Thursday, January 30, 2014

Preserving Income Under Community Medicaid With Pooled Trusts

When given the choice, most people would prefer to “age in place” in their residence rather than in a nursing home or similar facility. But for everyone other than the wealthy – or those fortunate enough to have robust long-term care insurance policies in place – paying the cost for long-term care is a major stumbling block.

Medicare provides minimal coverage for long-term care costs, and only then for “skilled” care such as nursing care, physical therapy, speech therapy and occupational therapy.  Most long-term health needs, however -- which are not covered by Medicare -- consist of “custodial” care, such as assistance with dressing, eating, toileting, bathing, transferring (i.e., from a bed to a chair) and similar “activities of daily living.”  For those without long-term care insurance, the only alternative to the use of personal resources to cover the costs of such custodial care is Medicaid.

While virtually every American 65 or older receives Medicare, Medicaid qualification is subject to strict income and resource limits. But for those seeking Medicaideligibility for home care, there are ways to gain eligibility for the program without having to spend down most of one’s income or assets.

In 2014, an individual applying for one of the available community long-term care Medicaid programs can retain total resources of $14,550, plus their home (which is deemed an exempt resource). But removing “excess” resources for Community Medicaid purposes is rather straightforward, as under Community Medicaid there are currently no “look back periods” or “penalty periods” for asset transfers; this is in contrast to the nursing home Medicaid program, which currently imposes a period of ineligibility for benefits for most types of asset transfers made to non-spouses during the five-year “look back” period prior to the date of filing an application for nursing home Medicaid. 

Given that there are no asset transfer penalties for Community Medicaid, the usual strategy in spousal cases is to transfer any excess resources into the name of the “well” spouse.  For single applicants, or in cases where both spouses need care, assets can be transferred to other family members, or to trusts for their benefit.

As far as the income requirements, the current maximum income allowance for Community Medicaid is $809 per month.  Without any planning, any excess income must be applied to a Medicaid “spenddown,” with Medicaid then paying the balance towards the cost of care.  For example, a person with $2,000 per month of recurring income (typically Social Security and a pension) would have to contribute $1,191 of her income towards her cost of home care, with Medicaid paying the difference. 

A practical limitation of the income rules is that the $809 income allowance does not take into account the applicant’s household expenses, such as rent, mortgage, property taxes, or utilities.  Given those typical expenses, it can be difficult if not impossible for most people to live off of the monthly Medicaid income allowance after satisfying the spenddown requirement.  

Fortunately the Community Medicaid rules permit an applicant to fund their excess income into a vehicle known as a "Pooled Income Trust." Pooled Income Trusts are statutorily approved trusts that are established and operated by various charitable organizations throughout New York State.  To participate in a Pooled Income Trust, the Medicaid Applicant signs a "joinder agreement" prepared by the charity that operates the trust. Once Medicaid is approved, the participant's excess income would be transferred tot he Pooled Income Trust and held in a separate trust share account for the participant's benefit. Each month the participant (or often their representative, such as an agent under a power of attorney) may submit bills incurred by the participant for household expenses such as rent, food, clothing, utilities, etc.  The Pooled Income Trust Trustee is authorized to pay any such non-medical bills that are incurred by the participant. To the extent that after payment for such expenses the participant has excess income, such income will remain part of the Pooled Income Trust, and can be used towards the charitable purposes of the organization administering the Trust.


Friday, January 17, 2014

Essential Estate Planning for Young Adults

As my daughter gets ready to head back to college after her lengthy winter break, I made sure she took care of one essential piece of business in between her relaxation and spending time with friends. Earlier this week I had her stop in to the office to sign a financial power of attorney, health care proxy, living will and HIPAA authorization.

Once your children turn 18, a parent no longer has the right to administer a child's bank accounts or other financial transactions without a power of attorney, unless the parent is jointly titled on the account. Even then, the prudent course is to have the child execute a broad financial power of attorney to enable the parent to handle any and all of the child's financial matters if the child is unable to do so.

 Perhaps even more important is the execution of the various health care documents. It is important to have a conversation with your young adult child about their preferences for end of life care, and to ensure that the child appoints someone (most likely the parents) to have legal authority as health care agent to make health care decisions on behalf of a disabled child, including the final authority to terminate life support in a worst-case scenario.

The reality is that with older adults, family members are more likely to accept that providing life support for a loved-one in contravention of the physicians' recommendations is pointless. With younger adults, however -- such as the infamous Florida case involving Terri Schiavo -- in the absence of a written direction from the patient, controversy may erupt between the incapacitated person's parents and their spouse who may well have different opinions as to the appropriate course of treatment.