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Do you have the right kind of 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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– 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
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.
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, Estate Planning, Estate Planning Attorney, Medicaid and Paying for Nursing Home Care, Uncategorized
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
- Income Eligibility
- Resource Eligibility
- Penalty Eligibility
Blog, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Medicaid and Paying for Nursing Home Care, Medicaid spend down planning
Installment 9 of 10
In Our Series:
“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”
Generally the Medicaid application process involves many steps generally described as follows:- Projecting Medicaid eligibility by categorical reference,
- Establishing eligibility based on resources consisting of both countable assets and exempt assets,
- Determining income eligibility,
- Establishing the treatment of transfers and penalty periods that are result of the Medicaid applicant’s history, and
- Anticipating whatever estate recovery and lien rules there may be and then applying.
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.
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.Installment 8 of 10
In Our Series:
“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”
Picking a strategy is not something one can easily do on their own. Selecting strategies in order to minimize the cost of long-term care requires an understanding of both the requirements of sophisticated estate planning and access to governmental benefits. However in order to provide an overview of how strategies are selected, you must understand that strategies will vary depending on whether or not the senior is in one of the following phases:- Preplanning Mode
- Wait-and-See Mode
- Crisis Mode
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.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