Your House is a Medicaid Money-Laundering Machine! (so maybe don’t give it away)

Many clients come to me, sometimes even before retiring, asking me to help them give their homes to their children to “protect it from Medicaid.” They are the lucky ones who haven’t already done so through a friendly paralegal or attorney who did not ask important questions or give important advice.

There are some benefits and also a number of risks to giving away any real estate, but especially your home and especially if you do not keep a life use. I will discuss the practical and tax concerns of this in another article, but for the time being I would like to focus on one of the single biggest issues that folks are unaware of: if you have money you want to protect for yourself from Medicaid, owning a home can actually make it easier to do it!

You see, “money” is a dirty word for Medicaid: if you want help with your care, you have to be pretty much out of it (a healthy spouse can keep a bit, but not that much). But while you can’t have money, they will ignore your home, even a nice and pretty expensive one, so long as you or your spouse reside there. If you receive in-home care, an increasingly popular option, they don’t touch your house. If you go into your nursing home and your spouse remains at home, they don’t touch your house. You can even go into a nursing home for up to six months after Medicare Part A coverage expires, and Medicaid will give you an allowance to pay your mortgage, taxes, and insurance while you are away!

If you have money and need assistance with your care, Medicaid will ask you to spend that money (ideally on that care) before they’re willing to pay a penny. But if you also have a house, you can use the money to pay off your mortgage, make the house more accessible, upgrade the kitchen, add central air, or build an extension, and Medicaid will pay right away. You can also buy a house from not owning one at all to spend down that extra money, and save the cost of rent. Even more stunning, Medicaid’s definition of “your house” is much closer to “the plot your house is on and all of the land and structures you own that touch it.” There are actual recent examples of seniors who have used their savings on an adjacent plot of land, or have bought an apartment building and let their relatives occupy other units rent free. And the state HATES THIS. But they legally have to approve you for benefits.

While you can put money into your house, you can also take money out of it without being disqualified from benefits. So-called “reverse mortgages” often get a bad rap due to misunderstandings by consumers and also some bad practices that took place before the federal government began supervising and insuring the process. In reality, reverse mortgages are fair and useful vehicles in many circumstances, whether or not you have Medicaid. But if you do have Medicaid, the State of Connecticut offers you a bonus: if you take money out of the house through a reverse mortgage, they pretend you don’t have it, so long as you keep it in its own “segregated” bank account until you spend it.

So in summary: a man with $50,000.00, a house, and serious daily care needs have to pay for his care until only $1,600.00 of that money is left. But if the same man puts that money into home improvements, or a bigger house, or paying off a mortgage, he will be eligible right away. And if he borrows the same money right back out through a reverse mortgage, he won’t have to spend any of it on his care. Like the title says, it’s legal money-laundering.

To be clear, this is not a perfect solution. Nothing with Medicaid is. There are also caps, exceptions, and exclusions to many of the legal rules I have summarized in this article. At the very least, I hope by reading this you will understand that multiple considerations in protecting assets for your children as well as for your own use, and a conversation with a qualified elder law attorney is essential before making such a big decision so that you are fully informed of the different scenarios that could take place, and what these mean not just for your future wallet, but for your future care and quality of life.

Attorney Rosenberg practices throughout South-Central Connecticut. He can be reached at 203-871-3830 or by email at Scott@ScottRosenbergLaw.com.

Rosenberg Firm Wins Appeal; Case Selected for Publication

We are excited to announce that Attorney Rosenberg has been selected to present a paper in the CT NAELA Practice Update based on his appeals court victory in Harborside Conn. Ltd. Partnership v. Witte earlier this year. Practice Update is the official journal for our state’s chapter of the National Academy of Elder Law Attorneys, the nations preeminent education and advocacy source for the practice of elder law.

In the Harborside case, the nation’s largest nursing home chain sued the widow of a former resident for her husband’s outstanding bill. Since neither of them had signed a contract, the nursing home claimed they were entitled to collect the debt directly from the widow because she had managed the family finances, paid the bills, and received insurance checks in the past. When this claim was thrown out of court without a trial, the nursing home appealed. In a split decision, the Appeals Court upheld the dismissal of the suit, siding with the brief of Attorney Rosenberg and lead appeal counsel Miguel Almodóvar. The court ruled that the nursing home only had a debt with the decedent, and could only recover it by filing a claim with his probate estate. Because this decision comes from the appellate court, other judges may now be required to throw out similar lawsuits in the future.

Ordinarily, spouses are jointly responsible for their housing and necessary medical expenses, but both state and federal laws require a spouse to volunteer through a written document in the case of nursing home care.

The published paper, Anatomy of Harborside v. Witte, may be downloaded here.

Handling Alzheimer’s During the Holidays

Having a parent or loved one with any form of dementia in never easy.  It comes with a continual sadness over the loss of the person you once new.  The holidays can be a particularly difficult time to deal with this reality, but that is nothing compared to the difficulty you may fear by having your loved one visit during this season.  With that in mind, I’m posting the following quick guide to make these experiences easier on the both of you.

1. The General Rules Still Apply

There are some best-practices employed by elder care providers, and these should be continued while your loved one is in your care.  This is particularly important when visiting you because the environment may seem foreign to your loved one, increasing anxiety as well as the risk of disorientation.  These practices include:

  • Sticking to your loved one’s regular routine as much as possible
  • Being mindful of hygiene, but also respect your loved one’s privacy
  • Allowing your loved one do the activities that they can ordinarily do with safety
  • Avoiding being domineering or expressing frustration, where possible

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What a Power of Attorney Actually Does

Powers of Attorney are a major tool in every estate planner and elder law attorney’s toolkit, and the concept has been fairly well ingrained in our cultural lexicon. Perhaps it’s because of that that it never ceases to amaze me how frequently misunderstood they are. It shouldn’t be surprising that a properly informed client does not translate to properly informed children a decade or two down the road, and yet, when my colleagues and I then try to set the record straight for family members, they do not want to believe us.

I have given some thought to what the easiest, proper explanation of a power of attorney is, and if I was pressed to boil it down to a single sentence, I’d go with the following:

A power of attorney is a document that allows an individual to share with another person their own ability to manage their money and property and make legally binding agreements on their behalf to the extent specified in the document.

However, since my goal is to provide a well-rounded discussion in these blog posts, and there’s no shortage of space, I’d like to break down a few key parts of that definition for those who are interested.

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AARP’s TaxAide – A Great Cause and a Great Help

AARP TaxAide Volunteer

AARP volunteers help millions across the U.S. file their taxes each year.

Tax season is coming into full swing shortly, and this will be my third tax season volunteering with AARP’s TaxAide program.  For me, it’s an opportunity to do some good and keep abreast of how all the different tax tweaks congress makes each year find their way into the IRS forms and filing requirements we actually deal with back here on Earth.  For you – or for an elderly friend or loved one – it’s can be an opportunity to get your taxes done for free with friendly, convenient service.  For the benefit of those who might be interested, I’ve reposted this FAQ article with a summary of the services we provide.
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The Hidden Costs of Not Having a Basic Estate Plan: 3 Examples

Estate Planning file tabPeople in unique situations, like family business owners, parents of children with special needs, and people with substantial net worth are often very proactive about enlisting attorneys to craft a comprehensive estate plan. Most others understand the benefit of such planning – stating how your property would be divided up with specificity, appointing decisionmakers for any future incapacity, naming alternate guardians of minor children – but are hesitant to contact an attorney to set their affairs in order. This is entirely understandable. People rarely find themselves excited to consult an attorney in general, and even less so when the purpose is to contemplate your own mortality. The prospect of death or incapacity may seem unlikely for your age, making it easy to put off, and spending money on a backup plan may not seem like the best use of limited resources in a tight economy. Notions of costs in the thousands rather than hundreds or the belief that an expensive “living trust” is needed to avoid probate doesn’t help much either.

But for all of the practical difficulties people know are possible with a lack of planning, few are aware that there can be significant financial consequences of improper planning, even for those modest means. In most cases, even basic estate planning will offset significantly higher hidden costs in the future. After the break, three extremely common examples of these costs.
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Pardon our dust….

The Estate Planning Ticker will be undergoing some upgrades in the near future.  It’s my hope to give the blog’s style a decent upgrade, then pull the rest of my website into it for a more consistent and interactive client experience.  If you happen to notice a missing heading, oddly shifted pictures or mismatched colors, it’s all part of the process.

I continue to appreciate your readership.

 

Scott

Where Should I Keep My Important Documents?

The $45 will storage solution

A common non-legal question estate planning attorneys get is where you should keep the documents we draft for them.  As is so often the case in law, the best answer is “it depends.”  For most people, I feel a lock-box inside the house is usually the best solution, but in some cases, the traditional “valuables in the safe deposit box” approach remains a better choice.  Here are some of the major considerations:

The Merits of the Fireproof Lock-Box

Most of my clients are people with spouses and children who get along well, or even if they bicker or are distant, have some modicum of respect and integrity amongst them.  The kids will know the basics of their parents’ estate plans, and anyone who is asked to be a power of attorney, healthcare representative, or trustee of a trust will get copies of the documents naming them to those positions.  You might even give the named executor a copy of your will.  In any of these cases, I’m a big proponent of fireproof lock-boxes, like the Sentry 1100 or F2300 (also waterproof, pictured above).  These and similar boxes, about the size of two small loaves of bread, can be kept in a bottom file drawer, closet, or under your bed.  They are easy to find, can hold all of your important documents, and offer a modicum of fire and water protection.  The locks are laughable – on the First Alert version it’s a plastic clasp – but this is usually a good thing:  it’s sufficient to keep prying eyes away, but can be accessed in an emergency even without the key.
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My Name’s on Mom’s Checkbook – What Does That Mean?

It’s a common situation.  Your dad realizes he’s not getting any younger, so he adds your name to his bank account “just in case.”  Or mom offhandedly tells you she “put you on [her] annuity,” though your name’s not on the statements.  Maybe Mom’s not as sharp as she once was, and after requesting copies of her statements and faxing over your power of attorney as they asked, you find your name added to the account.  Perhaps a decade ago your parents put away some college spending money for your son, and you’re listed as “Custodian under UTMA” on the bank statements.

If you have elderly parents, it’s likely you’ve come across one or more of these scenarios, and they tend to bring with them a bunch of questions, like:

  • Does that mean it’s my money?  Does half this interest go on my taxes now?  Does all of it?
  • Can I take out money if I want to?
  • Does this mean I have to do anything?  Will I get in trouble if I leave things as they are?
  • Is this a gift?  Can I take out money if I want to?
  • What happens when they pass away?  Can I just withdraw the money, or does it have to go through probate, or what?

The answers are fairly easy, yet it is a subject on which even veteran accountants and policy reps get their wires crossed.  However, if you understand which of the three reasons has placed your name within your parent’s records, it’s easy to understand what is actually going on.

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Home Renovation Choices That Will Help Later in Life

The Life Alert Lady - she's fallen and she can't get up.

Life Alert is good, but a few tweaks to your home renovation plan can actually prevent falls later in life.

A little over a year into The Estate Planning Ticker, I’ve come to find that articles can be inspired by just about anything. Some are obvious – a new law, a sage or misleading news story, a cautionary tale manifested in a recent client; some less so. In this case, I was inspired by two consecutive life experiences.  First, watching my mother put her insight as a geriatric nurse into practice as she renovated the family home, and second, helping to move her mother out of her home of 40 years because it had become unsafe.

Falls are among the most prominent health risks facing elderly Americans. They can cause serious injury, make you feel defeated and embarrassed, and terrify your adult children.  That last bit explains why it’s one of the most frequently cited reasons for children to pressure their parents out of the home and into some form of managed care facility.  What makes it that much worse is the simple fact that most falls, as well as other physical difficulties around the home, are completely preventable.

If you’re fortunate enough to have a home where you intend to spend your later years, and are planning renovations big or small, there are some simple considerations which, for an extra few hundred dollars, may save you from aggravation, injury, or additional contractors later in life. After the jump, a checklist of the more important considerations of elder-living architecture.

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