Category Archives: Medicaid and Paying for Nursing Home Care

Seniors and Asset Protection Trusts for Long-Term Care

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.

The Risks of Using Non-Professional Home Caregivers

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.

General Medicaid Eligibility Requirements for Long-Term Care – Don’t Go Broke in the Nursing Home!

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:

  1. 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.

  1. 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.

  1. 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.

  1. 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.

Preparing and Filing the Medicaid Application

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:

  1. Projecting Medicaid eligibility by categorical reference,
  2. Establishing eligibility based on resources consisting of both countable assets and exempt assets,
  3. Determining income eligibility,
  4. Establishing the treatment of transfers and penalty periods that are result of the Medicaid applicant’s history, and
  5. 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

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

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:

  1. Preplanning Mode
  2. Wait-and-See Mode
  3. 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

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:

  1. Ownership of assets: Husband, Wife, Joint, or Other
  2. 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.
  3. Debts: mortgages on real estate, credit cards, credit lines, etc.
  4. 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.

Creating a Blueprint – For Asset Protection from Long Term Care

Installment 5 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 a Blueprint (Medicaid asset protection letter) for your asset protection planning?

Just like in building a home, you don’t hire a contractor to start slapping bricks together until you have decided on the number of rooms, type of rooms, location of the rooms, etc.

Likewise, many are quick to suggest creating a will, trust, powers of attorney, perhaps an irrevocable trust, or an annuity, etc.

This can be very costly and foolish. How can you create a plan consisting of various documents that are supposed to protect you without a design in mind? Mindlessly putting together layers of documents accomplishes nothing except large bills.

Before our clients create any legal documents we suggest to them that they do a blueprint, which is in effect a Medicaid asset protection letter. In that letter we outline the following:

  1. Planning strategies that can be done in preplanning mode, or crisis mode, depending on where you are in the long term care journey.
  2. Planning strategies available for single individuals, or the community spouse when an ill spouse is going into a nursing home.
  3. An outline of the current status of the law as it relates to Medicaid eligibility.
  4. Finally, planning recommendations that are broken down into things that you must do immediately and things that you may be able to defer until later.

Below are some examples of our final recommendations in our Blueprint:

Immediate Action

  • Creation of powers of attorney for healthcare and powers of attorney for property. However, our powers of attorney have many more powers and are more substantial than the average power of attorney that most people have.
  • Creating wills and trusts that have special needs trusts built into them for a surviving spouse or a minor or adult disabled child. This takes advantage of certain relief that Congress intentionally placed into the Medicaid laws.

Deferred Actions

  • The purchase of a Medicaid compliant annuity or a Medicaid compliant promissory note.
  • Our office files a Medicaid application.

Conclusion

As you can see from the above, there are strategies that we rely on that result in the savings of a lot of assets for middle class seniors and boomers who are going into long-term care. However, because these measures are complicated, it makes sense to have a blueprint laid out describing them in detail using your asset and income numbers before actually engaging in these actions.

We want our clients to go into strategies and solutions with eyes wide open. The only way that can be accomplished in most cases is to create blueprint that lays out all of the Medicaid asset protection planning strategies in the form of a letter that the client can study, and ask questions about. We usually resolve all of the questions the client may have at our subsequent “Design Meeting.”

Make sure you look before you leap.

When to Revise Old Wills and Trusts and How?

Installment 4 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 this part of our ongoing series of how to deal with the looming crisis associated with long-term care costs for the middle class, I would like to talk about when it may be necessary to revise wills and trusts.  Also, what should newly restated revised wills and trusts look like?

First of all, we should remember that during our maturing years, most people, especially those with children, will prepare wills and trusts that deal with what happens to their assets upon death. This is a very understandable and laudable goal, especially for those people that are afraid of leaving small children behind. However, as we go beyond our maturing years and start focusing on our senior years, the focus is no longer “what happens when we die,” the focus now changes to “what happens if I don’t die and I need long-term care for a long period of time.” When that becomes the concern of someone going into their senior years, wills and trusts must be modified in few different ways.

  1. For single persons, there needs to be the ability to withdraw assets from a revocable living trust, or various types of asset management accounts, like pay on death accounts at a bank, transfer on death accounts at a brokerage firm, and IRA accounts. The reason for this additional withdrawal power is so assets can be withdrawn from these repositories and used elsewhere in accordance with planning techniques designed to preserve assets so that eligibility for Medicaid long-term care benefits, such as nursing home cost coverage, can be achieved. This would be a satisfactory result.
  1. In the case of married individuals, it becomes very important to be able to not only withdraw assets from various places, but also redirect assets in the event of the death of one spouse. Specifically, if we have two spouses, but one is in a nursing home, and the other spouse, who is otherwise healthy, should die unexpectedly, the assets of the deceased spouse will be transferred to the surviving spouse and those assets could be subject to a complete Medicaid required spend down for nursing home costs. This unfortunate circumstance can be avoided if the couple restates their wills and trusts. Rather than transfer assets to the surviving spouse directly, assets can be transferred to certain special needs trusts that are created for the surviving spouse who is residing in a nursing home. This type of special transfer will allow the surviving spouse to continue to receive benefits from Medicaid for their long-term care, and at the same time enjoy the inheritance left behind by the predeceasing spouse. This would also be a satisfactory result.

These types of more favorable results don’t happen automatically. They require very careful drafting by elder law attorneys who have familiarity with the Medicaid statutes and regulations.

Careful drafting can allow people who need Medicaid for long-term care to, some extent, retain assets that can act as their lifetime “rainy day fund.” Again, this is planning that is done not for wealthy people, but rather  is done for middle-class individuals who have few remaining assets and would like to preserve them to elevate the quality of their life should they be in long-term or nursing home care for an extended period of time. Remember Medicaid does not cover the cost of the television, hearing aids, eyeglasses, certain podiatry care and other essentials that add to a senior’s quality of life. That is why the planning for the creation of a “rainy day fund” for this type of circumstance is so crucial.

Caution:

This type of planning must be done while you are able to do it. It cannot be done once you have diminished mental capacity to the extent of not being able to make financial decisions for yourself all. Start your planning now!

Afraid of Long Term Care Costs in the Middle Class? Seek Asset Protection Through Long Term Care Planning in Illinois, for Middle Class Seniors and Boomers

Problem: We recommend that our clients seek to purchase long term care insurance. But, what happens if it cannot be purchased either due to unaffordable costs or underwriting prohibitions?

Solution: Medicaid is the only federal governmental program that will pay for long-term care. This will require using some of your own funds in order to properly pay your way at a long term care facility, but if planned for properly, will not result in the use of all of your funds.

Therefore, in order to access the Medicaid program in Illinois, one must take some of the following steps in order to become eligible. Be aware, this is a very complex area of planning, but these initial steps should be an overview of what you need to do to begin the process. You would be wise to consult with an Illinois elder law attorney who focuses in this type of asset protection work.

  1. Revise Powers of Attorney

First, revise any powers of attorney for property and health care that you currently have. Most of the powers of attorney that we see in our office, while valid, are inadequate to allow the necessary repositioning and reclassification of assets to gain eligibility to Medicaid, VA, and other governmental benefits.

  1. Contact a Physician

If the senior has mental competency issues, then perhaps contacting a physician to determine whether or not the senior has the requisite mental capacity to execute new estate planning documents is essential. It is unethical to have a senior sign anything that they don’t have the capability of understanding.

  1. Seek Guardianship

This step is a last resort, but may be necessary in some cases, if no powers of attorney can be executed due to diminished mental capacity.

  1. Revise Old Wills and Trusts

Revising old wills and trusts is also essential. Most wills and trusts are nothing but death plans. But, when you’re looking to gain eligibility for Medicaid for long-term care, the documents must reflect the authorization of handling long-term care planning matters rather than just distribution of assets and a death.

  1. Create a Blueprint

The next step, which is useful to seniors, and the family members that are supporting them, (and boomers that are beginning to ponder the long-term care journey), is to create a blueprint.  This blueprint will consist of breaking down considerations into life’s 3 main phases: preplanning, wait-and-see planning, and crisis planning. Preplanning is done when there is plenty of time to plan, waitand-see planning is done when there is a diagnosis, but you are not forced to leave home for long-term care, and crisis planning is when you must seek a higher level of care in an institutional facility of some type.

Quite often, after the blueprint is done and steps one through four are completed, there is nothing further to do until the situation becomes more escalated and a higher level of care may be needed by the senior or boomer, who may migrate to a crisis planning stage.

  1. Inventory Assets

Assuming that we need a higher level of care, we need to continue the work that we did in steps one through five and take the next step, which is set up work necessary to inventory assets and get an understanding of asset ownership, beneficiary designations, and ability to convert to cash in order to pay for long-term care expenses, at least for some period of time.

  1. Seek Placement in a Facility

The next step, assuming that a higher level of care is to be delivered, is to seek placement in a facility. There are many kinds of facilities, such as, independent living facilities, assisted living facilities, supportive living facilities, and nursing homes, and continuing care retirement communities (CCRC’s). I am pleased to say that, for the most part, we see these business entities delivering good care to most of our seniors. Like any other business entity some of their business contracts are fair and others are unscrupulous. It is necessary for you to have a lawyer familiar with these types of contracts to be sure that, from a legal standpoint, whatever you are signing is acceptable. Remember, some of these contracts can require you to pay $10,000 a month and may unnecessarily impose financial liability on children and other signers of these contracts.

  1. Select a Strategy

The next task is to select a strategy which will allow the senior or boomer to legally and ethically reposition his or her asset(s).  This opens up eligibility for the Medicaid benefit in Illinois without spending down to the paltry statutory level of $2,000 of assets. Remember without further planning, Illinois expects you to rely on $2,000 for the rest of your life. This is impossible because some of our seniors enter long-term care at the age of 67 and may remain in long-term care for the next 20 years. It would be nice to have more than a mere $2,000 to buy the TVs, radios, bathrobes and slippers, hearing aids, and eyeglasses that make life more tolerable.

  1. Prepare and File the Medicaid Application

The next step is to prepare and select a time, after the implementation of all asset protection strategies, to file the actual Medicaid application, which fully documents all transactions over the last 60 months. In some cases this can be very demanding task as some seniors lose documentation and forget about transactions and assets.

  1. Prepare for the Post Application Audit

The next step is to prepare for the post application audit by the State of Illinois staff members and be ready to file an appeal in the event the state objects to anything you have presented in the application. Also be ready on an annual basis to respond to the state’s request in what is called their annual redetermination process (REDE).

Summary:

I hope this gives you a simplistic view about how to qualify for Illinois Medicaid while using Medicaid asset protection strategies. Most clients are trying to preserve some assets and they are entitled to do so as a matter of exercising their civil rights as long as they do this legally and ethically.

This planning is not done by wealthy individuals, as they can pay their way through any costs associated with long-term care. Rather, this planning is best done by middle class individuals who have worked to accumulate some savings only to find that the cost of long-term care make their life’s work disappear in no time.

Our goal, as asset protection attorneys for the middle class, is to allow seniors to gain access to the Medicaid program. Although this requires clients to use some of their own assets for their cost of long-term care, it also enables them to preserve some of their assets.  Therefore, in their senior years, after a lifetime of work, they are entitled to some dignity and some resources to make a life in a nursing home more livable.

Anthony B. Ferraro

BS-MSTax-CPA-JD