- Legal fees are no longer exempt for 3-month backdating.
- Abolishes spousal refusal entirely.
- A homestead in Trust is no longer an exempt asset.
- Except for the Community Spouse Resource Allowance ($109,560) and Minimum Monthly Needs Maintenance Allowance ($2,739, HFS is no longer limited in how much it can seek when pursuing a support order against a community spouse.
- Reverts to the old limits on prepaid funeral contracts.
- Reduces the home equity exemption to the minimum allowed under federal law (base figure of $500,000, adjusted annually for inflation, rather than the $750,000 adopted in the DRA rulemaking).
- No exception for prepaid funerals for 3-month backdating.
- the person,
- the person’s spouse; or
- any other person, including a court or administrative body with legal authority to act on behalf of or at the direction of the person or the person’s spouse.
- Two exceptions are what is commonly referred to as (d)(4(A) irrevocable trusts and (d)(4)(C) irrevocable trusts. These trusts are the self settled OBRA trusts that are created by an individual for their own benefit.
- the purpose of the trust,
- whether the trustee has or exercises any discretion under the trust; or
- whether there are any restrictions on distributions or use of distributions from the trust.
- treat the principal as of an available resource
- treat as income payments from the trust that are made to or for the benefit of the person, and
- treat any payments from the trust is transfers of assets by the person (subject to the provisions of Section 120.387 or 120.388).
- treat as an available resource the amount of the trust for which payment to or for the benefit of the person could be made,
- treat as income payments from the trusts that are made to or for the benefit of the person,
- treat any other payments from the trust is transfers of assets by the person (subject again to section 120.387 or 120.388; and
- treat as a transfer of assets by the person the amount of the trust for which no payment could be made to the person under any circumstances. The date of the transfer is the date the trust was established or, if later, the date that payment to the person was foreclosed. The amount of the trust is determined by including any payments made from the trust after the date that payment to the person was foreclosed.
- payment of income is made solely to one spouse, in which case the income shall be attributed to that spouse;
- the payment of income is made to both spouses in which case one half of the income shall be attributed to each spouse, or
- the payment of income is made to either spouse, or both, and to another person or persons, in which case the income shall be attributed to each spouse in proportion to the spouse’s interest, or if payment is made to both spouses and no such interest is specified, one half of the joint interest shall be attributed to each spouse.
- revocable and assignable annuities are considered available resources
- any portion of an annuity for which payment to or for the benefit of the person or the persons house could be made is an available resource. Also, an annuity that may be surrendered to its issuing entity for a refund or payment of a specified amount or provides for a lump sum payment settlement option is an available resource valued at the amount of any such refund, surrender or settlement.
- Income received from an annuity by an institutionalized person is considered non-exempt income. Income received by the community spouse of an institutionalized person is treated as available to the community spouse for purposes of determining the community spouse income allowance under 120.379(e).
- An annuity that fails to name the State of Illinois as a remainder beneficiary as required under 120.385(b) shall result in denial or termination of eligibility for long-term care services.
- if payment is made solely in the name of one spouse , the income will be considered available only to that spouse,
- if payment of income is made in the name of both spouses, one half of the income shall be considered available to each spouse,
- if payment of income is made in the names of either spouse, or both, and to another person or persons, income shall be considered available to each spouse in proportion to the spouse is interest or if payment is made to both spouses and no other interest is specified then one half of the joint interest shall be considered available to each spouse
- if payment of income is made from a trust income shall be considered to each spouse as provided under 120.340 7H
- if there is no trust or instrument establishing ownership, one half of the income shall be considered available to institutionalized spouse and one half the community spouse.
- At the beginning of a continuous period of institutionalization, and the total value of resources owned by either or both spouses shall be computed.
- The Department, at the beginning of a continuous period of institutionalization and at the request of the institutionalized spouse, community spouse, or a representative of either, shall conduct an assessment of the couple’s resources for purposes of determining the combined amount of non-exempt resources in which either spouse has an ownership interest area person requesting the assessment shall be responsible for providing documentation and verification. For purposes of this subsection a continuous period of institutionalization is defined as at least 30 days of continuous institutional care. The Section goes on to describe for how long that initial assessment remains effective if there are discharges from a long-term care facility, hospitalization etc.
- For purposes of this subsection (c) a continuous, a continuous period of institutionalization is defined as at least 30 days of continuous institutional care. An initial assessment remains effective during that period if:
a. a resident of a long-term facility is discharged for a period of less than 30 days and then re-enters the facility;
b. a resident of a long-term care facility enters a hospital and then returns to the facility from the hospital;
c. a person discontinues receiving home and community case-based services for a period of less than 30 days; or
d. a person discontinues receiving home and community-based services due to hospitalization and then is
discharged to receive home and community-based services. .4. At the time of the institutionalized spouse’s application for medical assistance, all non-exempt resources held by either the institutionalized person, the community spouse or both are considered available to the institutionalized spouse. From this amount may be deducted and transferred to the community spouse the Community Spouse Resource Allowance ( CSRA). This means that at all assets of both spouses are added up, and then $109,560 is allocated to the community spouse, and the rest is considered an available resource to the institutionalized spouse. Subsection d) Transfer of resources to the community spouse. From the amount of non-exempt resources considered available to the institutionalized spouse, a transfer of resources is allowed by the institutionalized spouse to the community spouse or to another individual for the sole benefit of the community spouse in an amount that does not exceed the CSRA i.e. $109,560. The CSRA is further defined to be the difference between the amount of resources otherwise available to the community spouse and the greater of:
- the amount established annually by the US Department of Health and Human Services, which as of January 1, 2011 was $109,560,
- the amount established through a fair hearing under subsection (f)(3)F3 of this Section, or
- the amount transferred under a court order against an institutionalized spouse for support of the community spouse.
- the resource is a joint income tax refund,
- when one party documents that he or she does not have access ro the resource,
- jointly held accounts, and other related accessibility issue situations.
- the property is exempted as income producing to the extent permitted under Section 120.381(a)(3) (limiting equity to $6,000); however the $6,000 equity limitation shall not apply to farmland property and personal property used in the income-producing operations related to farmland;
- ownership of property consists of a fractional interest of such a small value is substantial loss to the person would occur if the property were sold,
- the property has been listed for sale, in which case the property will not be counted is available for at least six months as long as the person makes a continued good effort to sell the property; or
- the homestead property that is no longer exempt is producing annual net income for the person an amount that is not less than 6% of the person’s net income. In making this calculation, the Department will recognize business expenses allowed for federal income tax purposes.
- homestead property;
- personal effects and household goods;
- resources (for example, land, buildings, equipment and supplies or tools) necessary for self-support up to $6,000 of the person’s equity in the income-producing property, provided the property produces a net annual income of at least 6% of the excluded equity of the value of the property;
- life insurance policies of the total face value of $1,500 or less and all term life insurance policies. If the total face value exceeds $1,500 the cash surrender value must be counted as a resource
- a description of equity value is provided.
Are you thinking of buying into a comfortable retirement community?
That is often a good idea but, think again carefully.
The new Illinois Medicaid law taking effect on January 1, 2012 dramatically change the treatment of entrance fees at Continuing Care Retirement CommunitiesContinuing Care Retirement Communities (CCRCs) are communities that provide a full continuum of care for its residents. They have flexible accommodations designed to meet their resident’s health and housing needs as their needs change over time. They offer independent living, assisted living and nursing home care, usually all in one location. As a requirement for admission to most CCRCs, residents are required to pay an entrance fee or a lump sum “buy-in” which, in addition to other things, guarantees the resident’s right to live in the facility for the remainder of their lifetime. In addition to the entrance fee, residents also pay a monthly service fee. The entrance fee is often, but not always, reimbursable (at least partially) if the individual moves from the facility, if they pass away while a resident at the facility, or if they otherwise terminate the contract. Many contracts also contain a provision wherein an individual is able to use a portion of their entrance fee toward their monthly resident charges if the resident exhausts his resources and becomes otherwise unable to pay. PRIOR LAW Prior to the new Medicaid law (the Deficit Reduction Act of 2005, hereinafter “DRA”), the entrance fee was generally not considered an available asset for Medicaid eligibility purposes. NEW LAW Under the new DRA, that took effect on January 1, 2012, a CCRC entrance fee is considered an available or “countable” asset if: (1) the contract provides the entrance fee may be used to pay for care should the resident run out of money and become unable to pay their monthly charge; or (2) the individual is eligible for a refund of any remaining entrance fee when the individual dies, leaves the community or otherwise terminates the life care contract; and (3) the entrance fee does not confer an ownership interest in the CCRC. Also, under the new law, CCRC’s are given the authority to include in their contacts a provision which requires residents to spend all of their resources on their care prior to applying for Medicaid benefits (essentially disallowing any Medicaid planning or asset protection once the contract is signed). Thus, when an individual applies for admission to a CCRC, the application may request full disclosure of an individual’s resources. Prior to the new law, regardless of the amount of resources an individual declared, the CCRC could not prohibit the individual from doing any long-term care planning or asset protection planning and then applying for Medicaid. PROBLEM CREATED BY NEW LAW Now CCRC’s can contractually require a resident to spend down all of the assets they declared at the time of admission before applying for medical assistance. This new provision will greatly limit the ability of CCRC residents to protect their assets once admitted to the community. Some residents may not care about the ability to protect their assets once they are admitted to the community. But for those of you that do care about protecting assets from being lost to the devastating cost of long-term care, the inability to plan with your remaining dwindling resources is a big deal! CONCLUSION It is a good idea to consult with an experienced elder law attorney prior to entering into a contract at a Continuing Care Retirement Community. This ensures that you understand how your entrance fee/”buy-in” agreement may financially and legally impact your long term care plan and any asset protection planning that you may have in mind. CCRC’s can do a nice job of providing care, but there is no substitute for getting the appropriate legal advice before you enter into a binding contract with anyone.
- the ability to protect the assets inherited by a child from the creditors and predators of the child, such as divorcing spouses, business creditors, tort creditors, etc.;
- the ability to allow the management of the assets to continue under the supervision of the parents’ financial advisor who may have assisted the parents over the years in accumulating a critical mass of assets that can provide for many years of security for the children;
- the ability to meet the five-year lookback requirement of the new Medicaid laws;
- and, finally, the ability to prevent the children from squandering or losing the assets that the parents carefully accumulated during their lifetime.
- For example: Prior to January 1, 2012, a $70,000 gift made by someone in Chicago, Illinois would create a 10 month penalty from the date the gift was made. (Assume Skilled Nursing Facility (“SNF”) cost of $7,000 a month. $70,000 divided by $7,000 = 10 months). Thus, if the gift were made 12 months prior, the penalties would have already expired.
- Under the new Illinois DRA law for Medicaid, for gifts made after January 1, 2012, the same 10 month penalty period will not begin until the following requirements are all met:
- So let’s review another example: Assume Mr. Applicant is a resident of the Gracious Nursing Facility located in Chicago, Illinois and that he has been paying the Gracious Nursing Facility privately for some months. He will be ready to apply for Medicaid in September, 2012 because at that time he will be spent down.
- However, in January, 2012, after the new law came into effect, Mr. Applicant made a gift to his granddaughter for tuition at a local college.
- Assume that the amount of tuition payment was $70,000. Under the old law, that would have meant that there would be a penalty of 10 months ($70,000 gift divided by $7,000, which is the cost for a semi private room on a private pay basis at Gracious Nursing Facility=10 month penalty). Under the old laws, the 10 month penalty calculation would begin on the date of the transfer. Thus, the penalty would have ended by August, 2012.
- However, under the new laws, the penalty won’t start until September, 2011, when Mr. Applicant is spent down to $2000. This means he may not be eligible until the same 10 month penalty period ends in June, 2013!