Protect Assets from Medicaid Recovery

Medicaid is a government program used by Americans to pay long-term care, typically for nursing homes or in-home care.   What some people don’t realize is that Medicaid seeks reimbursement for money spent on someone’s behalf after they pass away.  The Medicaid Estate Recovery Program (MERP) is used to recoup costs paid toward long term care, so that the program can be more affordable for the government, says the article “What is Medicaid Estate Recovery?” from kake.com. Beneficiaries of Medicaid recipients are often surprised to learn that this impacts them directly, and are even more surprised that you can protect assets from Medicaid recovery with some planning.

Medicare was created to help pay for healthcare costs of Americans once they reach age 65. It covers many different aspects of healthcare expenses, but not costs for long-term or nursing home care. That is the role of Medicaid.

Medicaid helps pay the costs of long-term care for aging seniors. It is used when a person has not purchased long-term health care insurance or does not have enough money to pay for long-term care out of their own funds.  Medicaid is sometimes used by individuals who have taken steps to protect their assets in advance by using trusts or other estate planning tools.  See here for more detail.  https://galligan-law.com/can-i-afford-in-home-elderly-care/

The Medicaid Estate Recovery program allows Medicaid to be reimbursed for costs that include the costs of staying in a nursing home or other long-term care facility, home and community-based services, medical services received through a hospital when the person is a long-term care patient and prescription drug services for long-term care recipients.

When the recipient passes away, Medicaid is allowed to pursue assets from the estate. In fact, Federal law requires the states to have such a program.  Now, this is critical to recognize, but the scope of Medicaid varies widely between what state provided the benefits.  For the most part it means any assets that would be subject to the probate process after the recipient passes. That may include bank accounts, real estate, vehicles, or other real property.  Texas Medicaid recovery is happily limited to the estate.  So, there are many options to protect assets from Medicaid recovery in Texas.

In some states, recovery may be made from assets that are not subject to probate: jointly owned bank accounts between spouses, payable on death bank accounts, real estate owned in joint tenancy with right of survivorship, living trusts and any assets a Medicaid recipient has an interest in.

An estate planning attorney will know what assets Medicaid can use for recovery and how to protect the family from being financially devastated.

While it is true that Medicaid can’t take your home or assets before the recipient passes, it is legal for Medicaid to have a claim to assets before the beneficiaries, similar to the way other creditors of a decedent must be satisfied before beneficiaries receive property.  Let’s say your mother needs to move into a nursing home. If she dies, you’ll have to satisfy Medicaid’s claim before you can take possession or will pay the claim as part of a sale.

Strategic planning can be done in advance by the individual who may need Medicaid in the future. One way to do this is to purchase long-term care insurance, which is the strategy of personal responsibility. Another is removing assets from the probate process. Married couples can make that sure all assets are owned jointly with right of survivorship, or to purchase an annuity that transfers to the surviving spouse, when the other spouse passes away.

In most cases we can advance clients on how to change the the titling of their accounts to protect assets from Medicaid recovery before the person passes away.  We may also be able to create a Medicaid Asset Protection Trust, which may remove assets from being counted for eligibility.

As a final point, clients often encounter the medicaid claim in the estate, which is the first time an attorney is involved in the process.  Now, you may not have the same options to protect assets from Medicaid recovery because you’ll have lost prospective planning, but their are exceptions to recovery and ways to defend against the claim.  They are all very time sensitive however, so you should reach out to an attorney immediately upon encountering them.

Speak with an estate planning attorney to learn how to prepare for yourself or your parent’s future needs. The earlier the planning begins, the better chances of successfully protecting the family.

Reference: kake.com (Feb. 6, 2021) “What is Medicaid Estate Recovery?”

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Trusts Aren’t Just for Billionaires: Reasons for a Trust

Occasionally clients are hesitant to utilize trusts in their estate plan because they “just have a simple estate” or believe they need substantial assets to warrant a trust.   In fact, trusts are for everyone and solve a variety of purposes in estate planning.  According to an article entitled “3 Reasons a trust may make sense for your family even though your name isn’t Trump, Gates or Rockefeller” from Market Watch, trusts give great flexibility in how assets are divided after your death, no matter how modest or massive the size of your estate. Using trusts in your estate plan is a smart move, for many reasons.

There are two basic types of trust. A Revocable Trust is flexible and can be changed at any time by the person who creates the trust.  This person is known by many different names based upon the convention of where the trust is established, but is often known as the “grantor” or “trustor” or something similar.   These are commonly used because they allow a high degree of control while you are living, especially if your goal is to avoid probate while being able to revise your plan in the future.  The idea is that if your trust is the owner of an asset or properly receives the assets at your death, there will be no need for a Will to be probated through the court system.

Once the trust is created, homes, bank and investment accounts and any other asset you want to be owned by the trust are retitled in the name of the trust or directed to it upon death, depending on the type of asset and what your goals are. This is a step that sometimes gets forgotten, with terrible consequences. Once that’s done, then any documents that need to be signed regarding the trust are signed by you as the trustee, not as yourself. You can continue to sell or manage the assets as you did before they were moved into the trust.

See here for a more robust discussion of how a trust works versus a will.  https://galligan-law.com/will-vs-living-trust-a-quick-and-simple-reference-guide/

There are many kinds of trusts for particular situations. A Special Needs Trust, or “SNT,” is used to help a disabled person, without making them ineligible for government benefits. A Charitable Trust is used to leave money to a favorite charity, while providing income to a family member during their lifetime.

Assets that are placed in trusts do not go through the probate process and can control how your assets are distributed to heirs, both in timing and conditions.

An Irrevocable Trust is permanent and once created, cannot be changed subject to a few caveats. This type of trust is often used to save on estate taxes, by taking the asset out of your taxable estate. Funds you want to take out of your estate and bequeath to grandchildren are often placed in an irrevocable trust.  These types of trust are becoming more and more useful as the estate tax exemption is expected to go down leaving more and more clients exposed to potential estate taxes.

If you have relationships, properties or goals that are not straightforward, talk with your estate planning attorney about how trusts might benefit you and your family. Here’s a few reasons for a trust and why this makes sense:

Reducing estate taxes. While the federal exemption is $11.58 million in 2020 and $11.7 million in 2021, state estate tax exemptions are far lower. New York excludes $6 million, Massachusetts exempts $1 million, Texas has none at all.  Some states are even more complicated in having inheritance tax (taxes are applied against the exact amount transferred).  Further, it is widely accepted that the federal estate tax exemption will be lowered as well.  An estate planning attorney in your state will know what your state’s estate taxes are, and how trusts can be used to protect your assets.  You can also see here for a recent article I wrote on life insurance trusts as a good example of a common trust used to reduce estate tax exposure.  https://galligan-law.com/the-irrevocable-life-insurance-trust-why-should-you-have-one/ 

If you own property in a second or third state, your heirs will face a second or third round of probate and estate taxes. If the properties are placed in a trust, there’s less management, paperwork and costs to settling your estate.

Avoiding family battles. Families are a bit more complicated now than in the past. There are second and third marriages, children born to parents who don’t feel the need to marry and long-term relationships that serve couples without being married. Trusts can be established for estate planning goals in a way that traditional wills do not. For instance, stepchildren do not enjoy any legal protection when it comes to estate law. If you die when your children are young, a trust can be set up so your children will receive income and/or principal at whatever age you determine. Otherwise, with a will, the child will receive their full inheritance when they reach the legal age set by the state. An 18- or 21-year-old is rarely mature enough to manage a sudden influx of money. You can control how the money is distributed.

Protect your assets while you are living. Having a trust in place prepares you and your family for the changes that often accompany aging, like Alzheimer’s disease. A trust also protects aging adults from predators who seek to take advantage of them. Elder financial abuse is an enormous problem, when trusting adults give money to unscrupulous people—even family members.

Talk with an estate planning attorney about your wishes and your worries. They will be able to create an estate plan and trusts that will protect you, your family and your legacy.

Reference: Market Watch (Dec. 4, 2020) “3 Reasons a trust may make sense for your family even though your name isn’t Trump, Gates or Rockefeller”

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Long Distance Caregiving During These Difficult Times

A well thought out plan is the key to effective long distance caregiving.
A well thought out plan is the key to effective long distance caregiving.

Trying to coordinate long distance caregiving is a challenge for many. Add COVID-19 into the mix, and the situation becomes even more difficult, reports the article “When your parent is far away and you are trying to care for them” from the Pittsburgh Post-Gazette.

If you are in the position of having to care for a loved one long distance, the starting point is to have the person you are caring for give you legal authorization to act on their behalf to make financial and medical decisions for them. A financial power of attorney (known as a Statutory Durable Power of Attorney in Texas) naming you as agent will allow you to help manage your loved one’s financial affairs.  It is also important that the person give you a HIPAA Release. HIPAA (Health Insurance Portability and Accountability Act) is the law that governs the use, disclosure and protection of sensitive patient information. With a HIPAA Release you will be able to receive medical information relating to the person you are caring for and to discuss matters with the person’s health care providers.

Next, find out where all of their important documents are, including insurance policies (long-term care, health, life, auto, home), Social Security and Medicare cards. You’ll also want to be able to access tax documents which will provide you with information on retirement accounts, bank accounts and investments. Don’t forget to ask your loved one for family documents, including birth, death, and marriage certificates, which may be necessary to claim benefits. Make copies of these documents so that you can make appropriate decisions for your loved one, even from a long distance.

Ask your family member whether he or she has completed their estate planning, and whether they want to make any changes. You may wish to review with your loved one changes that indicate when an estate plan should be updated. See https://galligan-law.com/when-to-update-your-estate-plan/.

Put all of this information into a binder, so you have access to it easily.

Consider setting up a care plan for your family member to take care of things that come up when you can’t be there. Think about what kind of care do they have in place right now, and what do you anticipate they may need in the near future? There should also be a contingency plan for emergencies, which seem to occur when they are least expected and which make long distance caregiving especially difficult.

A geriatric care manager or a social worker who can do a needs assessment can help coordinate services, including shopping for groceries, administering medication and help with food preparation, bathing and dressing. If possible, develop a list of neighbors, friends or fellow worshippers who might create a local support system that compliments your long distance caregiving.

Keeping in touch is very important. These days, many are doing regular video calls with their family members. Conference calls with caregivers and your loved one is another way keep everyone in touch.

Long distance caregiving is difficult, but a well-thought out plan and preparing for all situations will make your loved one safer.

Reference: Pittsburgh Post-Gazette (Sep. 28, 2020) “When your parent is far away and you are trying to care for them”

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