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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

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

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 3 Phases of Life

By Anthony Ferraro on

June 8, 2016

- Uncategorized

The Law Offices of Anthony B. Ferraro, LLC covers planning for life’s 3 phases:

– Maturing years,
– Senior years and
– Post death years.

In planning for his clients’ maturing years Mr. Ferraro and his firm engage in traditional estate planning which consists of wills, trusts, powers of attorney, income tax minimization, estate and gift tax minimization and asset protection planning. In planning for his clients senior years, the shift of the focus is made towards long-term care planning.

Because most clients Mr. Ferraro meets do not have private long-term care insurance, long-term care planning becomes essential for these individuals. In doing long-term care planning or “senior estate planning” as he refers to it, his effort is dedicated to asset preservation in 3 types of long term care planning:

– early pre-planning,
– wait-and-see planning (when a diagnosis is made but some time at home still remains), or
– crisis planning (when the level of care needed requires immediate or near term placement in either an independent living, assisted or supportive living, or nursing level of care.

Don’t get left behind without any options. Planning starts today! Call our offices at (847) 221-0154 to schedule your consultation.

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

The Risks of Using Non-Professional Home Caregivers

By Anthony Ferraro on

May 17, 2016

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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.

Seeking a Care Facility

By Anthony Ferraro on

December 8, 2015

- Uncategorized

Installment 7 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”

The first determination in selecting a facility is to realize whether a facility is required at all in order to deliver the long-term care that the senior needs. Families should ask, “Can our loved one live at home with in-home care? Are there any alternatives to institutionalization, such as daycare? Private duty nursing care?” The answer to these questions is based on medical decision. If a physician indicates that institutionalization is required, then another set of questions needs to be asked. For example can care be delivered in: Independent living? Assisted living? Supportive living? (Note: Supportive living is similar to assisted living, but supportive living can be reimbursed through Medicaid whereas assisted living cannot.) Intermediate nursing care? Skilled nursing care? When the time comes, will Medicaid still approve the case for eligibility if there was a personal care contract in place, allowing the children to receive compensation when they are providing care for their parents? Thus for many families the ultimate decision will be based on the medical recommendations of the attending physician so that the senior can be kept safe in the environment that is appropriate for them. However, another series of questions and the ones in which our office spends a substantial amount of time addressing, are the legal and financial issues associated with obtaining governmental benefits to assist in the payment of the cost of care. The only governmental benefit that will provide any support in long-term care in any of the above circumstances where Medicaid is available is the Medicaid program itself. Remember, Medicare does not pay for long-term care, it only pays for acute care and short-term rehab. Only Medicaid pays for long-term custodial care, and Medicaid has financial eligibility requirements, whereas Medicare does not. In addition to public benefits questions, families need to ask a series of questions and visit facilities to select the appropriate facility, if a facility is indicated as required. We recommend, rather than thumbing through the phonebook, that you contact a firm that is familiar with helping families select the appropriate facility. A skilled senior housing placement and eldercare firm should take into consideration the following: the needs of the senior, the geographic range in which the family would like to be able to visit, and access to governmental benefits to help defray some of the costs of long-term care. Once the short list of facilities is established, with the assistance of senior housing professionals, we recommend that families visit the facility before they make any final decisions. Lastly and most important, we strongly urge that before families sign any kind of contract for long-term care, that it be reviewed by elder law counsel so that some of the harsh provisions that are often found in long-term care contracts, like mandatory arbitration provisions and clauses shifting liability to children and responsible parties, may be stricken. Make sure your loved one gets the care they need. But it is the “who, how, where, what, and when” that can present stumbling blocks. Seek the appropriate counsel in getting these questions answered.

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.

Creating a Blueprint – For Asset Protection from Long Term Care

By Anthony Ferraro on

October 12, 2015

- 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, senior estate planning, Uncategorized

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:

Planning strategies that can be done in preplanning mode, or crisis mode, depending on where you are in the long term care journey.
Planning strategies available for single individuals, or the community spouse when an ill spouse is going into a nursing home.
An outline of the current status of the law as it relates to Medicaid eligibility.
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.

Guardianship – The Last Resort

By Anthony Ferraro on

August 12, 2015

- Alzheimer's Care, Blog, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Guardianships, Probate, Estate, and Trust Administration, senior estate planning, Uncategorized

Installment 3 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”

Many people ask, “What is guardianship in the state of Illinois?” Simply put, guardianship is the process of applying to a court to be able to legally assist an individual over the age of 18, if the person has a disability. A disabled person, for purposes of guardianship laws, is someone who cannot make basic life decisions or manage their own property or money. Due to the participation of the court system and the attorneys’ fees involved, this process is an expensive proposition and should be avoided at all costs, if possible. Guardianship is avoided by using other methods of surrogate decision making for disabled individuals such as powers of attorney, trusts, the Health Care Surrogate Act, and other related surrogate roles. Unfortunately, many people wait too long and do not have the authority to execute powers of attorney, trusts, etc. because they are incapacitated. In such cases, we are grateful that the guardianship court exists. Guardianship is achieved to the following general steps:

Filing of a petition for appointment of a guardian to be determined at a court hearing
Issuance of service of summons;
Appointment of a guardian and guardian ad litem, an unrelated individual who will be the eyes and ears of the judge in understanding the circumstances;
Obtaining the necessary physician’s report establishing that the individual does not have decision-making authority, and;
Giving notice to all spouses, children, siblings and agents under power of attorney so that they can concur or object with the guardianship itself.

The benefits of guardianship are that the day-to-day management of financial affairs can be handled by the guardian of the estate, and the day-to-day management of health matters can be accomplished by the guardian of the person. Sometimes the same individual is the guardian of both the estate and the person and sometimes different persons are appointed to these roles because of their different skill sets. Guardianship can consist of both:

Uncontested guardianships: when everybody agrees with the process of the person selected, or
Contested guardianships: when the Ward (the person that is the subject matter of the guardianship process) or someone known to the Ward may object to the guardianship, in which case the guardianship process becomes what is called a contested guardianship (which results in expensive litigation)

The guardianship process is a last resort when people have not taken time to do the appropriate estate planning. I recommend that people get powers of attorney for property and powers of attorney for healthcare in place at age 18, in order to avoid guardianship in the event they become incapacitated. Remember, at age 18, you are an emancipated adult and you can make decisions for yourself and nobody else can make decisions for you, unless you authorize them to do so. It is for this reason we recommend powers of attorney whenever we can. Don’t allow your personal and health matters to fall into guardianship. We are grateful that guardianship exists for tragic situations where proper planning has not taken place. But, now that you know that you can avoid guardianship through proper estate planning, prudence would indicate that you take the steps to do such planning.

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

By Anthony Ferraro on

May 21, 2015

- Blog, Chicago, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Medicaid and Paying for Nursing Home Care, Probate, Estate, and Trust Administration, senior estate planning, Uncategorized

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.

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.

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.

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.

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.

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, wait–and-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.

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.

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.

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.

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.

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