Estate planning frequently addresses property transfers in contemplation of death while elder law considers retirement income issues. While it is easy to consider the two issues in isolation, this is frequently a mistake. This comment briefly provides an incomplete educational overview of some common legal issues that are relevant in both the estate planning and elder law context. Consult experienced professionals in specific situations. For the ordinary person, government benefit programs are an important retirement income consideration. In broad overview, governmental programs may be divided into "means-tested" and "non-means-tested." Supplemental Security Income (SSI) and Medicaid are examples of federal means-tested programs that consider an individual's resources and income. In contrast, a number of Social Security administered programs and Medicare benefits are non-means-tested.
Recently, the Huffington Post published an article titled “Some Legal Issues at the Intersection of Elder Law and Estate Planning.” The article discusses some ethical and legal issues that are very important.
One is whether to dispose of assets through pre-need planning to qualify for means-tested government programs such as Medicaid that might pay, for example, the cost of long term nursing home care. This is very complicated, and you should work with a qualified elder law attorney.
If you want to maximize eligibility for means-tested governmental benefits, a common income reduction technique is to create a Qualified Income Trust (QIT), often called a “Miller Trust.” There are also other types of "special needs trusts" that can be created without reducing government benefits. Again, this is a highly complex area that requires help from an elder law attorney.
Remember the five-year look-back on transfers. Medicaid eligibility usually examines the transfer of assets (like gifts) to third parties that happen in the 60 months prior to the Medicaid application. To avoid this issue, you may be able to create irrevocable college saving plans and also make transfers to your spouse without penalty. A child who lived in the parent's home and cared for the parent—and delaying institutional care in a physician's opinion—may be able to get assets as a gift without a Medicaid penalty under the "two-year caretaker rule." This is also extremely complex and requires consultation with an experienced elder law attorney.
For your family and yourself, do as much elder law and estate planning as far in advance as possible.
Reference: Huffington Post (September 22, 2015) “Some Legal Issues at the Intersection of Elder Law and Estate Planning”