Question: Would you please provide me with some information re: gifting as it relates to VA planning for Aid & Attendance. It is my understanding that there are no penalties involved for gifting assets in order to reduce resources to approved levels. Mom’s income is less than the medical expenses that she will pay in the assisted living facility, but her assets are a bit too high.
Answer: At this time, gifting does not create penalties (or periods of ineligibility) for the purposes of VA pension benefits. That being said, gifting for VA purposes may create penalties (periods of ineligibility) for the purposes of future applications for Medi-Cal for skilled nursing facilities. Any time you do gifts for VA purposes, you should be structuring a plan that ensures that you will not be creating periods of ineligibility for future Medi-Cal applications. Often a stroke, hip fracture, heart attack, or some other unexpected medical hospitalization and subsequent discharge to a skilled nursing facility will create a need for Medi-Cal benefits within the look-back period (currently 30 months after the gift was made, or 60 months in the case of gifts to irrevocable trusts, and 60 months for all gifts in the future when the Deficit Reduction Act is implemented with filing of final regulations with the Secretary of the State of CA). If you have not structured the gifts to create either no period of ineligibility or very minimal period of ineligibility, then you will have shot yourself in the Medi-Cal foot when you do your VA pension gifts. Because the gifting rules for Medi-Cal are complicated, see an experienced California attorney who knows the current rules about gifting. Be sure to ask the attorney if they are experienced in the laws governing gifting under Medi-Cal and if they can structure a gifting program that will not create a period of ineligibility, or that will greatly minimize any gifting period of ineligibility. Also, if you are thinking of gifting real estate, the rules are even more complicated for purposes of VA pension or Medi-Cal, and you will need an attorney with experience in both areas of law. Any time you gift an asset that has appreciated in value since purchase, there will be tax issues to evaluation, discuss, and account for—income tax issues, capital gains step-up issues, 121 exclusions, property tax reassessment issues, so do not try to do this on your own. Lastly, when someone needs VA pension now, it is not unlikely that they will need Medi-Cal within a matter of months or a few years, so always consider that VA gifts may create Medi-Cal penalties if not structured properly. The area of gifts for VA and Medi-Cal is not a do-it-yourself proposition. Get good legal advice and guidance.
Dallas Leigh Atkins, Esq.
Law Offices of Dallas Atkins
Santa Barbara, CA 93101
Member of the national ElderCare Matters Alliance, California chapter
Answer: The fact that your mother granted you and your brother her power of attorney is a good indication that she trusts the two of you (and is, perhaps, relying on you) to step in to protect her interests when you think protection is warranted. You should look into her situation and her finances as far as your power of attorney allows, while at the same time respecting whatever level of autonomy your mother is capable of exercising. It might be appropriate to enlist the input of her physician or other medical providers who are in a position to shed light on her medical condition. Hopefully, your mother has given her medical providers her written permission to share her health information with you. She may have done this in her advance health-care directive, her “HIPAA authorization,” or other estate planning or health care documents. If she has not done so, her medical providers will probably decline to talk with you.
POSSIBLE ACTION STEPS: (1) Get clear with your brother on your specific concerns. (2) Agree with your brother on who (if anyone) should be consulted concerning your mother’s medical condition and her finances. (3) Approach your mother with your concerns and let her know that you are there to make sure her interests are protected. If you can involve your mother’s physician or other family members or trusted individuals, that will probably promote her comfort level.
If your mother clearly understands that you are endeavoring to act in her best interest, she will probably appreciate the attention that you are focusing on her.
Scott Makuakane, Esq., CFP
Founding Partner, Est8Planning LLLC
Honolulu, Hawaii 96813
Member of the national ElderCare Matters Alliance, Hawaii chapter, State Coordinator
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Answer: Assuming you have a valid financial or general power of attorney that complies with state law, you need to check the document. When does the document say the power is effective? Some are effective immediately upon signing it. In that case, you can use the power right now. She may, however, try to revoke it.
Most powers of attorney, however, are considered “springing.” That means the power of attorney is effective upon some triggering event, usually incapacity. The document should say how incapacity will be determined. For example, some say that the principal (the person who signed the power of attorney) must be determined to be incapacitated by two physicians. If such a requirement is in the document, then you will need written statements from the physicians stating that she cannot manage her financial affairs. Those statements should be kept with the power of attorney and made a part of it.
Remember that financial institutions may not accept the power of attorney. Some will not accept a power that is a certain number of years old. Others will look for certain clauses that may or may not me in your document. And some financial institutions seem to give people a hard time just because. It is very difficult to try to force a financial institution to accept a power of attorney.
If your power of attorney turns out to be ineffective for whatever reason, you may need to petition the court for a conservatorship.
Ronald Zack, Esq.
Answer: The correct answer is “It depends”. It depends on your unique family, health, and financial situation. Tax consequences also have to be considered. In the event you need long-term care, there is a five year look-back period that applies to gifts (transfers of assets without consideration). Thus, if you are faced with a chronic or catastrophic illness within five years after you transfer the home to your children; such transfer may impact your ability to obtain Medicaid (Title 19) benefits. This is a very complicated area of the law and requires careful consideration.
If it makes sense to transfer the home to your children, there are several ways to structure the transfer. The first is an outright gift to your children. This is generally not advisable for tax reasons and asset protection purposes. The second is by completing the transfer but retaining a life estate. While generally superior to an outright gift, this is also not without problems. However, the retained life estate does give you some legal control over the property and also preserves some tax benefits associated with inherited property versus gifted property. The third is a transfer of your home to an irrevocable trust. This is usually the preferred method of protecting the home as it balances tax benefits with asset protection issues and also protects the home from your children’s creditors or in the event they should predecease you.
As you can see, the transfer of your home is something that requires careful consideration and sound legal counsel.
Paul T. Czepiga, Esq., CELA
Czepiga Daly Dillman, LLC
Newington, CT 06111
Member of the national ElderCare Matters Alliance, Connecticut chapter
Question: “I have a potential concern for my recently widowed 84 year old mother, a Massachusetts resident who requires home care. Mom is independent, still has all her intellectual faculties, and has a great memory, but has some physical limitations, so she requires home care assistance. I visit Mom every few weeks to help her pay her bills.
Mom recently disclosed to me, that she recently gave money to one of her home care aids. My mother says she gave her the money, in cash, and told her it was a gift. I know that my mother would never complain about this woman as she would not want to lose her care.
I feel my mother has been taken advantage of financially, and am concerned it will happen again. As her daughter, what can I legally do?”
Answer: You’re in a difficult situation and there’s no easy answer. It’s good that your mother is mentally sharp but she may well be feeling vulnerable because of her physical limitations. I have seen quite a few cases where normally financially astute elders make unwise decisions because of these changes.
Since you are with your mother regularly and help her pay her bills, you should be able to keep on eye on things and be alerted if she starts withdrawing more cash then usual from the bank. If you are named as the agent under your mother’s power of attorney you many also speak with the people at her bank to be on the alert for unusual activity.
Dagmar M. Pollex, Esq.
Law Offices of Dagmar M. Pollex, P.C.
Braintree, Massachusetts 02184
Member of the national ElderCare Matters Alliance, Massachusetts chapter
Answer: With Reverse Mortgages, it doesn’t matter how many mortgages have previously been placed on the property. The couple must be at least 62 years old. Actually, the amount of money you might get extended as a reverse mortgage is based upon the age of the couple and the value of the home. The older you are, the more money you can qualify for. This is because you can continue to live in the home for the rest of your life and never have to make a mortgage payment. So, if the elderly couple in the question are more advanced in age, it greatens the chance that the amount they qualify for can pay off both of the two prior mortgages. It needs to because a reverse mortgage won’t be extended unless it will occupy a “first” position.
One of the best things about reverse mortgages is that they are non-recourse. The concept began in 1988 under Ronald Reagan, an oldster himself.
Russell Hodges, Esq., Managing Partner
Hodges Law Firm, LLC
Atlanta, Georgia 30040
404-824-4225 or 770-888-0015
Member of the national ElderCare Matters Alliance, Georgia chapter
Answer: Wow, I would be worried also, without any assurances in writing. Please understand that there are a number of issues in your question, all rolled into one. First, when your mother entered the assisted living facility, she or, perhaps a family member acting on her behalf, probably signed a contract. It is important to know what provisions are contained in the contract to see if, in fact, what you have been told verbally is in the written agreement. Second, you said your mother moved into assisted living. However, unless it is a continung care community or one of the few supportive living facilities in Illinois that take Medicaid, most assisted living facilities do not accept Medicaid, so more information is needed. Third, you don’t mention how your mother is paying for the assisted living facility and what other assets she may have, so it’s difficult to asses how soon she may need assistance paying for care. The house presents a trickier issue. Is there a possibility your mother intends to return to her home? If so, the home may not be considered an available asset for purposes of qualifying for Medicaid. The home may also be exempt if a “qualifying family member” is living in the home. She may be allowed to transfer the home to a qualifying family member. However, if she does not intend to return home, if there is no qualifying family member living in the home, and the home is sold, there may be planning strategies that could preserve some of the funds for her use, rather than to spend them all down before qualifying. Bottom, line, it is not a simple question, and you would be well served by seeking the advice of an experienced elder law attorney in your area who could sort out all the issues and recommend planning strategies rather than rely on verbal assurances of the facility representative.
Teresa Nuccio, Esq.
Teresa Nuccio & Associates, P.C.
Park Ridge, Illinois 60068
Member of the national ElderCare Matters Alliance, Illinois chapter
Answer: Georgia Medicaid policy, found at Section 2332 et seq. of VOLUME II/MA, MT 39-08/10 titled “Retirement Funds”, expressly exempt retirement funds, including, Individual Retirement Accounts (IRAs) Keogh plans, and some retirement profit sharing plans are “exempt” or non-countable resources for Aged, Blind, or Disabled classes of Medicaid, including Long-Term Care (Nursing Home) Medicaid if owned by the applicant/recipient if the applicant/recipient applies for “periodic” distributions. To be eligible for ABD Medicaid, the individual must apply for periodic benefits. If s/he has the choice between periodic payments and a lump sum, the individual must apply for periodic payments.
A “lump” sum is a liquidation of the retirement fund. There’s no requirement in the Medicaid plan that payments be taken monthly; payments can be made annually. The Medicaid policy states “[p]eriodic retirement benefits are payments made to an individual at some regular interval (e.g. monthly). The signal, “e.g.” means “for example”. As a result, the use of “monthly” in the policy is intended only as an example of what “periodic payments” means.
The caseworker is directed to determine if the applicant for Nursing Home Medicaid is eligible for periodic payments from the IRA. If not, can the individual make a lump sum withdrawal. If the individual is eligible and receiving periodic payments, the payments are treated as “income” only; the fund is disregarded as an asset.
A retirement fund belonging to an applicant/recipient’s spouse is disregarded, regardless as to whether periodic payments are made.
The income is budgeted with other sources of income the applicant receives. For example, if she has Social Security retirement and the IRA distributions, these amounts make up her income. Once Medicaid eligibility is established, Medicaid calculates a “patient liability” or cost-share which is her contribution toward the costs of her long-term care. Patient liability is paid over to the nursing home each month.
The IRA does not designate the State as the beneficiary upon death; she can designate whomsoever she wishes.
It sounds like the Medicaid caseworker communicating with this family is confusing the treatment of an “annuity” with the treatment of “retirement funds” for Nursing Home Medicaid eligibility purposes.
David Paul Pollan, Esq.
The Pollan Law Firm
Atlanta, Georgia 30309
Member of the national ElderCare Matters Alliance, Georgia chapter
Answer: If you have a loved one living in a nursing home, it is important for you to understand what constitutes abuse and neglect, and how to recognize the warning signs. Abuse and neglect comes in many different forms and may affect a resident physically, mentally and emotionally. The most important things to look for if you suspect abuse or worry about the welfare of your loved one include: falls, cuts and bruises, the development of bed sores, sudden weight loss, anxiety or agitate behavior, overmedication, poor hygiene, unsanitary conditions, or a sudden change in the resident’s disposition or behaviors. Residents and their families have a right to question a nursing home’s care decisions. If you believe a loved one is receiving substandard care in a nursing home, you should discuss their care plan with staff. If you suspect that your loved one has been seriously injured as a result of nursing home abuse or neglect, you should contact a nursing home lawyer who can help you determine if you have a case against the facility.
Steven M. Levin, Esq., Co-Founder & Senior Partner
Levin & Perconti
Chicago, Illinois 60654
Member of the national ElderCare Matters Alliance, Illinois chapter
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