September 28, 2017: Financial Planners & Medicaid

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Presentation transcript:

September 28, 2017: Financial Planners & Medicaid Daniel Timins, Esq., CFP® dan@timinslaw.com 477 Madison Avenue, Suite 240 New York, NY 1022 (212) 683-3560

Disclaimer All information contained in these pages is for informational purposes only. It should not be considered legal advise. Please consult an attorney before taking any steps based on this information.

Medicaid: Why Should Planners Care? Clients are asking about it Children are demanding it (for parents) Preserves wealth for another generation Allows the Planner to: create a relationship with the children maintain AUM for another generation

Remember: Medicaid is NOT LTC Most LTC policies are pools – use as much of the pool as you desire when you desire Medicaid chooses how much care you get, I.e. may only qualify for 4 hours of home care per day instead of 24 hour In fact, qualifying for 24 hour home care is now very, very difficult LTC usually covers Assisted Living Facility Medicaid does not cover assisted living costs LTC gives you higher-level care givers you can easily replace Medicaid-eligible workers tend to be lower quality Medicaid is best looked at as the end game of the caregiving process Use LTC for initial care needs and transfer assets immediately upon LTC being initiated That way the best care is given early in the process when recipient’s quality of life is still best

MEDICAID A government program that pays for people needing help with ADLs Reminder: NOT Medicare MEDICARE: An “Entitlement Program” – you paid for it, you get it Pays for HEALTH care MEDICAID: A “Needs Based Program” “Means Tested” must meet asset & income limitation requirements

The Need: Activities of Daily Living ACTIVITIES OF DAILY LIVING (“ADLs”) Transferring (Ie. Walking) Bathing Dressing Eating Continence Toileting

How is the Planner Still Relevant? Proper income generation still required Knowledge of Basis / Capital Gains taxes is more important than ever Identifying ALL of the assets is ESSENTIAL Identifying ALL of the gifting is ESSENTIAL

Types of Medicaid Home / Community Care Institutional The type of Medicaid benefit you receive determines “look back” periods (I.e. the penalty for transferring assets) Home / Community Care Personal care, physical therapy, home health care and home health aid services; clinical or out-patient basis; includes physicians, dentists, pharmaceutical, nursery Institutional Hospitals, medical facilities, nursing homes

Financial Eligibility Requirements for an Individual ASSETS $14,850 in the recipient’s name EXCEPTIONS: “Burial Allowance” of $1,500 Life Insurance: $1,500 cash value Personal Property (unlimited) Client’s House (ONLY for Home & Community care) Supplemental Needs Trusts Medicaid Trusts Retirement Plans (IRAs) are exempted from assets if they are in “payout status” (Required Minimum Distributions or Separate and Equal Periodic Payments if recipient is under age 59 ½), in which case payments are included in Income MONTHLY INCOME HOME CARE: $845 per month Any excess income must go to the recipient’s “SPEND DOWN” INSTITUTIONAL (at a Nursing Home): ALL of the recipient’s monthly income in excess fo $50 must be paid to the NH to offset Medicaid payments

Transfer Penalties Home & Community Care Nursing Home Department of Social Services and Medicaid impose a “Lookback Period” for transferring assets outside of the proposed recipient’s name Home & Community Care 3 MONTH Lookback One Strategy: Transfer all financial assets (except $14,850) to a non-spouse, wait one month for bank statements to be updated, then apply for Home Care. DOWNSIDE: If the recipient needs Nursing Home care the 5 Year Lookback rule applies Nursing Home 5 Year Lookback Period, and the Homestead can be attached by Medicaid EXAMPLE: In January, 2011 Mary transfers her Coop and most of her assets to her son Joe (total of $280,000), and applies for Home Care. In March 2015 Mary goes to a Nursing Home. She failed to make the 5 year Lookback (4 years & 2 months). Nursing Home Care in Manhattan equals approximately $12,000 per month. $280,000 (amount gifted) = 23.3 MONTH $12,000 (monthly benefit) “Penalty Period” Medicaid will not pay Mary’s Nursing Home benefits for 23 months. ..and Joe is liable. Joe should have paid for Mary’s care for 10 more months to get through Mary’s Lookback Period.

MEDICAID TRUSTS Elder client is Beneficiary / Creator, child(ren) is the Trustee NO principle can be distributed, income distributions are optional A pure “Asset Transfer vehicle” Perfect for illiquid assets, such as real estate Look-Back Period still applies Does NOT work at the last minute – need to plan Step-up in basis is maintained at client’s death Assets are protected from client’s creditors Deed & account changes required; separate tax return may be needed for invested assets

Other Planning Options For 3rd Party Money (Ex: Parent’s $) Inter Vivos Supplementary Needs Trusts Testamentary SNTs (in Will) For 1st Party Money (the Recipient’s $) Pooled Trusts (payback provisions apply) Inter Vivos SNTs (payback provisions apply) Promissory Notes (protects 40%-45%)

What About the “Well” Spouse? The “Community Spouse” is entitled to some assets and income, but they are limited If spouse is in a Nursing Home: $3,022 of income per month ~$120,000 of assets If spouse has Home Care: Combined income of $1,200 per month During the Medicaid Application process the well spouse may exercise a “Spousal Refusal” to avoid inclusion of his/her assets and income Medicaid may accept this, but will have a claim against the well spouse when he/she dies Often asks for 25% of community spouse’s income over $3,022 New “Spousal Impoverishment” rules avoid liens

Tips for “Older” / Sick Clients Execute POAs & HCPs early Gift early / Fund Trusts early Pre-pay burials Look into child / sibling care givers for homestead exemption Look at disabled parent / child pairs Fund IRAs / Retirement as much as possible

Reminder: What Does NOT Work Roth IRA Conversations do NOT avoid RMDs / 72t SEPP STILL have to take RMDs Commercial Annuities are HORRIBLE for Medicaid Planning (unless in IRAs) Large cash values in Life Insurance policies are also bad - $1,500 limit

YIKES! Care Givers You “Hire” someone at 30 Hours Per Week An Employee? You “Hire” someone at 30 Hours Per Week Need Worker’s Comp Withhold for Payroll Taxes Should have a Time Card If You Don’t… Worker’s Comp can GET YOU IRS / NY Tax authority can GET YOU Care Giver can GET YOU

BEWARE! (Caregiver Buzz Words) “This is a family friend” “She only accepts cash” “We pay her under the table” “Mom doesn’t like ________” “We have known her forever” “A friend recommended her” “She can work 24 / 7”

Care Giver Prep Hire an OUTSTIDE Social Worker Not biased toward care hours Use an AGENCY for Care Givers IF you choose an unlicensed Care Giver: Background Check!!! Do ALL things on prior page Keep receipts: Care may be Tax Deductible Do NOT pay cash