Guidebook
Top 10 Myths of Elder Law & Estate Planning
- A revocable trust avoids estate taxes.
- A joint account is not a countable asset for Medicaid purposes.
- A power of attorney can make health care decisions.
- An IRS tax-free gift does not count as a gift for Medicaid purposes.
- A Will governs all assets, even accounts with joint titleholders or beneficiaries.
- You can’t own a home and be eligible for Medicaid benefits.
- Life insurance is not part of your taxable estate.
- An IRA is a countable resource for Medicaid purposes.
- A young person does not need Advance Directives.
- A disabled person cannot inherit money without losing government benefits.
Find out why all of the above are incorrect and get all the right answers inside our Guidebook. Click here for your FREE copy.
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Medicaid Planning
Many people believe their long-term health care costs will be paid for by Medicare. Others believe their private health insurance will cover such costs. Generally, neither is the case. Neither Medicare nor private health insurance benefits cover long-term health care needs. So how does the average senior meet the looming costs of long-term health care without exhausting all assets? Many families engage in Medicaid planning for the purpose of qualifying an individual for Medicaid benefits.
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Medicaid Nursing Home Benefits
Many people believe that they are not eligible for Medicaid benefits because they did not give away their assets five years ago. This is a common misconception of the law.
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Medicaid Home Care Benefits
Everyone is familiar with the five-year look back period when applying for Medicaid benefits. Most people believe they are not eligible for Medicaid benefits because they did not give away their assets five years ago. TRUE or FALSE: You can give away all your assets today and be eligible next month for Medicaid Home Care benefits. The answer is TRUE.
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Married Couples and Medicaid
Married couples are afforded great leniency under New York’s Medicaid laws. A couple can transfer any amount of money or property from one spouse to the other without incurring a Medicaid penalty. For example, if a husband falls ill, the couple can transfer all assets to the wife’s name and the husband will be eligible for Medicaid benefits immediately. There is no penalty or waiting period. This applies for both Medicaid nursing home benefits and home care benefits.
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Spousal Refusal
Under New York law, spouses have a legal duty to support each other. Until the Medicare Catastrophic Coverage Act of 1988 (“MCCA”) was adopted, many well (i.e., healthy) “community” spouses became impoverished as a result of the astronomical costs of long-term care for their ill spouse. The MCCA legislated significant and important changes to assist the community spouse.
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Medicaid Exempt Transfers
Many people believe that when you engage Medicaid planning, you must transfer all of your assets and wait five years to be eligible for Medicaid benefits. Often times, this is not the case. There are some transfers that are exempt and therefore do not create any type of penalty period whatsoever.
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Deficit Reduction Act of 2005: Impact on Medicaid Benefits
On February 8, 2006, former President George W. Bush signed into law the Deficit Reduction Act of 2005 (“DRA”) which severely restricts Medicaid eligibility for the elderly and disabled by drastically changing the Medicaid asset transfer laws. The new law, aimed at reducing Medicaid fraud, will severely impact the most vulnerable of our population. There are four major changes wrought by the DRA: 1) increased look-back period; 2) new commencement date for penalty periods; 3) changes to the homestead exemption; and 4) changes to the treatment of annuities.
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Protecting the Family Home
For many families, the family home is the largest asset. Many people are concerned about losing their home, and rightfully so. With the rising cost of health care, how can you protect your home? There are many ways to protect your home, each of which has Medicaid planning consequences and tax consequences.
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Protecting Your Assets
You worked hard for the money you earned and saved. How do you protect your assets from the escalating cost of health care or from the government?
- Plan for Medicaid eligibility
- Take steps to protect the family home
- Investigate long-term care insurance
- Make annual exclusion gifts.
Tax planning and Medicaid planning are often contrary to each other. Make sure you seek legal counsel before taking any actions.
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Preparing an Application for Medicaid Benefits
Applying for Medicaid benefits can seem like an overwhelming task. However, with some simple preparation, you and your attorney can successfully complete the application process. The following items need to be gathered for both the applicant and spouse. Incomplete Medicaid applications are routinely rejected. Providing your attorney with complete information will lead to a speedier and more cost-effective Medicaid Application process.
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Medicaid Benefits for Elderly Immigrants
Mrs. S was an elderly woman who had entered the United States from Canada in the 1930s, before the Immigration and Naturalization Service existed. She married an American citizen, worked here all her life, voted in many elections, collected Social Security benefits and simply assumed she was a citizen. However, when Mrs. S applied for Medicaid benefits after entering a nursing home, she learned that her status in this country was questionable. Unfortunately, she was not officially a citizen or legal permanent resident and the punishment was severe. Medicaid refused her application and her nursing home care was not covered. What can you do to guard against this bureaucratic nightmare?
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Medicaid Home Care: Documenting Your Needs
Most elderly and disabled persons who require long-term care would prefer to receive such care in their own homes. The elderly and disabled residents of New York State are fortunate enough to reside in a state that has the most comprehensive government-financed home care program in the United States. The New York State Medicaid Home Care program is frequently misunderstood by consumers, social workers, health care providers, and government officials.
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Medicaid Home Care: Choosing & Keeping Your Home Health Aide
A home attendant who helps an elderly or disabled person fulfill their basic care needs on a daily basis develops an unusually close relationship with the patient and their families. Therefore, it is of critical importance that a patient is able to utilize the services of a home attendant with whom they can be compatible. New York State offers a Consumer-Directed Personal Care Assistance Program that recognizes the value of choosing or keeping your own home health aide. This unique program allows a Medicaid recipient and their families to select and supervise their own home health attendants.
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Power of Attorney: Who Will Control My Money?
The loss of control over your finances is a scary notion. A Durable Power of Attorney is one of the best defenses, and a powerful offensive tool, to protect your assets. A Durable Power of Attorney is a legal document wherein a trusted family member or friend may be appointed to act on your behalf should you become incapacitated
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Living Will and Health Care Proxy: Do I Need Both?
Any person with capacity can communicate their wishes to doctors or hospital staff with regard to their medical care but what happens if you temporarily or permanently lose capacity or are unable to communicate? A Health Care Proxy and Living Will permit individuals to engage in advance medical care planning and are critical in the event of temporary or permanent incapacity.
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Protection for the Disabled: Supplemental Needs Trusts
Many disabled adults receive some form of government benefits, such as Social Security benefits, Supplemental Security Income (“SSI”) and Medicaid benefits. What happens if a family member wants to leave that disabled person an inheritance? What happens if the disabled person comes into some money, such as proceeds from a lawsuit or a lump sum payment from Social Security?
The law entitles disabled individuals to keep such monies in a special trust, called a Supplemental Needs Trust, without eliminating or reducing their government benefits. This is a special kind of trust for disabled people only. An unlimited amount of money may be kept in a Supplemental Needs Trust--without effecting governmental benefits.
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Pooled Income-Only Trusts
While it is true that you can divest yourself of all assets and be eligible the following month for Medicaid Home Care benefits, until recently, Medicaid recipients were required to contribute their “surplus” income to Medicaid before they would receive benefits. Specifically, an individual is only entitled to keep a maximum income allowance each month and any monthly income over this amount must be “spent down” before Medicaid will pay for the individual’s care. As a result of a recent New York State fair hearing decision, however, qualified elderly and disabled individuals in need of home care or community services can now use all of their excess income to pay for their living expenses by participating in a Pooled Income-Only Trust.
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Guardianship Proceedings
If a person has certain functional limitations that affect their ability to tend to their personal needs or make prudent decisions with respect to their property management and they have failed to appoint a person to handle such matters on their behalf via a Power of Attorney or Health Care Proxy, they will require the appointment of a Guardian. Any concerned party may petition for Guardianship on behalf of such person.
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Basic Estate Planning
Like it or not, you already have an estate plan. Under New York law, your house and other assets will pass to your heirs according to statute, unless you have a valid Will. Many people want to avoid probate of a Will, assuming that it is an expensive and long-drawn out process. However, if the assets are not complex, probate can be relatively painless and can assure that your money passes the way you intended. Your Will should provide for payment of debts, selection of guardians and executors, formations of trusts, and specific bequests of assets. The bottom line is...plan ahead. Our Guidebook takes you through the proper planning tools for your unique situation.
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Do I Need a Will?
Every competent adult should execute a Last Will and Testament. This document determines how your estate will be distributed upon your death. It keeps decision making in your hands, where it belongs. In the event you die without a Will, your estate will be distributed pursuant to New York state laws. If you do not have a Will, your estate will be distributed in accordance with New York State laws which may not direct your assets as you would have liked.
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Last Will and Testament Tips
Question: I want to revise my Last Will and Testament but I don’t want to spend a fortune on legal fees. Do you have any suggestions?
Answer: Preparation is the key to saving money at your attorney’s office. The two most expensive mistakes clients make is bringing either too much information to their attorney, or too little. If an attorney must wade through thick envelopes of old records, the client must pay for the time spent. On the other hand, if critical information is not available, the client can lose as well. Make sure to bring copies of deeds and financial account records to your first appointment. Your attorney will need certain specific information when you meet. Our Guidebook takes you through what you will need to do to prepare for this meeting.
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Choosing your Executor and Trustee
When it comes to managing your estate or financial affairs, you must choose wisely. Many people choose a family member as Executor of their Will or Trustee of their trusts so that fees for this service do not have to be paid. This may be a bad decision if your trust or estate has any complications. Courts hold Trustees and Executors to the highest standards. The fiduciary must be prudent, wise and honest. The Executor of your Will and/or Trustee of your trust will have many responsibilities.
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Executor and Trustee Commissions
You’ve chosen an Executor for your Will and a Trustee for your Trusts, so what exactly are they entitled to as compensation for their services?
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Probate of a Will
Probate is the process the Courts use to supervise the distribution of your assets after you pass away. The Surrogate judge must be convinced that your Will is legitimate and that you meant to have your assets pass in the way that you describe. Most Wills that are drawn up today have an affidavit for the witnesses to sign, which makes it very easy for the Surrogate to determine that you were competent to sign a Will and that the Will reflects your intentions. The Surrogate’s Court first determines whether your Will is valid. If it is, the Court remains available to oversee the process under which your heirs inherit your assets.
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Out of State Wills
Question: I signed a Will in New York ten years ago. If I move to Florida, must I sign a new Will?
Answer: Your Will, if properly executed, will hold up to scrutiny by the Florida courts. Proper execution in New York means that you had the capacity to make a Will and observed all the formalities that New York Courts require.
Also, our Guidebook offers general advice for "snowbirds".
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The Life Estate
For many people in the New York metropolitan area, their home is their largest asset. Most families seek to protect the value of their home but do not want to give up any ownership rights. The life estate can be one way to accomplish this goal.
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Living Trusts
Trusts can be one of the most effective tools in your estate and asset protection plan. Properly drafted trusts can avoid probate, create tax advantages, promote Medicaid eligibility and protect property from creditors. But what is a trust and how does it work?
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Qualified Personal Residence Trusts
A Qualified Personal Residence Trust (“QPRT”) is an irrevocable trust that is created to hold title to your personal residence for a period of years, after which title to the property passes to your designated beneficiaries, either outright or in further trust. A QPRT is primarily designed as an estate tax savings devise.
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Irrevocable Life Insurance Trusts
As the name suggests, an Irrevocable Life Insurance Trust (“ILIT”) is created to hold a life insurance policy and is designed primarily as an estate tax savings device. Contrary to popular belief, a life insurance policy is part of your taxable estate, even though it may have little or no value to you while you are alive. This can be a very expensive consequence since it is not uncommon for a person to have a sizeable life insurance policy.
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Retirement Assets
In order to become eligible for any type of Medicaid benefits, an individual must have less than the resource allowance amount as set by the State. To reach this asset limit, many people transfer their assets to family members. Such transfers may be subject to a penalty or ineligibility period wherein Medicaid benefits are not available for a calculated period of time. When dealing with retirement accounts, the task of transferring assets can become very difficult. Many times, individuals will incur large penalties for pulling the assets out early or withdrawing a large sum at one time. In addition, there may be enormous tax consequences.
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Caregiver Agreements
Many elderly and disabled people are cared for routinely by their family members. A family member often has to step in to take over certain daily activities of an aging senior, often to the detriment of their own jobs or other obligations. Now, there is a way to compensate such family caregivers for the services they perform. Pursuant to a Caregiver Agreement, you may hire a family member or friend to oversee, monitor, supervise, and in some instances, provide hands-on care for you and you agree to compensate that person for their services. This contractual arrangement is a way to transfer and preserve assets for your family members without incurring negative Medicaid consequencesClick here to return to the Guidebook Table of Contents
Family Agreements
Engaging in Medicaid planning early not only ensures that you will qualify for Medicaid when you need it, but ensures that you are the one who determines how your assets are divided among your beneficiaries. However, if you wait to engage in Medicaid planning when your need for long-term care is immediate, you may be forced to take advantage of certain exempt transfers discussed earlier in this our Guidebook, which may lead you to favor one of your beneficiaries more than the others.
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Long-Term Care Insurance and NYS Partnership Plans
With the ever-changing landscape of Medicaid eligibility rules and the daunting notion of paying privately for your long-term care needs, long-term care insurance may be the best option in planning for your future care. Whether you should buy a policy will depend on various factors including your age, health status, income, assets and family composition.
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Economic Growth and Tax Relief Act of 2001: Impact on Estate Planning
On June 7, 2001, former President Bush signed into law a set of federal tax relief provisions. The new law includes the highly publicized “repeal” of the estate tax in the year 2010. The new tax law makes many changes to our current gift and estate tax laws, the least of which is the “repeal” of the estate tax. Instead, the new law provides for decreased federal estate tax rates as well as increases in the amount of assets that may pass free of estate tax. In 2011, the new tax law is automatically revoked, leaving the exemption amount to return to one million dollars and the federal estate tax system reinstated. What does the new tax law mean for you?
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Putting Your Affairs in Order
You’ve signed a Will and prepared your advance directives. You breathe a sigh of relief. Your affairs are in order. Right? Not quite. Before you are truly done, you must review your assets and investments. Remember to review:
- Investments
- Retirement plans
- Jointly held assets
- Accounts "in trust for"