Don’t Make the Same Mistake Bill Made
May 30, 2011
The world is ever changing, and in recent years, with the technology boom, it seems that the rate of change has increased dramatically. In the long term care world, we are seeing the same thing, and not in a good way. We are receiving more calls lately from people in crisis, who we can’t help. Years ago there was always something we could do. Granted, the result would almost always be better had the call been made earlier, but still, there was something we could do.
Bill called us regarding his dad, who is now in a nursing home. 2 ½ years ago Dad transferred $300,000 to Bill and his brother. Bill said he did this after speaking with friends who he said “had been through the Medicaid process”, his accountant and financial advisor. He said if Dad needed nursing home care (he was living at home at the time of the transfer) he understood that he could apply for Medicaid, get a penalty assessed because of that transfer and then transfer 1/2 the money back to Dad, reducing the penalty.
Bill was describing what is known as the reverse half a loaf strategy. Transfer back a part of the assets, apply for Medicaid, receive a Medicaid penalty, or period of ineligibility and use the funds transferred back to cover that time period. It all sounded good to him. Except for one thing. Earlier this year the State put a stop to the reverse half a loaf strategy. I told Bill that he would need to either transfer all of the money back and use it for Dad’s care or keep the funds in his name and pay for Dad’s care for another 2 ½ years till the 5 year look back expires.
That’s when Bill told me his problem. He didn’t think he would need the other ½ of the $300,000 for Dad’s care and Dad wanted to pay for his grandkids college education so Bill only has enough to cover the next 1 ½ years. Yet he won’t be able to get Medicaid for 2 ½ years. Bill’s mistake is that he left himself with no other options. He expected that things wouldn’t change, that his strategy would work exactly as he planned. He never considered that the Medicaid rules could change.
That’s a mistake people so often make when it comes to long term care planning. They focus on one solution to the exclusion of all else. But, predicting the future is a risky business. What works today may not work tomorrow, which is why getting the right advice from someone who has been through the process so many times, such as a qualified elder law attorney, can make all the difference. I didn’t have a great solution for Bill. If Dad outlives the balance of $150,000, Bill and his brother will have to come up with the funds to pay for care for another year until he can get Medicaid. At least he has 18 months to figure that out but that was little consolation for Bill.
Another Trend to Rival the Aging Babyboomer?
May 23, 2011
When asked whether I am busy in my practice, I always make reference to the fact that the population is aging and that there are 77 million baby boomers beginning to enter senior status this year. As more people enter the long term care system things will only get busier. There is, however, another trend, highlighted in a recent New York Times article, that is developing at the same time. At least 500,000 children with autism will reach adulthood in the next 10 years.
I have written in the past about some of the issues facing parents of disabled children who become adults. Parents may not automatically make all decisions, financial and medical, for their children. The children must either sign a power of attorney and health care directive or the parents must petition a court to declare the child incapacitated and have themselves appointed guardians.
While it is important to address the issue of decision making, that is only a part of the problem that many families will face in coming years. Services for adults with disabilities are not mandated in the way that school age education is for children. These adult children will face many of the same issues that aging seniors, eventually their own parents, will have to address. That won’t be easy as the government cuts services and programs to save money and there are fewer working-age adults to provide the necessary care.
For example, many parents are unaware of how difficult it is to move a child to a group home setting. The demand for this type of housing far outstrips the supply and the trend in many states is to get away from group housing because it is costly. That leaves many families unprepared for the possibility that their disabled child may live with them for many years, perhaps until the parents die. But, then what becomes of the child?
Well, that typically will fall to the non-disabled siblings and other family members. Imagine what you would do if you suddenly had the responsibility of caring for a severely disabled person. Would you be able to take the person into your home? Do you have the space to do it, the proper environment, the financial means, the emotional and psychological strength to do it? For most people the answer is no or not without great difficulty.
The services available and the system in place to assist the disabled is even more of a patchwork, than is the long term care system for the elderly. Financially, the disabled are generally worse off than seniors, most of whom were part of the work force for many years and accumulated some amount of wealth that their families can apply towards their care. Not so for the developmentally disabled, such as those who are autistic. Whatever funds available for their use will be provided by their parents.
Which is why it is so important for those parents to set up a plan now, while they are healthy, before they spend all their assets on their own care, leaving their surviving family members with the problem of providing quality care without the funds to pay for it. That’s a sure recipe for disaster.
Underground Storage Tanks and Long Term Care?
May 16, 2011
It just keeps getting worse doesn’t it? I’m talking about the economy and our federal, state and local governments’ inability to balance their budgets and provide the services and assistance they have provided in the past and promise to provide in the future. And is why you can’t expect the government to bail you out.
The latest example is not about long term care but the parallels are there. The State of New Jersey established a fund to help homeowners remove rusted and leaking underground storage tanks that contaminate the soil. 5 years ago the fund had $90 million. Now there is nothing. But it’s the reason why there is nothing left that gets me. The fund ran out of money in part because it was spent on other things that had nothing to do with removing underground storage tanks and in part because too many people were made eligible. As a result, 1300 people seeking grants or loans to help pay for cleanup will have to wait at least a year and no new requests will considered until 2014. Of course, there is nothing preventing the State from extending either of those timelines, making residents wait even longer.
Meanwhile, leaky tanks will continue to leak and the State environmental agency can, by law, hold the residents responsible for the spill. It’s commissioner has said that in some cases, where the homeowner doesn’t have the money to pay for the removal and it can’t wait, then the State will go in and clean it up and then put a lien on the property for the cost of that cleanup. What does that tell you about whether any funds will be available next year, 2014 or any time? All the chairman of the Senate environmental committee could say is that they will conduct an investigation as to what happened to all the money and why no one told them sooner. Great.
What has this got to do with long term care? Nothing and everything. Certainly environmental and long term care issues couldn’t be more different. What is important, however, is to pay attention to what the government is, or in this case, is not, doing for its citizens, especially where it made certain promises. The State isn’t beyond changing the rules in the middle of the game and breaking its promises.
And that’s the lesson to be learned here. Long term care is a huge problem. The government is a part of the solution. But, it has in the past, and will most certainly again in the future, change the rules. If you aren’t prepared for the possibility of needing long term care and expect the government to be the answer, you’d better rethink it. Look what happened with a small program to remove underground tanks. Don’t think it won’t happen with a program like Medicaid. It will. That’s why it’s so important to get your ducks lined up now, have a plan and a backup plan in place. Because what the government provides you today may be very different than what is willing to provide you tomorrow. You’d better know how you will respond.
OK, I Can Keep My Home – But Can I Sell It?
May 9, 2011
A very common question I get from clients and prospects in the following situation. We are working towards qualifying Betty’s husband, Joe, for nursing home Medicaid. I explained to Betty that as long as she is living in the marital home she can keep it. But she will lose some of Joe’s income which will go to the nursing home. “But I can’t afford to keep the home so what happens if I sell it”, she asks. “ Will Joe lose his Medicaid eligibility?”
The short answer is no — if Betty follows our instructions carefully. First of all, she shouldn’t sell the home until Joe is approved for Medicaid. Why? Because we don’t want what is a non-countable asset to turn into a countable one. If Betty’s house is worth $500,000, then she’ll have to spend down those assets until she has no more than a shade under $110,000 before Joe receives Medicaid. That doesn’t leave her a whole lot to live on and is why I always tell clients that in long term care planning timing is everything.
When Joe reaches Medicaid eligibility there is what is called a “division of assets”. The State determines what Betty is entitled to keep. The house is the biggie. That means that as long as she lives she does not have to use any of those funds to pay for Joe’s care. So, if she sells the house, while it does mean that these assets are now countable for Medicaid purposes, that applies only to Betty, if at some point in the future she applies for benefits. It does not affect Joe’s Medicaid eligibility. This is very important to Betty because, as I said, she will lose some of Joe’s income and she doesn’t have much in the way of investments. She can’t afford the cost of maintaining the home and has determined that renting will cut her monthly expenses considerably. Betty was relieved to hear what I had to say as I could see the stress just drained from her face. She was onboard and gladly will accept our guidance.
A Mom Without a Home?
May 2, 2011
Mary called with the following story. Mom had sold her home in New Jersey 8 years ago. The plan was for Mom to live with Mary in New York. However, her health deteriorated rapidly and she never moved in with Mary, instead living in an assisted living facility in New York. Mom used the proceeds of the sale to pay her expenses but now the money is gone and Mary has been told her mom isn’t eligible for Medicaid in New York because she doesn’t live there. She called us to see if Mom could get Medicaid in New Jersey but, again she doesn’t live here either. So, what really happened here?
In New York residing in an assisted living facility doesn’t establish residency for Medicaid purposes. However, Mom hasn’t lived in New Jersey since 2003. She’d have to move back here to qualify. Moving directly to a nursing home would work but Mary said it’s difficult to make a move now and she want Mom near to her, which I certainly can understand. So, New Jersey appears out.
Let’s go back to New York. If Mom lived even one day with Mary she’d satisfy the residency requirement. Alternatively, if she had at any point entered a facility for rehabilitation she’d qualify that way. Mary needs to go back over the past 8 years and determine if either of these scenarios has occurred. If so then she’ll be able to get New York Medicaid. Of course, I am presuming that no transfers for less than fair value have been made and a clear paper trail exists to prove that Mom’s money was spent entirely on Mom’s needs. Since Mary was not at all familiar with these concepts it is entirely possible that a Medicaid penalty will result. And, what if she can’t establish residency? The options are not very appealing.
And that’s the lesson to be learned. Mary’s mistake occurred 8 years ago. She had a plan, moving Mom in to live with Mary. But, when that fell through she had no contingency plans. She didn’t consider what would happen if Mom ran out of money. Mary took for granted that the government would help out. Unfortunately, it’s not that simple. Better to plan ahead and get your “ducks lined up”. Speak to someone who knows the rules and do it well before the money runs out because once the money is gone your options are drastically reduced, and in some cases eliminated altogether.
