • The Medicaid Landscape is Changing on a DAILY BASIS • There are multiple lawsuits currently pending in which elder law attorney’s are taking the state to federal court • Strategies differ between single individuals and married couples
  21. 21. Convert Countable Resources to Non-Countable Resources • This process can be complicated and requires financial calculations • See the advice of a qualified elder law attorney • If done correctly, you can protect a significant amount of resources
  22. 22. Example: Our Clients and Spend Down • Assets to Spend Down $118,440 • Pay Down Mortgage - 10,000 • Prepay Funeral - 8,000 • Use Funds for Qualifying Purchases and Spend Down of Resources - 35,000 • Purchase of Personal Needs Items - 1,000 • Adjusted Countable Assets Remaining $ 58,440
  23. 23. Whenever Appropriate, Start the 5 Year Clock, Pre Plan • Use of Trusts 1.Irrevocable trusts A. Grantor trusts for income and estate tax benefits B. Income only trust 2.Must be an outright transfer; remember, no strings can be attached (continued…)
  24. 24. (Cont’d) • No access to income • No access to principal • 5 year lookback • Keep in mind family issues, tax consequences, further care needs
  25. 25. More Advanced Concepts The Purchase of a Life Estate in Child’s Home • 1 Year Residency required • Based on actuarial life expectancy of parent • Capital Gains Tax Considerations to – Parent – Child (cont’d.)
  26. 26. (Cont’d.) • Regulations define method of calculating value of Life Estate • Transfers to disabled child(ren) – Age does not matter – SSI – SSD – DDD • Outright OR in trust • Be careful not to jeopardize SSI and Medicaid eligibility
  27. 27. Purchase Remainder Interest in Parent’s Home • Parent sells interest in their home to child • Opposite concept of parent purchasing of life estate in child’s home • Strict criteria for NJ eligibility
  28. 28. Care Agreement(s) • Must be in writing • Can not be for past services – Prospective services only • Reasonable Compensation – Based on hourly/daily rates (cont’d.)
  29. 29. Care Agreement • What is “Reasonable Compensation?” – can include rent, utilities • Care in Parent’s Home • Care in Child’s Home • Care in Separate Residences • Documentation is a must • Failure to document equals denial
  30. 30. Care Agreement… (continued) • Taxable Income to Caregiver • Withholdings Required by Parent – FUTA – FICA – Income Tax (optional)
  31. 31. Life Insurance • Convert Cash Value to Additional Paid Up Insurance • Assign ownership & beneficiary designation on term policies • Children can/should purchase high value insurance policies – Example: • $250,000 death benefit • $65,000 cash surrender value • Mom 89 years old
  32. 32. Medicaid Qualifying Annuity (MQA) • A little known and understood type of annuity • NOT! A commercial annuity • Must have mandatory features to be legal under NJ Medicaid
  33. 33. Strategies for Protecting Your Home • Timing and Contents of Transfer Critical • Transfer to Community Spouse • Transfer to Child Under 21, Blind or Disabled • Transfer to Caregiver Child – Strict Conditions Precedent Must be Met – Transfer to Sibling With an Ownership Interest
  34. 34. What About the Transfer of the Home Outright to Children • Gift Tax Issue • Carry Over Basis • Loss of $250,000/$500,000 Principal Residence Exclusion • Lose Homestead Tax Rebate, Veteran’s Deduction, Senior Citizen Deduction, Itemized Deduction
  35. 35. Other Options to Protect the Home: Transfer Home/Retain Life Estate • Retain Control • Gift Tax • Step Up in Basis • Retain Homestead Tax Rebate • Veterans Deduction, Senior Citizen Deduction, Itemized Deduction • Principal Residence Exclusion/Trust
  36. 36. Summary of Seminar by Use of a Case Example You Be the Lawyer Bill Smith Age 88 (early onset Alzheimer’s) Sofia Smith Age 71 (good health, primary caregiver) House (jointly owned) $450,000 John IRA $101,000 Sofia IRA $44,000 Brokerage Account (jointly owned) $160,000 CD’s (jointly owned) $75,000 (cont’d)
  37. 37. (Cont’d) Money Market (jointly owned) $30,000 Checking Account $14,000 Vacation condo in Florida (jointly owned) $150,000 1998 Buick (Sophia) $5,000 2007 Ford (Bill) $9,000 Total Assets: $1,038,000 (cont’d)
  38. 38. (Cont’d) Income • Bill – Social Security $1,200 per month • Pension $1,300 per month • LTC Insurance $5,000 per month Total $7,500 per month • Sofia – Social Security $989 per month Total $989 per month
  39. 39. As You Develop a Plan, Here Are a List of Considerations • Income Requirements and Limitations Under Medicaid • Resource Requirements and Limitations Under Medicaid • Transfer Rules and Penalty Periods • Income, Gift and Estate Taxes
  40. 40. (Cont’d) • Beneficiary Designations of Existing Accounts and Assets • Estate Recovery • Fair Hearing Appeals • Documents
  41. 41. A Final Thought Long Term Care Insurance (LTCI) • 5 Year Policy • Inflation Factor • Transfer of Assets Prior to Start of Policy Benefits – Policy Pays for Care During Penalty Period • NJ Long Term Care Partnership Act – No one over 65 who is healthy should be without LTCI!
  42. 42. Hanlon Niemann, PC Attorneys at Law 3499 Route 9 North, Suite 1-F Freehold, NJ 07728 (732) 863-9900 fniemann@hnlawfirm.com www.njelderlawcenter.com www.njmedicaidattorney.com www.applyingformedicaidinnj.com www.appealingmedicaiddenialinnj.com FREDRICK P. NIEMANN, ESQ. ELDER LAW AND LIFE CARE PLANNING

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