Garland Law Offices, P.A.

What Is a ‘Caregiver’ Agreement?

“As family members age and require care, the burden of that care often falls on an adult child. For those that leave jobs to care for family members, it can become a financial hardship for the family.”

The idea that a family member or trusted friend may be paid to take care of an aging parent or sibling is a welcome one. However, most family members don’t understand the legal complexity involved in privately paying for care, says the recent article “Paying a family member for care” from The Times Herald. Payments made to a family caregiver or a private caregiver can lead to a world of trouble from Medicaid and the IRS.

This is why attorneys create caregiver agreements for clients. The concept is that the care and services provided by a relative or friend would otherwise be performed by an outside person at whatever the going rates are within the person’s community. The payment should be considered a fully compensated transfer for Medicaid eligibility purposes and should not result in any penalty being imposed if it is done correctly.

This is more likely to be avoided with a formal written caregiver agreement. In some states, like Pennsylvania, a caregiver agreement is required to be sure that the payments made to the caregiver are not deemed to be a gift under Medicare rules.

The caregiver agreement must outline the services that are being provided and the rate of pay, which can be in the form of weekly, monthly or a lump sum payment. This is where it gets sticky: that payment should not be higher than what an outside provider would be paid. An excessively high payment would trigger a red flag for Medicaid and could be viewed as a gift.

Medicaid has a five-year look back period, where the applicant’s finances are examined to see if there were efforts to minimize the person’s financial assets to qualify for Medicaid. If any transfers of property or assets are made that are higher than fair market value, it’s possible that it will be viewed as creating a period of ineligibility. That is why it’s so important to have a contract or written agreement in place, when a family member or other person is hired to provide those services and is paid privately.

There are also income tax consequences. The caregiver is considered a household employee by the IRS. They are not considered to be an independent contractor and should not be issued a 1099 to reflect their payment. If that is done, it could be considered to be tax evasion.

Speak with an estate planning attorney about crafting a caregiving agreement and how to handle the tax issue, when privately paying for care. They will help avoid putting Medicaid eligibility in jeopardy, as well as avoiding problems with the IRS.

Reference: The Times Herald (Aug. 13, 2020) “Paying a family member for care”

How Do I Plan My Estate With a Disabled Child?

“As our children with disabilities grow older, and we ourselves grow older, the future can seem daunting. The future can be overwhelming. Taking steps to plan for the future can seem way too complicated, especially when you don’t know where to start.”

Yahoo News’ recent article, “4 Tips for Estate Planning When Your Child Has a Disability” gives us four simple steps to take, if you have children with disabilities.

1. Draft a letter of intent. This is a letter of instruction that includes instructions that your family and friends will need, if you die or for any reason become incapacitated. This letter should list the passwords to your online financial accounts and personal information someone would need to efficiently step into your life, your home and care for child with a disability. It can include medications, daily routine, strategies you use for calming, therapists’ contact info and other daily living items someone not living in your home may not know about your life.
2. See an estate planning lawyer. Ask an attorney to help you build a vision for what you want your child’s future to look like. Have the attorney create a will and a special needs trust. A special needs trust lets you to distribute funds and property in a way that doesn’t interfere with government program benefits.
3. Create a power of attorney or guardianship. A power of attorney for financial and medical issues may be a viable solution. Supported decision-making is an alternative that empowers those with intellectual disabilities to make choices with support and while preserving their rights. If guardianship is your objective, talk to an attorney before your child reaches age 17.
4. Create an ABLE account. This account can hold funds to ensure your child’s regular account never has more than $2000, which would jeopardize government program benefits, like Medicaid.

This may seem like a gigantic task, so take it one step at a time. Do one thing at a time. Begin the process with the letter of intent and think about the vision you have for your child. Then speak with an estate planning attorney, who is experienced in helping special needs families.

Reference: Yahoo News (August 26, 2019) “4 Tips for Estate Planning When Your Child Has a Disability”

What's the Difference Between a Life Estate and an Irrevocable Trust?

“Whether you’re preparing your estate to pass on to loved ones or helping guide a parent in that process, estate law can be tricky and unfamiliar ground. One of the most important aspects of estate preparations is figuring out what to do with one’s home and property.”

Investopedia’s recent article asks “Life Estate vs. Irrevocable Trust: What's the Difference?” The article explains that a life estate and an irrevocable trust are two different ways to make certain that assets are transferred to the right party. Each of these has advantages and disadvantages.

A life estate that’s used to gift property will divide the ownership between the giver and receiver. Some parents create a life estate to reduce their assets to qualify for Medicaid. While the parent still has some interest in the property, Medicaid doesn’t count it as an asset. A life estate lasts for the lifetime of its creator and it prohibits the selling of the asset, without the permission of its beneficiaries. Therefore, a parent can’t sell a home without the permission of his children, if they are beneficiaries of the life estate.

If you’re attempting to be eligible for Medicaid and are concerned that your home will disqualify you, ask your estate planning or Medicaid planning attorney about an irrevocable trust. With this trust, if a husband and wife both own a home, the husband can transfer his portion to his wife, and his Medicaid eligibility won’t include the home.

There must be a five-year gap between the creation of the trust and the application for Medicaid. If there isn’t, those funds will be counted as part of existing assets when determining Medicaid eligibility. Therefore, you can’t start an irrevocable trust right before you apply for Medicaid, if you want to receive those benefits.

One negative of an irrevocable trust is that the founder of the trust relinquishes any rights he has to the home. However, the beneficiary of the trust can’t sell the home, unless he or she is also named as a trustee. Once an irrevocable trust has been created, the trustee can’t take back control of the trust.

Remember that a life estate and an irrevocable trust aren’t always mutually exclusive. It’s possible to place an asset (like a home) in an irrevocable trust and keep a life estate. In that case, you’re irrevocably transferring ownership of your house to the trust. However, you still keep control. In this case, you are permitted to sell the home, remodel, or rent out a room, but the house itself—or the sales proceeds from it—would remain in the irrevocable trust.

In this situation, a parent would also not risk giving their children part of the tax liability that is associated with owning a home. The parent would keep more personal control over the house and wouldn’t need their child’s permission to sell the home. This may be the best option because it would still allow the parents to apply for Medicaid and not have the property count in their assets, but he or she would remain the sole decision-maker for the house.

Both have their pros and cons, but a combination of the two can often be the best answer. Make no moves either way, without the advice of an experienced elder law attorney.

Reference: Investopedia (June 16, 2019) “Life Estate vs. Irrevocable Trust: What's the Difference?”

Should I Get a Divorce to Protect My Spouse from Medical Debt When I’m Dead?

“If you have a medical issue that will certainly lead to death and significant costs, is it wise to legally divorce ahead of your death, so that the person dying owns very little beyond their health care coverage to protect assets from the likes of the medical insurance community?”

It really depends based upon the facts of the specific situation.

nj.com’s article asks “Will getting a divorce protect my spouse from my medical debt when I’m dead?” According to the article, the factors to consider include details on the couple’s assets, income and debts, the existence of a will and/or other estate planning documents and the amount and nature of the medical expenses.

There are a few medical expenses of a deceased spouse, for which the other spouse may be liable. The nature of the medical debt is relevant, in addition to the amount, in the Garden State.

In addition, whether the would-be deceased spouse has a will and the extent of his or her estate is also an important factor. If the estate assets are insufficient to pay all debts of the estate in full, it is possible that medical debt may not be paid at all. For example, New Jersey’s applicable statute—N.J.S. 3B:22-2—states the debts in order of priority to be repaid when the estate assets are not enough to pay all claims in full:

• Reasonable funeral expenses;
• Costs and expenses of administration;
• Debts for the reasonable value of services rendered to the decedent by the Office of the Public Guardian for Elderly Adults;
• Debts and taxes with preference under federal law or the laws of New Jersey;
• Reasonable medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him;
• Judgments entered against the decedent according to the priorities of their entries respectively; and then,
• All other claims.

There are also some concerns as to whether this type of Medicaid planning, or Medicaid divorce, may raise potential implications of fraud. Before acting, speak with a knowledgeable estate planning attorney who practices in this area.

Reference: nj.com (May 16, 2019) “Will getting a divorce protect my spouse from my medical debt when I’m dead?”

Should I Get a Divorce to Protect My Spouse from Medical Debt When I’m Dead?

“If you have a medical issue that will certainly lead to death and significant costs, is it wise to legally divorce ahead of your death, so that the person dying owns very little beyond their health care coverage to protect assets from the likes of the medical insurance community?”

It really depends based upon the facts of the specific situation.

nj.com’s article asks “Will getting a divorce protect my spouse from my medical debt when I’m dead?” According to the article, the factors to consider include details on the couple’s assets, income and debts, the existence of a will and/or other estate planning documents and the amount and nature of the medical expenses.

There are a few medical expenses of a deceased spouse, for which the other spouse may be liable. The nature of the medical debt is relevant, in addition to the amount, in the Garden State.

In addition, whether the would-be deceased spouse has a will and the extent of his or her estate is also an important factor. If the estate assets are insufficient to pay all debts of the estate in full, it is possible that medical debt may not be paid at all. For example, New Jersey’s applicable statute—N.J.S. 3B:22-2—states the debts in order of priority to be repaid when the estate assets are not enough to pay all claims in full:

• Reasonable funeral expenses;
• Costs and expenses of administration;
• Debts for the reasonable value of services rendered to the decedent by the Office of the Public Guardian for Elderly Adults;
• Debts and taxes with preference under federal law or the laws of New Jersey;
• Reasonable medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him;
• Judgments entered against the decedent according to the priorities of their entries respectively; and then,
• All other claims.

There are also some concerns as to whether this type of Medicaid planning, or Medicaid divorce, may raise potential implications of fraud. Before acting, speak with a knowledgeable estate planning attorney who practices in this area.

Reference: nj.com (May 16, 2019) “Will getting a divorce protect my spouse from my medical debt when I’m dead?”

Why Did a Federal Judge Block the Medicaid Work Requirements?

“A federal judge ruled Wednesday that Medicaid work requirements undermine the program's mission of providing health care for the needy, dealing a blow to the Trump administration's efforts to push the poor toward self-sufficiency.”

U.S. District Judge James E. Boasberg in Washington, D.C. recently blocked work requirements for low-income people in Arkansas and Kentucky. The judge held that the states' requirements create numerous obstacles to getting health care that have gone unresolved by federal and state officials.

KCAU reports in the article “US judge blocks Medicaid work rules in blow to Trump” that Judge Boasberg sent the federal Health and Human Services Department back to square one. The judge didn’t determine the central question of whether work requirements are incompatible with Medicaid, a federal-state program that traditionally allows states broad leeway to set benefits and eligibility.

The judge said that HHS approval of the Arkansas work requirement was "arbitrary and capricious because it did not address...whether and how the project would implicate the 'core' objective of Medicaid: the provision of medical coverage to the needy.” Likewise, the judge said the same in his ruling on Kentucky.

About 60% of adults on Medicaid already work in low-wage jobs, according to the nonpartisan Kaiser Family Foundation. Most of those not working say they are in poor health, are caring for an elder or a child, or are attending school full-time.

Kentucky Republican Governor Matt Bevin said his state would appeal.

"We have one guy in Washington who thinks he owns Kentucky," said Bevin, referring to the judge. "We're right, and we'll be right in the end. And one guy can gum up the works if he wants, for a while, but this, too, shall pass."

Arkansas Gov. Asa Hutchinson, also a Republican, said he doesn't think the ruling jeopardizes the future of Medicaid expansion, which covers more than 200,000 residents. About 18,000 have lost coverage as a result of the work requirements.

President Donald Trump supports work requirements for public programs across the government. Last year, he signed an executive order directing Cabinet agencies to add or strengthen work requirements for programs, including subsidized housing, food stamps and cash welfare.

Medicaid is the government's largest health insurance program. It covers 1 in 5 Americans, ranging from pregnant women and infants, to the severely disabled and elderly nursing home residents.

Reference: KCAU (March 27, 2019) “US judge blocks Medicaid work rules in blow to Trump”

How Does the Medicaid Look-Back Work?

“Medicaid will look back five years, to see if there should be a penalty period.”

Say that an investment house in New Jersey worth $300,000 is passed from mother to daughter for sale of $1 today. Just two years later, the mother applies for Medicaid. There’s a look-back penalty period that will apply, says nj.com in the recent article, “If mom sells her house for $1, what Medicaid penalty will apply?” The article explains that when someone applies for Medicaid, gifts create periods of Medicaid ineligibility.

A Medicaid applicant is required by the government to document all of her financial transactions during the "look-back period." That period is five years immediately prior to the date of application.

If the applicant’s financial records show a transfer of assets within that period, the Medicaid administrators will presume that the assets were transferred to promote eligibility for Medicaid benefits. This could be a check or withdrawal, for which there is no explanation other than a gift.

The value of the transfer will be divided by the statewide daily nursing home rate to get the number of months of the ineligibility, also known as the penalty period. In New Jersey, that rate is currently $343.85, or $10,459 per month.

The five-year year look-back period commences when the transfer is made. However, the penalty period of ineligibility starts on the date the applicant is otherwise eligible for medical assistance under the State plan, but for the application of the penalty period.

So, in our $1 house example, if the New Jersey Medicaid applicant transferred $300,000, the monthly penalty period of ineligibility for this transfer would be calculated by dividing $300,000 by $10,459, which equals 28.68 months of ineligibility. There is no rounding down, by the way.

The penalty period would start when the applicant medically needs an institutional level of care, has countable resources below $2,000 and has filed a Medicaid application to establish that she would have been otherwise eligible but for the asset transfer. Note: there’s no limit on the length of the penalty period.

Thus, assuming the applicant otherwise would have qualified for Medicaid but for the asset transfer, the applicant wouldn’t be eligible for Medicaid for an additional 28.68 months.

However, if the application was made more than 60 months after the transfer date, then the transfer would be outside of the 60-month lookback period and, if no other transfers were made, then no penalty period would be imposed, and the applicant would be eligible 61 months after the transfer date.

Contact an elder law attorney in your state to learn how the rules would apply under local law. There are a number of strategic asset protection tools available, but they must be completed in a timely fashion.

Reference: nj.com (December 25, 2018) “If mom sells her house for $1, what Medicaid penalty will apply?”

What’s the Difference Between Medicaid and Medicare?

“Learn the basics of the government health programs that insure millions of Americans.”

A big difference between Medicaid and Medicare is that Medicare beneficiaries are usually seniors, and Medicaid beneficiaries are people in low to moderate income households, says U.S. News & World Report in the article “Medicare vs. Medicaid.” People who aren’t eligible for employer-based insurance or who don't earn enough to buy an individual policy, may be eligible for coverage through one of these two government programs.

Each program concentrates on different populations and offers specific benefits for its insured. There are several differences between Medicare and Medicaid. However, they share one thing: they are similarly complex. Let’s look at the key differences between Medicare and Medicaid and how each health insurance program works.

Medicare

Medicare beneficiaries are primarily seniors. Everyone who has paid into the Medicare system becomes eligible for Medicare, when they reach age 65. Medicare isn’t based on income. Those who’ve received Social Security disability benefits for two years or who have certain conditions, like ALS (Lou Gehrig’s Disease), are also eligible. Medicare is operated by the federal government, and expenses are paid from Medicare trust funds. Original Medicare includes Part A, which pays for expenses related to hospitalizations, and Part B, which covers outpatient care. Beneficiaries can also buy a separate Part D plan for prescription drugs. There may be deductible and copayment costs associated with these plans.

Those who’d rather get benefits from a private insurer, instead of from the government can sign up for Medicare Advantage, or Part C. These plans are required to cover everything provided by Medicare Parts A and B, and many also provide Part D coverage and dental or vision care benefits. Medicare Advantage plans vary in their deductibles and out-of-pocket costs and can restrict participants to the use of a network of approved providers.

Medicaid

Medicaid is the government health insurance program for those in low to moderate income households. People may also be eligible if they have physical, intellectual or behavioral disabilities. The income and asset limits vary by state, but 138% of the federal poverty limit is the median eligibility requirement for adults. Applicants can usually have no more than $2,000 in liquid assets. Medicaid coverage includes hospitalizations, outpatient care and prescription drugs, as well as long-term care. Many enrollees have little or no out-of-pocket costs for coverage.

To be eligible for Medicaid, seniors must spend down most of their assets, as well as meet income requirements. Most states have a five-year look-back period that prevents seniors from transferring assets to another family member to meet Medicaid eligibility.

Medicare and Medicaid pay for many of the basic services, but there may be gaps in coverage, such as dental services or prescriptions. One can close the gap in dental care, by coupling their Medicare or Medicaid coverage with an affordable alternative to dental insurance, such as a dental savings plan, which can save members between 10 to 60% on procedures. For prescriptions, free discount services can reduce drug costs by half or more.

Working through Medicare and Medicaid can be confusing. An elder law attorney can be a great resource.

Reference: U.S. News & World Report (November 21, 2018) “Medicare vs. Medicaid”

The Sumner Redstone Saga Inspires HBO Series

“Many of us have read the titillating and tragic story of Sumner Redstone, the former executive chairman of Viacom, and the litigious financial power struggle that has embroiled his family.”

HBO says that the Sumner Redstone saga was a key influence on its series Succession. That show involves money, a media mogul, a conniving lover and children trying to get control of the family fortune.

Forbes’s recent article, “What 'Succession' And Sumner Redstone Can Teach Us About Planning Ahead For Senior Care,” says that many of us won’t need to concern ourselves with a multi-billion-dollar empire, so our family struggles may look fairly mundane in comparison. However, disagreements over money can and frequently do keep families from making the right decisions about elder care.

A family’s financial resources—or lack thereof—may determine the options available and the type of long-term care a senior will ultimately receive. The big surprise for many retirees is that Medicare doesn’t usually pay for long-term care services. This means that nursing home expenses, which run more than $80,000 a year on average, must be paid in some other way. With most people preferring to age in place, in-home care may be the best option.

The tough news for many who aren’t rich enough to afford the skyrocketing cost of long-term care, is that they don’t qualify for Medicaid either. If you’re one of the “in-betweeners,” you’ll need to be resourceful and there’s a lot to learn.

Baby Boomers are turning 65 at a rate of 10,000 people a day, so it might be time to plan for what comes next. Roughly 70% of Americans over age 65 will need some form of long-term care during their lifetime. If you don’t make plans, you and your family will have to prepare on the fly, when a crisis happens. Let’s discuss some of the things you’ll want to learn about:

Medicare vs. Medicaid. You’re not the only one to get these two programs mixed up. Medicare is a federally-funded insurance program for people aged 65 and over (as well as for those under 65 with certain disabilities, regardless of income). Medicaid is funded jointly by states and the federal government. It is also the largest funding source for long-term care in nursing homes. Medicaid is for people with low incomes, who typically don’t have more than $2,000 in assets. There are specific eligibility rules for each state, so plan ahead with an elder law attorney.

Long-Term Care Insurance. Long-term care insurance is a type of private insurance that gives you limited coverage (often after an initial waiting period) for long-term care. The cost varies, based on the type of plan, the senior’s age, and his or her health status.

Veteran’s Benefits. The Department of Veteran’s Affairs has long-term care benefits for eligible veterans, who’re either homebound or need assistance with their activities of daily living. Although there’s a lot of bureaucratic red tape to apply for veteran’s benefits, it can really be worth it.

Take the time now to get a feel for what’s covered by insurance, how much money—if any—your parents have saved and if they have long-term care insurance or veteran’s benefits.

Reference: Forbes (September 27, 2018) “What 'Succession' And Sumner Redstone Can Teach Us About Planning Ahead For Senior Care”

Planning for the Death of a Spouse

“Of all the risks couples face in retirement, the death of a spouse is a certainty.”

According to a Merrill Lynch and Age Wave study on widowhood, people aren’t really planning for this certainty. USA Today’s recent article, “Before the death of a spouse, here's how to prepare a financial plan for living alone,” reported that 53% of widows say they and their spouse didn’t have a plan for what would happen, if one of them passed away, and 76% of married retirees say they wouldn’t be financially prepared for retirement, if their spouse died. After the death of a spouse, half of all widows experience a household income decline of 50% or more.

Here’s what couples should do to better prepare for the loss of a spouse.

There are about 20 million widows in the U.S., and 1.4 million new widows annually, according to the study. Nevertheless, most married couples don’t like discussing or planning for death. Nonetheless, it’s best to address this difficult subject head-on, because of the potentially dire consequences.

If you need assistance, speak with a qualified elder law attorney. A new widow also should put together a comprehensive financial evaluation and plan with an analysis of potential cash flow issues that emerge after the death of a spouse.

An experienced and knowledgeable elder law attorney can conduct a thorough inventory of the available financial resources and help integrate Social Security, Medicare, Medicaid, veteran’s benefits, and other programs to maximize the benefits you will receive. An experienced estate planning attorney can also then determine, if any asset protection/wealth preservation strategies are necessary to qualify for and preserve government benefits. For instance, an income-only trust to make sure an individual qualifies for Medicaid may be needed to qualify for Medicaid.

Ask yourself if you have enough life insurance because it’s important to get the necessary amount of insurance, in case of an unexpected or premature death. Calculate how much to purchase using any number of methods—human life, financial needs, and capital retention.

A widow needs planning, not products. This is where estate planning attorneys and elder law attorneys can maintain the focus on planning and help protect widows financially.

The key to planning properly for the death of a spouse, is to determine exactly what the available financial resources are and figure out the financial needs.

The next step is to plan on the best way to maximize those resources, while getting additional funds through government benefit programs.

Reference: USA Today (September 26, 2018) “Before the death of a spouse, here's how to prepare a financial plan for living alone”