Elder Law Articles, Uncategorized

Elder Law Update – May 2008 (Financial Advisors Edition- Volume I)


1. The New Paradigm for Long Term Care? Will You Advise Your Clients the Same Way? Dissatisfaction with Medicaid by persons who believe the system is unfair to citizens and extremely expensive for government has created new interest in a new model for delivering long term care. The new model would allow the elderly and disabled to obtain custodial care without impoverishing themselves, but at the same time it will curb the ever expanding cost of the Medicaid program. In the State of New York, the legislature has pending a new model for long term care called “The Contract for Long Term Care”. The American Bar Association, and more recently the Illinois State Bar Association, have both approved resolutions urging legislative bodies to consider this model. More will follow about this as it develops in the future. It may be the new paradigm in long term care planning for those that don’t have long term care insurance. Stay tuned. 2. Advise Your Clients to Have a Compliant Medical Power of Attorney A recent Illinois case demonstrates that relying on the Healthcare Surrogate Act may not provide continuity in the delivery of medical records in the event that your client is ill. In this recent case, two individuals were named as surrogate decision makers under the Illinois Healthcare Surrogate Act. However, once the patient left the nursing facility, the application of the act was deemed to have terminated as well, and did not control. The best course of action is to make sure your clients have HIPAA-compliant powers of attorney for healthcare in place. 3. Advise Your Clients That Not All Trusts are Alike, But Don’t Get Hung Up On Details. In a recent Ohio case, the appeals court ruled that certain assets that were held by the Medicaid applicant in an irrevocable trust were deemed available to the Medicaid applicant, and thereby subject to spend down because the trustee of the trust had the discretion to make payments of trust principal for the Medicaid applicant’s benefit. Nevertheless, there are plenty of trusts that can be used to benefit your clients who are Medicaid applicants. The key to these trusts lies in the proper drafting. 4. Can the Home Be Saved? I’m Sure You Get This Question All The Time. While Medicaid does not force the sale of homes in order to qualify for Medicaid, it is more prudent to consult with a qualified elder law attorney before entering a nursing home in order to discuss ways to protect the home. Sometimes placement in revocable trusts and irrevocable trusts can help. Conversion to rental can help, too. It really does depend on the circumstances. 5. Reapply for SS Benefits In connection with taking early Social Security benefits, if your clients change their mind and retirement age, it is possible to pay back the benefits that they have already received with regard to early retirement benefits, and then reapply for full retirements after their retirement date. 6. Nursing Homes Costs Are Rising Costs with regard to nursing homes, home healthcare services, and assisted living facilities have risen for the fifth year in a row. The national average cost for a nursing home is approximately $209.00 per day. That turns out to be $76,000 for coverage on an annual basis. Advise your clients to get LTC insurance if they qualify and can afford it. 7. Financial Abuse of the Elderly Watch your clients for signs of financial abuse of the elderly. What is happening in many cases is that unscrupulous home healthcare aides gain the confidence of a frail, elderly person by helping them with bathing and dressing and constantly being at their side for assistance. Once this trust and confidence is won, the healthcare aides will ask the elderly to write checks payable to cash for supplies from the grocery store, drug store, etc. This kind of abuse can also happen withfamily members who are delivering services. If you suspect this type of financial abuse, it should be immediately reported to the police. 8. Are Pending Contracts Countable Assets? A recent New Jersey appeals court decision indicates that money in customer contracts held by a disabled person’s business should be counted as a countable resource when determining Medicaid eligibility. This is a case where business succession planning should have long before preceded such a chain of events. This is where your value as an advisor is priceless. 9. Trial vs. Arbitration In Nursing Home Contracts Two U.S. Senators have recently proposed legislation that would ensure that nursing home residents have a right to trial for claims they have against the nursing home, rather than being forced by contract into arbitration. The benefits of arbitration to clients are lower costs and less time before a decision is made. But, some counsel feel that trials are more advantageous for a plaintiff. 10. Don’t Trigger Tax In IRA’s and 401(k)s Before Their Time. In some states and IRA or 401(k) or the other tax qualified account is considered a countable asset for a person who is going to be institutionalized. Thus, the IRA or tax qualified asset will need to be spent down for care before Medicaid will provide any coverage. In such cases, the financial advisors will often liquidate the existing tax-qualified account and then cause the account to be subject to early withdrawal penalties and immediate income taxation of the entire liquidated amount. As an alternative, advisors should consider doing a trustee to trustee transfer of the IRA or tax qualified account from the current custodian to a Medicaid compliant annuity. The result can be that this will not trigger a taxable event. Furthermore, you may be able to avoid early withdrawal penalties and immediate taxation on the cash out of the entire account. This is situation where it is worth running the numbers for your client. P.S. Teleseminar for Advisors Call our offices at 847.563.4887 to learn about the specifically tailored upcoming teleseminars that we offer only to advisors that discusses Medicaid preplanning and crisis planning solutions and tools. Join us as Mr. Ferraro dissects the new law and shows you how you can still help your clients even under the new DRA rules. Call to reserve your space. This will fill up quickly! You don’t want to miss this teleseminar!

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Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC 5600 N River Road, Suite 764 Rosemont, IL 60018 PH(847)292-1220 abferrarolaw@abferrarolaw.com https://abferrarolaw.com/ 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.