1. Long Term Care Strategic Planning using the Alabama Family Trust
Melanie B. Bradford, Executive Director
ALABAMA FAMILY TRUST
2820 Columbiana Road
Vestavia Hills, AL 35216

2. As an assisted living facility, you may be wondering. . . . .
Why do I need to know about long term care planning?

3. To be truly helpful to your residents and their families
To help make sure assets are allocated properly if a resident is part of a couple and one spouse may be going to a nursing home.
If your facility is associated with a skilled nursing facility, you are helping yourself if proper planning is done to make sure there is money to pay during any penalty periods.

4. The Rising Likelihood of Needing Skilled Nursing Home Care?
70% of Americans over the age of 65 will need long term care at some point in their lives.
1 in 9 people over the age of 65 has Alzheimer’s.
1 in 3 seniors dies with Alzheimer’s or another form of dementia.
The average length of stay in a nursing home is 2.5 years ($195,000 or $390,000 for a couple).
However, the life expectancy of someone diagnosed with Alzheimer’s is between 4 and 8 years.
By 2050, it is anticipated that 14 million people will have Alzheimer’s. In 2013, America had 5 million with Alzheimer’s.
The average cost for a nursing home in Alabama is $6,500 per month.

5. Long Term Care Options Living at home Independent living
Assisted Living
Memory Care
Skilled Nursing Facility or VA Nursing Home

6. Methods of Paying for Long Term Care
Medicare
Private Pay Long Term Care Insurance
VA Aid & Attendance
VA Nursing Home
Medicaid

7. Medicare Limited to 100 days
may pay for days 1 to 20 following a 3 day hospital stay if the patient needs skilled nursing or rehab care.
For days 21 to 100, the patient pays $161 (2016) and Medicare pays any remainder.
Medigap policies may pay the patient’s daily deductible for days 21 to 100 of rehab stay.

8. VA V.A. nursing homes 4 V.A. nursing homes in Alabama:
Long waiting lists
Veterans with service-related injuries and disabilities receive top priority
4 V.A. nursing homes in Alabama:
Bill Nichols State Veterans Home in Alexander City
Floyd E. “Tut” Fann State Veterans Home in Huntsville
William F. Green State Veterans Home in Bay Minette
Colonel Robert L. Howard State Veterans Home in Pell City

9. VA Aid and Attendance Pension
Pension benefit; not service-related disability
Income and asset requirements: needs based benefit
Benefit for a Wartime Veteran is up to $1,788 per month ($2,120 with one dependent).
Benefit for a Surviving Spouse of a Wartime Veteran is up to $1,149 per month.
Benefit is reduced to $90 per month for nursing home care IF application is made for Medicaid benefits.

10. VA Aid and Attendance Pension
Wartime Service (or widow of wartime veteran)
90 days or more of service
One day during a period of war
Honorable or general discharge; or
Served for any period of time and discharged for service related disability
Medical Criteria
Needs assistance with two or more ADLs
Income and Asset Requirements - Countable income must zero out for max benefit; asset limits determined by age formula.

11. Long Term Care Insurance
Long term care insurance payments can be used in conjunction with income and savings/assets to pay for long term care in a skilled nursing facility.

12. PRIVATE PAY
The average cost of assisted living care each month is $3,000.
The average cost of nursing home care each month in Alabama is $6,500.
- This cost is for room and board only.
- Payment will come from client’s income, savings, and assets (including IRAs, annuities, CDs, bonds, land, and life insurance). If married, payment will come from a combination of the couple’s assets as determined by a formula.

13. For Many Seniors: Alabama Medicaid is the Only Option
If the senior needs assistance with activities of daily living, does not have long term care insurance, and lives for a lengthy time, the assets the senior spent years accumulating may be exhausted paying for assisted living care.
When this happens, the senior has little choice but to move to a skilled nursing facility.

14. Alabama Medicaid What is it and how does it work?
We need to understand it to understand the pitfalls in planning and how to prepare the residents – and ourselves

15. Alabama Medicaid: Basic Eligibility Requirements
To receive long term care nursing home benefits, a person must meet general medical and financial criteria:
The person must be a U.S. citizen; or, a qualified alien
The person must live in Alabama and intend to stay in Alabama
The person must meet medical criteria
The person’s gross income must be at or below $2,199
The person’s countable resources must be at or below $2,000

16. Income
An individual keeps his/her own income and is responsible for using it for long term care expenses (with few exceptions)
To receive Medicaid, income cannot exceed the monthly limit of $2,199
However, excess income can always be “corrected” using a Qualifying Income Trust (QIT) so Medicaid will “overlook” the excess income.

17. Monthly Needs Allowance for Community Spouse
The Community Spouse, the spouse remaining at home, is allowed to keep the portion of the Institutionalized Spouse’s income necessary to raise the gross monthly income for the CS to $1967.
The CS cannot retain this income during the spend down period.
Example: Mr. Smith receives a pension and Social Security totaling $3,000 per month. Mrs. Smith receives Social Security totaling $800 per month. Once Mr. Smith is eligible for Medicaid, Mrs. Smith may keep $1,967 of Mr. Smith’s income to supplement her income. The remainder of Mr. Smith’s income will be applied to his health insurance premiums, prescription drug premiums, $30 monthly allowance with the remainder being paid to the nursing home.
$1,967 – $800 = $1,167 that Mrs. Smith can keep.

18. Resource Requirements
A Medicaid applicant is limited to $2,000 in countable resources.
Some resources are excluded; but, those exclusions are very limited.
If a couple is married, EVERYTHING, no matter how the property is titled or “tied up” is on the table for Medicaid eligibility purposes.

19. The Snapshot: Determining the Assets
Medicaid will take a “snapshot” of a couple’s assets on the date of institutionalization to determine the amount of spend down for the IS and what the CS can keep.
All resources owned by either spouse are included in this assessment. It does not matter if there is a prenuptial agreement.
To the surprise of most, the CS’s IRAs, cash value of life insurance, separate accounts, business interests, and assets inherited from other sources are included.

20. What Can a Spouse Keep? Out of all countable assets, the CS may keep:
A minimum of $27,000 in countable resources; or
One half of the couple’s total assets up to a maximum of $119,220 (2017).
This can have very harsh results. It may mean that the family farm your patient/client’s wife inherited from her parents must be sold. It may mean the CS’s IRAs are liquidated and used for the IS, not the CS – despite the fact that she earned the funds.

21. What is “Spend-Down”?
Generally speaking, spend-down occurs by the CS or family spending everything required to reach the poverty criteria of Medicaid on nursing home care before Medicaid will pay any benefits.
Example:
John and Mary own their home, a car, a joint checking account with $9,000, a savings account with $30,000, a mutual fund account with 200,000, John’s IRA of $80,000, and Mary’s IRA of $40,000.
The home and car will be excluded.
Of the total remaining assets of $359,000, Mary will be able to keep $119,220. She will keep her IRA, the checking and savings accounts, and $40,220 of the mutual fund account. Everything else must be spend on John’s nursing home care. John can keep the $2,000 maximum. Mary will spend $237,780 for John’s care before he is eligible for any benefits.

22. DO YOU SEE PROBLEMS FOR MARY?
Mary has no idea that she only needs to spend $237,780 for John’s care. She spends down $300,000 before she ever asks about applying for Medicaid. She loses her ability to keep $119,220 because it no longer exists.
Mary does learn that she only needs to spend down $237,780 before John should be eligible for nursing home care; but, she doesn’t know that the gifts to her granddaughter for college tuition are a problem. She applies for Medicaid and learns that John will be denied because of the gifts totaling $30,000.
Mary does learn that she only needs to spend down $237,780; but, John has a lot of extra needs that Medicaid doesn’t cover. Mary has to use her own funds to pay for things that John needs.

23. Another Example of “Spend-Down”?
John and Mary own their home, a car, a joint checking account with $9,000, a savings account with $30,000, a mutual fund account with 100,000, John’s IRA of $40,000, and Mary’s IRA of $8,000.
Mary has been in assisted living for two months. John suddenly has a stroke and is in a skilled nursing facility. It is expected that he will remain in the skilled nursing facility.
Mary is paying $3,000 per month and John will be paying $6500 per month after his Medicare days for a total of $9500 per month. They have $187,000. They will be able to pay for their care using their own funds for a period of 19 months. If they sell their home, they should be able to pay for their care for 31 months or roughly 2.5 years.

24. DO YOU SEE PROBLEMS FOR MARY?
Mary is 76 years old. She is in good health although she does need some assistance with bathing and dressing. Her memory is sharp.
Her mother and aunts lived into their 90’s and needed about the same level of assistance as Mary now needs.
If Mary lives to be 95, she needs to provide for her long term care for 19 years.
She cannot accomplish this goal while paying for John’s care.
If John applies for Medicaid, Mary will only be allowed to keep one-half up to the maximum of $119,220. If the couple has $187,000 and sells their home for $114,000 for a total of $301,000.00, Mary only gets to keep $119, This will only pay for 39 months of care or approximately 3 years.
What if Mary could keep more of John’s share to use for her assisted living costs?

25. Medicaid Problems: Penalty Issues
Son took $40,000 from Dad’s account. Dad did not authorize this; but, Dad refuses to criminally prosecute son.
Granddaughter “convinced” Grandmother to “loan” her $10,000 as a down-payment for a car. No written documentation regarding the “loan” exists and granddaughter refuses to pay the money back.
Sam had a stroke that completely disabled him at age 60. He is in a skilled care facility. Before the stroke, Sam had a gambling problem. He routinely went to Tunica and Biloxi to gamble. More recently, he went to Wind Creek to gamble. Sam always took cash on his trips and there is little to no documentation proving he was gambling. Over the last few years, it is estimated that he lost over $125,000. There is no proof that he ever won.
Son transferred $110,000 overseas for a mail-order bride. Mom has Alzheimer’s; but, she sent a note to her financial advisor approving the transfer because her son “is lonely.”

26. Penalties Improper transfers/gifts cause penalties.
There is no money to pay a facility during a penalty period if Medicaid is applied for in the traditional method

27. ALABAMA FAMILY TRUST TO THE RESCUE

28. What is Alabama Family Trust?
Alabama Family Trust (AFT) is a non-profit 501(c)(3) pooled trust company that administers special needs trusts for people with disabilities.
AFT was created by the Alabama legislature in as the entity designated to provide pooled trusts services compliant with federal and state law.
AFT is able to shelter monies that otherwise would keep a disabled person from qualifying long-term care Medicaid.

29. Pooled Special Needs Trusts: Alabama Family Trust
The purpose of the pooled trust is to pool funds of disabled individuals for management and investment purposes while preserving eligibility of benefits for the disabled individual.
The AFT board serves as Trustee. The AFT board is normally composed of 11 board members. Of those members, many are practicing attorneys experienced in special needs trust matters. The remaining members are experienced in mental health and finance.
The board reviews requests for disbursements from the Co-Trustee (usually a family member) and approves or disapproves based on whether the disbursement will cause the disabled individual to be ineligible for benefits.
No danger of the Trustee dying and leaving the beneficiary without a Trustee.

30. What is a Special Needs Trust?
A special needs trust is designed to shelter assets and allow the individual to be within Medicaid’s resource limit.
The disabled individual receives Medicaid benefits if otherwise eligible.
Trust assets are used to supplement the needs of the disabled individual.
For individuals 65 and older, a pooled special needs trust must be used.

31. Excluded Resources: Pooled Self-Settled Special Needs Trusts
The assets in a self-settled pooled special needs trust established under 32 U.S.C. §1396(d)(4)(c) are not considered available for eligibility purposes.
This type of trust must be for a disabled person.
The assets placed in the trust are assets that the disabled person would otherwise need to “spend-down.”

32. Excluded Resources: Pooled Self-Settled Special Needs Trusts
The family can use the monies in trust to buy things for the disabled person. Examples include:
Pay the difference for a private room at the nursing home
Pay for assisted living care or caregivers (at home or in a facility setting)
Clothing
Televisions; books, magazines
Lift chairs
New glasses, hearing aids or therapies that Medicaid does not provide
Manicures/pedicures and salon services
Pay vet bills, etc., for beloved pets
Pre-paid funerals and burial items

33. Excluded Resources: Pooled Self-Settled Special Needs Trusts
Using the monies in the trust for the disabled person’s needs means that the spouse or children will not need to pay for these items out-of-pocket.
The disabled person’s trust assets can be spent for his/her own needs.
The Community Spouse monies will be able to qualify faster for the Monthly Maintenance Needs Allowance

34. Excluded Resources: Pooled Self-Settled Special Needs Trusts
Placing assets in AFT and applying for Medicaid means that Medicaid will do a penalty assessment. Penalties can be paid from the trust funds to the skilled care nursing home facility.
THIS MEANS THE NURSING HOME GETS PAID, THE PATIENT STAYS IN THE NURSING HOME, AND THE “GOOD CHILDREN” ARE NOT FORCED TO PAY FOR PENALTIES.

35. Excluded Resources: Pooled Self-Settled Special Needs Trusts
Placing assets in AFT for a spouse in assisted living and applying for Medicaid for the spouse in a skilled nursing facility means the spouse in assisted living can keep more than the normal $119,220!!!!
This means the spouse can afford to stay in assisted living longer.

36. Benefits of the Alabama Family Trust
AFT will accept trusts as small as $1,500.
The trust assets are pooled for investment purposes; yet, retain independent character.
$750 set-up fee. The fees are very reasonable in comparison with most private trustees.
AFT does not charge administrative fees for trusts with balances under $3,000.

37. How do I Establish a Trust?
Review and complete the documents establishing the trust. The forms are online at
The disabled senior may establish the trust if he/she has capacity.
An agent using a Durable Power of Attorney may establish the trust. The Durable Power of Attorney document, if created on or after January 1, 2012, must include specific language giving the agent the ability to establish a trust.
A legal guardian/conservator may establish the trust.
A court may establish the trust.

38. Is it Difficult to Establish a Trust?
You do not need an attorney to establish a trust with AFT. However, we do not give legal advice and do recommend that you have an experienced elder law attorney advise you.
Establishing the trust is as simple as completing the paperwork that is on AFT’s website, submitting the payment of funds to the trust, and providing AFT with other required documentation such as: a letter or copy of medical records documenting the person’s disability, copies of driver’s licenses for any Co-Trustees, copies of any court orders or Durable Power of Attorney documents being used to establish the trust.

39. How does AFT work for Disbursements?
The Co-Trustee will submit a disbursement request to AFT for funds to be expended for the disabled person.
Examples:
Co-Trustee sends disbursement statement and copy of nursing home bill and letter from Medicaid setting out a penalty period. AFT pays the nursing home bill directly to the nursing home.

40. How does AFT work for Disbursements?
Examples Continued:
Co-Trustee sends disbursement statement and copies of receipts for clothes purchased for disabled person. AFT reimburses the Co-Trustee for the funds spent on the clothing.
Co-Trustee sends invoice for lift chair to AFT. AFT pays the furniture store directly for the chair.
TRUE LINK CARD
Controlled debit card. Co-Trustee sends invoice for lift chair to AFT. AFT programs card for the furniture store and sets the price of the chair and Co-Trustee can pay for the chair at the store.
Controlled card is necessary to protect eligibility for benefits . Allows Co-Trustees to make proper purchases more easily.

41. What happens when the Disabled Person Runs out of Money: Funds may be available from AFT’s charitable fund
AFT has a charitable fund that can help beneficiaries that have depleted their trust accounts.

42. What happens when the Disabled Person Dies
Federal law and Alabama law require that any money remaining in the disabled person’s trust account be used to pay toward reimbursement of the services provided by Medicaid.
10% of any funds remaining are applied to use for people that have exhausted their accounts.
The remaining funds are used to reimburse Medicaid, to the extent possible, for services provided to the disabled person.
Any monies remaining are distributed to the disabled person’s family or the people designated by the disabled person to receive the assets.

43. Remember our Scenarios? Alabama Family Trust can Help

44. How can AFT help Mary?
Mary has no idea that she only needs to spend $237,780 for John’s care. She spends down $300,000 before she ever asks about applying for Medicaid. She loses her ability to keep $119,220 because it no longer exists.
Mary does learn that she only needs to spend down $237,780 before John should be eligible for nursing home care; but, she doesn’t know that the gifts to her granddaughter for college tuition are a problem. She applies for Medicaid and learns that John will be denied because of the gifts totaling $30,000.
Mary does learn that she only needs to spend down $237,780; but, John has a lot of extra needs that Medicaid doesn’t cover. Mary has to use her own funds to pay for things that John needs.

45. How can AFT help Mary?
If $271,000 could be set aside for Mary in AFT and $30,000 could be set aside for John in AFT . . .
Mary could pay for 90 months or 7.5 years of assisted living care. She would be 83.5 years of age.
John would have $30,000 to pay for his supplemental needs

46. How can AFT help with the other Penalty Issues?
Son took $40,000 from Dad’s account. Dad did not authorize this; but, Dad refuses to criminally prosecute son.
Granddaughter “convinced” Grandmother to “loan” her $10,000 as a down-payment for a car. No written documentation regarding the “loan” exists and granddaughter refuses to pay the money back.
Sam had a stroke that completely disabled him at age 60. He is in a skilled care facility. Before the stroke, Sam had a gambling problem. He routinely went to Tunica and Biloxi to gamble. More recently, he went to Wind Creek to gamble. Sam always took cash on his trips and there is little to no documentation proving he was gambling. Over the last few years, it is estimated that he lost over $125,000. There is no proof that he ever won.
Son transferred $110,000 overseas for a mail-order bride. Mom has Alzheimer’s; but, she sent a note to her financial advisor approving the transfer because her son “is lonely.”

47. Alabama Family Trust:
Alabama Family Trust allows a family to apply for Medicaid sooner to determine if there are penalties
Alabama Family Trust helps the spouse that remains at home or in Assisted Living
Alabama Family Trust can pay the nursing home out of trust proceeds during the penalty period (which helps the family and the nursing home)
Alabama Family Trust can buy things for the person in the nursing home so that his/her standard of living is better
Alabama Family Trust works to protect assets so the beneficiary continues to receive valuable Medicaid benefits.

48. Melanie B. Bradford, Executive Director ALABAMA FAMILY TRUST
For more information, please contact:
Melanie B. Bradford, Executive Director
ALABAMA FAMILY TRUST
2820 Columbiana Road, Ste 103
Vestavia Hills, AL 35216
Doug Marshall – Chief Financial Officer & Community Outreach
Lesley Byars – Chief Taxation Officer
Laura Jenkins – Staff Attorney and Trust Specialist
Shannon Brubaker – Chief Administrative Officer