Why would an individual renounce or disclaim an inheritance in North Carolina? An inheritance may not always be expected and it may not be desirable for the beneficiary. Certain assets, like real estate or personal items, may require complicated or expensive maintenance that the beneficiary does not want to manage. An inheritance may also come with a heavy tax burden. For senior citizens, an inheritance could affect their eligibility for Medicaid benefits. Instead, a beneficiary may want another family member to receive their inheritance.Continue Reading...
April is Autism Awareness Month, Parkinson’s Awareness Month, and it is also Financial Literacy Month. These three campaigns may at first appear unrelated to each other, but they are interconnected.Continue Reading...
The “Sandwich Generation”—today’s 10 million baby boomers who care for both their own children or grandchildren and elderly parents or relatives—may need to take a different approach to estate planning. New research shows approximately 15% of baby boomers contribute financially to care and living expenses for their elderly family members. The average life expectancy is only going up and many seniors will outlive their savings. When caring for aging parents, particularly when it includes financial contributions, estate planning should include consideration of the parents’ eligibility for Medicaid long-term care coverage, Veterans benefits, the caregivers’ access to medical records, the caregivers’ authority to make medical and financial decisions for the parents, and possibly guardianship.Continue Reading...
Special Needs Law attorneys advise individuals with special needs, disabilities, and their loved ones, on laws concerning their financial comfort and well-being. As National Special Needs Law Month, October is an excellent time to review or implement legal documents such as trusts and powers of attorney and sound financial planning for you and for family members who live with a disability. Meeting with a special needs law attorney will help you create a plan for critical situations you or your loved ones may face as they age with a disability or special need. Guardianship, housing issues, Medicaid benefits, and survivor and pension benefits can all be addressed to give caregivers and disabled individuals peace of mind.
During Special Needs Law Month, parents of children with special needs should revisit their wills and trusts to check that their child has a care plan in place and funds set aside to contribute toward their living and care expenses. Over 1 in 4 of today’s 20-year-olds will develop a disability before they retire, according to the Council of Disability Awareness. Issues with education and care for all stages of life may also arise, and special needs lawyers will help you navigate those as well.
The Raleigh News & Observer recently commented on the surging insurance rates for long-term care insurance (LTCI) policies in North Carolina, the article for which can be read here. Yet it seems that an increased prevalence of premium hikes isn’t the biggest concern that LTCI policyholders in North Carolina might face.
LTCI partnership policies provide asset protection for policyholders who use up their plan benefits, increasing the amount of non-countable resources that the insured can retain and still receive Medicaid by the amount of LTCI benefits he or she uses. Thus, if the insured requires care beyond the benefits period provided by the LTCI plan, the state will disregard the insured’s assets dollar for dollar by the amount the LTCI policy spent during the benefits period. This feature makes partnership policies seem like an attractive option for many people as it allows them to become eligible to receive Medicaid benefits without first having to spend down their assets to the minimum amount permitted by North Carolina’s Medicaid program.
However, while many might be tempted to seek out an LTCI plan to take advantage of this treatment of assets for Medicaid, potential policyholders should be aware of North Carolina’s distinct treatment of LTCI plans for Medicaid estate recovery purposes. North Carolina statute defines “estate” for decedents who have LTCI partnership policies as “including assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement” (N.C.G.S. § 108A-70.4). Thus, unlike Medicaid recipients who did not hold LTCI partnership policies during life, the estate subject to recovery includes interests transferred to third parties during the decedent’s life as well as real and personal property passing to heirs through state probate law, either under a will or through intestacy. North Carolina residents contemplating purchasing an LTCI policy might want to consider the risk to lifetime property transfers that the policy could pose before committing to an LTCI plan.
I recently met with a loving grandson, who needed some advice regarding his grandmother. His grandmother currently lives in another state. She was recently diagnosed and treated for cancer, but in the process was also diagnosed with dementia. She moved into an assisted living facility after her cancer surgery, and is not likely to move back home. Her only child lives here in North Carolina, and so a move to a North Carolina assisted living facility is likely the next step.
The grandmother does not have much income or assets, so paying for her care is a top concern. Before we could truly discuss options and develop a plan, though, I would need a more accurate picture of her finances. While I would need to meet with the grandmother personally to determine her legal capacity to make decisions and sign documents, I suggested that she have Powers of Attorney in which she designates who can make financial and medical decisions for her. The grandson mentioned his grandmother is hesitant to give up control, and that she’s been expressing fear and distrust lately where there was none before, possibly resulting from the dementia. He asked what happens if she doesn’t sign one, then declines to the point she can’t sign one, and the facility decides she needs someone to make decisions for her. I explained that guardianship – the court process of determining someone incompetent and appointing a decision-maker – might become necessary.
Then the grandson said, “Okay, well, do you have any tips on how to talk to her about this? How to start the conversation?”Continue Reading...
Those considering long-term care insurance should be aware of recent several changes in the long-term care insurance industry. Guardian stopped offering the insurance as of December 31, 2011, and Prudential will no longer be offering individual coverage after March, 2012. MetLife exited the market at the end of 2010. In addition, John Hancock and UnumProvident are no longer offering group coverage. Consequently, underwriting is becoming more stringent.
Anyone in the market for long-term care insurance may not want to delay much longer, and should work with a long-term care professional to help ensure that they obtain suitable coverage with a financially strong company.
Note: Certain companies have "Partnership" status in North Carolina - the Partnership program allows those covered by long-term care insurance to protect the amount that will be provided by insurance from Medicaid countable assets.
From today's NEALA eBulletin:
Leola Joyner had been a Medicaid recipient since November 2005. She executed two promissory notes on March 1, 2006, secured by correlating deeds of trust in favor of her son. The first deed reimbursed the son for past expenditures for his mother in the amount of $68,000. The second compensated him for future personal services in the amount of $88,615.80. Together, they fully encumbered Leola's home. In June 2006, Medicaid informed Leola that her Medicaid would be terminated as a result of the notes and deeds; Medicaid took the position that they were uncompensated transfers. She appealed that decision, dying in January 2007, prior to a hearing. Her estate continued the appeal. A hearing took place in July 2008, where the Department's determination was affirmed. After the Commissioner affirmed, the estate appealed to superior court where the decision was reversed; the superior court concluded that execution of the promissory notes and deeds of trust was not a transfer or disposal of any asset. The Department then appealed that decision to the court of appeals. The court of appeals initially found that execution of the deeds of trust was a transfer of legal title since it places the property in the hands of a trustee for the purpose of securing the debt. It then found that it also constitutes a transfer or disposal of assets for purposes of 42 U.S.C. 1396p. Having found a transfer, the Court looked next at consideration; it found that the Medicaid Manual's insistence on a prior written agreement was not dispositive; “merely explains the definitions that currently exist in federal and state statutes, rules” and “...[is] of no effect unless the act or omission in question amounts to a failure to meet the requirements set out in the federal and state statutes and regulations.” Thus, the original finder of fact should have considered whether the first note was supported by adequate consideration and any evidence rebutting presumptions of inadequate consideration. Since it failed to do so, the case was remanded. The court then rejected the argument that the second note was supported by adequate consideration since it “is difficult for us to see how a lump sum advancement for future services could ever actually represent the fair market value of those services.” There are simply too many contingencies to make that determination.
I have had a few clients who have been sold “Medicaid Friendly” Annuities. In at least one case, the annuity salesman sold the client a “Medicaid Friendly” annuity in the local senior center. I don’t know who the salesman was, or the details of his sales pitch, but what he sold the client made an extreme mess of her Medicaid eligibility.
Annuities can be an invaluable tool in Medicaid planning. When used correctly, an annuity can convert a person’s spend-down amount (excess resources) to a stream of income for the spouse at home, or, in the case of a single or widowed person, can preserve some of the spend-down amount for expenses not covered by Medicaid.
Medicaid regulations became much more strict in recent years, and the criteria that an annuity must meet to be excluded as a resource for Medicaid eligibility are very specific. They must be:
· Provide equal payments
· Name the NC Medicaid Program as beneficiary for benefits paid on behalf of the annuitant
Most of the “Medicaid Friendly” annuities being sold out there do not meet these requirements and will count against a person applying for Medicaid benefits. Often the seniors are advised by the annuity salesman that all they need to do is annuitize the annuity if and when they enter a nursing home in order to become eligible for Medicaid. This is often not true because these annuities do not meet ALL the other Medicaid requirements for them to be considered a non-countable resource.
Most annuities are simply a tax-deferred investment tool. Medicaid Compliant Annuities, on the other hand, are a very specific product offered by only a limited number of insurance agents and companies. Medicaid Compliant annuities are best used when a person knows that nursing home care is imminent and the annuity is then tailored to immediately convert the person’s spend-down amount to an income stream. So, be wary of “Medicaid Friendly” annuities being marketed to the senior community at large.
Recently, I heard a story about a family who used a reverse mortgage. The mother has Alzheimer’s but is in great physical health. The father was in good health and was caring for the mother. The son was recently out of work and decided it would be a good time to move back to help his father care for his mother. The parents recently qualified for Medicaid, but had a reverse mortgage line of credit to help in the event of emergencies. The house is worth $175,000.00 and they owe $35,000.00 on the reverse mortgage. The parents had intended to leave their estate, which consisted primarily of the house, to their son.
The father suffered a heart attack and passed away suddenly. The mother is physically “healthy as a horse,” as are many people who suffer from Alzheimer’s, and may have many years of life left. The son, however, may not be able to provide care for her for the rest of her life.
THE PROBLEM: If the mother has to go into a nursing home and is there for over a year, the reverse mortgage will be called. The mother and son, unable to repay it, will lose the house. The mortgage company will auction or sell the house and any money left over from the sale will go back to the mother, which will kick her off Medicaid. The parents’ lives of hard work to pay off their home and to have something to pass on to their loyal son may be lost in the blink of an eye.Continue Reading...
There are numerous rules governing who is eligible for Medicaid to help pay nursing home costs. Medicaid planning involves advising clients about what those rules are and applying the rules to their financial situation. The goal of Medicaid planning is to protect the client’s rights and maximize the assets that Medicaid allows them to keep or transfer.
In the overwhelming majority of cases, the people who are coming to see me for Medicaid planning are not wealthy, and are not trying to hide money. The people who come to see me are often the spouse or family member of an elderly person who needs to enter a nursing home. The family is overwhelmed by the circumstances. They are worried about how to pay for the huge nursing home bills and how to protect the spouse who is still living at home. They are devastated by the thought that everything their spouse or parent spent their life working for and saving will be depleted by their final health care costs. They are often planning for Medicaid eligibility in order to protect the spouse who will remain at home (the “community spouse”) from becoming impoverished, and to protect some resources to help the person entering the nursing home maintain the best possible quality of life in his or her last years.
The truth is, Medicaid planning is usually the last ditch effort. How many people really think about long-term care planning? Even if they have thought about it, how many people know how to plan for it? Who knows if they’ll need it? Who knows when they’ll need it? Who knows how long they’ll need it? Who knows what level of care they’ll need? Who knows how much it will cost by the time they need it?
Moreover, in situations where someone needs nursing home care, there are often many other issues going on simultaneously. In some cases, the person entering the nursing home has either reached the point or is about to reach the point that he can no longer make his own decisions. An elder law attorney can help you navigate all of these issues to understand your rights and options, and to develop a plan to tackle the hurdles ahead.
The North Carolina Medicaid program paid a total of $52,575.14 in nursing home costs for Sallie Anthony. After Mrs. Anthony's death, Anna Thompkins, who would become the Executrix of Anthony's estate, contacted the State to inquire about its claim for the Medicaid expenditures. She then completed the probate of the Estate without paying the State. Some time later, the State filed suit against Thompkins, who defended herself by alleging that the statute of limitations had expired. The Court ruled for the State because the statute of limitations did not expressly apply to the State and, in the absence of express inclusion in the statute, the doctrine of nullum tempus occurritt regi (no time runs against the king) applies in North Carolina.
North Carolina Department of Health and Human Services v. Thompkins, 2010 N.C. App. LEXIS 1153 (July 6, 2010)
Source: July 13, 2010 NAELA eBulletin
A New Social Security Program Operations Manual System (“POMS”) Section Regarding Early Trust Termination Provisions for "Self-Settled" Special Needs and Pooled Trusts is set forth below. This will not affect SNTs established with the assets of a third party, such as a parent.
Provided by Sharon Kovacs Gruer, CELA and Richard A. Courtney, CELA
A. Introduction to early termination provisions and Trusts
1. Effective date of instructions regarding early termination provisions and trusts. These instructions are effective 10/1/10 and are to be considered informational until that date. Do not apply the policy or procedures in this section prior to 10/1/10.
2. Applicability of early termination provisions and trusts
This section provides the policy for evaluating special needs and pooled trusts established with the assets of an individual on or after 1/01/00 and that contain early termination provisions. If certain criteria are met, such trusts can be excepted from counting as a resource under Section 1613(e)(5) of the Social Security Act (the Act). If those criteria are not met, such trusts should instead be evaluated under Section 1613(e) of the Act. [emphasis added.] For more information about evaluating trusts under Section 1613(e) of the Act, see SI 01120.201 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120201> .
Use the instructions in this section to evaluate the following types of trusts:
· Special needs trust established under Section 1917(d)(4)(A) of the Act
For information on special needs trusts established under Section 1917(d)(4)(A) of the Act, see SI 01120.203 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120203> .
· Pooled trusts established under Section 1917(d)(4)(C) of the Act
For information on pooled trusts established under Section 1917(d)(4)(C) of the Act, see SI 01120.203 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120203> .
3. Case processing alert regarding early termination provisions and trusts
Trusts are often complex legal arrangements involving State law and legal principles that require obtaining legal counsel. Therefore, the following instructions may only be sufficient to recognize that an issue is present that should be referred to the regional office (RO) for possible referral to the Regional Chief Counsel. When in doubt, discuss the issue with the RO staff. Many issues can be resolved by phone.
B. What is an early termination provision?
An early termination provision or clause would allow a trust to terminate before the death of the beneficiary. Commonly, such provisions or clauses provide for termination of the trust when, for example, the beneficiary is no longer disabled or otherwise becomes ineligible for Supplemental Security Income (SSI) and Medicaid, or when the trust fund no longer contains enough assets to justify its continued administration.
In this North Carolina Court of Appeals case a Medicaid beneficiary was held liable for overpayment of Medicaid benefits when a newly discovered asset caused her to assets to exceed the resource limit:
Ella Mae Cloninger entered a nursing home on May 28, 2000 and her children applied for Medicaid on her behalf. When the Medicaid application was filed, the children (allegedly) did not know their mother owned two endowment life insurance policies; the existence of the policies was not disclosed. Later, as a result of class action litigation, they became aware of the policies and, in June, 2005, disclosed them to Medicaid. The policies were cashed in ($330,685) and placed in an account in Ella Mae’s name. After receiving notice of the policies, the Medicaid agency terminated Ella Mae’s benefits because she was over-resourced. The Department then determined that an over-payment was made in the amount of $142,366.44. This decision regarding over-payment was appealed. The hearing officer found that the insurance policies were available resources and affirmed the over-payment, finding “[Petitioner] liable for the repayment of all Medicaid benefits paid on [their] behalf.” On appeal, the court found that an unknown asset is not necessarily unavailable. There was no legal impediment prohibiting Ella Mae from accessing the life insurance funds; because she was over-resourced when benefits were paid, the trial court correctly determined she was liable for the overpaid amount.
Source: the 4/13/10 National Academy of Elder Law eBulletin.
This report on the NC case of Estate of Wilson is from the National Academy of Elder Law Attorneys (NAELA)'s eNewsletter:
Kenneth Wilson was hospitalized from January 7, 2007 through the date of his death on February 22, 2007. While he was hospitalized, his community spouse, Doris, sold her 100% stock ownership in Brothers Deliver Service to her son pursuant to a purchase agreement. The agreement provided for a total payment of $62,531, to be paid in 60 installments of $1041.82. Doris then applied for Medicaid on April 5, 2007. Benefits were denied after the Department determined that the purchase agreement was a countable promissory note. A fair hearing followed affirming that decision. The trial court reviewing the administrative appeal determined that the agreement was not a promissory note, but determined that it was countable as “chattel” since it involved the sale of stock. On appeal, the Court of Appeals reversed, finding that the agreement was not a countable resource. In analyzing the administrative code, the Court found three forms of property defined: real, personal and liquid. The agreement did not fall within the Medicaid Manual’s definitions of real or personal property. Therefore, to be considered countable, it must fall within the manual’s definition of “liquid assets.” Initially, the court of appeals agreed with the trial court that the agreement was not a negotiable promissory note. Its payment terms were too uncertain to constitute an unconditional promise to pay. The court then found that the agreement was not chattel paper; to be classified as such it must be a monetary obligation and thus be capable of being monetarily valued. In this case, the payment terms were too uncertain to determine what value should be given and when payments would begin. Although the court held the agreement was not countable because it did not squarely fit within the terms of a poorly worded manual, the decision appeared to be influenced by its finding that the stock would have been exempt if Doris had simply left it in her name; under North Carolina’s rules, the asset would have been exempt as property actively used in a trade or business.
By Chris Burti, Vice President, Senior Legal Counsel, Statewide Title, Inc.
Elder Law is becoming a burgeoning practice area as the Baby Boomer Generation is rapidly beginning to gray out. This group has arguably accumulated more wealth as a group than any prior generation and has paid more taxes to support entitlement programs than any have previously. Not surprisingly, its members are trying to retain as much of this wealth as possible and pass it on to the next generation while lawfully maximizing their rights to participate in governmental entitlement programs. The Federal Government’s attempts to cut costs by restricting these entitlements has given rise to a concentrated effort among Elder Law practitioners to develop mechanisms to legally retain assets within the family while qualifying for benefits.
Nursing homes are being accused by some patient advocates and state long-term care ombudsmen of increasingly evicting patients who are too inconvenient or too costly to care for. And the most vulnerable appear to be those patients with dementia or highly vocal families who are on Medicaid, according to a recent Wall Street Journal report.
The federal government permits nursing homes to evict patients for specific reasons, such as endangering the health or safety of others and needing care only available elsewhere.
The facilities claim they play by the rules and follow federal guidelines, but an increasing numbers of formal complaints about nursing home discharge practices suggest otherwise.
The U.S. Administration on Aging has seen complaints double from 1996 to 2006. And this doesn’t take into account informal complaints or unreported incidents.
The reason for the increase in nursing home evictions – also referred to as involuntary discharges – appears to be financial. Evicted Medicaid patients are replaced by patients coming out of the hospital who pay a higher daily rate for short-term care and rely on Medicare or private insurance to pick up the tab.
This new focus on short-term recovery and rehabilitation makes good financial sense for facilities. One nursing home chain claims it averages $411 a day from Medicare patients but just $166 from those on Medicaid. As an industry, nursing homes report Medicaid reimbursements are $4.4 billion short of the actual cost of care.
Of course it’s the patients who suffer the most. Elderly and frail, they are transferred to other nursing home facilities, hospitals or psychiatric facilities, where they find it difficult to thrive in a totally new environment. The “transfer trauma” they experience results in mental health problems, weight loss, and frequent falls that can lead to death within months of a change in venue.
In comparison with nursing home patients, assisted living residents have even less protection. Management in assisted living centers can evict residents without reason or appeal process just by giving them one or two month’s notice. Here, too, the U.S. Administration on Aging has seen discharge practice complaints soar over the last decade. Accusations are growing that Medicaid patients are being targeted for eviction and two states are pursuing assisted-living companies on these charges.
Source: To be Old, Frail and Evicted: Patients at Risk. Wall Street Journal, 7 August.
I previously blogged about the changes in the federal Medicaid laws that took place last year. The implementation in North Carolina has been delayed several times, but the rules are expected to be effective November 1, 2007.
In brief, the lookback period for disqualifying gifts will increase from 3 years to 5 years, and the penalty period for gifts within the 5 years will start on the date the Medicaid applicant would otherwise become eligible for Medicaid, instead of the date of the gift.
I previously reported briefly on the Medicaid changes required by the Deficit Reduction Act of 2005. The effective date in North Carolina has been postponed several times, and it now appears that the new rules may not take effect until next year. The reason is that North Carolina has yet to come up with final "undue hardship" exemptions as required by federal law.
I previously reported that the changes in the Medicaid rules from the Deficient Reduction Act were to become effective in North Carolina on March 1, 2007. Now it appears that the implementation date has been moved to April 1, 2007. See my earlier posts under the Medicaid category to read about the changes.