One of the things you need to be aware of when you are transferring your property is that there may be ramifications beyond just making a nice gift or helping out a child:

• If you give property to a child, it could be at risk if that child is sued or files for bankruptcy.
• If you put money in your child’s name that they plan to hold on to for your future use, this could count against them if they need to apply for financial aid for their children or for themselves.
• If you pass the remainder interest in your home to a child, you will not be entitled to the full proceeds from the sale if the home is sold during your lifetime.  You will only be entitled to the share of the proceeds that are allocated to the life estate, and your children will be entitled to the proceeds that are based on the value of the remainder interest.  This could significantly reduce the amount of money you thought you would receive upon the sale of your home.
• If you pass the remainder interest in your home to a child, and that child later needs to file bankruptcy they could be forced to sell their share in the family home to satisfy their debts.
• If you give property to your child, either cash or real estate, that property could be at risk if your child goes through a divorce.
• If you give your property to a child, you may end up needing it for your care and be unable to access it when you need it.
• If you give real estate to a child, there may be negative tax consequences for them when the property is sold.
• If you give the remainder interest in your real estate to more than one child, and they later can’t agree on what to do with the property, one of them may take legal action against the other to force the sale of the home.
• If you give money or property away and later need to apply for public benefits such as MassHealth, you may be ineligible due to your gifting.

What seems like a relatively simple transaction can be riddled with “traps for the unwary” for both the giver and the recipient.  There are many safe and appropriate ways to make transfers of property to your children while insuring that you, your children and your property are protected.  It is vital that both parties seek legal advice so you can go into the transaction being fully aware of the consequences of the gifts, and the best way to structure the transaction.

As part of its advocacy for quality of life for seniors, the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA) is filing four bills for the 2009-2010 legislative session that affect the state's elder population. The bills focus on improving the ability of elders to remain financially independent and in their home while dealing with the cost of long-term care.

"Our efforts at the State House make a tremendous difference for elders," states Suzanne Sayward, president of MassNAELA. "In this time of financial crisis, it is critical we do all we can to allow elders to remain in their homes with sufficient income and resources to provide for their needs. We are very pleased that so many Representatives and Senators have signed onto our legislation supporting elders' financial security."

The four bills recently filed by MassNAELA are as follows:

"An Act to Help Families Care for Frail Elders," sponsored by Senator Mark Montigny and Representative Kay Khan, would allow elders to compensate family members providing in-home care-giving services without violating MassHealth eligibility rules. The bill would permit family members to leave employment to care for loved ones, thus preventing nursing home placement and saving costs to the MassHealth program.

"An Act to Provide Financial Security for Spouses of Nursing Home Residents," filed by Senator Jamie Eldridge and Representative Alice Peisch, would help community spouses of nursing home residents retain their Individual Retirement Accounts (IRA's) as non-countable assets when the resident applies for MassHealth. Allowing spouses to keep their retirement assets provides them with additional income and resources while they are dealing with the substantial cost of nursing home care.

"An Act Relative to Nursing Facility and Long Term Care Claims," sponsored by Senator Robert O'Leary and Representative Chris Fallon, concerns MassHealth's exemption of the estates of individuals with minimum long-term care insurance coverage from its estate recovery claims. This bill would allow the use of such coverage for community-based care before entering a nursing home without forfeiting the exemption from MassHealth estate recovery. Allowing seniors to use their long term care insurance for community-based care will enable many more elders to remain in their homes rather than forcing them into institutional care.

"An Act to Correct the Income Calculation for Spouses of Nursing Home Residents," filed by Senator Gale Candaras and Representative John Fernandes, would correct the unrealistically high interest rate that is used by MassHealth to deem investment income to the community spouse of a nursing home resident. Most seniors invest in shorter-term investment products such as money market accounts, which have relatively low interest rates. Use of a money market interest rate to deem marital income to the community spouse would provide additional assets for their support.

MassNAELA's most recent legislative success, Chapter 125 of the Acts of 2008, orders financial institutions to not charge fees for providing up to 5 years of retroactive bank records for a MassHealth applicant or recipient who has a written request signed by a MassHealth employee or agent.

Anyone with questions regarding these bills or interest in expressing their support may contact their local state representative or state senator.

The New York Times blog, Aging Well, has a recent column about the idea that children should have to financially contribute to their aging parents care. The author writes about her experience watching her mother spend her savings on health care, and then having to turn to Medicaid to pay for the care.  She writes

Massachusetts does have one of those laws on the books ( link to the Massachusetts general law on filial responsibility) although I doubt it's been enforced in the recent past.  However, as Medicaid regulations tighten you never know what might happen in the future. 

Most of my clients who end up needing nursing home care have been cared for by their family members for years, first small things like a ride here or there, or meals and cleaning every so often, progressing up to full time live-in care before the health and safety of the elder requires more professional care.  And while there are certainly some clients whose children haven't been involved with their care for whatever reason, they seen to be the exception rather than the rule. 

The MassHealth eligibility regulations can be found by clicking here. 

If you find you need assistance applying for MassHealth, or have questions about the eligibility process or the ramifications of actions taken in the years prior to applying for MassHealth, feel free to contact my office to schedule a consultation. 

This is one of the easier aspects of applying for Medicaid.  If you find you have more complex issues, or just want someone else to handle everything, feel free to call me about setting up a consultation. 

1. Copies of birth certificates, driver’s license or citizenship papers.  If you were born in a foreign country, these can be difficult to obtain, and obtaining copies of citizenship papers can take time.
2. Copies of all health insurance cards including Medicare.
3. Copies of at least 3 months of bank statements for all bank accounts, including those you share with another person, and accounts which have been closed in the last 3 years.  This means checking, savings, money market, CDs, and passbook accounts.  You will also need to provide an explanation of all withdrawals over $500.00 (and sometimes lower amounts).   You may also be asked for records of where certain deposits came from. 
4. Proof of all income.
5. Copies of the first page of all life-insurance policies, and a letter from the insurance company regarding the cash value of certain policies.
6. Proof of value of stocks, savings bonds, mutual funds.
7. Copies of annuity contracts.
8. Copies of deeds, current tax bills and amounts owed on all real property that you have an interest in – whether it it your principal residence, a vacation home, or a life estate that you hold in certain property. 
9. Copies of the registration for each vehicle, proof of outstanding loans and the current value.
10. Copies of funeral trusts, burial accounts or prepaid funerals.
11. Copies of any trusts of which you are the grantor, trustee or beneficiary, and documents showing financial activity of the trust.
12. Copies of proof of your at-home spouse’s living expenses.
13. Documentation and explanation of any transfers you made in the last 36 months of any funds or property.
14. The last two years of tax returns.
15. Clinical information on the applicant, which must be sent in by the facility. 

After the application is filed, there will be a request for more information mailed to you which will often require further explanation of certain things like deposits for withdrawals, proof of certain transactions,  and updated statements for all accounts.  You will have a limited amount of time to get this additional information to MassHealth, and it must be received by MassHealth by the date indicated or it could impact your eligibility.   

It’s a good idea to keep your records up to date, and not discard any old passbooks from closed accounts, or bank statements.  Even if you don’t need assistance now, you may in the future, and it will save time if you have easy access to your records.  It will also save your family time if they have to take over management of your assets at some point in the future or apply for Medicaid on your behalf.

I provide assistance in preparing and filing MassHealth Applications.  Please call me to set up a consultation if you need assistance with this process, or if you think you or a loved on may need to file a MassHealth Application in the future. 

Asset Limits

• The applicant may have $2000.00 in countable assets. 
• If married, the applicant's spouse, living in the community, may keep: $101,640 [$99,540.00 in 2006]  in countable assets. This amount may be increased in certain circumstances as a result of an appeal.

Now, what is meant by "countable" and "non-countable"?

Countable assets include, but are not limited to: 

• cash, most savings bonds, retirement accounts, CD's, stocks, mutual funds, bank accounts,
• the home of a single applicant, in certain circumstances, see below for treatment of the home;
• a second home, or a vacation home.

Non-Countable Assets are:

• the home of the community spouse, see below for treatment of the home;
• the home of a single applicant, in certain circumstances, see below;
• a vehicle;
• irrevocable burial trusts, or prepaid funeral contract;
• life insurance policies if the total face value for each spouse is $1500.00 or less.  Term life insurance policies are not counted;
• burial plots;
• up to $1500.00 set aside in a burial account for the applicant and the applicant's spouse.

Special Rules for the Home

• Your home is not countable if you have moved to a medical facility and
  • you intend to return home,
  • you have long term care insurance that meets certain requirements, or
  • certain relatives, such as a spouse or disabled or minor child, live in your home.

• If the equity interest in the home is over $750,000.00, you may be ineligible for payment of long term care services, unless one of the following relatives lives in your home:
  • your spouse;
  • a permanently and totally disabled child;
  • a blind child; or
  • a child under the age of 21.

How income is treated by MassHealth:

• An applicant's income will usually be applied towards the care they are receiving in the facility, this is called the Patient Paid Amount.
• An applicant is allowed to keep $60.00 per month for personal needs. [$72.50 in 2008.]
• If an applicant pays for health insurance, they will be able to deduct this amount from their Patient Paid Amount. 
• The spouse at home does not have to contribute any of their income towards the cost of the applicant's care.
• The spouse living in the community may be allowed to keep some of the applicant's income, depending on the spouse's income and shelter expenses (the cost to maintain the home.)

There are additional rules that may apply to your situation. You can find more information on the MassHealth Programs on the Mass.gov website. If you need assistance preparing for filing a MassHealth Application, you may wish to contact an attorney. 

Annuities
Annuities used to be used as a planning tool by an unmarried person who is in a nursing home. By purchasing an annuity with excess funds, the person qualifies for Medicaid coverage. The income from the annuity goes to pay the nursing home every month, with the additional cost of coverage paid for by Medicaid. When the person dies, the beneficiary named on the annuity receives the remaining funds. This used to be a child or non-spouse partner.

The new law requires that the state be named as the remainder beneficiary (after any spouse  or minor or disabled child) for the amount equal to the funds paid on the deceased's behalf.  There are other very specific rules about annuities and Medicaid, which your attorney or financial adviser should be able to talk to you about. 

Home Equity
Under the new law, individuals cannot establish eligibility for Medicaid coverage of nursing home care if their equity interest in their home exceeds $500,000 (this has been increased to $750,000 in Massachusetts), unless a spouse or minor or disabled child resides in the home.  There will be a process whereby the home will not be a countable asset even if the equity exceeds the maximum "in the case of a demonstrated hardship."

There are ways to reduce the equity in the home without having to sell it, such as a home equity line, or selling a portion of the home to the children, but these should not be done without consulting an elder law attorney as each has their own ramifications. 

Long Term Care Insurance
For those people who can afford it, and qualify medically, long term care insurance may be a good way to protect yourself and your assets from overwhelming nursing home costs. In addition, some long term care insurance policies will allow coverage for in home care, which Medicaid does not usually cover.  AARP has educational materials on LTC insurance on their website, which also sells LTC insurance policies.

Final Thoughts

No one wants to go to a nursing home, and the cost is expensive for individuals and states, but the solution is not simply making drastic cuts to the system. People will still need the care, and the nursing home won't be able to simply discharge patients who have run out of funds but are in a "penalty period" for a donation they made to a charity 3 years ago, or a gift to a grandchild to go to college 4 years ago. It remains to be seen what the long term effects of the Deficit Reduction Act are. I'll be sure to post about them here, and feel free to let me know what your thoughts are as well. 

________
Estate
Planning, Medicaid, Probate and Trusts involve complex areas of law. Individual
circumstances must be considered before any advice can be given.  The
general information above is not to be construed as legal advice, which
can only be given after consideration of the unique facts of each
matter. Please seek the advice or counsel of your attorney, financial
advisor or CPA as it may be appropriate.

The changes to the Medicaid provisions of the DRA include postponing the penalty period start date and increasing the look-back period.

Penalty Period
Under Medicaid rule, transfers of assets for less than fair market value will result in a corresponding ineligibility period for Medicaid coverage of nursing home care.   Prior to February 2006, the ineligibility period started at the date of transfer, meaning that if you gave approximately $7000 to your child, you would be disqualified from Medicaid coverage for one month (Massachusetts considers $7000 to be the approximate cost of one month of nursing home care). However, you could plan ahead and be sure to keep enough money to pay for one month of nursing coverage (usually between $6000-$9000/month) if you should need it.  Upon applying for Medicaid, they would “look back” 3 years to see if you made any transfers of this nature, or five years if you made any transfers to a trust.

Under the new regulations (after February 2006), the penalty period starts at the later of the first day of the month of the transfer, or the date when the individual would otherwise be eligible for Medicaid. Meaning that, the ineligibility period will begin to run when the person has run out of money to pay for their nursing home care. So, in the above scenario, after the person gives away $7,000, and then uses their remaining money to pay privately for nursing home care for a number of months, when they have run out of money (except for the $2000 they are allowed to keep under Medicaid rules) and would otherwise be eligible for Medicaid, they will have a penalty period of a month during which there will not be any funds to pay for the nursing home. Because a nursing home cannot evict a patient without a safe place to transfer them to, nursing homes will be stuck providing care to a patient who cannot pay, and not receiving any reimbursement from Medicaid. 

In addition, the look-back period will change from 3 years for most transfers, to 5 years for all transfers, whether into a trust or outright to an individual. 

Do you have all of your records from 5 years ago? Can you predict what your health situation will be in 5 years? If you give your child money for them to use on a down payment for their house, or to help them in the adoption of a child or their schooling or medical expenses, what will the consequences be in a few years if you or your spouse should need nursing home care? What about charitable contributions, will people be more hesitant to make theses gifts, for fear they might come back to haunt them as disqualifying transfers?

An elder law attorney can best help you and your loved ones navigate this changing area of the law.  

________
Estate
Planning, Medicaid, Probate and Trusts involve complex areas of law. Individual
circumstances must be considered before any advice can be given.  The
general information above is not to be construed as legal advice, which
can only be given after consideration of the unique facts of each
matter. Please seek the advice or counsel of your attorney, financial
advisor or CPA as it may be appropriate.