Protect Your Estate from Nursing Home Costs

Nursing home costs for care are expensive, costing between $12,000 to $20,000 per month, so most seniors should do all they can to prepare for this possibility. According to a recent article from the Times Herald-Record, “Elder Law Power of Attorney can save assets that would go to nursing home costs,” this is something that can be done even when entering a nursing home is imminent.

A Power of Attorney is used to name people, referred to as “agents,” to conduct legal and financial affairs, if we are incapacitated. Having this document is an important part of an estate plan, since it reduces or completely avoids the risk of your family having to go through guardianship proceedings, where a judge names a legal guardian to take over your affairs.

The guardian likely will be someone you have never met, who does not know you or your family. It’s always better to plan in advance, so you know who is going to be taking charge of your affairs.

Then there’s the Elder Law Power of Attorney, a stronger form of a Power of Attorney that includes unlimited gifting powers. Having this unlimited gifting power lets a single person who applies for Medicaid in a nursing home to protect their assets, by using a gift and loan strategy.

Here’s an example: Amy, who is single, can’t live on her own and even having home health care aides is not enough care anymore. She has $500,000 in assets and does not qualify for Medicaid to pay for her care. Medicaid will allow her to keep only $15,900.

One option is for Amy to spend down all of her money on nursing home costs, until all she has is $15,900. All of her savings will go to the nursing home, with very little left for her daughter, Ellen.

However, if Amy has an Elder Law Power of Attorney, a gift and loan strategy can protect her assets. Half of the money, $250,000, can go to Ellen as a gift under the unlimited gifting powers. The other half goes to Ellen as a loan, under a promissory note with a set rate of interest.

Any gifts made in the past five years, known as a “five year look back,” cause a penalty period. Amy will have to pay for the nursing home costs for about twenty months. Every month during that period, Ellen will pay Amy a monthly payment that, with her income, is used to pay the nursing home bill. At the end of the 20 months, Amy qualifies for Medicaid to pay for her care for the rest of her life, and Amy may keep the $250,000. Saving half of her assets by using the gift and loan strategy is sometimes called the “half a loaf is better than none” strategy.

With a Standard Power of Attorney, there are no unlimited gifting powers.

A Medicaid Asset Protection Trust (MAPT) created five or more years before Amy needed a nursing home could have saved her entire nest egg for Ellen.

Preplanning is always the better way to go. An elder law estate planning attorney is the best resource for determining what the best tools are to protect a nest egg if and when a person needs the care of a nursing home.

Many people make the mistake of thinking that it “won’t happen to me.” However, injuries and illnesses often accompany aging, and it is far better to plan for this eventuality in advance than waiting and hoping for the best.

DISCLAIMER: Medicaid planning is complex and the case hypothetical above with “Amy and Ellen” is provided for purposes of illustration. Whether this strategy would work for you or your loved ones depends on the laws of your state of residence given your unique circumstances. Consult with an experienced elder law attorney admitted to practice law in your state of residence before engaging in any Medicaid planning!

Reference: Times Herald-Record (Jan. 8, 2021) “Elder Law Power of Attorney can save assets that would go to nursing home costs”

 

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Should I Transfer my home to my daughter ?

This estate planning issue concerns a single retired parent of an only adult daughter and how to transfer my home to my daughter. Should the daughter simply sell the house when her mother dies, or should the daughter be added to the deed now while her mother is alive?

Also, is there a court hearing?

In many states, there is no reason or requirement to go before a judge to probate your estate, says nj.com in its recent article “Should I add my daughter’s name to my home’s deed?”

In estate planning, there are two primary questions to answer about the transfer of the home. First, there would possibly be some significant capital gains if the mom adds her daughter to the deed prior to death.

Also, if the mother winds up requiring Medicaid, Medicaid might put a lien against the home after she dies for the value of the services it provided.

Generally, when a home has been owned for a long time, the mother should try to preserve the step-up in basis for tax purposes that happens, if the real estate is still in the mom’s name at her passing.

Whether that step up is preserved, depends on how the daughter is added to the deed.

Adding the daughter as a joint tenant or tenant in common won’t preserve the step-up basis for taxes. Ask an elder law attorney what this means in your specific situation.

A better option may be to transfer the remainder interest in the property to the daughter in this scenario and withhold a life estate for the mom.

That will preserve the step-up in basis at death.

This can also get complicated when there’s an outstanding mortgage, so speak to an experienced elder law or estate planning attorney.

Reference: nj.com (Dec. 15, 2020) “Should I add my daughter’s name to my home’s deed?”

 

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Tax Basis – Homeownership and Medicaid Can Be Problem

The challenges begin when homeowners don’t do any Medicaid planning and decide the best answer is simply to gift their home to their children. It doesn’t always work out well for the homeowners or their children, warns the article “Owning real estate without jeopardizing Medicaid paying for nursing home” from limaohio.com.

A key tax avoidance opportunity is usually missed, when real property is gifted outright. The IRS says that if someone owns real estate, when that person passes, the heirs may eliminate a large portion of the taxable gains, if the real estate ends up being sold by an heir for more than the original owner paid for the property.

Let’s walk through an example of how this works. Let’s say Terry buys a house for $1,000. The cost to buy the house is referred to as a “tax basis.”

If the family is planning for the possibility of nursing home costs, Terry might want to give that house away to her children Ted and Zach. She needs to do it at least five years before she thinks she’ll need Medicaid to pay for long-term nursing care, because of a five-year lookback.

When Terry gifts the house to Ted and Zach, the two children acquire Terry’s tax basis of $1,000. Ted gets $500 of the tax basic credit, and so does Zach.

The years go by and Ted wants to buy out Zach’s half of the house . The house is now worth $5,000. So, Ted pays Zach $2,500 for Zach’s half of the house . Zach now has a tax basis of $500, which is not subject to tax. And Ted receives $2,000 more than his $500 tax basis, and Ted will need to pay capital gains on that $2,000 gain.

It could be handled smarter from a tax perspective. If Terry owns the house when she dies, then Ted and Zach get the house through her will, trust or whatever estate planning method is used. If the house is worth $3,000 when Terry dies, then Ted and Zach will get a higher tax basis: $3,000 in total, or $1,500 each. By owning the house when Terry dies, she gives them the opportunity to have their tax basis (and amount that won’t be taxed if they sell to each other or to anyone else) adjusted to the value of the property when Terry dies. In most cases, the value of real estate property is higher at the time of death than when it was purchased initially.

There’s another way to transfer ownership of the house that works even better for everyone concerned. In this method, Terry continues to own the house , helping Zach and Ted avoid taxes, and keeps the property out of her countable assets for Medicaid. The solution is for Terry to keep a specific type of life estate in the house . This needs to be prepared by an experienced estate planning attorney, so that Terry won’t have to sell the house if she eventually needs to apply for Medicaid for long term care.

Your estate planning attorney will be able to help you and your family navigate protecting your home and other assets, while benefiting from smart tax strategies.

Reference: limaohio.com (Nov. 7, 2020) “Owning real estate without jeopardizing Medicaid paying for nursing home”

 

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Does Your Senior Know what a Deductible Is?

Many of the respondents to a new Medicare literacy survey poll of 1,000 Medicare beneficiaries by MedicareAdvantage.com didn’t seem to understand basic insurance-related terms like deductible.

More than half (56%) of respondents incorrectly answered the question “what is a deductible?” and 69% failed to correctly define the term “coinsurance.”

McKnight’s Business Daily’s recent article entitled “Nearly 6 in 10 seniors don’t understand what a deductible is” says that other responses indicated that many older adults don’t fully understand basic Medicare coverage and potential out-of-pocket expenses.

Medicare is the federal health insurance program for:

  • People who are 65 or older
  • Some younger people with disabilities; and
  • People with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD).

Medicare gives you options in how you get your coverage. Once you enroll, you’ll need to determine the way in which you’ll get your Medicare coverage. There are two main ways: Original Medicare and Medicare Advantage.

More than 70% of respondents incorrectly believed that Medicare would tell them, if they’re not automatically enrolled.

The survey found that some seniors may approach Medicare age or even be already enrolled in Medicare, before they understand just how limited Medicare’s long-term care coverage can be.

It’s extremely important that Medicare beneficiaries – and all insurance beneficiaries– clearly understand their coverage and how it fits with their expected healthcare needs and budget.

Reference: McKnight’s Business Daily (Sep. 14, 2020) “Nearly 6 in 10 seniors don’t understand what a deductible is”

 

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The Nursing Home took the stimulus check ?

Kentucky’s Attorney General Daniel Cameron said that Kentucky residents on Medicaid or living in nursing homes and assisted living facilities should be aware that some seniors had their stimulus checks unlawfully seized by nursing homes and assisted living facilities.

When the stimulus checks were approved, Cameron explained that they were labeled a tax credit by Congress under the CARES Act.

A Fox 19 Now recent article entitled “Nursing home, assisted living facility residents warned of possible financial exploitation of stimulus funds” explains that credits don’t count as “resources” for federal benefit programs, like Medicaid. As a result, Medicaid beneficiaries and residents of care facilities aren’t required to surrender their stimulus checks.

Even though Medicaid beneficiaries might go ahead and use their CARES Act stimulus checks on facility care, nursing homes and assisted living facilities can’t seize those funds.

Due to the fact that some people getting Medicaid who live in these facilities are isolated from their family, government officials warn that they might be more vulnerable to being victims of financial exploitation.

“Medicaid recipients living in nursing homes and assisted living facilities could be more susceptible to financial exploitation, while isolated from family during the COVID-19 pandemic,” Cameron explains. “In many cases, federal stimulus checks provide assistance to Medicaid beneficiaries experiencing financial hardships due to COVID-19, and any unlawful seizure of those funds should be reported to our Elder Abuse and Medicaid Fraud Hotline at 1-877-228-7384.”

Families and beneficiaries should be certain that no facility has illegally taken their stimulus funds, explains Executive Director of the Kentucky Attorney General’s Office of Medicaid Fraud and Abuse Control W. Bryan Hubbard.

“I encourage Medicaid beneficiaries and families with loved ones in nursing homes or assisted living facilities to make sure facilities have not illegally seized stimulus funds,” says Hubbard. “If you or someone you know is a Medicaid recipient and was forced to forfeit their stimulus check to a care facility, we encourage you to report the incident to our office.”

Complaints can also be filed online with the Federal Trade Commission.

Reference: Fox 19 Now (June 16, 2020) “Nursing home, assisted living facility residents warned of possible financial exploitation of stimulus funds”

 

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Should Medicare Continue with Expanded Telehealth Access after COVID-19?

Telehealth Access – “I can’t imagine going back,” said Seema Verma, administrator of the Centers for Medicare and Medicaid Services, told STAT during a live virtual event. “People recognize the value of this, so it seems like it would not be a good thing to force our beneficiaries to go back to in-person visits.”

STAT’s June 9 article “‘I can’t imagine going back’: Medicare leader calls for expanded telehealth access after Covid-19” reports that the comments were her strongest remarks to date on the need to preserve access to telemedicine after the outbreak. During the past three months, virtual visits have increased more than 40-fold in some parts of the country.

However, Verma remarked that the federal government must look at whether it should continue paying the same for virtual visits, as for in-person care. Equalizing payment during the pandemic was one of the big motivators in the telemedicine expansion.

“Right now for the public health emergency, we’re maintaining that equilibrium, but going forward that’s something that needs to be looked at,” Verma said. “I don’t see it as a one-to-one. think there are some potential savings for the system that do occur by having a telehealth visit.”

However, Verma was insistent in an interview that the increase in telehealth visits has significantly improved access to care. She said weekly telemedicine visits increased to more than 1 million a week, compared to about 12,000 before coronavirus began to spread in the U.S. in March.

“It’s made a big contribution in saving lives, because it didn’t require our Medicare beneficiaries to leave their home,” she said. “It’s been an incredible response.”

Verma said action from Congress will be required to permanently expand telemedicine on a national level, because existing laws restrict coverage to people living in rural areas where access to care is particularly tight. However, Verma remarked that CMS is looking at ways to preserve access to telemedicine visits in settings, such as patient’s homes, hospice care and nursing homes. They’re also reviewing ways to permanently expand the types of services that can be provided via telemedicine, like emergency care, physical therapy and mental health consultations.

She noted that the Trump administration would back efforts to allow more telehealth to be practiced across state lines. Currently, doctors are limited to providing care in the states where they’re licensed, which, in many instances, keeps patients from accessing care delivered by doctors who live across state lines. CMS relaxed those restrictions in the pandemic.

“For us to truly leverage the potential in the power of telehealth, we’re going to have to rethink our laws around licensing,” Verma said. “Is it really necessary to have those borders? We should allow…practicing across state lines, because it really has the potential to provide better services and reduce some of those shortages, especially in some of the highly specialized fields.”

Reference: STAT (June 9, 2020) “‘I can’t imagine going back’: Medicare leader calls for expanded telehealth access after Covid-19”

 

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Quirk in Medicare System’s Observation Status

There’s a troubling quirk in the Medicare system that occurs when older patients are hospitalized and instead of being officially admitted, they are placed on “observation status” reports the article “Caught Paying for Rehab Due to Observation Status? Medicare May Owe You” from The National Law Journal.

Observation status originally was meant to serve as a temporary status for people who were receiving medical care and tests in a hospital setting until they were either sent home or a diagnosis was made, and they were officially admitted.

However, in the past 10 years or so, the number of patients in hospitals deemed to be in observation status has increased enormously, even when patients have received a diagnosis and their doctors have admitted them to the hospital. This is a direct result of the Medicare claims review process, where hospitals risk not being paid because of inpatient services being billed without documents of certain diagnoses and levels of care.

The hospital seeks to protect itself, by designating a patient as observation status. There’s no downside to the hospital, since this is covered by Medicare, just under Part B, rather than Part A.

However, for the patient, it’s not that simple. First, the denial of Part A inpatient coverage means that the patient has to pay for each and every deductible and copay for each service. Prescription drugs received while the patient is in the hospital are billed separately and aren’t included under the Part A inpatient payment.

It gets worse. Medicare coverage for post-hospital care is denied or extremely limited for observation status patients. Medicare only covers rehab costs in a facility, if the patient was admitted to the hospital for at least three days.

Observation status days do not count towards those qualifying days. It doesn’t matter if the treating physician had the patient admitted to the hospital, because hospitals can change the status of the patient retroactively.

Until recently, there was no recourse for patients. However, a recent class action suit in Connecticut may see that begin to change. A federal judge held that Medicare beneficiaries whose hospital stays were changed to observation status may appeal to Medicare for reimbursement of their payments to rehabilitation facilities. As a result of Alexander v. Azar, patients have the right to recover payments for their nursing home rehabilitation stays.

Patients whose doctors placed them on observation status still are not permitted to appeal.

Speak with your elder law estate planning attorney, if this scenario applies to you or family member.

Reference: The National Law Review (May 26, 2020) “Caught Paying for Rehab Due to Observation Status? Medicare May Owe You”

 

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Will Mom Get a COVID-19 Stimulus Check in the Nursing Home ?

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act (passed on March 27, 2020) is a $2 trillion economic relief package designed to help offset the huge financial crisis caused by the Coronavirus (COVID-19) pandemic.

A new article on MedicaidPlanningAssistance.org entitled “Do COVID-19 Stimulus Checks Impact Eligibility for Persons on Medicaid? In Nursing Homes? Or Spouses?” says that many Medicaid beneficiaries who live at home, assisted living, adult foster care, or nursing homes and their families are worried the money will push them over the Medicaid income or asset limit, disqualifying them from Medicaid benefits.

Likewise, Medicaid applicants have the same concern that the additional cash will make them go over Medicaid’s limits, and prevent them from becoming eligible for Medicaid.

Stimulus checks won’t be counted as income and thus won’t affect Medicaid beneficiaries or applicants. However, if the stimulus money isn’t spent within 12 months, it may be counted as an asset.  This could impact eligibility in 2021.

Nursing Home Residents. The stimulus check to Medicaid beneficiaries who live in nursing homes won’t affect their Medicaid benefits. The check doesn’t disqualify anyone from Medicaid nursing home care. Medicaid won’t count the money as income, which means it can’t push one over Medicaid’s income limit and mean the loss of Medicaid benefits. Although Medicaid-funded nursing home residents must surrender all of their income, except for a personal needs allowance and a monthly maintenance needs allowance for a non-applicant spouse (if applicable) to Medicaid, the money from the stimulus check won’t have to be surrendered to Medicaid. The stimulus check won’t count as assets, if it’s spent within 12-months of receiving it.

Spouses of Nursing Home Residents. Spouses of nursing home residents—known as “Community Spouses”—who aren’t on Medicaid themselves will receive a stimulus check. This won’t affect their spouses’ Medicaid eligibility in any way. The money from the stimulus check isn’t considered income by Medicaid, and even if it were, the income of a non-applicant spouse isn’t considered in the continuing Medicaid eligibility of his / her nursing home spouse.

There’s no time limit in which a spouse of a nursing resident must spend his / her stimulus check.  Non-applicant spouses can spend the stimulus check any way they want.

Reference: MedicaidPlanningAssistance.org (April 16, 2020) “Do COVID-19 Stimulus Checks Impact Eligibility for Persons on Medicaid? In Nursing Homes? Or Spouses?”

 

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Medicare and Coronavirus – Will Medicare Cover Coronavirus Tests?

Medicare and Coronavirus – A test for the new coronavirus will be covered under Medicare Part B, and some large Advantage Plan providers are waiving copays or preauthorization requirements that would be applicable for diagnostic testing.

CNBC’s recent article entitled “Medicare will cover coronavirus tests. Here’s how to get one if you think you have symptoms” says that your physician would need to order a test, if they are concerned that you have the virus.

Lab services are covered by Medicare. However, if you want a random test out of the blue, it wouldn’t be covered if there’s no medically necessary reason for it. However, given the current environment, if a doctor is concerned, they’re going to say the test is medically necessary.

The number of COVID-19 cases is being tracked and is currently climbing. The fast spread of the virus has created issues with the stock market, as concerns of a global economic slowdown increase.

While the U.S. case count is low compared to some other countries, state and local governments are getting ready for community outbreaks as the virus continues to spread.

Many people experience mild symptoms from COVID-19. However, the virus appears to take a greater toll on individuals with underlying health conditions and seniors. It is similar to the influenza virus, better known as the seasonal flu. A vaccine for COVID-19 is probably a year away, if not longer. If the flu is caught early, it can be treated with antiviral medication that may lessen the symptoms and duration of the illness. However, there isn’t that option for this coronavirus.

The Centers for Disease Control and Prevention recommended that high-risk individuals stock up on supplies (such as extra medications and groceries), maintain some space between others and yourself, wash your hands frequently and avoid crowds. If there’s an outbreak in your area, stay at home as much as you can.

If you develop any symptoms that are concerning, contact your doctor by phone for guidance. The CDC has encouraged providers to use their best judgment for who should be tested, which may depend on your symptoms or other factors, such as known exposure to an infected person.

If your doctor or other provider thinks you need testing, they’ll contact their local health department or the CDC for instructions on where you can get the test, says the National Institutes of Health. The coronavirus test may involve a swab, blood draw, or other method, based on where the test is administered. The CDC said that coronavirus testing is now available across all 50 states, and Quest Diagnostics and LabCorp — two of the country’s largest private labs — are making test kits available.

Medicare Part B covers diagnostic tests. However, some of Medicare’s 62 million beneficiaries — the majority of whom are over 65 — may have a copay, if they have an Advantage Plan. Those plans may differ from original Medicare as to the amount patients must pay for any particular service. However, the good news is that many providers are waiving any cost-sharing associated with getting a COVID-19 test, as well as any prior authorizations that normally would be required, if a test is deemed warranted.

If there is a doctor’s appointment involved, you could have a copay or coinsurance, depending on your specific Medicare coverage. Costs beyond that would depend on whether you have the virus, whether you need additional medical treatment, or should self-quarantine.

Reference:  CNBC (March 10, 2020) “Medicare will cover coronavirus tests. Here’s how to get one if you think you have symptoms”

 

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