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Medicaid New Jersey 2013 version
- 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. 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. Legal Wit A curiouspasserby 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. Legal Wit It wasso 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. 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. 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. 5 Ways toPay 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. Goals of Planning forLong 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. WHAT IS MEDICAID? ITIS 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. Programs Continued • TraditionalMedicaid 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. Medicaid Eligibility isBased 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. Income and ResourceLimits 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. Cost to Clientfor 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. (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. 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. Non-Countable Resources • Homewith 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. Non-Countable Resources (continued) • TermLife 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. BEWARE OF THEMEDICAID “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. Here’s an Exampleof 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. What Strategies AreAvailable 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. Convert Countable Resourcesto 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. Example: Our Clients andSpend 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. Whenever Appropriate, Startthe 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. (Cont’d) • No accessto income • No access to principal • 5 year lookback • Keep in mind family issues, tax consequences, further care needs
- 25. More Advanced Concepts ThePurchase 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. (Cont’d.) • Regulations definemethod 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. Purchase Remainder Interest inParent’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. Care Agreement(s) • Mustbe in writing • Can not be for past services – Prospective services only • Reasonable Compensation – Based on hourly/daily rates (cont’d.)
- 29. Care Agreement • Whatis “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. Care Agreement… (continued) •Taxable Income to Caregiver • Withholdings Required by Parent – FUTA – FICA – Income Tax (optional)
- 31. Life Insurance • ConvertCash 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. 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. Strategies for Protecting YourHome • 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. What About theTransfer 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. Other Options toProtect 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. Summary of Seminarby 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. (Cont’d) Money Market (jointlyowned) $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. (Cont’d) Income • Bill – SocialSecurity $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. As You Developa 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. (Cont’d) • Beneficiary Designationsof Existing Accounts and Assets • Estate Recovery • Fair Hearing Appeals • Documents
- 41. A Final Thought LongTerm 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. Hanlon Niemann, PC Attorneysat Law 3499 Route 9 North, Suite 1-F Freehold, NJ 07728 (732) 863-9900 [email protected] www.njelderlawcenter.com www.njmedicaidattorney.com www.applyingformedicaidinnj.com www.appealingmedicaiddenialinnj.com FREDRICK P. NIEMANN, ESQ. ELDER LAW AND LIFE CARE PLANNING