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Scarsdale Congregational Church
Preserving Your Assets for Long Term Care
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"Today we are going to talk about how to pay for the non-skilled services
you or a loved one may need - services that allow a person to overcome deficiencies
in the activities of daily living or to continue life when there are cognitive
difficulties. There are only three ways to pay for these services:
- You pay for them from your private resources
- You purchase long term care insurance
- Medicaid pays for them."
Thus began Dean S. Bress of the Bress Law Firm in White Plains, whose
web site is http://www.bresslaw.com.
Clearly this is a subject of great interest to our fellowship and to others
in the community, for the Boynton Room was packed after worship on Sunday,
June 22, 2003 in a seminar brought to us by our Pastoral Support Committee.
Committee co-chair Diane Foster introduced Bress as a person with more
than 30 years of experience in various aspects of the law. He is chair
of the Elder Law Committee of the General Practice section of the New York
State Bar Association's "Elder Law Attorney" and former chair of the Public
Policy Committee of the Westchester chapter of the Alzheimer Association.
On March 9, 2003 he presented another seminar in the Boynton Room on
Living Wills and Health Care Proxies.
Bress explained that Medicare pays for skilled services. "And I
recommend you get a supplementary policy for the skilled services Medicare
doesn't cover, a Medigap policy," he continued. He said his comments would
not be about skilled services, but rather those services you need when "you
can't do what you used to do", either because of physical or cognitive difficulties.
"Please consider long term care insurance, if you're eligible for it
(don't have disabilities) and can afford it," he said. Such policies
cover a fixed amount per day for a time certain.
The balance of the seminar dealt with the third way to pay for long term
care - Medicaid. "But you have to be pretty poor to be eligible for
Medicaid - assets of $3,850 or less, excluding your residence." However,
Bress explained, if the house is in your name, Medicaid will put a lien on
the house when you die, seeking to recoup the money they have expended on
your long-term care.
Transferring the house to someone else is a way to avoid the Medicaid
lien. "But if you transfer the house to your children, you're losing
at least two important exemptions:
- The STAR real estate tax exemption
- The income tax exemption of $250,000 for a single person and $500,000
for a couple, when the house is sold."
Bress said he represents middle-class folks who might have $250,000 to
$300,000 in liquid assets plus a house. For a married couple where
one is sick and the other is healthy, it may make sense to transfer the house
to the healthy person, even if there are some taxes to pay as a result of
the transfer. Then the sick person can apply for Medicaid.
If the house were transferred on Monday, June 23, 2003, the sick spouse
could be eligible for Medicaid to pay for home care (not institutional care)
on the first day of the following month, Tuesday, July 1. In making
the Medicaid application, the well spouse must say specifically, "I am not
prepared to use my assets for the care of my spouse." Failure to make
such a statement will allow Medicaid to count the spouse's assets in determining
Medicaid eligibility.
Transferring the house to the well spouse "works" if the well spouse
remains well through the lifetime of the sick spouse. It is not as
effective if the formerly well spouse dies and has left the house to the
sick spouse. Even if the house is left to the children in the will,
Medicaid can pursue the rights of the sick spouse. "Spouses are entitled
not to be dis-inherited." If the death of the formerly well spouse
provides assets in the name of the sick spouse, the sick spouse may no longer
be eligible for Medicaid. They don't have to re-pay past Medicaid disbursements,
but they may not be eligible for future ones.
Many people consider transferring assets to their children. Bress
has found this often leads to problems:
- The children get divorced, and the assets become part of the divorce
proceedings.
- The children have credit problems.
- A child is in an accident and is sued for all their assets.
Bress recommends that persons planning for long term care consider transferring
their assets to a trust. A trust isn't subject to the lifestyle or
accident issues which are prevalent with children. Further, the trust
retains the STAR real estate tax exemption and the capital gains exemption
on the sale of the house.
If assets are transferred to a trust on Monday, June 23, 2003, the person
who no longer has assets can be eligible for Medicaid to pay for "care in
the community" (home care) on Monday, July 1, 2003.
There is also an income rule for Medicaid and care in the community.
Each year Medicaid sets a new monthly income that need not be spent on care
in the community. In 2003 it is approximately $700. The amount
over this monthly income (such as pensions and social security) must be spent
on the costs of care in the community.
Questions began to pepper the seminar at this point.
What happens if the spouse is not named in the will but now has Alzheimer's
and can't represent his or her own rights?
Bress explained that Medicaid will get a guardian for the sick spouse;
the guardian will exercise that spouse's rights to be a beneficiary of the
will.
Bress noted that "not everyone ends up in a nursing home." He said
that about 90% of the people in nursing homes are women. They care
for their husbands at home. Then the husband dies, there is no one to
take care of her, and the woman ends up in the nursing home.
Should I be signing up for a nursing home through the VA?
Bress said the VA nursing home in Montrose costs about $5,500 per month.
He said that is significantly less than the $8,000 - $9,000 per month which
is typical in Westchester County.
If I put the assets in a trust, what happens to the income from the
trust?
Bress said a trust is irrevocable, but those setting up the trust should
retain the power to change beneficiaries. The beneficiaries could be
your children who get the money, but use the money to pay your bills.
How do I get principal out of the trust?
Bress said the children are often both the trustees and the beneficiaries.
A trustee can write a check to a beneficiary who pays the bills of the parents.
We've investigated the cost of long-term care insurance. It's
about $9,000 per year for the two of us. That's more than we can afford.
Bress recommended that long-term care insurance be purchased for the wife
- who is likely to outlive the husband.
Bress then turned to the rules which pertain to Medicaid paying for the
cost of institutional care, such as a nursing home. He said there
are "periods of ineligibility" for institutional care. He described
four kinds of asset transfer and their impact on these periods of ineligibility.
- Transferring the residence to a spouse does not create any period
of ineligibility.
- Transferring the residence to an adult child who lives with the
parent for at least two years before the parent's entry into a nursing home
does not create a period of ineligibility. However, if there are multiple
children, there may be political problems with the children who don't get
the house.
- Transferring the residence to a sibling one year before going into
a nursing home does not create any period of ineligibility.
- Transferring the residence to a trust for a disabled person under
65 or for a disabled child does not create any period of ineligibility.
"If the transfer isn't one of the above, then there is some period
of ineligibility for Medicaid to pay for institutional care," Bress said.
At this point Bress emphasized that gift and estate taxes are playing
a diminished role these days. "They're only relevant for the very
richest among us, the top 1%," he said.
To describe the complicated rules about ineligibility for Medicaid to
pay for institutional care, Bress said we must consider:
- When the penalty period begins
- When the penalty period ends
Using a hypothetical example, he said, "suppose a parent transfers $75,000
to a child on Monday, June 23, 2003. The penalty period would begin Tuesday,
July 1."
The penalty period is calculated based on how long the $75,000 would pay
for nursing home care. Each year the New York State Department of Health
calculates the average monthly cost of nursing home care in each of seven
regions in the state. Westchester is part of a region that consists
of Westchester and nearby counties. In 2003 the average monthly cost
in this district is $7,464 - $7,500 in round terms. Thus $75,000 would
pay for ten months of nursing home care. And the penalty period (period
of ineligibility) would end in ten months - on May 1, 2004.
How would Medicaid know I made such a transfer?
There is a question on the Medicaid application regarding transfers.
Answering the question wrong is a felony. Medicaid has persons who
track asset transfers is many, many ways. It is best to answer this
question truthfully.
Bress explained there is also a concept for transfers called the "look
back period". Medicaid can only look back 36 months to find transfers
to other people; they can only look back 60 months to find transfers
to a trust. Therefore, no matter how large the transfer, if it has
made 37 or more months to a person or 61 or more months to a trust -
prior to the application, it won't be counted.
What kind of a power of attorney do I need to make sure that someone
else can handle my affairs if I become incapacitated?
Bress said the "standard power of attorney" limits gifts and transfers
to $10,000 per year. He said it is important to have a "comprehensive
power of attorney" that does not limit gift giving, transfers or the creation
of trusts.
How long does it take to get a guardianship?
It takes about three months, but most guardianships will not allow the
guardian to withhold life support. Sometimes it is possible to convince
the court, with very specific testimony about conversations or writings that
demonstrate the person did not want heroic measures, that the guardian can
withhold life support. However, it is far better to deal with this early
- with a comprehensive power of attorney.
What about the New York State Partnership for long term care?
Bress said he doesn't like this policy, even though it doesn't require
a transfer of assets. Among his concerns are:
- If you move out of New York state, there is no protection for your
assets.
- Any income not transferred must be used for care of the person.
What about group policies for long term care insurance?
Bress said group policies are, in general, not as good as individual policies.
He recommended that persons interested in long term care insurance talk with
a broker who handles multiple policies. He said companies offering
long term care insurance include:
- John Hancock
- General Electric - that took over the Travelers
- CNA
- First Unum
The ninety-minute seminar ended at 1:30 PM, with many persons remaining
to seek Bress's advice on next steps in their personal situations.
Reported by Lucy Werner
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