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Preparing Asset Inventories When on the Long -Term Care Journey

October 27, 2021

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In most people’s experience the creation of an asset inventory may seem to consist of nothing more than creating a list of assets.

However, in many cases, nothing could be further from the truth.

Some Issues that can Complicate Your Asset Inventory

The preparation of an asset inventory will depend, in part, on what the purpose of the asset inventory is for. There are many times in life that the preparation of an asset inventory is necessary, but the purpose for which the inventory will be used can vary.

For example, it is important to create an asset inventory at various times that include but are not limited to the following:

When you are ill, and high-cost long-term care costs may loom in the future.
When you are looking to establish eligibility for Medicaid for long-term care in either a supportive living facility or a skilled nursing facility.
When you’re contemplating transferring the responsibilities of conducting your affairs to a fiduciary such as an agent under power of attorney, a guardian, or a trustee.
When you’re doing estate planning both for disability planning and death disposition.
When you’re doing estate planning for the minimization of federal and Illinois estate taxes and income taxes
When you are doing estate planning for asset protection purposes.
When you’re doing estate planning to avoid probate.
When you are attempting to refinance.
Also, there are many other instances when an asset inventory is important especially in the commercial sector when financing is involved.

As an Elder Law attorney, I will focus momentarily on challenges faced by our clients that are seeking Medicaid for long-term care. Often, we are seeking to assist clients with specific issues involving asset inventories. In cases involving individuals who are applying for Medicaid, their asset level must be down to $2,000. Quite often the easiest way to get to those lower asset limits is to liquidate assets and convert to cash. However, in doing so, various issues arise, some of which I will describe below:

Any liquidation of any tax qualified retirement account such as a tax qualified annuity, 401(k), IRA etc. will trigger tax, except for a few exceptions. Quite often however, our clients are not sure whether their accounts are tax qualified or not. Hence the need for a thorough asset inventory.
The payment of debts prior to the filing of the Medicaid application for long term care, must be given adequate attention regarding the order in which debts are paid. Sometimes certain creditors have priorities over other creditors. Any failure to recognize these priorities and creditors can result in allegations of a fraudulent conveyance. Pay attention to due on sale clauses, and covenants in various contracts dealing with early prepayment.
In the liquidation of assets, sometimes there are penalties associated with early liquidation. For example, annuities can have early withdrawal penalties and surrender charges. Sometimes notice has to be given before you can exit from the contract.
Payment of outstanding debt such as credit card debt, mortgages and HELOC (home-equity) loans, may become an important part of your overall strategic spend-down plan when you’re seeking governmental benefits. In trying to reach the correct statutory asset limits for a spouse for example, paying off existing debt is often a wise choice in attempting to reach the correct asset limit.
Long Term Care Insurance can and should be considered an asset and income source for certain governmental benefits, but make sure to understand when and under what circumstances the policy terms will make payment available. Some policies are very strict regarding their elimination period (which is a form of deductible before payment starts 30 days, 60 days, etc.). Also, there are often restrictions on where and what the payments can be made for.
When seeking needs based governmental benefits like Medicaid, be sure to review of prior years’ account statements to determine whether there are prior transfers or gifts and other uncompensated transfers of cash or property that can make Medicaid eligibility impossible is such transfers were made within the past 5 years. This” lookback period” is often referred to as the 5-year Medicaid lookback period. This lookback period can be a liability when you look for Medicaid eligibility for long-term care, that results in a delay of the commencement of your monthly Medicaid payment.
Homes and principal residences may need to be listed for sale when an individual seeks Medicaid eligibility, unless occupied by certain allowable individuals such as adult disabled children, spouses, or minor children.
Business assets may also need to be listed for sale.

In SPOUSAL cases:

In a spousal case, if you are going to apply for Medicaid for an ill spouse, then the ill spouse may have to liquidate or change the form of ownership of certain tax qualified assets such as IRAs and 401k. However, with IRA’s and other tax qualified retirement accounts we do not want to trigger the payment of taxes sooner than is necessary since the ill spouse may still be residing either at home or in a facility that does not take Medicaid or where no Medicaid eligibility is possible. Why pay tax to the IRS earlier than you need to?
Eventually however you may begin the process of transferring the IRA from the ill spouse who may be entering a long-term care facility to the healthy spouse who may still be living in the community by relying on the provisions of a properly drafted power of attorney for property. However, to accomplish this, it will be necessary to have specific gifting provisions in the power of attorney for the ill spouse, to make such a transfer from the ill spouse to the healthy spouse. If such power of attorney does not exist or does not contain specific provisions allowing such gifting, it may be necessary to seek the assistance of the guardianship court to accomplish such a transfer.
When transferring an IRA from a living ill spouse to the healthy spouse, be prepared to incur the triggering of all deferred income tax (for example say, 20% or more).
Remember many IRAs are structured as “IRA annuities” by your financial adviser, and there may be penalties and surrender charges on the transferring of such IRA annuity or the cashing out of such an IRA annuity.
Illinois Medicaid regulations provide that if the community spouse can remain living in the family home, then the community spouse is entitled to retain $109,560 of the couple’s nonexempt assets in addition to the family home, an automobile, personal and household effects, and Medicaid compliant prepaid burial arrangements. Because of these asset limitations, which may be exceeded under certain circumstances with careful planning that is authorized under the Medicaid regulations, it is crucial that you be thoughtful in inventorying your assets, and then transferring assets from one spouse to the other.

Conclusion:

As we indicated at the outset, the task of preparing an asset inventory should not be that complicated.

The difficulties come in when one seeks to re-position or transfer certain assets that are found in your inventory.

Many assets have contractual constraints, deferred tax implications, or problems with access before the assets can be freely used for the benefit of you and your loved one.

Be complete in the inventory of your assets and consider seeking professional guidance to deal with any complicated assets in your asset inventory when you or your loved one is on the long- term care journey.

Anthony B. Ferraro
Elder Law and Estate Planing Attorney
Partner at DiMonte Law Firm

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Dementia, Alzheimer’s, and Diminished Mental Capacity: How it Affects Your Patient, Resident, Client, or Loved One on the Long-Term Care Journey

By admin on

August 25, 2021

- Alzheimer's Care, Asset Protection, Blog, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Guardianships, Medicaid and Paying for Nursing Home Care, Nursing Home Admissions, Nursing Home Contracts, Probate, Estate, and Trust Administration, senior estate planning

Dementia, Alzheimer’s, and Diminished Mental Capacity:

How it Affects Your Patient, Resident, Client, or Loved One on the Long-Term Care Journey

By: Anthony B. Ferraro

Navigating the Long-Term Care Journey

In the previous installment we mentioned how important it is to begin senior estate planning or traditional estate planning with the execution of powers of attorney for both property and healthcare matters. Quite often we take for granted the notion that these documents will be something that are easy to have signed.

However, when a person has diminished mental capacity, sometimes it can be difficult or impossible to have such documents executed by a patient, resident, client or loved one because they no longer possess the required cognitive capability to sign the documents legally and ethically.

This is an impediment, even if we know that the documents would be good for them to have. If cognitive capacity does not exist, the documents cannot be signed, legally or ethically, even if the individual can go through the physical motion of signing their name. This is because even though they may be able to sign their name, they may not understand what it is they are signing.

Sometimes circumstances are very clear-cut as to whether mental capacity exists, but sometimes the facts surrounding behavior are not so clear or not so well understood.

What can be done then?

In situations where it is not clear as to whether a person has mental capacity, the attorney may need to seek consultation from a medical professional or mental health expert.

If a formal assessment is required, the attorney usually attempts to obtain the consent and cooperation of the client, if that is possible. Sometimes this can be upsetting or embarrassing to a client. Nevertheless, the determination of mental capacity is something that must be established before other matters encountered on the Long-Term Care Journey.

Assuming that either the consent of the client is obtained, or perhaps the client cannot consent, then who should a lawyer look to as a referral for consultation on matters of diminished mental capacity?

If the patient, resident, client or loved one is fortunate enough to have a physician regularly attending to them, then reaching out to that physician may be the first order of business. Sometimes however, primary care physicians may decline to opine on matters pertaining to mental capacity as they may feel that they are not trained sufficiently to administer psychiatric, neurological, and psychological assessment tests.

It should be noted that effective January 1, 2023, the State of Illinois passed a new law indicating that any person seeking licensure to practice medicine in all of its branches is to have completed three hours of education on the diagnosis, treatment, and care of individuals with cognitive impairments, including, but not limited to Alzheimer’s disease and other dementias. Illinois Senate Bill 0677.

If the attending physician will not undertake the assessment, you may look to other geriatric assessment professionals that can often take a multidisciplinary approach to determining mental capacity.

Keep in mind that the determination of mental capacity is sometimes complicated by the fact that mental capacity
can vary from day to day and can vary from task to task. This means that an individual can have the capacity for one type of task, for example, the execution of a power of attorney for healthcare, but may not have the sufficient capacity for the execution of a power of attorney for property that has gifting and asset repositioning authorizations written into the document.

Why the difference?

The reason is: the former task (executing a power of attorney for healthcare) has a lower cognitive capacity standard or threshold that must be met to establish capacity. The latter task (executing a power of attorney for property) has a higher cognitive capacity standard that must be met, which standard is, for example, closer to the standard that must be met to knowingly execute a contract.

These varying degrees of capacity are why it’s important to select professionals that are trained to parse the levels of capacity needed based on the specific tasks that are being contemplated. As you can see this can become complicated.

The Takeaway:

Obtain and sign powers of attorney for healthcare and powers of attorney for property, as well as any other applicable and appropriate estate planning documents that you need for either “senior” estate planning or traditional estate planning, as soon as possible. Waiting until a person one reaches the later stages in life, creates the risk that in those later stages, you may not have the requisite mental capacity to execute the documents that you need.

The problem that arises:

If you do not have the requisite mental capacity to execute documents legally and ethically, it may be necessary for counsel to engage in a protective action such as an expensive guardianship proceeding in the State of Illinois court system. For example, let’s assume the senior resides in the City of Chicago. At this time, in the Circuit Court of the County, the waiting period for a hearing on a guardianship petition can take as long as 4-6 weeks, or longer, due to tremendous case backlog in Cook County. This creates unnecessary expense and time delay that can be avoided with the timely execution of estate planning documents such as powers of attorney for property and powers of attorney for healthcare.

In our office we recommend people execute powers of attorney when they are 18 years of age! Obviously, the type of powers of attorney that an 18-year-old may need will be quite different than that of an 88-year-old, but the point is you need to get these documents in place sooner rather than later.

Don’t fall into the trap of helplessness that diminished mental capacity can create and possibly be permanently locked out of your constitutional right to self-determination, regarding your own health needs, property matters, estate plan, and other related matters.

The Illinois Rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material. If the context requires, please consider this letter and the enclosed literature to be Advertising Materials.

This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice. You should never attempt Medicaid planning, Estate Planning, Probate or Trust Administration without the advice of competent legal COUNSEL.

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Correcting Your Estate Plan on the Eldercare Journey

By admin on

May 24, 2019

- Alzheimer's Care, Asset Protection, Blog, Chicago, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Guardianships, Medicaid and Paying for Nursing Home Care, Medicaid spend down planning, Nursing Home Admissions, Nursing Home Contracts, Probate, Estate, and Trust Administration, senior estate planning

Why is it necessary to correct your estate plan on the eldercare journey?

Because most people’s estate plans plan for death. Most attorneys will draft these plans well and accomplish the goals of asset transferring upon death. However when you’re on the eldercare journey, and death is not imminent but you face long-term care and the costs of $5,000 to $15,000 a month (in a facility located in Chicago and the surrounding Chicago suburbs and Chicago metropolitan area in general), estate planning documents that serve you well at death may not serve you so well when the healthy spouse may unexpectedly may die before an ill spouse who is residing in an Illinois nursing facility.

So the question remains how do we correct your estate planning documents when you begin the eldercare journey?

First we make sure that upon death assets do not go directly from the predeceasing spouse to the surviving spouse. Rather, upon death, assets are transferred from the predeceasing spouse to supplemental needs trust (SNT) for the benefit of the surviving spouse. Please note that the supplemental needs trusts for spouses must be found in the will of the predeceasing spouse. So instead of doing pour- over wills where assets controlled by the will pour -over to the trust, we do the reverse: assets controlled in the trust pour – back to the will, where the supplemental needs trust are found for the benefit of the surviving spouse.

Why is it advisable to do this as couples age?

Because if at the time of the death of the predeceasing spouse, the surviving spouse finds themselves either in a long-term care facility or soon to enter a long-term care facility, we are not enriching the surviving spouse directly and causing more potential costly spenddown. Rather, we are leaving assets in a supplemental needs trust for the surviving spouse so the surviving spouse can apply for governmental benefits to cover the devastating cost of long-term care ( $5000 to $15,000 per month in Chicago and the Chicagoland metropolitan area and in other parts of Illinois as well), while at the same time having the benefit of the assets and the inheritance left by the predeceasing spouse to be found in supplemental needs trusts left for their benefit.

Don’t fall into two traps of erroneous thinking!

First, don’t fall into the trap of thinking that if one spouse becomes ill, the couple can leave assets directly to the children. This is a formula for disaster because it may create immediate ineligibility for any governmental benefits related to long-term care under the Medicaid rules. Medicaid will not permit you to do this.

Second, don’t fall into the trap of thinking that if one spouse becomes ill, we must completely disinherit that spouse or watch a complete spend-down without any assets being left for the surviving spouse. That is not true either. The reason is spouses are allowed to leave assets for each other in supplemental needs trusts (SNTs) as described above. Thus, there is no need to completely disinherit your loved one, you can leave them assets (in an SNT) that will improve the quality of their life if they need institutional care but at the same time allow them to remain eligible and qualify financially for governmental benefits because the assets that you left for them are not left directly in their ownership, but rather in a special needs trusts that I described above, which is perfectly permissible under the Medicaid rules.

Sounds complicated?

It is not complicated. It’s just different than what you have most likely done with your “traditional” estate planning in the past. As we start approaching our senior years at around age 60-65, in addition to looking into Social Security and Medicare and other related topics for seniors, couples that are concerned about the devastating cost of long-term care you should consider correcting their estate documents so that assets are not left directly from one spouse to the other, but rather, transferred to supplemental needs trusts as described above. This type of planning can save assets by properly relying on rules left for the benefit of aging spouses by Congress in its legislation of the current Medicaid laws that have provisions intended specifically to help avoid this type of spousal impoverishment.

Conclusion

Take advantage of these generous Medicaid provisions and correct your estate plan documents as you begin the eldercare journey around age 60 to 65. Note: If there is a diagnosis of illness prior to age 60 sometimes it is prudent to do this type of planning even earlier.

And once again, this is not the kind of drafting that one will try on their own, rather you need to seek elder law counsel to draft these documents because these documents will be closely scrutinized by governmental agencies.

Best to you and your loved ones,

Anthony B. Ferraro

PS: in the month of May 2019 we have presented at least six times to various audiences on the issues pertaining to Elder law and Elder care. Please contact our offices if you would like to become aware of future speaking engagements that you may wish to attend.

Also please be aware that it is our practice that before clients retain us that we offer them a free 15 minute telephone consultation before they even have to come into our office. If this will help you or one of your loved ones please feel free to take advantage of it by calling our offices.

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Seniors and Asset Protection Trusts for Long-Term Care

By Anthony Ferraro on

June 9, 2016

- Asset Protection, Blog, Chicago, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Medicaid and Paying for Nursing Home Care, Medicaid spend down planning, senior estate planning, Uncategorized

Do you have the right kind of trust?

Many of our clients come into our office with trusts. Most of the time these trusts are what are called revocable living trusts (RLTs). These types of trusts offer no asset protection even though seniors are often ready to conclude that they have protected their assets with such a trust.

Only certain types of irrevocable living trusts (IRTs) provide asset protection for long-term care. Irrevocable trusts, if drafted properly, may be considered a complete gift by the senior to the beneficiaries of the IRT, and thus out of the senior’s estate permanently. If, however, the senior has any access to principal in the IRT, then the IRT will not provide any asset protection from the costs of long-term care.

It is possible to allow seniors to maintain an income interest in the IRT, as opposed to an interest in the principal of the IRT, but this creates a more complicated audit process if and when the senior ever needs to look to the Medicaid program to pay for the costs of long-term care.

About 66% of all US citizens will be looking to the Medicaid program if long-term care is needed. Therefore, it is increasingly important to properly draft an IRT and also understand the time of the creation and funding of the IRT so that the creation of the trust will not interfere with a possible application for Medicaid to cover the costs of long-term care.

Seniors also have to keep in mind that there are significant issues in the drafting of an asset protection trust that deal with the following:

Income tax issues
Gift tax issues
Estate tax issues
Medicaid eligibility issues
Issues about the right beneficiaries, receiving the right assets, at the right time
Trustee issues
Using the IRT in a period of health for the senior versus a health crisis for the senior
Issues regarding selecting the right assets to place in the IRT

So you see, asset protection trusts are essential for many seniors, because they may be the only way assets can be protected, not only from the cost of long-term care but also the predators and creditors of their beneficiaries. But the drafting of an IRT is much more complex than the drafting of an RLT and seniors need to make sure that they retain an elder law attorney to maximize the chances that their trust is the right trust for them at that point in their life.

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The Risks of Using Non-Professional Home Caregivers

By Anthony Ferraro on

May 17, 2016

- Asset Protection, Blog, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Medicaid and Paying for Nursing Home Care, Uncategorized

Many of our clients seek to stay home for as long as possible, without entering an assisted living facility. This is perfectly understandable, and we use our firm’s skills to allow them to accomplish this objective as long as they can remain safe in their home. However, sometimes in order to remain at home seniors will look for in-home assistance.

We see 3 circumstances in which this can be dangerous for the senior.

First, not enough care is being delivered. Occasionally, a senior may believe they only need someone to do a little shopping, cooking, and cleaning for them. However, this is not always accurate, and the senior may need a lot more care. The test we use to determine what level of care the senior really needs is to ask a question: “If the house is on fire at three in the morning, is the senior going to be able to get out?” An honest answer this question will determine whether or not the senior has enough help. Shopping and cleaning are one thing, but sometimes a senior needs 24/7 care but may be reluctant to pay for such a large amount of care.

The second problem we see is that oftentimes care is provided by third party caregiver but the caregiver is a fly-by-night – the caregiver does not come through an agency, is not insured for workers’ compensation or liability insurance, there is no training of the caregiver, there is no regulation of the caregiver, there is no written care agreement, and nobody withholds the caregivers taxes as is most often required by the IRS.

For instance, if the caregiver injures themselves in your home while helping you, they can sue you, and quite often the caregiver is not trained to handle the appropriate lifting and moving that the senior requires. Moreover, Medicaid will doubt the authenticity of the expenditures to the fly-by-night caregiver because there is no written contract or agency, and without a withholding of taxes the tax liability for the un-withheld taxes can be shifted back by the IRS to the employer, who is the senior. It is for this reason we recommend all seniors hire their help through a qualified private duty care agency.

Finally, seniors will rely on their children to give them assistance. Sometimes, they will go so far as to have the child move in with them to deliver more care. Often the child will quit their job or reduce the amount of hours they work just to help the senior. Because of this negative financial impact on the child, the parent wants to pay the child for their time. There is nothing wrong with this but the problem that we see is that payments made to a child are viewed by Medicaid as gifts rather than compensation because there is no written contract between the parent and child. If Medicaid assumes these payments are a gift it creates an eligibility problem, or a penalty period. Another problem is that the child and the parent will co-mingle their expenses, so there are no clear records as to what expenditures by the parent were for the parent and what expenditures for the child were for the child. Again, the co-mingling of funds can make it look to Medicaid as if the parent was making gifts to the child rather than reimbursing the child for advances and costs the child has made on behalf of the parent.

In conclusion, you may stay home as long as you can, but you need to have the appropriate private duty home care agency with a written care contract in place. If you are relying on your children for this help you must keep meticulous records and withhold taxes when you retain someone to assist you, even if it is your child. Again the reason is that there is a fair assumption that the senior who is receiving care at home may ultimately need care in a facility somewhere down the road.

Medicaid eligibility for long-term care in a nursing home is essential. Don’t disqualify yourself for Medicaid eligibility by being sloppy with home care giving. Remember Medicaid eligibility for long-term care nursing home can be worth the equivalent of $8,000.00 to $10,000.00 a month Chicagoland area. Preserve your qualification for these benefits.

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General Medicaid Eligibility Requirements for Long-Term Care

By Anthony Ferraro on

April 25, 2016

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Applying for Medicaid for long-term care in a nursing home is a complicated matter. This article will limit itself to describing the basic eligibility requirements. The eligibility requirements break down into four categories:

Medical Eligibility

This requires a demonstration of meeting the determination of need score, also known as the DON score, which is applied to decide whether or not someone is ‘needy’ enough, from a care standpoint, to be eligible to qualify for long-term care in a nursing home. This assessment may be administered by Catholic charities, nursing homes, and many other organizations.

Income Eligibility

The income eligibility requirement is to ensure that the amount of income that a person has does not exceed the private cost of care. For example, if the private cost of care in a nursing home is $8,000.00 a month and your income is also $8,000.00 a month, you have no need for Medicaid because your income will pay the monthly nursing home costs. Alas, for most middle-class Americans, there is not enough monthly income to meet an $8,000.00 a month nursing home bill, and therefore Medicaid eligibility is a necessity. Please note, income eligibility varies depending on whether or not someone is single or married.

Resource Eligibility

Resource eligibility requires an examination of all of the assets that you have had over the last five years, but focuses on what there is at the time of the application. At that point, Medicaid will break assets down between exempt assets and countable assets. Exempt assets are those that applicants are allowed to keep, such as the $30.00 a month resource allowance, personal belongings, life insurance that has no cash surrender value, life insurance that has a face value of no more than $1,500.00, automobile, etc. On the other hand, countable assets are everything else that is considered to be nonexempt. However there is a limitation on the amount of countable assets one is allowed to have—that limit is $2,000.00 a month for a single individual, and $109,564.00 for a married couple, where one spouse is in a nursing home and the other spouse can continue to remain in the community. Please note, there are many exceptions to this general rule and it’s important that you find a law firm, like ours, that is well-versed in these exceptions in order to preserve as many assets as you can.

Penalty Eligibility

Penalty ineligibility arises from what are called ‘uncompensated transfers’ by the Medicaid applicant. Uncompensated transfers are those where the individual made a transfer but did not receive a transfer of equal value in return. Gifts are the simplest example of an uncompensated transfer – the applicant gave something away but did not get something back in return. Also, there are penalties associated with uncompensated transfers, and the penalties are not imposed, or do not begin, until the applicant is in a nursing home or at least five years have passed since the uncompensated transfer. Medicaid audits all transactions during the prior five year period, thus there is a five-year audit that is quite substantial. If all of this seems confusing, it’s because it is. Qualifying for Medicaid for long-term care in order to cover nursing home costs is very complex and requires the expertise of an elder law attorney who focusing focuses on Medicaid asset protection planning and eligibility.

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Preparing and Filing the Medicaid Application

By Anthony Ferraro on

March 21, 2016

- Blog, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Medicaid and Paying for Nursing Home Care, Medicaid spend down planning

Installment 9 of 10

In Our Series:

“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”

Generally the Medicaid application process involves many steps generally described as follows:

Projecting Medicaid eligibility by categorical reference,
Establishing eligibility based on resources consisting of both countable assets and exempt assets,
Determining income eligibility,
Establishing the treatment of transfers and penalty periods that are result of the Medicaid applicant’s history, and
Anticipating whatever estate recovery and lien rules there may be and then applying.

There are a myriad of steps that have to be taken to file a Medicaid application. Illinois Department of Human Services (DHS) and Healthcare and Family Services (HFS) websites have a list of documentation that applicants are to gather in order to file a proper Medicaid application. For example, 60 months of statements for all accounts, copies of the applicant’s birth certificate, Social Security Card, Medicare Insurance Supplement Card, etc.

The gathering of documents is a long process, and even after the collection, Medicaid eligibility is not definite. What can help ensure your Medicaid eligibility is making sure that the application is prepared by the right person at the right time.

Who should file the Medicaid application? You can prepare your own Medicaid application. However, this is not advisable because there are many planning opportunities that you would overlook, and there are many items of information that you may incorrectly provide. You can also have a nursing home prepare the Medicaid application for you, and some even do this for free. This is not advisable either, unless the family is unable to afford professional help.

Although the nursing home employees will try to file the application to the best of their abilities, they will not be well versed in the Medicaid rules the way professionals in our firm are. Rather, a nursing home will fill out a Medicaid application by filling in biographical data, factual information, and attach financial statements and hope for the best. But, they will not do any asset protection planning for the Medicaid applicant because they are prohibited from doing so by law.

Only lawyers can do asset protection planning for Medicaid. Finally, that leaves utilizing the services of a firm that specializes in Medicaid asset protection for seniors who are going into long-term care. Utilization of a firm well versed in Medicaid will likely result in more savings for seniors in the future.

When to file the Medicaid application? You can prepare a Medicaid application too soon, too late, or right on time. Preparing a Medicaid application too soon will mean that you will be forced to spend down assets that could otherwise have been saved. It may also mean that you may be filing prior to an expiration of the prior penalty period that will penalize you in your eligibility status.

You can also file for Medicaid too late, which means that you will have lost Medicaid eligibility, you may be out of money, and the facility that you’re looking to either go into, or are already in, will be extremely perturbed that there is no source of payment for them, while they are delivering their worthwhile services. That leaves the right time to apply for Medicaid application.

When is that time? It depends on the facts of the case. If a client is out of money you need to file immediately, however if a client still has money you need to start planning for the Medicaid application filing once the protection of assets is accomplished, or during the asset protection process. This will vary from case to case. As I indicated above, it is very easy to take the list of items that are required to be included in the Medicaid application, slap them together, and send the application in.

If, however, you’re looking for Medicaid eligibility, and you are trying to protect assets at the same time, the process is much more complicated and merits the retention of a law firm that engages in Medicaid asset protection planning for seniors who are going into long-term care.

Please remember that these Medicaid applications are thoroughly audited by DHS, and sometimes the Office of the Inspector General (OIG) for DHS, and they have high standards as to what must be included into the Medicaid application and how the information is submitted. Seek professional help in order to file your Medicaid application.

The Post Application Medicaid Audit – Seeking Nursing Home Cost Savings

By Anthony Ferraro on

March 21, 2016

- Blog, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Medicaid and Paying for Nursing Home Care, Medicaid spend down planning

Installment 10 of 10

In Our Series:

“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”

In the previous section of our 10 part series, we talked about preparing and filing the Medicaid application. Once that application is filed, a new challenge will present itself. One or two months after the submission of the application to the Department of Human Services (DHS), the approved representative for the Medicaid applicant will receive a call from either the DHS caseworker or the caseworker for the Office of the Inspector General (OIG), depending on where the application is being audited. The approved representative will then be asked to submit additional documentation that the caseworker feels needs to be expanded upon or completed. Oftentimes the data requested is in the initial submissions in the application, but quite often the caseworker will ask for something new in the way of an explanation regarding something related to receipts, expenditures, asset liquidation, or other unexplained transactions. It is extremely important that you comply with the requests made by the caseworker. The caseworker is allowed to give extensions of time of a limited amount in order to allow the approved representative to satisfy the request for additional documentation. If you do not submit the requested documentation in the appropriate time allowed by the caseworker, it is very likely that the caseworker will deny the application, and then your only alternative is to appeal the application and try to win on appeal. Appeal is very costly and unnecessary when all the documentation is readily available to be submitted. If the requested documentation is unavailable and is in the possession of a third-party, there is an administrative law that indicates that the state has the ability to request the information from the third-party, if the Medicaid applicant or their approved representative is unsuccessful in requesting this information from the third party. Nevertheless, with the substantial caseloads that the caseworkers have, it is not very often that they will make the request of the third party, rather they will continue to rely on the Medicaid applicant or their approved representative to obtain that documentation. Like every other step we discussed in this 10 part series, Medicaid applications for long-term care are the most important governmental benefit that many seniors will rely on. Notwithstanding the importance of this benefit, the process of planning for the benefit and the preparation of the application itself requires a special skill that some Elder Law attorneys have. To think that individuals themselves, or representatives of hospitals, or nursing facilities can handle complex Medicaid applications is a misjudgment. Start preparing for your long-term care at about age 55. Hopefully no application will be necessary at that time, but at least you can start the process of planning for the day when you may need to rely on the Medicaid benefit for long-term care services. The earlier you start, the more you are prepared and the more successful you will be in obtaining this very valuable benefit that saves many families the monthly nursing home cost of $7,000 to 10,000 per month.

Picking a Strategy – In Order to Protect Against the Costs of Long-Term Care

By Anthony Ferraro on

January 14, 2016

- Alzheimer's Care, Asset Protection, Blog, Chicago, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Medicaid and Paying for Nursing Home Care, Medicaid spend down planning, senior estate planning

Installment 8 of 10

In Our Series:

“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”

Picking a strategy is not something one can easily do on their own. Selecting strategies in order to minimize the cost of long-term care requires an understanding of both the requirements of sophisticated estate planning and access to governmental benefits. However in order to provide an overview of how strategies are selected, you must understand that strategies will vary depending on whether or not the senior is in one of the following phases:

Preplanning Mode
Wait-and-See Mode
Crisis Mode

Preplanning can be done when there is no threat of a long-term care stay that is imminent. Wait-and-see mode exists when there is a diagnosis but the senior will not be leaving home in the near term, and crisis mode is when the senior is in a nursing home or soon to be in a nursing home. In preplanning, because time is on our side, we can engage in such strategies as looking for long-term care insurance to cover all, or part of, the cost of long-term care. Perhaps a long-term irrevocable trust that will put assets outside of the estate may be useful. Sometimes purchasing certain types of assets that are exempt non-countable is advisable. In wait-and-see mode, because there is often a diagnosis, good powers of attorney for health and property and the preparation of wills and trusts that bypass the ill senior are essential. Also, changing the beneficiary designations on various assets so that they do not pass automatically on the death of the healthy spouse to the ill spouse is another consideration. It may be even possible, at this point, for the healthy spouse to obtain long-term care insurance. In a crisis mode, it is essential that the ill senior be made eligible for Medicaid in order to cut the costs of long-term care. The only way a senior can be eligible is to be an asset level of no more than $2000, exempting non-countable assets like prepaid burial arrangements, personal effects, very small life insurance policies, and limited other resources. All other assets must be converted to a non-countable status. This is not always possible, so quite often it is necessary in crisis mode to transfer assets from the senior. You must understand that this will result in a period of ineligibility for the senior. However, with the assistance of competent elder law counsel who specializes in Medicaid asset protection planning, it is possible to transfer assets while at the same time retaining enough assets in a form that will allow the penalty period to be paid down and the transferred assets to be protected. Selecting a strategy for asset protection planning in long-term care is not an easy matter, but with the proper planning our office does it all the time. It is essential that Medicaid rules be followed strictly. This sounds like a heavy task, and it is, but the alternative of not selecting a strategy to protect assets from long-term care costs results in the impoverishment of seniors at a time in their life when they should not be destitute for such simple quality of life items, like hearing aids, eyeglasses, podiatry care, medications and certain therapies not covered by Medicaid. Plan ahead, it’s your quality of life that is at stake in your senior years.

Why an Inventory of Your Assets is Important for Long-Term Care Planning Purposes

By Anthony Ferraro on

November 10, 2015

- Asset Protection, Blog, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Medicaid and Paying for Nursing Home Care, Uncategorized

Installment 6 of 10

In Our Series:

“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”

Why create an inventory of your assets for long-term care planning? Often we go to the doctor thinking I feel fine. However as you are aware the doctor doesn’t take your word for it, rather the doctor will do a blood workup to see if he agrees with your assessment that you are fine. Likewise, the equivalent of a blood workup for legal and financial advisors professionals is a thorough inventory. You see, some think that by listing assets on a piece of paper that they have created an adequate inventory of what their assets are. This list certainly is a starting point for the creation of an inventory, but at this point is far from complete. And, like a doctor, your legal and financial professionals will not take your word for it when you say that you have an inventory, rather they are going to establish expectations for what that inventory should look like and what sort of information it must contain, so that they can agree with your assessment of exactly what your assets are and what can be done with them for various legal and financial reasons. A mere list of assets will not reflect all of the information that’s is needed for various professionals to make the judgments on how to best advise you. The more detail you can give a professional the more likely they will be able to interpret the positioning and nature of you assets, in order to give you guidance on planning strategies. How to create a proper inventory: In order to create a proper inventory of assets the following parameters should be kept in mind:

Ownership of assets: Husband, Wife, Joint, or Other
Types of assets: cash on hand, bank accounts, certificates of deposit, money market funds, brokerage accounts, stocks, government bonds, tax-free bonds, mutual funds, individual retirement accounts (IRAs), Roth IRAs, 401(k)s, keel plans, other tax qualified plans, immediate annuities, tax-deferred annuities, life insurance policies, real estate (primary residence, other real estate), passive real estate investments (such as limited partnerships, timeshares), automobiles, interests in closely held businesses, sole proprietorships, personal and miscellaneous assets of any value, miscellaneous intangible assets, etc.
Debts: mortgages on real estate, credit cards, credit lines, etc.
Beneficiary designation for each applicable asset: primary beneficiary, secondary or contingent beneficiary

There are many inventory forms that are readily available by commercial producers. Our office has its own type of form that we prefer to use. Conclusion While the steps we describe above may seem rudimentary and basic to a lot of our readers, I can assure you that most of the people that come into our office with an inventory of their assets really have no idea what they own, what the nature of the asset is, and what the flow of the asset may be in the event of either disability resulting in long-term care or death. It is for this reason that we have taken the time to suggest what an inventory can look like and for what purposes it can be used. A good idea would be to start with some sort of inventory, place this in a three ring binder and document every asset that you list on this inventory with a copy of a statement or evidence of the ownership of the asset so that in the future, your heirs or professional advisors can use this compilation or inventory of assets for your benefit and the benefit of your loved ones.