Medi-Cal's Treatment of the Home

Nursing home residents do not automatically have to sell their homes in order to qualify for Medi-Cal, but that doesn't mean the house is completely protected. The state will likely put a lien on the house while the resident is living and attempt to recover the property after the resident has passed away.

Medi-Cal

will not count a nursing home resident's home as an asset when determining eligibility for Medi-Cal as long as the resident intends to return home (in some states, the nursing home resident must prove a likelihood of returning home). In addition, the resident's equity interest in the home must be less than $585,000, with the states having the option of raising this limit to $878,000 (figures are adjusted annually for inflation; these are for 2019).

The equity value of the home is the fair market value minus any debts secured by the home, such as a mortgage or a home equity loan. For example, if your home has a fair market value of $400,000 and an outstanding mortgage of $100,000, the equity value is $300,000. Your equity interest depends on whether you own the home by yourself or with someone else. If you own the home by yourself, your equity interest is the entire equity value. If you own your home jointly with your spouse or someone else, your equity interest is only half of the home’s equity value.

The home equity rule does not apply if the Medi-Cal applicant's spouse or a child who is under 21 or is blind or disabled lives in the home.

While the house may not need to be sold in order to qualify for Medi-Cal, state Medicaid agencies will likely place a lien on any real estate owned by a Medi-Cal beneficiary during his or her life. The state cannot impose a lien if a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living in the house.

Once a lien is placed on the property, if the property is sold while the Medi-Cal beneficiary is living, not only will the beneficiary cease to be eligible for Medi-Cal due to the cash from the sale, but the beneficiary would have to satisfy the lien by paying back the state for its coverage of care to date. In some states, the lien may be removed upon the beneficiary's death. In other states, the state can collect on the lien after the Medi-Cal recipient dies. Check with your attorney to see how your local agency handles this.

Even if the state did not place a lien on the home during the Medi-Cal beneficiary's life, the home may still be subject to estate recovery after the Medi-Cal recipient’s death, again depending on the state.

There are steps you can take to protect your home. Contact your attorney to learn more.

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Elise Lampert, Attorney at Law

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Phone: 818-905-0601

Email:elise@elampertlaw.com

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IRS Issues Long-Term Care Premium Deductibility Limits for 2020

The Internal Revenue Service (IRS) has announced the amount taxpayers can deduct from their 2020 income as a result of buying long-term care insurance.

Premiums for "qualified" long-term care insurance policies (see explanation below) are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 10 percent of the insured's adjusted gross income.  

These premiums -- what the policyholder pays the insurance company to keep the policy in force -- are deductible for the taxpayer, his or her spouse and other dependents. (If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed a certain percentage of your income.)  Additionally, these tax deductions allowed by the IRS for long-term care insurance premiums are generally not available with so-called hybrid policies, such as life insurance and annuity policies with a long-term care benefit. 

However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for tax year 2020. Any premium amounts for the year above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year	Maximum deduction for year
40 or less	$430
More than 40 but not more than 50	$810
More than 50 but not more than 60	$1,630
More than 60 but not more than 70	$4,350
More than 70	$5,430

Another change announced by the IRS involves benefits from per diem or indemnity policies, which pay a predetermined amount each day.  These benefits are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $380 per day, whichever is greater.

For these and other inflation adjustments from the IRS, click here. 

What Is a "Qualified" Policy?

To be "qualified," policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold. 

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Elise Lampert, Attorney at Law

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Don't Let Medicare Open Enrollment Go By Without Reassessing Your Options

Medicare's Open Enrollment Period, during which you can freely enroll in or switch plans, runs from October 15 to December 7. Don't let this period slip by without shopping around to see whether your current choices are the best ones for you.  

During this period you may enroll in a Medicare Part D (prescription drug) plan or, if you currently have a plan, you may change plans. In addition, during the seven-week period you can return to traditional Medicare (Parts A and B) from a Medicare Advantage (Part C, managed care) plan, enroll in a Medicare Advantage plan, or change Advantage plans. Beneficiaries can go to www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227) to make changes in their Medicare prescription drug and health plan coverage.

According to the New York Times, few Medicare beneficiaries take advantage of open enrollment, but of those that do, nearly half cut their premiums by at least 5 percent. Even beneficiaries who have been satisfied with their plans in 2019 should review their choices for 2020, as both premiums and plan coverage can fluctuate from year to year. Are the doctors you use still part of your Medicare Advantage plan’s provider network? Have any of the prescriptions you take been dropped from your prescription plan’s list of covered drugs (the “formulary”)? Could you save money with the same coverage by switching to a different plan?

For answers to questions like these, carefully look over the plan's "Annual Notice of Change" letter to you. Prescription drug plans can change their premiums, deductibles, the list of drugs they cover, and their plan rules for covered drugs, exceptions, and appeals. Medicare Advantage plans can change their benefit packages, as well as their provider networks.  

Remember that fraud perpetrators will inevitably use the Open Enrollment Period to try to gain access to individuals' personal financial information. Medicare beneficiaries should never give their personal information out to anyone making unsolicited phone calls selling Medicare-related products or services or showing up on their doorstep uninvited. If you think you've been a victim of fraud or identity theft, contact Medicare. 

Here are more resources for navigating the Open Enrollment Period:

• Medicare Plan Finder, which helps you find a plan to match your needs: www.medicare.gov/find-a-plan
• Medicare coverage options: https://www.medicare.gov/medicarecoverageoptions/
• The 2020 Medicare & You handbook, which all Medicare beneficiaries should have received. The handbook can also be downloaded online at:  medicare.gov/forms-help-resources/medicare-you-handbook/download-medicare-you-in-different-formats
• The Medicare Rights Center: www.medicareinteractive.org
• Your State Health Insurance Assistance Program, which offers independent counseling: https://www.shiptacenter.org

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Elise Lampert, Attorney at Law

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: 818-905-0601

Email:elise@elampertlaw.com

http://www.eliselampert.com

The 2020 Social Security Increase Will Be Smaller than 2019's

The Social Security Administration has announced a 1.6 percent increase in benefits in 2020, nearly half of last year's change. The small rise has advocates questioning whether the government is using the proper method to calculate the cost of living for older Americans and those with disabilities.

Cost-of-living increases are tied to the consumer price index, and a modest upturn in inflation rates and gas prices means Social Security recipients will get only a small boost in 2020. The 1.6 percent increase is lower than last year’s 2.8 percent rise and the 2 percent increase in 2018. The average monthly benefit of $1,479 in 2019 will go up by $24 a month to $1,503 a month for an individual beneficiary, or $288 yearly. 

The cost-of-living change also affects the maximum amount of earnings subject to the Social Security tax, which will grow from $132,900 to $137,700. 

For 2020, the monthly federal Supplemental Security Income (SSI) payment standard will be $783 for an individual and $1,175 for a couple.

The smaller increase may mean that additional income will be entirely eaten up by higher Medicare Part B premiums. The standard monthly premium for Medicare Part B enrollees is forecast to rise $8.80 a month to $144.30. According to USA Today, advocates are questioning the method used to calculate cost-of-living increases. The Bureau of Labor Statistics uses the Consumer Price Index for Urban Wage Earners and Clerical Workers to set the inflation rate. This method looks at prices for gasoline, electronics, and other items that younger workers rely on. The advocates suggest using a different index (the Consumer Price Index for Elderly) that puts greater emphasis on medical and housing expenses. 

Most beneficiaries will be able to find out their cost-of-living adjustment online by logging on to my Social Security in December 2019. While you will still receive your increase notice by mail, in the future you will be able to choose whether to receive your notice online instead of on paper.

For more on the 2020 Social Security benefit levels, click here.

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9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: 818-905-0601

Email:elise@elampertlaw.com

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Medi-Cal's Power to Recoup Benefits Paid: Estate Recovery and Liens

Federal law requires the state to attempt to recover the long-term care benefits from a Medi-Cal recipient's estate after the recipient's death. If steps aren't taken to protect the Medi-Cal recipient's house, it may need to be sold to settle the claim.

For Medi-Cal recipients age 55 or older, states must seek recovery of payments from the individual's estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. States also have the option of recovering all Medi-Cal benefits from individuals over age 55, including costs for any medical care, not just long-term care benefits.

There are a few exceptions. The state cannot recover from the estate of a Medi-Cal recipient who has a surviving spouse until after the spouse passes away. After the spouse dies, the state may file a claim against the spouse's estate to recover money spent for the Medi-Cal recipient's care. The state also cannot recover from the estate if the Medi-Cal recipient had a child who is under age 21 or a child who is blind or disabled.

While states must attempt to recover funds from the Medi-Cal recipient's probate estate, meaning property that is held in the beneficiary's name only, they have the option of seeking recovery against property in which the recipient had an interest but which passes outside of probate (this is called "expanded" estate recovery). This includes jointly held assets, assets in a living trust, or life estates. Given the rules for Medi-Cal eligibility, the only probate property of substantial value that a Medi-Cal recipient is likely to own at death is his or her home. However, states that have not opted to broaden their estate recovery to include non-probate assets may not make a claim against the Medi-Cal recipient's home if it is not in his or her probate estate.

In addition to the right to recover from the estate of the Medi-Cal beneficiary, state Medi-Cal agencies may place a lien on real estate owned by a Medi-Cal beneficiary during his or her life unless certain dependent relatives are living in the property. The state cannot impose a lien if a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living there.

Once a lien is placed on the property, if the property is sold while the Medi-Cal beneficiary is living, not only will the beneficiary cease to be eligible for Medi-Cal due to the cash from the sale, but the beneficiary would have to satisfy the lien by paying back the state for its coverage of care to date. In some states, the lien may be removed upon the beneficiary's death. In other states, the state can collect on the lien after the Medi-Cal recipient dies. Check with your attorney to see how your local agency handles this.

There are some circumstances under which the value of a house can be protected from Medi-Cal recovery. The state cannot recover if the Medi-Cal recipient and his or her spouse owned the home as tenants by the entireties or if the house is in the spouse's name and the Medi-Cal recipient relinquished his or her interest. If the house is in an irrevocable trust, the state cannot recover from it.

In addition, some children or relatives may be able to protect a nursing home resident's house if they qualify for an undue hardship waiver. For example, if a Medi-Cal recipient's daughter took care of him before he entered the nursing home and she has no other permanent residence, she may be able to avoid a claim against his house after he dies. Consult with your attorney to find out if the undue hardship waiver may be applicable.

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Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: 818-905-0601

Email:elise@elampertlaw.com

http://www.eliselampert.com

What to Do If You Are Appointed Conservator of an Older Adult?

Being appointed conservator of a loved one is a serious responsibility. As conservator, you are in charge of your loved one's well-being and you have a duty to act in his or her best interest.

If an adult becomes mentally incapacitated and is incapable of making responsible decisions, the court will appoint a substitute decision maker, often called a "conservator," but in some states called a "guardian" or other term. Conservatorship is a legal relationship between a competent adult (the "guardian") and a person who because of incapacity is no longer able to take care of his or her own affairs (the "conservatee").

If you have been appointed conservator, the following are things you need to know:

Read the court order. The court appoints the conservator and sets up your powers and duties. You can be authorized to make legal, financial, and health care decisions for the conservatee. Depending on the terms of the conservatorship and state practices, you may or may not have to seek court approval for various decisions. If you aren't sure what you are allowed to do, consult with a lawyer in your state.

Fiduciary duty. You have what's called a "fiduciary duty” to your conservatee, which is an extremely high standard. You are legally required to act in the best interest of your conservatee at all times and manage your conservatee's money and property carefully. With that in mind, it is imperative that you keep your finances separate from your conservatee's finances. In addition, you should never use the conservatee's money to give (or lend) money to someone else or for someone else's benefit (or your own benefit) without approval of the court. Finally, as part of your fiduciary duty you must maintain good records of everything you receive or spend. Keep all your receipts and a detailed list of what the conservatee's money was spent on.

File reports on time. The court order should specify what reports you are required to file. The first report is usually an inventory of the conservatee's property. You then may have to file yearly accountings with the court detailing what you spent and received on behalf of the conservatee. Finally, after the conservatee dies or the conservatorship ends, you will need to file a final accounting.

Consult the conservatee. As much as possible you should include the conservatee in your decision-making. Communicate what you are doing and try to determine what your conservatee would like done.

Don't limit social interaction. Conservators should not limit a conservatee's interaction with family and friends unless it would cause the conservatee substantial harm. Some states have laws in place requiring the conservator to allow the conservatee

to communicate with loved ones. Social interaction is usually beneficial to an individual's well-being and sense of self-worth. If the conservatee has to move, try to keep the ward near loved ones.

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Elise Lampert, Attorney at Law

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: 818-905-0601

Email:elise@elampertlaw.com

http://www.eliselampert.com

What to Look for When Buying an Annuity

An annuity can be a useful tool for long-term care planning, but annuities are also complex financial products that are hard to understand. If purchasing an annuity, you need to consider your options carefully. 

An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life, or for a certain term. Annuities come in many flavors. They can be deferred (begin paying out at a later date) or immediate (begin paying out right away). They can pay a fixed amount each month or pay out a variable amount based on how the money is invested. While a fixed immediate annuity can be a good Medicaid planning option for a married couple, other annuity products can be quite complex and confusing and are not right for everyone. 

If you have decided an annuity is the right choice for your long-term care or retirement plan, you need to shop around to find the right product. The following are some purchasing tips:

• Check the terms. Be sure to read the annuity contract carefully. Annuities often have surrender charges that penalize you for withdrawing your money too early. You need to understand for how long you won’t be able to access your money and when payouts begin. There may also be other fees associated with the annuity as well as optional riders. Understanding the fees will allow you to shop around to find the best product. 
• Choose your salesperson. Insurance companies often pay generous commissions to the brokers who sell their particular annuities, payments that many of the brokers don't disclose. They also generally don't disclose whether they are paid more or less by one insurance company than another or whether the annuity being sold is the best option for the consumer. Ask your broker questions to determine how they are paid. You may want to seek a second opinion to make sure your salesperson isn't steering you into a product that isn't right for you. 
• Select a sound insurance company. Annuity payments are often supposed to last a lifetime, so you want an insurance company that will stick around. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moody’s, Standard & Poor's, or Weiss.  

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Elise Lampert, Attorney at Law

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: 818-905-0601

Email:elise@elampertlaw.com

http://www.eliselampert.com

How to Use a Trust in Medi-Cal Planning

With careful Medi-Cal planning, you may be able to preserve some of your estate for your children or other heirs while meeting Medi-Cal's low asset limit.

The problem with transferring assets is that you have given them away. You no longer control them, and even a trusted child or other relative may lose them. A safer approach is to put them in an irrevocable trust. A trust is a legal entity under which one person -- the "trustee" -- holds legal title to property for the benefit of others -- the "beneficiaries." The trustee must follow the rules provided in the trust instrument. Whether trust assets are counted against Medi-Cal's resource limits depends on the terms of the trust and who created it.

A "revocable" trust is one that may be changed or rescinded by the person who created it. Medi-Cal considers the principal of such trusts (that is, the funds that make up the trust) to be assets that are countable in determining Medi-Cal eligibility. Thus, revocable trusts are of no use in Medi-Cal planning.

Income-only trusts

An "irrevocable" trust is one that cannot be changed after it has been created. In most cases, this type of trust is drafted so that the income is payable to you (the person establishing the trust, called the "grantor") for life, and the principal cannot be applied to benefit your or your spouse. At your death the principal is paid to your heirs. This way, the funds in the trust are protected and you can use the income for your living expenses. For Medi-Cal purposes, the principal in such trusts is not counted as a resource, provided the trustee cannot pay it to you or your spouse for either of your benefits. However, if you do move to a nursing home, the trust income will have to go to the nursing home.

You should be aware of the drawbacks to such an arrangement. It is very rigid, so you cannot gain access to the trust funds even if you need them for some other purpose. For this reason, you should always leave an ample cushion of ready funds outside the trust.

You may also choose to place property in a trust from which even payments of income to you or your spouse cannot be made. Instead, the trust may be set up for the benefit of your children, or others. These beneficiaries may, at their discretion, return the favor by using the property for your benefit if necessary. However, there is no legal requirement that they do so.

One advantage of these trusts is that if they contain property that has increased in value, such as real estate or stock, you (the grantor) can retain a "special testamentary power of appointment" so that the beneficiaries receive the property with a step-up in basis at your death. This will also prevent the need to file a gift tax return upon the funding of the trust.

Remember, funding an irrevocable trust within the five years prior to applying for Medi-Cal (the "look-back period") may result in a period of ineligibility. The actual period of ineligibility depends on the amount transferred to the trust.

Testamentary trusts

Testamentary trusts are trusts created under a will. The Medicaid rules provide a special "safe harbor" for testamentary trusts created by a deceased spouse for the benefit of a surviving spouse. The assets of these trusts are treated as available to the Medi-Cal applicant only to the extent that the trustee has an obligation to pay for the applicant's support. If payments are solely at the trustee's discretion, they are considered unavailable.

Therefore, these testamentary trusts can provide an important mechanism for community spouses to leave funds for their surviving institutionalized husband or wife that can be used to pay for services that are not covered by Medi-Cal. These may include extra therapy, special equipment, evaluation by medical specialists or others, legal fees, visits by family members, or transfers to another nursing home if that became necessary. But remember that if you create a trust for yourself or your spouse during life (i.e., not a testamentary trust), the trust funds are considered available if the trustee has the ability to use them for you or your spouse.

Supplemental needs trusts

The Medi-Cal rules also have certain exceptions for transfers for the sole benefit of disabled people under age 65. Even after moving to a nursing home, if you have a child, other relative, or even a friend who is under age 65 and disabled, you can transfer assets into a trust for his or her benefit without incurring any period of ineligibility. If these trusts are properly structured, the funds in them will not be considered to belong to the beneficiary in determining his or her own Medi-Cal eligibility. The only drawback to supplemental needs trusts (also called "special needs trusts") is that after the disabled individual dies, the state must be reimbursed for any Medi-Cal funds spent on behalf of the disabled person.

To find out whether a trust is the right Medi-Cal planning strategy for you, talk to your elder law attorney.

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Elise Lampert, Attorney at Law

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: 818-905-0601

elise@elampertlaw.com

http://www.eliselampert.com