Elder Law

Joint Bank Accounts and Medicaid Eligibility

Like most governmental benefit programs, there are many myths surrounding Medicaid and eligibility for benefits. One of the most common myths is the belief that only 50% of the funds in a jointly-owned bank account will be considered an asset for the purposes of calculating Medicaid eligibility.

Medicaid is a needs-based program that is administered by the state.  Therefore, many of its eligibility requirements and procedures vary across state lines.  Generally, when an applicant is an owner of a joint bank account the full amount in the account is presumed to belong to the applicant. Regardless of how many other names are listed on the account, 100% of the account balance is typically included when calculating the applicant’s eligibility for Medicaid benefits.    

Why would the state do this? Often, these jointly held bank accounts consist solely of funds contributed by the Medicaid applicant, with the second person added to the account for administrative or convenience purposes, such as writing checks or discussing matters with bank representatives. If a joint owner can document that both parties have contributed funds and the account is truly a “joint” account, the state may value the account differently. Absent clear and convincing evidence, however, the full balance of the joint bank account will be deemed to belong to the applicant.  

Estate Planning: The Medicaid Asset Protection Trust

The irrevocable Medicaid Asset Protection Trust has proven to be a highly effective estate planning tool for many older Americans. There are many factors to consider when deciding whether a Medicaid Asset Protection Trust is right for you and your family. This brief overview is designed to give you a starting point for discussions with your loved ones and legal counsel.

A Medicaid Asset Protection Trust enables an individual or a married couple to transfer some of their assets into a trust, to hold and manage the assets throughout their lifetime. Upon their deaths, the remainder of the assets will be transferred to the heirs in accordance with the provisions of the trust.

This process is best explained by an example. Let’s say Mr. and Mrs. Smith, both retired, own stocks and savings accounts valued at $300,000. Their current living expenses are covered by income from these investments, plus Social Security and their retirement benefits. Should either one of them ever be admitted to a skilled nursing facility, the Smiths likely will not have enough money left over to cover living and medical expenses for the rest of their lives.

Continuing the above example, the Smiths can opt to transfer all or a portion of their investments into a Medicaid Asset Protection Trust. Under the terms of the trust, all investment income will continue to be paid to the Smiths during their lifetimes. Should one of them ever need Medicaid coverage for nursing home care, the income would then be paid to the other spouse. Upon the deaths of both spouses, the trust is terminated and the remaining assets are distributed to the Smiths’ children or other heirs as designated in the trust. As long as the Smiths are alive, their assets are protected and they enjoy a continued income stream throughout their lives.

However, the Medicaid Asset Protection Trust is not without its pitfalls. Creation of such a trust can result in a period of ineligibility for benefits under the Medicaid program. The length of time varies, according to the value of the assets transferred and the date of the transfer. Following expiration of the ineligibility period, the assets held within the trust are generally protected and will not be factored in when calculating assets for purposes of qualification for Medicaid benefits. Furthermore, transferring assets into an irrevocable Medicaid Asset Protection Trust keeps them out of both spouses’ reach for the duration of their lives.

Deciding whether a Medicaid Asset Protection Trust is right for you is a complex process that must take into consideration many factors regarding your assets, income, family structure, overall health, life expectancy, and your wishes regarding how property should be handled after your death. An experienced elder law or Medicaid attorney can help guide you through the decision making process.
 

Senior Citizens Comprise Growing Demographic of Bankruptcy Filers

It’s called your “golden years” but for many seniors and baby boomers, there is no gold and retirement savings are too often insufficient to maintain even basic living standards of retirees. In fact, a recent study by the University of Michigan found that baby boomers are the fastest growing age group filing for bankruptcy. And even for those who have not yet filed for bankruptcy, a lack of retirement savings greatly troubles many who face their final years with fear and uncertainty.

Another study, conducted by Financial Engines revealed that nearly half of all baby boomers fear they will be in the poor house after retirement. Adding insult to injury, this anxiety also discourages many from taking the necessary steps to establish and implement a clear, workable financial plan. So instead, they find themselves with mounting credit card debt, and a shortfall when it comes time to pay the bills.

In fact, one in every four baby boomers have depleted their savings during the recession and nearly half face the prospect of running out of money after they retire. With the depletion of their savings, many seniors are resorting to the use of credit cards to maintain their standard of living.  This is further exacerbated by skyrocketing medical costs, and the desire to lend a helping hand to adult children, many of whom are also under financial distress.  These circumstances have led to a dramatic increase in the number of senior citizens finding themselves in financial trouble and turning to the bankruptcy courts for relief.

In 2010, seven percent of all bankruptcy filers were over the age of 65. That’s up from just two percent a decade ago. For the 55-and-up age bracket, that number balloons to 22 percent of all bankruptcy filings nationwide.

Whether filing for bankruptcy relief under a Chapter 7 liquidation, or a Chapter 13 reorganization, senior citizens face their own hurdles. Unlike many younger filers, senior citizens tend to have more equity in their homes, and less opportunity to increase their incomes. The lack of well-paying job prospects severely limits older Americans’ ability to re-establish themselves financially following a bankruptcy, especially since their income sources are typically fixed while their expenses continue to increase.
 

Overview of Life Estates

Establishing a Life Estate is a relatively simple process in which you transfer your property to your children, while retaining your right to use and live in the property. Life Estates are used to avoid probate, maximize tax benefits and protect the real property from potential long-term care expenses you may incur in your later years. Transferring property into a Life Estate avoids some of the disadvantages of making an outright gift of property to your heirs. However, it is not right for everyone and comes with its own set of advantages and disadvantages.

Life Estates establish two different categories of property owners: the Life Tenant Owner and the Remainder Owner. The Life Tenant Owner maintains the absolute and exclusive right to use the property during his or her lifetime. This can be a sole owner or joint Life Tenants. Life Tenant(s) maintain responsibility for property taxes, insurance and maintenance. Life Tenant(s) are also entitled to rent out the property and to receive all income generated by the property.

Remainder Owner(s) automatically take legal ownership of the property immediately upon the death of the last Life Tenant. Remainder Owners have no right to use the property or collect income generated by the property, and are not responsible for taxes, insurance or maintenance, as long as the Life Tenant is still alive.

Advantages

• Life Estates are simple and inexpensive to establish; merely requiring that a new Deed be recorded.
• Life Estates avoid probate; the property automatically transfers to your heirs upon the death of the last surviving Life Tenant.
• Transferring title following your death is a simple, quick process.
• Life Tenant’s right to use and occupy property is protected; a Remainder Owner’s problems (financial or otherwise) do not affect the Life Tenant’s absolute right to the property during your lifetime.
• Favorable tax treatment upon the death of a Life Tenant; when property is titled this way, your heirs enjoy a stepped-up tax basis, as of the date of death, for capital gains purposes.
• Property owned via a Life Estate is typically protected from Medicaid claims once 60 months have elapsed after the date of transfer into the Life Estate. After that five-year period, the property is protected against Medicaid liens to pay for end-of-life care.

Disadvantages

• Medicaid; that 60-month waiting period referenced above also means that the Life Tenants are subject to a 60-month disqualification period for Medicaid purposes. This period begins on the date the property is transferred into the Life Estate.
• Potential income tax consequences if the property is sold while the Life Tenant is still alive; Life Tenants do not receive the full income tax exemption normally available when a personal residence is sold. Remainder Owners receive no such exemption, so any capital gains tax would likely be due from the Remainder Owner’s proportionate share of proceeds from the sale.
• In order to sell the property, all owners must agree and sign the Deed, including Life Tenants and Remainder Owners; Life Tenant’s lose the right of sole control over the property.
• Transfer into a Life Estate is irrevocable; however if all Life Tenants and Remainder Owners agree, a change can be made but may be subject to negative tax or Medicaid consequences.

The recent economic recession, and staggering increases in health care costs have left millions of Americans facing incredible losses and mounting debt in their final years. Are you concerned that, rather than inheriting wealth from your parents, you will instead inherit bills? The good news is, you probably won’t have to pay them.

As you are dealing with the emotional loss, while also wrapping up your loved one’s affairs and closing the estate, the last thing you need to worry about is whether you will be on the hook for the debts your parents leave behind. Generally, heirs are not responsible for their parents’ outstanding bills. Creditors can go after the assets within the estate in an effort to satisfy the debt, but they cannot come after you personally. Nevertheless, assets within the estate may have to be sold to cover the decedent’s debts, or to provide for the living expenses of a surviving spouse or other dependents.

Heirs are not responsible for a decedent’s unsecured debts, such as credit cards, medical bills or personal loans, and many of these go unpaid or are settled for pennies on the dollar. However, there are some circumstances in which you may share liability for an unsecured debt, and therefore are fully responsible for future payments. For example, if you were a co-signer on a loan with the decedent, or if you were a joint account holder, you will bear ultimate financial responsibility for the debt.

Unsecured debts which were solely held by the deceased parent do not require you to reach into your own pocket to satisfy the outstanding obligation. Regardless, many aggressive collection agencies continue to pursue collection even after death, often implying that you are ultimately responsible to repay your loved one’s debts, or that you are morally obligated to do so. Both of these assertions are entirely untrue.

Secured debts, on the other hand, must be repaid or the lender can repossess the underlying asset. Common secured debts include home mortgages and vehicle loans. If your parents had any equity in their house or car, you should consider doing whatever is necessary to keep the payments current, so the equity is preserved until the property can be sold or transferred. But this must be weighed within the context of the overall estate.

Executors and estate administrators have a duty to locate and inventory all of the decedent’s assets and debts, and must notify creditors and financial institutions of the death. Avoid making the mistake of automatically paying off all of your loved one’s bills right away. If you rush to pay off debts, without a clear picture of your parents’ overall financial situation, you run the risk of coming up short on cash, within the estate, to cover higher priority bills, such as medical expenses, funeral costs or legal fees required to settle the estate.

Medi-Cal is California’s Medicaid program, which is funded by both federal and state funds. It is overseen by the Department of Health Services. Medi-Cal has two divisions: one of them provides regular medical care for low-income individuals and the other provides assistance with paying for the high costs of nursing home care. This information is geared towards eligibility for the Medi-Cal Long Term Care program. To receive these Medi-Cal benefits, the applicant’s (and spouse’s, if married) assets must be within the Medi-Cal resource limits. If assets exceed the Medi-Cal resource limits, the excess must be “spent down” until the guidelines are met.

 The first and most important concept of understanding Medi-Cal Long Term Care eligibility is the way the state classifies assets into 3 categories: Countable Assets, Exempt Assets, or Unavailable Assets. (Exempt and Unavailable assets will not affect a person’s eligibility for Medi-Cal Long Term Care…in other words, these assets are not counted.)

A. Countable Assets.

1. Resource Limits: An applicant cannot have countable assets in excess of the applicable resource limits, which for the year 2009 are as follows:

Single Applicant: $2,000.00 In applicant’s name; no other assets

Married Applicant: $2,000.00 In applicant’s name

Applicant’s Spouse: $109,560.00 In spouse’s name

Both spouses in long term care: $2,000.00 in each spouse's name;no other assets

2. What Assets are Countable? These must be spent down and/or converted to Exempt or Unavailable assets prior to application:

Bank Accounts (Checking/Savings)

Money Market Accounts

Certificates of Deposit (CDs)

Mutual Funds

Stocks & Bonds

Real Estate (other than the home) 

B. Exempt Assets.

 The home and home improvements

Personal Service Contracts

Household goods and debt payments

Personal effects, family heirlooms, jewelry, etc.

One car

Term life insurance policies without cash value

Prepaid burial plans (if irrevocable)

IRA’s and work-related pensions if in distribution (periodic payments of principal and interest)

IRA’s and work-related pensions in spouse’s name

Immediate Annuities (if annuitized for the annuitant’s life expectancy or shorter period of time) 

C. Unavailable Assets.

 Listed Real Estate

Property or Accounts held in Joint Tenancy

Trust Deeds and Notes 

Treatment of an individual’s income is different than that of their assets. Once an applicant meets the proper asset resource requirements, the state will then look at their income to determine their Share Of Cost, or their contribution towards their monthly cost of care.

A. Income (monthly) – includes: social security, pension, interest, dividends, etc.

B. Income is used to determine SHARE OF COST (all income is counted, less a $35 personal needs allowance)

C. SPECIAL RULE FOR MARRIED APPLICANTS: The spouse remaining in the home must have a Minimum Monthly Maintenance Needs Allowance of $2,739.00 per month before the applicant spouse’s income will be counted towards his or her Share Of Cost.

D. If monthly income is GREATER than the applicant’s cost of care, the applicant does not need Medi-Cal Long Term Care benefits because the assets (principal) will not be exposed to spend-down.

 The Look-Back Period is a period of time during which Medi-Cal is allowed to inquire about an applicant’s financial history and question them about transactions and transfers made within the 30 months prior to application. THIS IS NOT A 30-MONTH BAR TO TRANSFERRING PROPERTY. In other words, an applicant can make transfers of their property during this time, however certain transfers may give rise to a period of ineligibility. (See Gifts/Period of Ineligibility below.) Furthermore, for transfers made to or from an irrevocable trust, the Look-Back Period is 60 Months.

 A. An applicant is allowed to make gifts of their property during the 30 months prior to application; however such gifts may cause a period of ineligibility to apply. This is simply a period of time during which an applicant is not allowed to apply for Medi-Cal Long Term Care benefits. Once this period of ineligibility expires, the applicant can then apply.

B. For every gift of $5,698, a one month period of ineligibility is created.

C. Example: A $20,000 gift divided by $5,496 equals 3.6 months. Medi-cal rounds down and reduces the period of ineligibility to the lowest full month. In this example, the ineligibility period assessed would be 3 months. In month 4, the applicant can submit an application.

  
 

Finding the right home care employee is very similar to choosing the right professional - it takes time to be sure that the selection process is proper, and sometimes the only way that you know you have done a good job and selected the right person is after the fact, through experience. However, the proper process is important. 

If an elder loved one is in need of homecare services, normally the first action is to search for candidates. The best ones will often come through word of mouth. If another client of an agency is satisfied with the care and support provided, this is normally a good reference point. If a personal reference is not available, then contacting a local discharge planner at a facility, or contacting the local senior citizen group, such as a council on aging, senior center, or social service agency may be the most appropriate means of finding the right agency. 

The next step is to interview the caregiver candidates you find through your search. Keep searching and interviewing until you find the most appropriate person to serve. Make sure that that person has the requisite ability, experience, and compassion to attend your loved one at home. For instance, the proposed caregiver may have significant experience with a person regarding bathing, dressing, feeding, etc., but perhaps they have not dealt with a person with a memory disorder such as Alzheimer’s. 

If the caregiver is merely providing light housework, cooking, and companionship, then would he or she also have the ability to transition into a higher level of care if and when the elder needs those services? If the caregiver needs to administer medication, do they have a license to do so? Also, the caregiver should be questioned as to whether they are available for additional hours if needed. 

Most agencies have pre-printed agency agreements, and it is very important to review these contracts before signing them. Sometimes the agency is willing to negotiate a change in the contract, and other times they are mandated through a parent company to not adjust the standard agreement. In most agreements there are provisions that the termination of the employee may be at will, without any advance notice or pre-payment.

On the other hand, there may be a provision that if the family wishes to engage the services of the caregiver privately, then there is a significant “buyout” fee that the family must pay to the agency. Also, provisions regarding whether the caregiver is expected to use their own automobile for transportation to doctor’s appointments, sporting events, and activities such as movies, lunches, etc. should be outlined. Most reputable agencies are licensed and bonded, and if desired, these certificates of insurance and liability should be provided to the family prior to the contract’s completion. 

The family should clearly define what they need and want for their loved one prior to the signing the contract. It is important for both parties to understand their duties, responsibilities, and the anticipated care prior to the signing of the contract to prevent problems in the future if the services are not provided as expected.
But in getting back to the process of finding the right caregiver for your loved one, your gut reaction is rarely wrong. Do your homework and don’t be hasty.

WHEN IN DOUBT, CALL ADULT PROTECTIVE SERVICES.  BETTER TO BE SAFE THAN SORRY!

Huguette Clark and Brooke Astor have a lot of things in common. They both were wealthy beyond wildest imagination, they both enjoyed their 104th birthday, and they both seem to have suffered elder abuse at the hands of the people they entrusted with their care. 
 
In 2009, Brooke Astor's son and attorney were convicted of stealing $10 million from the socialite's $100 million fortune. Today, investigations into the actions of the advisors (attorney and account) for104-year-old Huguette Clark, a reclusive heiress worth half a billion dollars, are being conducted by the New York District Attorney’s Office.  
 
It begs the question, who would steal from your grandmother? The answer unfortunately is far too common. In the Astor case, Brooke’s own son was convicted of grand larceny and in Huguette’s case, the lawyer and accountant are being investigated. Sadly,  the issues surrounding the handling of the money of these two women are not unique.   
 
It is estimated that near half a million elderly people are being abused by family, friends, and/or advisors, potentially taking $2.6 billion from infirm older Americans. The crime is known as elder financial abuse. Financial expert and consumer advocate, John Wasik has called it "the crime of the 21st century."
 
How does it happen? Many of these elderly people are too sick or infirm to know that abuse is taking place or to be able to report the abuse. If a person has dementia or alzheimer’s disease they are not going to know that their money is being squandered. For those that suspect there is an issue, fear of abuse, abandonment, and retribution also play a role in keeping them from reporting their concerns. 
 
Commonly, the tool used by the criminals who steal from the elderly is the power of attorney document, which enables a designated person to make the financial decisions on behalf of another. The decisions of the person exercising the power of attorney are rarely reviewed, and the document has been called a "license to steal." Even though there is a fiduciary responsibility on the part of the person appointed, if no one is holding them accountable, they can get away with the crime.  
 
In order to protect the elders in your life, it is of the utmost importance to get involved and stay involved in their lives. The crimes are often unreported or not pursued because relatives or friends are not involved in an elder’s life or assume that someone else is looking out for them. People are reluctant to get involved because they do not want to be perceived as a trouble-maker or greedy. The concern that they will be regarded as only looking out for their own interests in an inheritance also often keeps people from speaking up. 
 
Remember that this is abuse, and if there is financial abuse, there is likely other forms of abuse occurring as well. Having as much information as possible is helpful. Ask questions, lots of them. Get documents like bank statements and investment records. Keep in mind you are not alone, every state has an Adult Protective Services agency. Find the one that serves your area, and make a report. The new healthcare reform package has a provision called the Elder Justice Act, which set aside nearly $800 million to expand efforts to investigate elder financial theft over the next four years. This is a growing problem and elder care professionals are working to stem this type of fraud and abuse. 
 
But make no mistake, the power of attorney is not the problem itself. It is a good and very useful document, and as estate planners and elder law attorneys, we do recommend executing one and will continue to do so. However, the power of undue influence is so great that if a family member, or friend, or advisor is entrusted to care for an elder, they are often trusted to the point they can drive that elder to the bank and stand by while money is withdrawn and turned over to them. You would be surprised often this happens. You would also be pleasantly surprised to know that on numerous occasions, very astute and well intentioned bank tellers report the incidents. They get involved and by doing so are thankfully able to thwart a theft or prevent a future abuse. 
 
Do not be confused, just because Susie is going to inherit all of her mother’s money when she dies, this does not mean that Susie can help herself to part, some, or all of her mom’s money during her mother’s lifetime. Susie is not entitled to it until she actually inherits it at the time of mom’s death. Susie may be paying for kid’s college education, trying to save her own house from foreclosure, or heading for a lavish vacation on Mom’s money, however, not one of those reasons is justification for taking mom’s money. Hey Susie...its not your money! Mom still has to pay for her healthcare, housing, and living expenses. And what if mom needs a vacation?. Once its gone, the money is gone, and that can happen pretty quickly these days. Do not be afraid to get involved.
 
If you suspect an elder is being taken advantage of by a family member, friend or anyone else. Do not sit idly by. If it were you, your grandmother or grandfather, wouldn’t you want someone to help?

There has been some discussion recently relative to the workings of a Health Proxy (HCP) and a Power of Attorney (POA.) While the HCP agent attends to all medical decisions regarding the principal, who may then become physically or mentally incapacitated, it is the POA who attends to the payment of all bills and collection of income and assets of the incapacitated person. Often times, the principal may determine that the same person should not serve as both the HCP agent and the POA agent. Therefore, the principal may name two different individuals to serve in the respective capacities.

It is important that both individuals, if they are not the same person, will work together in the best interest of the principal, as there may be a conflict. For instance, the HCP agent is charged with the determination of the medical care for the principal. This may possibly include 24/7 home care or placing the person in an assisted living facility or long term care unit. While the HCP agent is making this decision, it is up to the agent under the POA to pay for the care that is contracted. 

Different facilities may elect to have either the POA, the HCP, or possibly both, sign the admission forms and responsibility forms for the principal when the admission is allowed. So long as both parties agree, and there is no conflict, the best interests of the incapacitated person are going to be carried out by the partnership between the decision makers. However, when one of the decision makers does not agree, it becomes a true conflict that must be resolved. 

The HCP agent may determine that the principal needs long term care and institutionalization. The POA may believe that the person does not need that level of care, but rather can use either assisted living or home care with either a significant amount of caregivers or perhaps 24/7 care. In the event of a disagreement, one of the decision makers will have to petition the Court for authority to take over. In these situations, it could be an expensive, long, drawn out process taking several months before a decision is reached by the Judge. Once the Trial Judge makes a decision, it is likely that one of the parties will appeal the case to the higher court. This is an unfortunate circumstance, as the incapacitated person is now possibly paying for two lawyers, one to represent the person in defending an action, and the other to pursue an action against the incapacitated person. In the alternative, perhaps the parties may seek the guidance of a mediator who is trained in resolving conflict without the need for court action. This is also expensive, time consuming, and public. 

Therefore, it is important to consider naming the same person to serve in all documents, or whether it is better to have separate decision makers to deliberately involve more people and provide as more oversight for the best interest of the principal. Often, a person merely names the oldest child or their closest living child, who may not be the best person to serve in all capacities. While there is no right or wrong, it is important to consider the maturity, time available, expertise, geographic addition, and all other factors regarding the decision maker on these documents before naming them.