Linda L. Kordes, Attorney At Law Official Newsletter
Autumn 2008
Inside This Issue
Spousal Refusal
Transfer of Assets
Exempted Transfer
Long Term Care Insurance

The focus of our Summer Newsletter was to give you useful, introductory information on long term care for the elderly. The emphasis was on the importance of planning; ahead of time rather than on the eve of disaster. Funny how many opt for the latter: more anxiety and fewer options. Instead, letís take the less traditional approach and consider some planning techniques before you have an emergent situation.

Spousal Refusal

Sally and Alex are a middle aged, married couple with two teen-aged children. Sadly, Sally has been diagnosed with early stage multiple sclerosis. They want to do some planning in the event that Sally needs institutional Medicaid sometime in the future. They own a home, with a fair market value of $750,000.00, and most of their income is produced by Alex who is an accountant. Sally is a homemaker who has a part-time job in an art gallery. They have 529 college fund trusts for their children, and Alex has an IRA with a balance of $250,000.00 and a brokerage account with a balance of $150,000.00. Sally has very little money and no pension.

Ordinarily, each spouse has a duty of support for the other, much the same way a parent has for a minor child. The law calls that individual a legally responsible relative, so it would be fair to assume that Sally and Alex are legally responsible for the expenses of one another and their minor children.

But, in fact, Alex has the right to refuse to support Sally's medical expenses. If he signs a statement to that effect, then Medicaid MUST consider Sally's income and resources in her Medicaid application without considering Alex's assets. This approach can be enormously helpful under circumstances like Sally and Alex's.


Transfer of Assets

While there is no penalty for the transfer of assets when one is attempting to qualify for Medicaid in-home care, there is a penalty for what is referred to as a "non-exempted uncompensated asset transfer." An uncompensated transfer is really a gift. Medicaid does not penalize for purchases of goods or services, normally. Since 2006, Medicaid has looked back five years from the date of submission of an institutional Medicaid application to determine if any non-exempt uncompensated transfer of assets has been made. This transfer of assets rule has changed dramatically, but what has not changed is the effect of exempted transfers. Those transfers trigger no penalty. Let's take a look at some of those exempted transfers.


Exempted Transfers

For many middle class families, their home is their single biggest asset, as is the case for Sally and Alex. Medicaid views a home, or primary residence, with a fair market value of less than $750,000.00 as exempted, so long as the Medicaid recipient, her spouse and minor children reside therein as their primary residence. But what if, in time, Alex predeceases Sally and their children reach the age of majority?

If Sally remains confined to a long term care facility and Medicaid makes the determination that she is a permanent resident therein and unable to return home, Medicaid could then place a lien on the homestead. Such an act would make the family's biggest asset vulnerable, and it is difficult to have such a lien removed. Take it from me, I have had no such luck.

"Such an act would make the family's biggest asset vulnerable, and it is difficult to have such a lien removed. Take it from me, I have had no such luck."

However, the transfer of a homestead to a spouse, minor child, disabled or blind adult child is considered exempted. No penalty. Also, the transfer of a homestead to a caregiver adult child who has resided in the homestead with the Medicaid applicant for two years prior to the applicant's institutionalization is exempted. Again, no penalty. The transfer of a homestead to a sibling with an equity interest therein who has resided in the homestead with the Medicaid applicant for one year prior to the applicant's institutionalization is exempted. Once more, no penalty.

Transfers of money or personal property between spouses is exempted and unlimited, and transfers by a parent to a certified disabled child are exempted and unlimited. Special care should be utilized here so as not to jeopardize that disabled child's eligibility for benefits. Special Needs or Supplemental Needs Trusts can be very useful here, and shall be the subject of a future newsletter.


Long Term Care Insurance

I have never been a proponent of long term care insurance, despite what many of my colleagues think. I find most policies disproportionately expensive when you view what the insured obtains in return, if anything at all. Ask: what is the monthly premium for an insured my age, and what benefits can I rely on monthly? How long can I expect the payments to continue?

I would caution anyone interested to shop around thoroughly, or, in the alternative, I would suggest that you ascertain what the monthly premium would be, then open a mutual fund or bank account and have a direct deposit in the amount of that premium deposited monthly. After several years, that account should contain a tidy sum suitable for medical care-or even better- if you do not need that medical care in your old age, a payment for that cruise around the world.

It just takes a little planning.

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