Advanced Planning

Kehila Chapels uses PREPLAN, the trust administered by the NY State Funeral Directors Association. This trust is acknowledged as the industry standard, placing the funds in an FDIC insured, interest bearing account. For more information visit Preplan at www.Preplan.org.

Reprinted with permission from “Frequently Asked Questions Regarding Your PrePlan Account and Tax Statement” 2013 NYSFDA© all rights reserved.

PREPLANS

A SIMPLE GUIDE TO ELDER LAW

We are hopeful that the following information gives you a general understanding of some of the terms used when meeting with an elder law attorney. The elder law attorney will be knowledgeable in the areas of estate planning, medicaid and tax implications of transferring assets.

Because of the harsh punitive effects of applying for medicaid prematurely, it is strongly advised that all those that may be affected meet with an elder law attorney prior to submitting a medicaid application.

Please keep in mind that this summary does NOT address the tax implications of transferring assets. Medicaid applicants and their representatives should take NO ACTION ON THEIR OWN regarding transfer of assets, including the homestead, without the advice of legal counsel.

ADVANCE DIRECTIVES

Durable Power of Attorney: A legal instrument authorizing another to act as one’s agent. The agent’s power to act terminates on the death of the principal and may be revoked by the principal during his lifetime. The power is durable if the instrument states that the power survives the incapacity of the principal.

Health Care Proxy: A document wherein the principal authorizes another to act as one’s agent to make health care decisions.

Living Will: A Living Will provides the Health Care Agent with a set of “instructions” regarding the principal’s wishes about end-of-life decisions, such as artificial nutrition, hydration and respiration.

Guardian: A person appointed by the court to manage the property/assets of another and to make personal and health care decisions for another who is unable to do so for himself. A Guardianship may be necessary when a person becomes mentally incapacitated prior to signing a Power of Attorney and/or a Health Care Proxy.

Do Not Resuscitate Order (“DNR”): An order directing that cardiopulmonary resuscitation not be attempted in the event the patient suffers cardiac or respiratory arrest. Such order may cover all cardiopulmonary resuscitation measures or may be limited to specific procedures or equipment, depending upon the scope of the consent. Under New York Law, all adult patients can request a Do Not Resuscitate Order.

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ESTATE PLANNING

Last Will and Testament: An instrument by which a person makes a disposition of his property, to take effect after his death. A Will is revocable during the person’s lifetime.

Trust: An arrangement whereby property is transferred with the intention that it be administered by a trustee for another’s benefit.

Supplemental Needs Trust: A special trust whereby the assets/income in the trust are used solely for the benefit of someone with a disability, but these funds are not considered available in terms of Medicaid/SSI eligibility.

Life Estate: A legal arrangement whereby the life estate holder is entitled to live in and/or use real property for the remainder of his/her life. A life estate terminates at death. Medicaid cannot file a lien against a life estate during the life of the life estate holder or after their death.

Gift Tax: When a transfer of an asset has been made to another for less than fair market value, this transfer is considered a gift, and a gift tax may have to be paid, depending upon the value of the gift.

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MEDICAID/MEDICARE

Medicare Catastrophic Coverage Act: Enacted in 1988 as the first major revision of the Medicare Program since its inception in 1965. Most of the act was repealed in 1989, however, the Medicaid Transfer of Assets Provisions remained intact. The section relevant to the transfer of assets provided for numerous exceptions wherein assets could be transferred without triggering a “waiting period” before the person who made the transfer would be Medicaid eligible. Aside from these exceptions, the general rule is that when a transfer of an asset has been made, this triggers a “waiting period”. The waiting period is dependent upon the size of the asset transferred. The waiting period is determined by using a formula. This is a complicated area that should always be discussed with an experienced attorney. This law has undergone numerous changes. Currently, there is no cap on the waiting period.

Deficit Reduction Act of 2005 (DRA): Enacted on February 8, 2006, the DRA inflicted harsh changes to the Medicaid laws. The DRA went into effect on August 1, 2006 in New York State.

Medicaid: A joint Federal-State program administered by local governments. Its purpose is to provide payment for a comprehensive range of medical services for persons with low income and resources. Applicants for Medicaid must show financial need.

Medicare: Medicare was enacted into law in 1965 as a part of the Social Security Act. It was intended to increase access to health care services and to reduce the financial burden of the high cost of medical care for the elderly. Medicare, unlike Medicaid, is not a means-tested program, that is, income and assets do not determine eligibility. A major drawback to Medicare coverage for nursing home patients is that Medicare does not cover custodial care.

Homestead: The primary residence occupied by a Medicaid applicant recipient and certain of his/her family, including integral parts such as buildings and garages. The residence can include a cooperative apartment, condominium, home trailers, mobile homes or a two or a three family house. Pursuant to the DRA, although a home remains an exempt asset, if a Medicaid applicant is receiving nursing home care, homesteads with equity above $500,000 would render an applicant ineligible. In New York State, the equity level was raised to $758,000 in 2011 and may be increased in future years. Regardless of the equity, the homestead is exempt if a spouse or child under 21 or child who is blind or disabled, resides in the home.
Homeowners can reduce their equity through a reverse mortgage or home equity loan.

Fair Hearing: A hearing where the Medicaid applicant or recipient challenges an action or lack of action of the Medicaid Program. The Fair Hearing System is managed by the New York State Department of Social Services.
Income: Any recurring payment that is counted in the month in which it is received. Income includes earned income, Social Security payments, interest and dividends.

Jointly Owned Resources: Under New York Banking Law, joint bank accounts are presumed to be owned equally by each person whose name is on the account. This presumption is rebuttable. In contrast, Medicaid presumes that a Medicaid applicant who has a joint bank account is the sole owner of this account. However, this presumption is also rebuttable.

Lien: A charge or security interest or encumbrance against property. The State may place a lien against the estate of a Medicaid recipient if the homestead is no longer exempt upon the death of the Medicaid recipient and there is no surviving spouse and no surviving disabled child. If there is a surviving spouse, then no lien can be placed until the death of the surviving spouse at which time a lien can be placed against the surviving spouse’s estate. A lien terminates if the Medicaid recipient, while still alive, is discharged home from an institution.

Assets: An asset includes any income or resources of the individual or the individual’s spouse, including any income or resources which the individual or individual’s spouse is entitled to but does not receive. (Hence, a transfer of income also creates a period of ineligibility.)

Notes and Loans: Pursuant to DRA, notes and Loans must be actuarially sound, with no balloon payment and not self canceling upon the death of the lender.

Look-Back Period: When a person applies for Medicaid benefits for skilled nursing care, the local Medicaid agency will analyze all the financial transactions that have taken place within a specified “look-back period”.
The DRA created a single look-back period of 60 months for all transfers made on or after February 8, 2006.

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WHEN TRANSFERS OF ASSETS RESULT IN A PERIOD OF INELIGIBILITY FOR MEDICAID

Institutional Care
Applicants for Medicaid for institutional care who transfer assets are not eligible for Medicaid for institutional care for the following period of time:

  • All uncompensated transfers made within the look back period are added together.
  • The total amount is divided by the monthly cost of nursing facility services in the state determined as of the date of the application for benefits, not on the date(s) of the transfer.
  • Under DRA, the penalty period commences on the later of: (1) the month following the month in which the transfer is made (existing law) or (2) the date on which an individual is both receiving nursing home care and whose application for Medicaid benefits would be approved but for the imposition of a penalty period at that time. To start the penalty period, the individual must be “otherwise eligible” for Medicaid.
  • There is no cap in time on the period of ineligibility.
  • In the case of jointly owned assets, any action by the Medicaid applicant or by any other person that reduces or eliminates such individual’s ownership or control of such asset (or the affected portion of the asset) shall be considered a transfer.
  • There will be a penalty period imposed for an institutionalized spouse when his/her spouse transfers any assets for less than fair market value within the look back period, however, after the month in which the institutionalized spouse has been determined eligible for Medicaid, no assets of the community spouse are considered available to the institutionalized spouse. Therefore, a transfer by the community spouse after the month in which eligibility is established does not result in a penalty period for the institutionalized spouse.

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EXCEPTIONS TO THE TRANSFER OF ASSETS RULE

When a Transfer will not result in a period of ineligibility

  • If a satisfactory showing is made to the state that the institutionalized individual intended to dispose of assets for “fair market value” or for other valuable consideration.
  • If the individual makes a satisfactory showing that the assets were transferred exclusively for a purpose other than to qualify for Medicaid.
  • If the assets were transferred to an individual’s child who is blind or permanently and totally disabled or to a trust established solely for the benefit of such child.
  • If the individual makes a satisfactory showing that all assets transferred for less than fair market value have been returned to the individual.
  • If the assets were transferred to or for the sole benefit of the community spouse, or to another for the sole benefit of the community spouse, and also transfers from the community spouse to another for the sole benefit of the community spouse.
  • If all assets were transferred to a trust established solely for an individual under 65 years of age who is disabled.
  • If the state determines that a denial of eligibility would result in “undue hardship”.
  • If a Medicaid applicant purchases a life estate in a home and resides in the home for at least one year after said purchase.
  • The asset qualified as a homestead and was transferred to any of the following individuals:
    1. A spouse
    2. A minor child under age 21 or a blind or disabled child of any age.
    3. To a sibling of the individual who has an equity interest in the home and was residing in the home for at least one year immediately before the date of institutionalization. Equity interest means that an individual has invested money in the property or has the right to use of the property without necessarily having title to the property.
    4. To an adult, non-disabled son or daughter who was residing in the home for at least two years immediately before the date of institutionalization and who has, as determined by the State provided care to the individual which permitted him or her to reside at home.

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Medicaid Estate Recoveries: Liens are imposed on the estate of a Medicaid recipient upon his/her death if he/she was 55 years of age or older when he/she received such assistance.
The definition of an individual’s “estate” includes all of the individual’s real and personal property and other assets included within the individual’s estate and passing under the terms of a valid will or by intestacy. Pursuant to regulations to be promulgated by the commissioner, an individual’s estate also includes any other property in which the individual has any legal title or interest at the time of death, including jointly held property, retained life estates, and interests in trusts, to the extent of such interests; provided, however, that a claim against a recipient of such property by distribution or survival shall be limited to the value of the property received or the amount of medical assistance benefits otherwise recoverable pursuant to this law, whichever is less.

Spousal Refusal: Under Federal and State law, the Community Spouse may refuse to provide for the care of the Institutionalized Spouse by executing a Spousal Refusal form. The Institutionalized Spouse must sign an assignment of his right to support to the state and thereby Medicaid cannot be denied to the Institutionalized Spouse. The local Medicaid Agency, however, may sue the refusing spouse for payment of services rendered to the Institutionalized Spouse.

Spousal Impoverishment: A Community Spouse is a person who is married to someone who resides in a nursing home or who participates with the Lombardi program. Medicaid permits a Community Spouse to keep a specified amount of assets (Community Spouse Resource Allowance) and a specified amount of income (Community Spouse Income Amount). These amounts change annually.

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TRUSTS AND MEDICAID

Trusts established after August 10, 1993

Revocable Trusts:

  • The entire value of the trust is considered available to the individual.
  • Payments from the trust to or for the benefit of the individual are considered income of the individual in the month received.
  • All payments from the trust to a person other than the individual are considered assets disposed of by the individual for the purposes of the transfer of assets rules (subject to a 60-month look back).

Irrevocable Trusts:

  • Trusts that provide for income payments to the individual, but do not provide any access to the principal for the individual’s benefit protect the trust principal for Medicaid purposes.
  • If there are no circumstances under which payments from the trust could be made to or for the benefit of the individual, funding the Trust is considered a transfer of assets in determining the period of ineligibility, subject to a 60 month look back.
  • Payments from the trust to the individual shall be considered income of the individual. If principal can be paid to the individual the principal will be considered an available resource.

Trusts in Which Income and Principal ARE NOT Considered Available to Medicaid

  • Trusts for the benefit of a disabled individual, while such individual was under 65 years of age, which are established by a parent, grandparent, legal guardian of the individual or a court and provided the State receives all amounts remaining in the trust on the death of the individual up to an amount equal to the total medical assistance paid on behalf of the individual.
  • Trusts containing the assets of a disabled individual of any age established and managed by a non-profit association which pools the accounts of disabled individuals and provided the trust funds are established solely for the benefit of individuals who are disabled by the disabled individual, a parent, a grandparent, legal guardian or court and to the extent that any principal that remains in the individual’s account do not remain in trust upon the death of the individual, the state will receive all such remaining amounts up to the total value of all medical assistance paid on behalf of such individual.

Medicaid Rules for Transfer of Assets DO NOT Apply To Home Care

  • Individuals transferring assets and applying for home care may transfer any amount of assets to anyone at any time. There is no waiting period after the transfer of assets before the applicant will qualify for Medicaid for home health care or for acute hospital care. There is a look back period should this applicant thereafter seek institutional care.

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