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Miller Time in Missouri: Qualified Income Trusts Are OK to Use

Old couple having coffeeThe St. Louis Post-Dispatch recently reported in "Trusts sidestep Missouri income limit for home care" that the Missouri Department of Social Services now recognizes Qualified Income Trusts, also known as Miller Trusts. This type of trust is a workaround for a rule that requires some people to live on $841 a month but allows others to make $1,280 while getting the same in-home help.
This in-home help can some seniors avoid nursing homes. However, it's hard to keep a private home going on $841 a month. The issue involves people who are at least 63 years old and who meet the state's medical standards for receiving in-home help, which is help cleaning, cooking, and other daily functions.
Miller Trusts have been used for many years in other states. However, elder law attorneys in Missouri ran into difficulty getting their state's officials to accept Miller Trusts. Nevertheless, this has recently changed, they claim.
Those who apply for in-home help can only have so much income; those who bring in less than $1,281 a month will qualify. However, if you earn a dollar more than $1,281, you have to pay for your own help until you have only $841 a month left. So it amounts to a $440 monthly penalty for income $1 over the limit!
But a Miller Trust can hold the amount over $1,281 because money in the trust does not count as income. A senior can then satisfy the $1,281 income cutoff and won't have to spend an extra $440 to qualify for home help. He or she can't just keep the money in the trust, however, but must spend it each month for medical needs: a wheelchair, doctor and hospital bills, drugs, and medical supplies.
The Miller Trust solves the basic numbers problem: a senior cannot buy food and clothing and pay utilities, rent or real estate taxes, and medical expenses on $841 a month. That kind of rail-thin budget pushes people toward nursing homes.
Note that a trust is not easy to set up. You need to hire a lawyer and get your bank to accept a small trust account. Typically, small community banks will help, but not the big banks. The senior will not have control of the money in the trust. Instead, it will be in the hands of a trustee, usually a close relative.
Miller Trusts are commonly used in other states that require a spend-down for home help. Somehow, Missouri social services officials had never heard of them.
However, the department spokesperson said, "The Department of Social Services has accepted Miller Trusts for the Home and Community-based services program for a number of years. However, Missourians rarely used it until recently. Due to the sudden increase in demand, it became necessary to establish a better process to handle the higher number of Miller Trusts. Initially, there may have been some confusion, but we have worked through it and apologize for any inconvenience it may have caused."
Reference: St. Louis Post-Dispatch (May 15, 2016) "Trusts sidestep Missouri income limit for home care"

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Help with Complex Medicaid Planning

Bigstock-Medicaid-Protection-93963323Estate 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.

For more information about estate planning, please visit my estate planning website.

Reference: Huffington Post (September 22, 2015) “Some Legal Issues at the Intersection of Elder Law and Estate Planning”

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Medicaid Changes May Mean More for Spouses

DownloadAllowing the spouse of a person in a nursing home to keep enough money to live on independently is, in many ways, a moral issue. But in a tight budget year in Connecticut, it's a fiscal issue. A proposal that would increase the minimum assets that a spouse living in the community can keep — from $23,844 to $50,000 — in order for his or her partner to be eligible for Medicaid nursing-home care is being backed by elder advocates, who say the increase would help seniors, especially women, remain able to live independently. But the move is being opposed by the Department of Social Services on the grounds it will shift millions in costs to the state-funded Medicaid program.

The CT Post report, in an article titled “Legislature asked to raise asset level for Medicaid spouses,”says that the bill would affect couples with assets of about $24,000 to $100,000. Right now, when a person tries to qualify for Medicaid, couples will split their assets evenly, and the nursing-home-bound spouse must spend down his or her portion to $1,600. This means if a couple has $60,000, each spouse is attributed $30,000, and the one heading to the care facility must get his or her share down to $1,600. [Note: These numbers can and do vary state by state.] This is typically accomplished by paying for initial nursing home care. Under the state’s new proposal, the community spouse would be able to keep $50,000 in assets.

If this legislation succeeds in reducing the amount of money assigned to the institutionalized spouse, he or she would become eligible for Medicaid assistance more quickly. The original article says that advocates believe that in allowing the community spouse to keep $50,000, it might help him or her stay out of poverty, off government programs, and in the couple's home.

Raising the allowance for spouses could save money in the long run: it could keep the spouses off public assistance longer by giving them some money for health or other emergencies that could impoverish them.

In all states, federal Medicaid law provides special protections for the spouses of Medicaid applicants. However, it’s the states that determine the amount of money the non-institutionalized spouse may keep (within a range). Connecticut's allowance of $23,844 is the lowest in the country. States like Massachusetts, Vermont, Maine and Illinois are much higher. The highest is reported to be $119,200.

Medicaid nursing home costs average an estimated $6,000 a month in the state, so it can be quite an expense. See how your state is handling the Medicaid spend-down, and if there are any changes on the horizon. Make an appointment to see a qualified elder law attorney to discuss Medicaid in your state.

Reference: CT Post (March 10, 2015) “Legislature asked to raise asset level for Medicaid spouses”

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Medicaid Planning for Seniors

Medicaid planningMedicaid is the United States' health care safety net. It is an insurance program for low-income and needy people that provides health-related coverage for children, many seniors, and/or people who are disabled. A widespread and dangerous misconception is Medicare will cover long-term costs. In reality, Medicare benefits for long-term care are very limited. Medicare pays only for skilled care that is deemed "medically necessary," and it does not cover personal care required by most seniors with chronic, custodial care needs.

A recent article in The Victoria (TX) Advocate, titled How does Medicaid factor into financial planning?”, recommends that seniors need a strategy for paying for long-term care, should the need arise. In some instances, however, some individuals may have to rely on Medicaid if they don't have enough income to purchase long-term care insurance, the assets to pay for care themselves, or they are uninsurable.

Medicaid planning was often thought of as a viable tool for long-term planning. However, estate planning attorneys are now rethinking this strategy. Medicaid planning—which was, in essence, planning to make asset transfers, used to be the primary tool used by seniors considering long-term care costs. However, law changes and the advent of new financial products and plans will work better, they say. Medicaid "planning" is actually a misnomer as most seniors don’t plan to go on Medicaid, but rather experience an urgent care need, and there aren’t any other options. A better alternative is to obtain a long-term care insurance policy.

To qualify for Medicaid, a senior must be at what the government deems poverty level: less than $2,000 in countable assets (countable assets doesn’t include one's personal residence and this threshold varies by state) and roughly $2,000 or less in monthly income. Even if a senior is considered well off when he or she retires, medical and long-term care costs can decrease their assets to the poverty level, which means Medicaid would be an option at that point.

Some seniors will purposely transfer or retitle assets to qualify for Medicaid. This can be risky, the original article advises. There are other methods of spending down assets which can be more beneficial to the senior—like using cash assets to make substantial home improvements and repairs, adding safety features in the home should the senior become wheelchair bound.

Another risk in depending on Medicaid for long-term care is that federal law requires states to look for recovery of Medicaid benefits. The state will put in a claim against any assets that pass through probate upon the death of the recipient. This will include assets not counted during eligibility, such as the senior’s home.

Because estate and lifetime planning can be overwhelming and wrought with pitfalls, the article advises seniors to enlist the help of an estate planning attorney and, more particularly, an elder law attorney to evaluate all options available.

For more information about estate planning, please visit my estate planning website.

Reference: The Victoria (TX) Advocate (February 13, 2015) How does Medicaid factor into financial planning?

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Protecting Assets from Nursing Home Expenses

ProtectingOne attorney calls it the "Get out of Dodge plan"—the best way to keep your assets intact before applying for Medicaid to cover nursing home costs. 

Medicaid is a federal program, but administered differently and with different regulations in each state. Some states, like Florida, have relatively lenient eligibility requirements while other states, like New Jersey, are more restrictive. The "Get out of Dodge" plan referred to above is one attorney's advice  in a recent Asbury Park Press article titled "Protecting assets: Three things to know before Medicaid." For those living in restrictive states, he literally suggests moving to a less restrictive one, like Florida.

Of course, not everyone can or wants to use the Get Out of Dodge plan. Thankfully there are other ways to preserve assets. For example, when only one spouse goes to a nursing home the couple's home may be exempt from Medicaid's asset eligibility calculations, meaning it would not have to be sold to pay nursing home expenses before Medicaid. The healthy spouse can still live there. However, if the healthy spouse dies first, things can get complicated: the house could be lost to pay the nursing home costs of the surviving spouse.

Here are a few facts to keep in mind. Families should:

  • Create a comprehensive power of attorney—it's critical to prevent court involvement;
  • Do Medicaid estate planning long before you think you may need it to avoid making irreversible mistakes;
  • Consult with an attorney about trust planning with Medicaid eligibility in mind. Although trusts can be great Medicaid planning tools, they are complex and missteps can be costly.

Despite the complexity, an experienced elder law attorney may be able to help preserve your assets in the face of long-term nursing care.

For more information about estate planning, please visit my estate planning website.

Reference: Asbury Park Press(January 24, 2015) "Protecting assets: Three things to know before Medicaid"

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