Elder Law FAQ’s
1. How much can a person earn to qualify for Medicaid?
If a person’s monthly income (i.e. Social Security and Pension) exceeds $2,829 (in 2024), then they may be declared ineligible for Medicaid assistance.
However, if a person earns more than $2,349, then you can prepare a Qualified Income Trust. This trust is also commonly referred to as a QIT. In the legal books it is referred to as a Miller Trust. The QIT trust is not that hard to set up. It is only about three pages. A person will also have to obtain a tax identification number for the trust. The senior’s Social Security and pension income can be deposited into this Trust. Since the Trust owns the income (and not the senior), the income cap of $2,829 is not applicable.
The Medicaid now will govern how income in the QIT Trust can be spent. The disbursements are generally limited to the expenditures that will help out the senior or the Medicaid patient. In some cases, the funds in the QIT trust can be transferred to the at-home health spouse.
Once the senior denies, then any remaining funds in the QIT trust, will be used to reimburse Medicaid for any of their liens for providing care.
2. How should I change my estate plan if a loved one is going to be placed into a nursing home?
If a loved one is New Jersey nursing home bound, it is imperative that you change your estate plan immediately. The Medicaid laws have really tightened up in the last 10 years. However, there are still many legal strategies and steps that can be taken to save you and your family your lifetimes savings and your home.
First, if your will leaves your estate to a spouse who is heading to live in a nursing home, then you must dis-inherit that person, to the extent permitted by law. In New Jersey a person can’t disinherit their spouse. A spouse is entitled to a 1/3 augmented share of his or her deceased partner’s estate. This legal right can be waived in a pre-nuptial agreement.
Second, you must also update your power of attorneys. A power of attorney is a very powerful document. A person’s life savings can be wiped out in a “flash” with a power of attorney. Many banks, brokerages, and mutual funds won’t honor power of attorneys if these documents are more than three years of age. If is important to change your power of attorney if it names the nursing home-bound loved one as your agent.
Third, you must also review your living wills and your healthcare directives. It is important that both your living will and your healthcare directive must be viable outside of New Jersey. Your spouse could receive medical treatment in an out of state hospital. Moreover, it is possible that a spouse could become sick while traveling. Thus, it is important that the living will and the power of attorney be viable in all states.
In addition to naming healthcare agents to act for you, our Living Wills contain several different medical scenarios for someone to consider. Under each separate scenario, the living will asks the person make important medical decisions on hypothetical medical procedures.
Don’t pay a fortune to have your power of attorney, living will and health care proxy prepared. There are affordable lawyers all throughout New Jersey.
3. I hear that paying for Medicaid is outrageously expensive. How can I pay for the nursing home care for my sick husband?
In my practice, I prepare many estate plans for clients of all walks of life. I always advise clients that their biggest concern should be how to protect their assets from the nursing home. Federal estate taxes and New Jersey inheritance taxes can be minimized. However, in general terms the cost for a month at a nursing home or at an assisted living care facility run about $10,000 per month. A family’s life savings can evaporate in a few years if both spouses have to pay for a nursing home or for an assisted living center facility.
There are basically four ways that you can pay the cost of a nursing home:
A. LONG TERM CARE INSURANCE: If you are fortunate enough to have long term care coverage, then it may really help pay for the costs of nursing homes. However, the premiums can be high. How much insurance can an average American pay for. Sadly, most typical families don’t have long term care insurance. Thus, most people have to rely on their own assets to pay for a nursing home.
B. PAY WITH YOUR OWN SOURCE OF FUNDS: Most citizens have to use their own funds to pay for a nursing home for an assisted living care center. However, paying for a nursing home can be a sickening experience. Most facilities charge about $10,000 per month. You can blow more money paying for a nursing home than you can at a local casino. Every time you turn around these facilities are sending you another bill. These facilities are also very aggressive. Normally, the assign the family a so called “case manager.” These case manager’s primary goal is to get you to pay their bill. They want to see all of the patient’s money, their portfolios, their Social Security payments, and the pension payments.
Paying for a nursing home is miserable to say the least. This is the primary reason why it is extremely important to engage in Medicaid planning, and to transfer major real estate holdings, and other assets to the children at least five years before any Medicaid application is undertaken.
C. MEDICARE: This is the national health insurance program primarily for people 65 years of age or older, for certain younger disabled people, and for people with kidney failure. Medicare only provides short term assistance with nursing home costs, but only if you meet the strict qualification rules. In short, typically Medicare will pay for 100 days of a nursing home costs. Medicare is only a short term solution for paying for care.
D. MEDICAID: This is the primary avenue wherein most people use to fund their stay at a nursing home. Medicaid is a federal and state funded and state administered medical benefit program which can pay for the cost of the nursing home. However, a person will only qualify for Medicare if certain asset and income tests are satisfied. There are many rules concerning qualifying for Medicaid. These rules become more complicated every year.
4. What exactly is Medicaid?
Medicaid is the most important concept in Elder Care law. Simply put Medicaid is a colossal benefits program for seniors and the disabled. Medicaid is primarily funded by the federal government. Each state administers Medicaid to their own citizens. Each state has different rules and regulations as to the administration of the Medicaid program. New Jersey has some of the strictest enforcement of the Medicaid regulations in the nation. New Jersey also has some of the strictest estate recovery rules on the books. This reality alone makes it critical for every family to at least consider Elder Care planning.
One of the primary benefits of Medicaid is that, unlike Medicare (which only pays for skilled nursing), it will pay for long-term care in a nursing home once you have qualified. Medicaid pays for long term care at a nursing home or at an assisted living care facility. For instance, a long term stay at a nursing home may be triggered by Alzheimer’s or Parkinson’s disease, even though the patient receives medical care. This type of long term health condition will not be paid for by Medicare. These types of stays most often last longer than 100 days. These types of stays are called custodial nursing stays. Medicare does not pay for custodial nursing home stays. In that scenario, you will have to pay privately, or you will have to qualify for Medicaid.
5. What are the Medicaid Rules on Countable Assets?
THE FEDERAL DEFICIT REDUCTION ACT OF 2005: This sets the national guidelines for the various state agencies to follow.
HOWEVER: Federal law allows the states to set their own written ground rules which may differ from the 2005 act.
NJ MEDICAID: Allows the 21 counties to establish their own unwritten rules and procedures. These unwritten rules and procedures may follow the statutory guidelines and case law when and if NJ sees it fitting to do so. However, these unwritten rules and procedures may result in NJ Medicaid ignoring the statutory guidelines and case law when and if it sees fitting to do so.
Medicaid Rules On Exempt & Countable Assets:
To qualify for Medicaid, applicants must pass some fairly strict tests in the amount of assets they can keep. To understand how Medicaid works, we first need to review what are known as exempt and non-exempt (or countable) assets. Exempt assets are those which Medicaid will not take into account (at least for the time being). In general, the following are the primary exempt assets:
Home, no matter what its value. The home must be the principal place of residence. The nursing home resident may be required to show some “intent to return home” even if this never takes place. A home vacant for more than 6 months, is an exception to this rule.
These assets are exempt:
- Personal belongings and household goods.
- One car or truck.
- Income-producing real estate.
- Burial spaces and certain related items for applicant and spouse.
- Up to $1,500 designated as a burial fund for applicant and spouse
- Irrevocable prepaid funeral contract.
- Value of life insurance if face value is $1,500 or less. If it does exceed $1,500 in total face amount, then the cash value in these policies is countable.
- All other assets are generally non-exempt and are countable. Basically, all money and property and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt.
- This includes cash, savings, and checking accounts, credit union shares and draft accounts.
- Certificates of Deposit.
- U.S. Savings Bonds
- Individual Retirement Accounts (IRA), Keogh plans (401K, 403B)Nursing home accounts.
- Prepaid funeral contracts which can be cancelled.
- Trusts (depending on the terms of the trust).
- Real estate (other than the residence).More than one car.
- Boats or recreational vehicles.
- Stocks, bonds or mutual funds.
- Land contracts or mortgages held on real estate sold.
While the Medicaid rules themselves are complicated and tricky, it’s safe to say that a single person will qualify for Medicaid as long as he/she has only exempt assets plus a small amount of cash and/or money in the bank, up to $2,000 in New Jersey.
6. How does Medicaid consider joint accounts with children?
This is a very common question. Many times children will be on the same account with a parent. A joint account enables a son or a daughter to go to the bank for mom or dad. However, this type of short cut can create disastrous complications. If the parent dies, then this bank account will not be part of the estate. Moreover, this account could be considered to be an “account of convenience.” Another issue is whether this account will be devoured by Medicaid. The general answer is a resounding yes. Medicaid will almost try to consider any asset as a countable asset.
Medicaid, takes the position that a joint bank account is a countable asset. If a children can prove and source their individual contribution to the account, then some of the account may not be classified as a countable asset. This set of rule and doctrine also applies to these assets:
- Savings and checking accounts.
- Credit union share and draft accounts.
- Certificates of Deposit
- U.S. Savings Bonds
7. Why can’t I just give my assets away? I thought we lived in America!
Many people wonder, can’t I just give my assets away? The simple answer is, maybe, but only if it’s done just right. The law has severe penalties for people who simply give away their assets to create Medicaid eligibility. In New Jersey, for example, every $17,000 given away during the five years prior to a Medicaid application creates a one month period of ineligibility. So even though the federal gift tax allows you to give away up to $17,000 per year without gift tax consequences, those gifts could result in a period of ineligibility for N.J. Medicaid of 2 months.
8. What are the Spousal Impoverishment Rules of Medicaid?
These rules apply to married couples and the the Medicaid division of assets. Division of Assets is the name commonly used for the Spousal Impoverishment provisions of the Medicare Catastrophic Act of 1988. It applies only to couples. The intent of the law was to change the eligibility requirements for Medicaid where one spouse needs nursing home care while the other spouse remains in the community (i.e., at home). This recognizes that it is not good for the local communities to impoverish both spouses when only one needs to qualify for Medicaid assistance for nursing home care. Consequently, the concept of the division of assets was created. Basically, in a division of assets, the couple gathers all their countable assets together in a review. Exempt assets are not counted.
The countable assets are then divided in two, with the at-home or “community spouse” allowed to keep one half of all countable assets to a maximum of approx. $154,140. The other half of countable assets must be “spent down” until $2,000 remains. The amount of the countable assets which the at-home spouse gets to keep is called the Community Spouse Resource Allowance (CSRA).
Each state also establishes a monthly income floor for the at-home spouse. This is called the Minimum Monthly Maintenance Needs Allowance (MMMNA). This permits the community spouse to keep a minimum monthly income ranging from about $2,645 to $3,854 .
If the community spouse does not have at least $2,645 in income, then he or she is allowed to take the income of the nursing home spouse in an amount large enough to reach the MMMNA (i.e. up to $3,854). The nursing home spouse’s remaining income goes to the nursing home. This avoids the necessity (hopefully) for the at-home spouse to dip into savings each month which would result in impoverishment.
The floor can be raised by certain living allowances and utility allowances which are allowed by the state. Under no circumstances, will the at-home spouse be allowed to keep more than $3,8540 of total income. If “hardship” circumstances should warrant, this allowance can be appealed.
9. Can you give away $17,000 per year?
As discussed in other Articles, people have heard that the federal Gift Tax provisions that allows them to give away $17,000 per year (per person) without paying any gift taxes. What they do not know is that this refers to a Gift Tax exemption. They wonder, “Can’t I just give my assets away?”
The Gift Tax rules are from the Internal Revenue Service. Although a gift of $17,000 to a person will not incur any gift tax implications, these gifts will trigger the of the Medicaid auditors if done within the 5-year look-back period.
The Internal Revenue Service is a separate division of the government from Medicare and Medicaid. What may appear as sound advice for tax planning may prove to be disastrous for Medicaid planning. It’s surprising how many professionals (financial planners, general practitioner attorneys and accountants) do not understand this concept! The bottom line is that any gifts can be recaptured by Medicaid even if they are considered to be the exempted $17,000 gift. Medicaid looks for every dime. The local Boards of Social Services are highly adept at ferreting out gifts made by seniors before he or she applies for Medicaid. The State auditors are hawks and they look for every possible angle to capture funds back into the Medicaid estate.
9. If I apply for Medicaid will I lose my home?
This is the major question in Medicaid law. I receive tons of calls and emails on this question. Moreover, in almost all of my Elder Law consults this is the all of the consults on Elder Law The answer this questions depends on the scenario. Under the Federal Medicaid Regulations, the home is an unavailable asset. This means that the the home is not a countable asset.
But in 1993, Congress passed a little-debated law that affects hundreds of thousands of families with a spouse or elderly parent in a nursing home. That law requires that states try to recover the value of Medicaid payments made to nursing home residents.
Estate recovery does not take place until the recipient of the Medicaid benefits dies. Then, federal law requires that states attempt to recover the benefits paid from the recipients’ probate estate. Generally, the probate estate consists of assets that the deceased owned in his or her name alone without beneficiary designation. New Jersey goes even further and recover from non-probate assets, including assets owned jointly or payable to a beneficiary.
About two-thirds of the nation’s nursing home residents have their costs paid, in part, by Medicaid. Obviously, the Estate Recovery law affects many families. The asset most frequently caught in the Estate Recovery trap is the home of the Medicaid recipient. A nursing home resident can own a home and receive Medicaid benefits without having to sell the home. It is important to emphasize that that once a nursing home resident dies, the home is part of the probate estate. Thereafter, the state may seek to force the sale of the home so as to to reimburse the state for the payments that were made.
10. What is the caregiver child exception?
The caregiver child exception is one of the best “loop holes” in Medicaid planning. Basically, a house can be transferred to a caregiver child . This transfer is an exception to the Medicaid 5-yr. lookback rule. In order for this exception to be granted, the following conditions are required.
- The parent’s diagnosis must be a chronic degenerative condition. It cannot be a condition that is rapid onset.
- A deed must be prepared and recorded which shows the child as the new owner.
- Medicaid may also want to see a copy of the deed whereby the parent originally took title.
A doctor’s letter must clearly state that to the best of that physician’s knowledge, information and belief, the child provided care that exceeded normal personal support activities such as shopping and transportation. It must have been care essential to the parent’s health and safety such as supervision of medication, monitoring nutritional status, and insuring the parent’s safety. The note must include a statement that the care was sufficient to have allowed the parent to remain in his/her own home, for at least 2 years, instead of being placed in a nursing home or assisted living arrangement This note must be on a doctor’s letterhead including the address and phone number for verification.
The child must establish verification that he/she lived with the parent for 2 years prior to the parent being admitted into the nursing home or assisted living facility.
The child must prepare a statement with regard to his/her employment. If he/she was not employed, what was the means of support. If he/she was employed, who was the parent’s caregiver during working hours.
It is important to emphasize that even if there is a transfer of the marital home to a caretaker child, NJ DMHAS will still try to pursue estate recovery against the estate. In many cases, a good lawyer can reach a reasonable deal with DMHAS. DMHAS will require a full disclosure of the family’s assets. However, the overwhelming goal of NJ DMHAS is to keep families intact. DMHAS always want to collect as much money as possible. However, this agency does not want to displace families.
11. Are personal service contracts (or Employment Agreement) permissible. This is a type of contract that is utilized where a parent compensates a family member for their time, effort, and energy to take care of the senior?
These types of contracts just don’t work. I have tried to get these contracts approved by Medicaid. However, this type of contract raises red flags by Medicaid. Moreover, Medicaid insists that the party who gets paid must pay taxes on the monies. Some elder care lawyers promote the use of personal service contracts. These types of contracts sound great in theory. However, this type of Medicaid planning just does not work anymore.
