Do you have questions about long-term care?

The Law Office of Raymond N. Beebe has the answers you need to make a more sound decision in protecting you and your family’s future.

1. What legal options are there to protect your assets from the costs of long term care?

There are numerous planning options available such as long term care insurance, irrevocable trusts, testamentary trusts, outright transfers to children and caregiver contracts. Typically, in order to do Medicaid planning a combination of these tools is used. What planning options may
be appropriate for each situation will depend on the circumstances of each individual.

2. If my spouse needs long term care, can I keep my one-half (1/2) of the assets? Does a prenuptial agreement help protect my assets?

As of the first day of institutionalization, a snapshot is taken of all of the couple's non-exempt resources, and the community spouse (the spouse who is not in need of long term care) is entitled to retain one-half (1/2) of the nonexempt resources, with a current maximum that can be retained by the community spouse of $119,220 (as of January 1, 2015) [Community Spousal Resource Allowance (CSRA)]. There must be a spenddown of the assets in excess of the CSRA. This can be done through various expenditures many of which can benefit the community spouse. A prenuptial agreement will not protect against the cost of long term care of one spouse. There are other Medicaid planning techniques that may be able to be used to protect assets in excess of the CSRA. A prenuptial agreement will not protect against the cost of long term care of one spouse. There are other Medicaid planning techniques that may be able to be used to protect assets in excess of the CSRA.

3. If I transfer my assets to my children will I be disqualified from Medicaid for five years?

Under current Medicaid regulations, when you apply for Medicaid there is a five (5) year lookback period. The penalty period for any transfer made during the lookback period does not start until you are institutionalized and your assets are depleted. If transfers are done improperly, you can be disqualified for Medicaid for more than five (5) years.

4. If my accounts are in joint names with my children are they protected?

If assets are in an account titled between individuals as an "or" account, all of said assets are deemed to be the assets of the Medicaid applicant. If assets are in an "and" account which requires both signatures to withdraw funds, then the assets are deemed to be owned on a pro-rata basis between the parent and the child, Whether or not said assets in an "and" account are exempt resources depends on how long said account has been established and how long the funds have been in same.

5. Are accounts with the designation of "ITF", "TOO" or POD" protected assets?

Accounts with the designation of "ITF", "TOD" and "POD" are not protected assets since they are available to the owner.

6. If my relative is incompetent, can I sign for them?

In order to do any type of planning for an individual, there must be a Durable Power of Attorney or a legal guardianship in place with specific gifting authority which enables the Agent to make gifts on behalf of said individual. If the individual cannot execute a Durable Power of Attorney, then a legal guardianship would have to be established.

7. Can I have too much income to qualify for Medicaid?

As of December 1, 2014, if the gross monthly income of a Medicaid applicant (for long term care or assisted living) exceeds Three Hundred (300%) Percent of the SSI Federal Benefit Rate (FBR), then a Qualified Income Trust (QIT) is required whereby the income of the applicant that is in excess of the FBR must be deposited into an account in the name of the QIT, As of January 1, 2015, the FBR is $2,199 per month.

8. Is my home protected?

Generally, if you are single, assets including the value of your home must be spent down to less than $2,000, If you are married and one spouse remains in the home, then the home is a protected asset. However, Medicaid could place a lien on the home if the institutionalized spouse's name is not removed from the Deed. There are exceptions to protect the home such as the caregiver exemption for children that have cared for their parent in the home for at least two (2) years prior to institutionalization, as well as an exemption for siblings that have lived together and owned the home jointly.

9. How much income tax will my children have to pay if I give them a gift?

Generally speaking, gifts and inheritances are not subject to income tax, however, before making any gifts you must examine the capital gains consequences as the transfer of an asset with a low cost basis may result in a capital gain upon the subsequent sale of the asset.

10. If I give my children more than $14,000, will there be gift tax? Will this help protect my assets from nursing home costs?

Currently (for the year 2015), each person can give away $14,000 per year per donee under the annual exclusion. In the event that you give away more than $14,000 per year per donee, then you use your lifetime gift tax exclusion of $5,430,000 per person. Accordingly, unless you exceed both the annual exclusion and your lifetime gift tax exclusion, there should not be a gift tax. This is a federal gift tax exclusion and it has nothing to do with the Medicaid regulations. Any gifts (including annual exclusion gifts of $14,000 per person) transferred during the lookback period will be subject to a penalty period.

11. If I provide care to my parent, can I be paid for my services?

Yes, provided that you execute a Caregiver Agreement. This is a contract between you and your parent explaining the services to be provided and the payment for same, and should be based on an expert report to establish the value of the services rendered by the child.

12. If my spouse and I are in good health, what options should we consider?

Some options to consider are: long term care insurance, creating a Durable Power of Attorney, and creating Testamentary Trusts whereby a portion of the assets on the first death can be placed into a protected trust as well as an Irrevocable Trust for the benefit of family members other than yourself and/or your spouse.

Still have questions? We are here for you. Call the Law Office of Raymond N. Beebe today at 609-601-2400 or email us at rbeebe@beebelawnj.com for more information.