1. Change is Upon Us- So Legally and Effectively Protect Your Home and Savings Now. It is believed by observers that in the near future Illinois will adopt the Deficit Reduction Act of 2005, which may have the effect of reducing the availability of Medicaid funds for the nursing home bound Illinois resident. With that in mind, you should begin shopping for your long term care insurance now. While there will always be some asset protection planning that we can do, the first line of defense for long term care is long term care insurance.
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2. Election Year Stuff. One Presidential candidate has unveiled a plan to lower long term care costs by: 1) providing a $3,000 per year caregiving tax credit to help seniors, 2) making long term care insurance cheaper, and 3) improving the quality of care in nursing homes.
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3. Bad Nursing Homes. in certain advocacy groups recently asked the Bush administration to make it easier for consumers to identify poorly performing nursing homes. Apparently the administration has agreed and the Centers for Medicare & Medicaid Services will be listing the allegedly suspect homes on its website.
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4. Medicaid Spousal Impoverishment Figures. For 2008, the CSRA (Community Spouse Resource Allowance) is $104,400. This means that this is the maximum amount of assets that a Medicaid applicant can transfer to the well spouse if the ill spouse is living in a nursing home and seeks Medicaid reimbursement for long term care. The MMNA (Monthly Maintenance Needs Allowance) is $2,610. This is the maximum amount of monthly income that a Community Spouse can have if their ill spouse is living in a nursing home and wishes to obtain Medicaid reimbursement for long term care.
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5. Be Careful with Powers of Attorney. Under Illinois law, the establishment of a joint checking account created prior to the execution of the Power of Attorney creates a presumption of donative intent. Also, the transfer of funds from a joint account by an agent for the agent’s own use creates a presumption of fraud, absent a gift-giving power in the Power of Attorney. Illinois courts have held that where these two presumptions exist, and where the agent actively uses his or her position to create the joint tenancies, the presumptions do not cancel, rather, the controlling presumption is the presumption of fraud, which requires strong evidence to rebut.
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6. Creating Liquidity for the Elderly with “Private Reverse Mortgages”. Consider private” reverse mortgages recorded against the residence in order to pay for care when there is no liquidity. This can eliminate the large fee that many reserve mortgage providers impose. However, you may lose some of the fluidity and automation that the good lenders provide so well. Also, keep in mind regulatory restrictions on home mortgages.
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7. Move Assets to Caregivers Legally with Personal Care Agreements. In Illinois and some other states, the law presumes that a person who furnishes services to a family member is presumed to do so gratuitously and not for pay. This presumption can be overcome, but the cases require that parties enter into express or implied contracts at the time of service. Hence, personal care agreements are useful. These are written contracts describing services that family members or friends will provide for the elderly at pre-established fair market value rates. Accounting and bookkeeping are required, as is tax withholding and contemporaneous timesheets. For someone who is assisting an elderly person, there is no reason why a transfer of assets from the elderly to the caregiver cannot be made at fair market value, and thus keep the elderly person at home for a longer period of time and shelter some of the elderly person’s assets in the process. These must be legitimate pay for services arrangements. When done properly, they serve a useful purpose.
Our firm is dedicated to the legal and effective protection of our clients’ assets from taxation, as well as planning for Medicaid asset protectiondue to a long term nursing home stay.
“Educate to Motivate”
Anthony B. Ferraro
The Law Offices of Anthony B. Ferraro, LLC
5600 N River Road, Suite 764
Rosemont, IL 60018
Note: Pursuant to federal regulations imposed on practitioners who render tax advice (“Circular 230”), we are required to advise you that any tax advice contained herein is not intended or written to be used for the purpose of avoiding tax penalties that may be imposed by the Internal Revenue Service.
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 Estate and Trust Administration without the advice of competent legal counsel.