Attorney Mark D. Munson, CELA* Shepherd Elder Law Group, LLC

August 9, 2018

PROTECT YOUR ASSETS: Long-Term Care and

Medicaid Planning

Hutchinson | Overland Park

www.ShepherdElderLaw.com

* Distinguished as a Certified Elder Law Attorney by the National Elder

Law Foundation, as accredited by the American Bar Association.

Asset Protection Planning

Tax Planning

Insurance Planning

Limited Liability Entities

Risk Management Planning

Medicaid Eligibility Planning

Medicaid Eligibility

Planning

What is Medicaid Eligibility?

What is Medicaid Eligibility Planning?

Medicaid Eligibility

SINGLE PERSON

Eligibility Criteria

• U.S. Citizen

• Elderly (age 65 or older), blind, or disabled

• $2,000 or less in assets

• Income less than the cost of care

SINGLE PERSON

Asset Exemptions • Home up to $572,000 (if intent is to return)

• Automobile

• Personal property

Medicaid Eligibility

SINGLE PERSON

Asset Exemptions (continued)

• Pre-paid funeral arrangements ($1,500 burial

fund; $4,500 irrevocable trust account; up to

$7,000 of irrevocable funeral plans and burial

insurance for funeral services (with unlimited

value for caskets, vaults, spaces, etc.)

• Life insurance with no potential cash surrender

value (i.e., term, group, Veterans, etc.) and life

insurance up to $1,500 face value

Medicaid Eligibility

SINGLE PERSON

Income Exemption

NONE

This means all income must go

toward long-term care

(except $62 monthly for personal needs allowance).

Medicaid Eligibility

Medicaid Eligibility

MARRIED COUPLE

Eligibility Criteria

• For the spouse in need of long-term care, the asset

allowance and exemptions are the same as a single

person.

• The “Community Spouse” is allowed to keep

additional assets and may be entitled to income

from the spouse who needs long-term care.

COMMUNITY SPOUSE

Asset Exemptions

• Home (unlimited value)

• Automobile (unlimited value)

• Retirement accounts belonging to the CS

(i.e., IRAs, 401(k)s, etc.) (KS only)

Medicaid Eligibility

• In addition to the asset exemptions, the

“Community Spouse” is allowed to keep $0

to $123,600 in non-exempt marital assets,

depending on the amount of the couple’s

non-exempt marital assets.

COMMUNITY SPOUSE

Resource (or Asset) Allowance

Medicaid Eligibility

If a couple’s

combined non-exempt

assets are:

Community Spouse

may keep:

$0 - $24,720 ALL

$24,721 - $49,440 $24,720

$49,440 - $247,200 HALF of the combined assets

Over $247,200 $123,600

COMMUNITY SPOUSE

Resource Allowance

Medicaid Eligibility

What are Examples of

Non-Exempt Marital Assets?

Checking Accounts

Savings Accounts

Certificates of Deposit

Stocks

Bonds

Mutual Funds

U.S. Savings Bonds

Non-Homestead Real

Estate

Mineral, gas, and oil

interests

Life Insurance with Cash Value

Non-Qualified Annuities

Nursing Home Spouse’s

Retirement Benefits (IRAs,

401(k)s, etc.)

Non-Retirement Investment Accts

Inheritances

Gifts from Family and Relatives

Cash on hand

The remaining balance of $100,000 must be spent

down before medical assistance will begin paying for

spouse’s long-term care costs.

COMMUNITY SPOUSE

Potential Problem

Non-Exempt Marital Assets = $200,000

Community Spouse Resource Allowance = ($100,000)

Remaining Balance = $100,000

• The Community Spouse is entitled to have up

to $2,030.00 of monthly income. To get to this

level, income of the “nursing home spouse”

can be given to the Community Spouse.

COMMUNITY SPOUSE

Income Allowance

EXAMPLE

John and Jane Doe are married. John is in the nursing home

and has a monthly income of $1,000. Jane is still at home and

has a monthly income of $800. Jane can have John’s entire

monthly income of $1,000 given to her because $1,800

(John’s monthly income of $1,000 plus Jane’s monthly

income of $800) is less than $2,030.00.

COMMUNITY SPOUSE

Income Allowance

EXAMPLE (continued)

If John’s monthly income was $2,000 per month, only

$1,230 could be given to Jane, and John would have to

pay $708 toward his care at the nursing home. John is

allowed to keep $62 per month as his personal needs

allowance.

COMMUNITY SPOUSE

Income Allowance

Medicaid Eligibility

Any Questions?

Medicaid Eligibility

PLANNING

Planning for Incapacity

Durable Power of Attorney

• For property and financial decisions

Power of Attorney for Health Care

• For health and medical decisions

• HIPAA

Power to create trusts and make gifts

Power to fund trusts and transfer assets

Power to deal with retirement benefits -

401(k)s, IRAs, etc.

Powers to be Included in your

Durable Power of Attorney

Need to make sure that medical assistance

eligibility planning can be accomplished if

you are incapacitated.

Powers to be Included in your

Durable Power of Attorney

The number one goal and objective in any asset

protection planning engagement involving Medicaid

should be to protect the assets of the original

owner(s) so that assets are available if needed and

protected if not needed.

Number One Asset Protection

Planning Goal and Objective

How Do I Protect My Assets?

The key to asset protection planning is

getting assets out of your name so that you

no longer have legal ownership over those

assets so that they are not available to you.

How Do I Protect My Assets?

If your assets are available to you, they

must be used on your care, including long-

term care costs.

The only way to get assets out of your

name is to give them away by making

gifts. A gift is a transfer of assets where

you do not receive anything in return.

How Do I Get Assets

Out of My Name?

Considerations When

Gifting Assets

Five–year look-back period.

Determination of penalty period. (Calculated by dividing the value of gifts within the

last five years by the average daily private pay

nursing home cost in Kansas, which is currently

$197.88) ($160.73 in Missouri)

Considerations When

Gifting Assets

Delayed penalty period start date

(The need for asset protection after a gift has been

made is now far more important than ever before.)

Delayed Penalty Period

Start Date

In the event a gift or gifts is/are made within

the five-year look-back period, the penalty

period for the gift(s) will not start until all four

of the following conditions are met and

satisfied:

Delayed Penalty Period

Start Date

The Medicaid applicant is in the nursing home;

An application for Medicaid is filed;

The Medicaid applicant’s income is less than the cost

of care; and

The Medicaid applicant’s non-exempt assets/resources

are less than $2,000.

EXAMPLE

Four years ago, Jane Doe gave away (gifted)

$60,000 to her children. Jane has a 303 day

penalty period ($60,000 / 197.88 = 303) and is

now in a Kansas nursing home. She has applied

for medical assistance, her income is less than the

cost of care, and she has $20,000 in

assets/resources remaining.

EXAMPLE (continued)

Jane’s 303 day penalty period will not start until

the $20,000 she has in assets is spent down to

$2,000 or less.

In order to get Jane through the 303 day penalty

period, it is likely that the beneficiary or

beneficiaries of Jane’s $60,000 gift will have to

give that money back to Jane so she can pay for

her nursing home care.

EXAMPLE (continued)

Two realistic choices:

1. Your children.

2. Your asset protection trust.

Who Should Receive My Gifts?

Risks of Gifting Assets

to Children

Five years is a long time

Irrevocable

No direct access to principal

or income

No legal ownership

No legal control

Death

Financial and creditor

problems

Job loss

Incapacity/Guardianship

Divorce

Nursing home

Health

Human vices

Accidents and lawsuits

Judgments and liens

Loss of tax benefit

What is a Trust?

A trust is a legal arrangement created by a person

(known as the Settlor(s) or Grantor(s))

where assets and property are held and managed by a person

(known as the Trustee)

for the benefit of one or more people

(known as the Beneficiary or Beneficiaries).

What is a Revocable Trust?

A revocable trust is a trust that you can revoke

(undo, change, amend, or terminate) at anytime.

Revocable trusts do not provide any asset

protection to the Settlor(s).

A Settlor is the person who sets up or establishes the trust

and contributes assets to it.

What Does it Mean if a

Trust is Irrevocable?

If a trust is irrevocable, the trust cannot be

terminated unilaterally by the Settlor(s).

In order for an irrevocable trust to be

terminated, all of the trust parties

(Settlor(s), Trustee(s), and Beneficiary or Beneficiaries)

must agree and consent.

What Does it Mean if a

Trust is Irrevocable?

This is the precise reason why

irrevocable trusts can provide asset protection.

Neither the nursing home nor the State of Kansas

can force you to revoke or terminate your trust

(because you do not have the

legal power to do so by yourself).

What Does it NOT Mean

if a Trust is Irrevocable?

If a trust is irrevocable, it does not mean:

1. That you cannot have control over trust assets

(YOU CAN – indirectly);

What Does it NOT Mean

if a Trust is Irrevocable?

If a trust is irrevocable, it does not mean:

2. That the trust cannot be amended to deal with

unforeseen situations that actually occur in

the future (IT CAN BE AMENDED OR

MODIFIED IN THE FUTURE);

What Does it NOT Mean

if a Trust is Irrevocable?

If a trust is irrevocable, it does not mean:

3. That you cannot change who will inherit

from the trust upon your passing (YOU CAN

RETAIN CONTROL TO DETERMINE WHO

SHOULD INHERIT FROM YOUR TRUST

UPON YOUR PASSING);

What Does it NOT Mean

if a Trust is Irrevocable?

If a trust is irrevocable, it does not mean:

4. That you cannot have the same tax

benefits when compared to outright

ownership (YOU CAN HAVE THE SAME

TAX BENEFITS AS OUTRIGHT

OWNERSHIP).

• Control

• Management

• Creditor protection

• Flexibility for future planning

• Preservation of tax benefits

• Access to income (if desired)

Advantages of Gifting Assets to

an Asset Protection Trust

Trust Parties

Settlor: The person who creates the trust; YOU

Trustee: - The person who administers the trust and

manages the trust assets; YOU DECIDE

Beneficiary - the person who receives distributions

from the trust; YOUR CHILDREN

Asset Protection Trust

You

Your Asset

Protection Trust

Trustee = You

Decide Assets

Asset Protection Trust

Trust Distributions

Income: To YOUR CHILDREN

Principal: To YOUR CHILDREN

Nothing to you. You are not a beneficiary of

the trust at all. You are not a beneficiary as to

income. You are not a beneficiary as to

principal. You are never a beneficiary under any

circumstance.

Asset Protection Trust

You

Your Asset

Protection Trust

Trustee = You

Decide

Your

Child

Your

Child

Assets

Beneficiaries

Income and

Principal

Income and

Principal

Asset Protection Trust

You

Your Asset

Protection Trust

Trustee = You

Decide

Your

Child

Your

Child

Assets

Beneficiaries

Income and

Principal

Income and

Principal

Gifts from

your children

back to you

Asset Protection Trust

All assets, except for qualified retirement

accounts, such as IRAs, 401(k)s, 403(b)s

Real estate, bank accounts, certificates of

deposit, stocks, bonds, mutual funds, life

insurance, non-qualified annuities, etc.

What Assets can be Transferred to

an Irrevocable Income-Only Trust

or an Asset Protection Trust??

Personal Care Contracts

Promissory Notes

Annuities

Life Estates with Real Estate

Limited Liability Companies (LLCs)

Special Needs Trusts

Other Planning Options

Planning now is always better than later.

• Potential to protect more assets

• Lower legal fees

General Observations

Assets can still be protected at the last

minute.

• Can usually save around one-half if single.

• Can usually save more than one-half if

married.

General Observations

Identify assets that you want to protect and

that you do not want to use in order to pay

long-term care expenses and then get those

assets out of your name.

General Observations

Everyone has an estate plan.

Your estate plan is either planned by you or has already

been planned for you by the government.

If your estate plan is planned for you by the government,

it will very likely involve probate, unnecessary expenses,

extra taxes, time and confusion for family members,

along with unnecessary spend down

and loss of family assets.

Final Thought

(and a Call to Action)

A “government planned” estate plan will provide no extra

benefits or protections for you and your family.

A government-planned estate plan may

be accurately summarized as follows:

“Heads, the government wins;

tails, you and your family lose.”

Final Thought

(and a Call to Action)

When it comes to estate planning,

failing to plan is planning to fail.

Final Thought

(and a Call to Action)

Any Final Questions?

Final Thoughts

www.shepherdelderlaw.com

Shepherd Elder Law Group, LLC – Hutchinson

1 North Main, Suite 410

Hutchinson, KS 67501

©2018 Shepherd Elder Law Group, LLC, Accurate

reproduction with acknowledgment granted. All rights reserved.

This document provides information of a general nature

regarding legislative or other legal developments. None of the

information contained herein is intended as legal advice or

opinion relative to specific matters, facts, situations, or issues,

and additional facts and information or future developments may

affect the subjects addressed.