Tag Archives: Medicaid

Fitting Medicaid Issues and Long-Term Care Insurance into Estate and Gift Tax Planning

by: Brian E. Barreira, Esq.

Proper estate planning should not ignore long-term care issues, such as the following:

(1)  Any gifts or other transfers for less than full value, including $13,000.00 gifts and other annual exclusion gifts, are considered to be disqualifying transfers for Medicaid purposes.

(2)  The average current cost of a semi-private room in a Massachusetts nursing home is now roughly $300-320 per day, which amounts to $9,000-9,600.00 per month or $108,000-115,000 per year. Persons with Alzheimer’s disease who can no longer remain at home run the risk of an extended nursing home stay, reputedly averaging 8-9 years. With a potential long-term care cost of roughly $864,000-1,035,000, how can intelligent estate and gift tax planning be done without factoring long-term care insurance into the process? It is difficult for an estate planner to recommend making large gifts if the remaining assets will possibly be insufficient to meet the client’s foreseeable needs.

(3)  Often overlooked in the estate and gift tax planning process is how a revocable trust established by a now-deceased spouse is viewed if the surviving spouse applies for Medicaid. A funded trust that avoided probate is often considered completely available for the surviving spouse’s care, so funding a revocable trust for the sole purpose of avoiding probate can place a surviving spouse in a worse position than if probate avoidance had not been accomplished.

(4)  There is one type of trust that spouses can establish for each other that meets the criteria established under both federal law and Massachusetts regulations for being considered unavailable to a Medicaid applicant: a discretionary testamentary trust. Under a peculiar federal Medicaid law, an unfunded trust that was funded by the deceased spouse’s Last Will and Testament is not considered available for payment of the nursing home care of the surviving spouse to the extent that distributions are discretionary. In essence, a bypass or credit shelter trust can be established under the decedent’s Last Will and Testament that has only the surviving spouse as a beneficiary, with no required distributions of income or principal. The surviving spouse should not be given a general power of appointment over the trust or any other power to make withdrawals.


A Life Care Agreement Should Have Been Considered in the 2009 Hernon v. Hernon Will Contest Case in Massachusetts

by: Brian E. Barreira, Esq.

In the 2009 case of Hernon v. Hernon, a successful will contest was upheld by the Massachusetts Appeals Court. A nephew had moved in with the decedent, then the decedent had executed a new will 2 months before death that left his estate to the nephew’s children.

The court found that the elements of undue influence were present. A long-time friend of the decedent testified that (1) the will was not consistent with their many conversations; (2) the decedent had believed he had no other choice than to have the nephew move into his home to take care of him; (3) the decedent felt quite dependent on the nephew; (4) the nephew had driven the decedent to many of his appointments, including to the lawyer’s office to execute the will; (5) the nephew refused to put the decedent on the phone when some friends called the house; (6) the decedent had expressed fear of the nephew’s anger, and once had quickly hung up the phone when he heard the nephew approaching him.

What appears to be missing in this case is an analysis of the benefit provided by the nephew to the decedent. Where many elderly persons are living longer and moving in with relatives or having relatives move in with them when home care is needed, this case highlights the need for independent legal representation to explore health care and estate planning options. The decedent in this case may have wanted to benefit the nephew for his help, and there were other alternatives such as a Life Care Agreement, where the nephew would have been directly and appropriately compensated for his services.

What is evident is this case is that the compensation for the nephew was not well thought-out. On one hand, if the decedent had only lived for a short time, having a will that left the home to the nephew would have been far too much compensation for his help. On the other hand, if the nephew had provided care for years, then the decedent spent a long time in a nursing home, the nephew could have received nothing.

How could the nephew have been left with nothing after providing extensive care? The reason is that a will only gives away what you have left after you die, after all debts have first been paid. Most payments made on a person’s behalf by Medicaid or MassHealth are essentially loans that have to be repaid from your probate estate after you die. An eventual MassHealth estate recovery claim against the decedent’s estate always comes first, before inheritance provisions in the will. In this situation, after a lengthy stay in a nursing home, the home would have had to be sold to pay the MassHealth debt, and the nephew could then have been left with little or no compensation.

Despite Medicaid Transfer Restrictions, Some Transfers of the Home are Always Safe

by: Brian E. Barreira, Esq.

A person’s home can sometimes be given away without penalty or disqualification from MassHealth even after a nursing home stay has begun.

While many transfers of the home are subject to a period of disqualification from payment of nursing home costs by the state Medicaid program, some transfers can be made even after a nursing home stay has begun, and are immediately safe under federal law. (Other exceptions, especially in California, may apply under state interpretations of the federal law.)

One such permissible transfer is to the elder’s spouse. If one spouse becomes institutionalized, the home could probably be deeded to the spouse remaining in the couple’s home. This plan may not be very helpful to the family if the spouse who is institutionalized later receives the home back by will. Married couples that wish to have such action taken in case one of them becomes incompetent should have durable powers of attorney empowering each other to transfer the home.

Another permissible transfer is to (presumably reward) a child who spent no less than the 2 years immediately prior to the client’s institutionalization living in the client’s home and who took care of the client in the client’s home. The care must have been of the type which kept the client out of a nursing home. Since the state Medicaid program makes the decision as to whether these requirements were met, the child would be well-advised to keep detailed records during this period.

Another permissible transfer is to a child who is a minor or who is blind or disabled, or to an irrevocable for the benefit of a disabled child.

Finally, a transfer could also be made to a sibling who has an equity interest in the home and who has lived there for no less than one year prior to the client’s institutionalization; this exception could arguably apply if the client and sibling were co-owners of a multi-family home.

Even if the exceptions outlined above do not apply to the situation, in some cases there may be other steps that can be taken even after a nursing home stay has begun.

Minimum Monthly Maintenance Needs Allowance for Nursing Home Resident’s Spouse Stays Unchanged through June 30, 2011

by: Brian E. Barreira, Esq.

When one spouse is living in a nursing home and the other spouse is living anywhere else, the spouse who is not living in the nursing home (known under Medicaid and MassHealth law as the “community spouse”) is allowed by Medicaid or MassHealth to keep some or all of the nursing home resident’s income through an income allowance known as the Minimum Monthly Maintenance Needs Allowance (MMMNA).  Every July 1st, this figure is supposed to change based on federal poverty level guidelines, but the U.S. Department of Health and Human Services did not revise the guidelines this year, so the MMMNA will remain $1,821 through June 30, 2011.

If certain basic household expenses are more than 30% of the MMMNA, the community spouse is entitled to keep extra income, known as the Excess Shelter Amount (“ESA”).  Between the MMMNA and the ESA, the community spouse can now be entitled to as keep as much as $2,739 of the married couple’s total income.  If even more income is needed, such as where the community spouse is living in an assisted living facility, the community spouse can request a fair hearing and attempt to prove the need for more than $2,739 of the married couple’s total income.  All of these figures remain unchanged through June 30, 2011.

Another option to retain greater income for the community spouse is a Probate Court procedure known as separate support.  Since both spouses need legal representation in court, it is important that the institutionalized spouse have a durable power of attorney that allows the appointed person to hire a lawyer.

Utilizing the MMMNA provisions in Medicaid/MassHealth law is always better than purchasing an immediate annuity, since all payments from the annuity are treated as income, and taking that step ends up reducing the amount of the married couple’s retirement income that the community spouse could otherwise keep.  Unfortunately, due to the asset rules under Medicaid/MassHealth, in many situations the community spouse has no choice but to purchase an immediate annuity with excess assets.  See Preserving Assets and Maximum Income for the Healthier Spouse When the Other Spouse Enters a Nursing Home.