ELDER LAWENHANCING THE LIVES OF SENIORS THROUGH EDUCATION

PLANNING FOR WHAT COMES NEXT

JAN NEAL

1

Part I

OVERVIEW OF TOPICS

2

Part I

• Older Americans Act Legal Assistance

• Materials needed to plan

• Authority Issues

• Long-term care levels of care

• Payment options

• Medicaid for Long-term care

Part II

• Special Needs Planning

• Probate

• Administration of Estates

• Last Remains

• Funeral Planning

OLDER AMERICANS ACT LEGAL ASSISTANCE

• What the service is: counsel and advice, representation, information and referral and public education for persons 60+ at no cost*

• What the service is not: based on income, representation in criminal or fee generating cases or non-specifically designated case types

* Contributions payable to the Area Agency on Aging are accepted and appreciated

3

4

OLDER AMERICANS ACT LEGAL ASSISTANCE CASE TYPES

• access to public benefits (including SS/SSI/SSDI, Medicaid and Medicare, veterans benefits and unemployment

• advance directives for financial, routine medical and end of life decision making and simple wills

• issues related to guardianship with a focus on representation for older persons who are the subject of guardianship actions

• access to available housing options, including low income housing programs that allow seniors to stay independent in their homes and communities

• foreclosure or eviction proceedings that jeopardize the senior's ability to stay independent in his or her home and community

• access to health care and the full benefit of appropriate long-term care private and public financing options

• maintenance of long term financial solvency and economic security

• elder rights protections for seniors in long-term care (LTC) and those transferring from LTC facilities to home and community-based care

• consumer issues and elder abuse including consumer fraud and financial exploitation

5

NOTES

6

GETTING STARTED ACCESSING AND ORGANIZING INFORMATION YOU WILL NEED

7

• Deeds

• Mortgages

• Property Tax Assessments

• Statements for all assets in accounts (bank accounts begin to collect back five years and consider using online accounts to accumulate)

• All insurance policies

• Determine beneficiaries on all accounts

• Existing wills and/or trusts

• Existing powers of attorneys, living wills, advance directives for health care

• Titles to vehicles

• Probate/administration papers relevant to any property

• All online accounts with passwords

• Income (source, gross and net amount)

PAPERS TO ACCUMULATE

8

9

NOTES

AUTHORITY ISSUES

• Powers of Attorney including health care directives

• Guardianships/Conservatorships

• Social Security Representative Payees

• VA Fiduciaries

• Appointment of Representative before SSA, Medicaid, Medicare, etc.

• Sponsors

10

11

NOTES

LONG-TERM CARE ISSUES

• Level of care

• Independent Living

• Assisted Living (to include Special Needs Assisted Living)

• Nursing Homes

• Payment Sources

• private pay

• Long Term Care Insurance*

• VA

• Medicare

• Medicaid

*Estate Preservation: An Alabama Long-Term Care Partnership Policy is one that qualifies for asset protection for an amount of money equal to funds paid by an insurance company for long-term care (above and beyond the resource limit allowable). To qualify a policy must be issued on or after March 1, 2009, cover an individual who was an Alabama resident when coverage first became effective under the policy, be a tax-qualified policy under Section 7702(B)(b) of the IRS, meet stringent consumer protection standards, and meet certain inflation requirements.

This may or may not be a benefit that can be transferred to another state, depending upon whether that state has a comparable Long-Term Care Partnership Policy Program.

12

13

NURSING HOME ISSUES

• Relatives cannot be required to sign as guarantors on the bill

• Sign so that personal liability is not incurred

• Care plans are developed to determine the individual needs of each patient; families should participate in planning

• Patients can only be discharged if the facility cannot meet the patient’s needs, the patient is presenting a danger to himself or others, non-payment of the bill, or the facility is going out of business

• The use of chemical or physical restraints is prohibited except in rare circumstances and under a doctor’s orders. If use of restraints is suspected contact the local Ombudsman.

MEDICARE PAYMENT FOR LONG-TERM CARE

• Very limited coverage

• While literature indicates payment for 100 days, Medicare coverage usually stops after 20 days. Even if it does not, a $161 per day copayment begins on day 21, and most supplemental policies do not pay that copayment

• Must be hospitalized three days (inpatient, not observation status) before being transferred to long-term care

• Skilled nursing services must be ordered by the doctor

14

STATE VETERANS HOMES

Bill Nichols State Veterans Home 1784 Elkahatchee Road, Alexander City, AL 35010

Phone: (256) 329-3311 Facsimile: (256) 329-3350

Floyd E. “Tut” Fann State Veterans Home 2701 Meridian Street Huntsville, AL 35811 Phone: (256) 851-2807 Facsimile: (256) 851-2967

William F. Green State Veterans Home 300 Faulkner Drive Bay Minette, AL 36507-1461 Phone: (251) 937-8049 Facsimile: (251) 937-2472

Colonel Robert L. Howard State Veterans Home 7054 Veterans Parkway Pell City, AL 35125 Phone: (205) 338-6487

These facilities are subsidized by federal and state funds leaving the veteran with minimal expense (e.g. $1500)

15

• Application is similar to an audit in that Medicaid examines all financial transactions for the previous five years

MEDICAID COVERAGE

• Applications cannot be pre-approved; the applicant must be residing in a nursing home for an application to be accepted

• Medicaid eligibility varies state to state • Medicaid can pay three months

retroactively • VA benefits for single veterans drop to

$90 after Medicaid is established, and the applicant can keep that amount plus the $30 for personal needs

• Medicaid Estate Recovery permits Medicaid to recover fund from a probate estate

16

• For Medicaid to pay at all, a 30 day stay is required

17

• Evaluation for eligibility is based on marital status due to spousal impoverishment law designed to protect the spouse at home from complete impoverishment.

• A single person’s gross income allowable is $2199; a Medicaid Qualifying IncomeTrust (MQIT) is needed if income exceeds $2199; resources allowable are $2000

• A married person’s allowable income is the same as a single person’s; only the income of the institutionalized spouse counts, not the income of his or her spouse at home; with spousal resources under $25,000, spouse at home keeps all; with spousal resources over $50,000, the spouse at home can keep ½ of all assets not to exceed $119,220; institutionalized spouse must spend down the rest; the spousal resource determination is based on snap-shot date of when institutionalized spouse entered long-term care (e.g. when entered the hospital if he or she did not return home for 30 days or more); Minimum Monthly Maintenance Needs Allowance permits the institutionalized spouse to allocate income to spouse at home to bring income of spouse at home up to $1991. All property of both spouses count; prenuptial agreements are not recognized by Medicaid.

MEDICAID INCOME AND RESOURCE LIMITS

18

HOW TO VALUE PROPERTY• Real property is the value of the tax assessor’s appraised value, less any indebtedness on property. If the

property cannot be sold for an amount equal to that value, the property value can either be reassessed by the county or, if the appraised value is over one year old, a commercial appraisal can be used to establish value

• Joint Accounts are considered the property to the applicant up to the full value unless proof can be provided that funds were deposit by the joint owner

• Annuities are considered transfers of assets unless highly specific rules are met; lump sum annuities that can be sold will be considered a resource in the amount of the current value of the annuity

• Life Insurance - The cash surrender value of any life insurance policy owned by the applicant/recipient is a countable resource

• Trusts - whether the principal of a trust is a resource to the applicant/recipient depends on its availability to the applicant/recipient by the terms of the trust instrument itself

• Promissory Notes, Loans, and Property Agreements (Mortgages) are considered resources, if the owner has the legal right to sell them. If so, the resources should be counted in the amount of the outstanding principal balance

• Stocks, Bonds, and Mutual Fund Shares are considered countable liquid resources according to their market value

• Retirement accounts are the value of accessible funds less taxes owed on same

EXCLUDED RESOURCES • The home if the spouse resides there (a lien cannot be taken and should be transferred to spouse at home)• One vehicle with a value not exceeding $4,500 (may exceed that value if necessary to take nursing home

resident or spouse to receive medical care • Burial space items including casket, vault, burial space, marker, opening and closing the grave, and cremation

container • Up to $5000 cash value in life insurance or $5000 in a designated fund (not counting space items excluded) or

prepaid funeral contract • Life Estates • Personal property • The home if a dependent relative other than a child under 21, blind or disabled lives there (a lien may be

taken) • The home if a dependent child who is under age 21, blind or disabled lives there (no lien may be taken and

property may be transferred with no penalty) • The home if a sibling with an equity interest lives there and was lawfully residing in the home for at least one

year immediately poor to the claimant’s admission to the nursing home (no lien may be taken and property may be transferred with no penalty)

• The home if the claimant has a reasonable intent to return home (if claimant does return home, lien dissolves) • Real property on which a joint owner lives for whom sale of the property would cause a loss of housing (a lien

may be taken) • Rental property up to $6000 in value (a lien may or may not be taken) • Real property the applicant is making a bona fide effort to sell (a lien will be taken) • Property held in a Special Needs Trust

19

20

EXEMPT TRANSFERS

• The home to the spouse • The home to a child under 21, blind or disabled for use as his

or her home • The home to a sibling who has an equity interest and who was

residing in the home for at least one year immediately before the admission to long-term care

• The home to a son or daughter who has lived with the applicant for two years prior to the institutionalization who provided care which allowed the claimant to live at home rather than in an institution (if not transferred may be treated as property excluded on which Medicaid takes a lien)

21

• Gross income

• Minus $30 for personal needs allowance

• Minus funds to pay for unreimbursed medical expenses (e.g. Medicare Part B premium)

• Minus Minimum Monthly Maintenance Allowance payable to spouse

= Personal Liability from income payable to nursing home

Difference in personal liability and nursing home charges is what Medicaid pays

During the wait for application approval, the personal liability must be paid, and when approved Medicaid will pay back to the eligibility date

Medicaid is payor of last resort so do not pay the nursing home if the resident is eligible for Medicaid or Medicaid may not pay when approved

POST ELIGIBILITY PERSONAL LIABILITY CALCULATION

22

• For every $5800 transferred within five years of Medicaid application one month of penalty is assigned

• A month of penalty means no eligibility is possible

• The penalty begins to run when the applicant would otherwise be eligible for Medicaid (in other words, when the person is institutionalized and out of money)

• Do not confuse allowable $14,000 gift tax gifts with Medicaid gifting

• Application timing is important when gifts have been made to keep from triggering penalties (do not let nursing home pressure you into premature filing of application)

• Sometimes planning involves gifting money, applying and being approved subject to the penalty and paying with the gifted money during the penalty period

• Be aware of the fact that paying relatives to provide care can be considered a transfer of assets unless specific caregiver agreements are established

• While spouse outside nursing home should leave nothing in will to institutionalized spouse, if spouse at home dies, the omitted spouse who is a Medicaid recipient must claim up to $15,000 for homestead exemption, $7,500 for personal property exemption and $15,000 for family allowance (total $37,500) and elective share (about ⅓) or failure to claim is considered a transfer of assets

TRANSFER OF ASSETS

23

EXAMPLES OF MEDICAID APPLICATION TIMING ERRORS

• Mrs. Jones transferred $200,000 to her children in January 2011. She entered the nursing home September 2015. The nursing home told her that the penalty on the transfer was only 34.48 months and she should be in the clear now, so she applies. Because she applied during the five years prior to application the penalty is triggered, and she won’t qualify for Medicaid until 34.48 months from 09/15, approximately August 2018. If she had waited to apply until February 2016, there would have been no penalty at all.

• Same scenario except this time Mrs. Jones did wait until February 2016 to apply. She marked the box indicating that she requested assistance retroactively three months, and the full penalty was triggered because she requested assistance during the five year look back. She requested Medicaid for November 2015, establishing the look back to November 2010.

24

NOTES

ELDER LAWENHANCING THE LIVES OF SENIORS THROUGH EDUCATION

PLANNING FOR WHAT COMES NEXT

JAN NEAL

25

Part II

SPECIAL NEEDS PLANNING

• Special Needs Trusts: Trusts created for disabled persons to permit the set aside of funds to pay for special needs without loss of public benefits. Often used when personal injury proceeds are received by person on public benefits but may also be used for a spouse’s special needs rather than spending down the share attributable to the institutionalized spouse (e.g. to pay for private room, sitters). Usually requires a Medicaid pay back clauses

• ABLE Accounts: Accounts created to help pay for disability-related expenses for persons who became disabled prior to age 26 without loss of public benefits. Limited to $14,000 contribution yearly. Accumulation up to $100,000 permitted before loss of SSI; accumulation up to $235,000 to $452,210 (depending on the state) before loss of Medicaid.

26

27

NOTES

SETTLING ESTATES: WILLS,TRUSTS, GIFTING, ASSET TITLING

• It is important to understand the distinction between the probate estate and the non-probate estate

• Property in the probate estate requires court action to transfer property

• Through planning a person can decide whether to make property part of the probate estate or not (trusts, asset titling, beneficiaries, life-time gifts)

• A will determines who takes the probate property

• The law of intestacy determines who takes the probate property in the absence of a will

• Often the will of the first spouse to die does not need to be probated, but the will of the last spouse to die usually does need to be probated

• Plan for the liquid cash your estate will need (attorneys fees, out of pocket expense, home expenses while property is being sold or estate is in the six month claim period)

• Estate tax becomes an issue only for estates passing $5,450,000

28

29

AVOIDING PROBATE: HOW TO KEEP PROPERTY OUT OF YOUR PROBATE ESTATE

• Living Trusts are an option for property in different states, but all property must be titled to the trust, and property encumbered by a mortgage usually cannot be titled to a trust

• Life Gifts (e.g. transfer of home while retaining a life estate)

• Joint Ownership

• joint bank accounts

• joint tenants with right of survivorship on deeds (not transfer on death deed)

• Payable on death designations on bank accounts

• Transfer on Death (TOD) registration for securities

• Affidavit for Assignment of Title for a Vehicle from a Deceased Owner Whose Estate Does Not Require Probate (Alabama Department of Revenue MVT 5-6) for paid off vehicles

30

HOW PROBATE PROPERTY IS DISTRIBUTED WITHOUT A WILL

• If there are no children and no parents, all to the spouse

• If there are no children, but there are parents, first $100,000 plus ½ of balance over $100,000to the spouse and ½ of the balance over $100,000 to the parent or parents

• if there is a spouse and a child or children by a pervious relationship, ½ to the spouse and ½ to the child or children by the previous relationship

• if there is a spouse and a child or children by the surviving spouse, first $50,000 to the spouse plus ½ of the balance over $50,000 to the spouse and ½ of the balance over $50,000 to the child or children by the surviving spouse

• if there is no surviving spouse, then distribution in the following order:

• all to the child or children

• all the the parent or parents

• all to the siblings

• all to the grandparents

• all to the aunts and uncles

• all to the cousins

PROBATE PROCESS: PASSING PROPERTY WITH A WILL

• Wills must be probated within 5 years of death

• A will may or may not need to be probated depending on the need to pass property

• A trust can be established in a will and is called a testamentary trust

• Procedure includes

• file the will and death certificate asking court to issue Letters Testamentary appointing Personal Representative (Executor), along with proof of notification of next of kin and persons named in will

• if all parties sign waivers and will is self-proving, no hearing required

• Obtain a tax ID number for estate and pay any taxes

• gather and take possession of the assets

• notify known creditors and advertise for unknown creditors

• wait six months to give creditors an opportunity to file claims and settling debts of the estate

• pass property to beneficiaries named in the will (sometimes involves selling property after the claims period has run)

• Medicaid estate recovery requires Medicaid to be notified as a creditor in cases where the decedent received Medicaid benefits

31

32

SMALL ESTATE DISTRIBUTION FOR ESTATES NOT EXCEEDING $28,052 IN 2016

• No real estate can be passed

• Petition under oath filed by spouse or distributees entitled to personal assets of the estate in the Probate Court of the county where decedent lived prior to death

• Provide death certificate

• If will existed, provide to court

• Provide names, addresses and ages of surviving spouse, children,distributees

• Provide details concerning any debts, funeral expenses and a value of each asset

• Publish at the instruction of the court

33

NOTES

ADMINISTRATION OF ESTATES WHEN YOU DIE WITHOUT A WILL

• File a petition in the Probate Court where the decedent lived at the time death asking that the petitioner be named the Administer of the Estate and that Letters of Administration be issued giving him or her power to act for the estate; give notice to the next of kin

• Hearing required unless all interested parties waive further notice

• Be bonded in an amount equal to the value of the personal property of the state plus one year’s estimated income

• Gather the assets after Letters of Administration are issued

• Inventory the estate and file with the court within two months

• Give notice to known creditors and advertise for unknown creditors

• Wait six months and satisfy or dispute all claims

• Divide estate after the claims have been satisfied

• Probate court must approve administrator fee unless all interested persons agree and consent

34

35

DISPOSITION OF REMAINS

• Specific burial or cremation wishes can be included in a will, but such an arrangement has limited value when you consider the immediate need to make burial arrangements

• Code of Alabama 34-13-11 permits the making of an affidavit naming a particular person to handle funeral arrangements with specific instructions

• An affidavit may be useful in situations involving second marriages where the deceased wished to be buried beside first spouse

36

NOTES

FUNERAL PLANNING

• The Federal Trade Commission (FTC) Funeral Rule requires open disclosure of costs in selling funeral services and requires a generalize price list (GPL) be provided. You have the right to purchase only what you want rather than being required to purchase a particular plan

• The Alabama Preened and Funeral Act of 2002 (Amended 2008) requires those who sell funeral or cemetery merchandise pursuant to pre-need contracts to obtain a Certificate of Authority with reporting obligations and requirements to set aside or purchase insurance to cover a portion of contract payments. Alabama Department of Insurance monitors compliance.

• Cemetery operations remain largely unregulated in Alabama

• Pre-need policies freeze the cost of funeral services at today’s prices and avoid purchase decisions being made during the time of funeral arrangements following death

• Whole life insurance can be assigned to the funeral home to defray the cost of a pre-need plan

• A price list will show the amount spent for space items vs non-space items which is important for Medicaid eligibility

• Any amount may be spent on space items (casket, cremation container, vault, burial space, marker, opening and closing the grave). All other pre-need plan items should total $5000 or less. When this is not the case it is usually transporting the body out of state for burial that makes for higher costs

• Embalming is not required by law except in unusual circumstances such as shipping the body out of state

• Alabama has no restrictions on disposition of ashes (though a particular venue may have restrictions)

37

38

NOTES

ADDITIONAL RESOURCES

National Academy of Elder Law Attorneys: https://www.naela.org

Elder Law Answers: http://www.elderlawanswers.com

Special Needs Answers: http://specialneedsanswers.com

Alabama Benefit Checklist: http://www.slideshare.net/jan_neal/2016-m4a-alabama-benefit-checklist

39