Category Archives: Giving Away Assets

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Penalty Recovery through Annuities

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This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017.  The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.)  The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system.  The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care.  The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month.  The June 23, 2016installment discussed the difficulty in understanding the need for a Miller Trust.  The July 1, 2016 installment discussed the need to empty the Miller Trust account every month.  The July 7, 2016 installment discussed the need to balance the Miller Trust with the desire to have health insurance.  The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts.  The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document.  The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust.  The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic.  The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust.  The August 18, 2016 installment discussed  the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums.  The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust.  The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust.  The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice.  The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.)  The September 22, 2016 installment discussed keeping the house with an intent to return to home.  The September 29, 2016 installment discussed keeping the house while a dependent family member lives there.   The October 6, 2016 installment discussed the home that is co-owned by someone else (other than the spouse.)  The October 27, 2015 installment discussed real property that is “essential for self-support.”  The November 10, 2017 installment discussed the retirement funds belonging to the spouse who does not seek Medicaid’s help with long term care costs.  The November 17, 2016 installment discussed the 2016 changes in how Ohio Medicaid will allow applicants to give away some of their assets cover the resulting penalty period through a return of part of the assets.  The December 1, 2016 installment discussed Ohio Medicaid’s new prohibition on using promissory notes to recover from an applicant giving away assets.   The December 8, 2016 installment discussed the possibility of using a Special Needs Trust to recover from assets given away creating a Medicaid penalty period.  Today’s installment will discuss the use of short-term annuities to recover from a long term care Medicaid penalty period that results from giving away assets.

Note:  What I am calling “assets” Medicaid calls “resources.”  In Medicaid’s terminology, “assets” includes both “resources” and “income.”  Because most of the public thinks of “resources” as human resources or natural resources, and thinks of money in the bank as “assets,” I will use the term “assets” in this installment to refer to money in the bank and other similar things of value (like real estate, life insurance, etc.) that may be included in the applicant’s life savings.

Generally, when an applicant for Medicaid for long term care services gives away something of value (aka “assets,”) Medicaid will not pay for services for the amount of time that the given-away assets would have covered.  This “penalty” is found within the “transfer of assets” rule in Medicaid’s regulations.

Despite the penalty, some Medicaid applicants wish to give away some of their assets.  Usually, the applicants wish to give assets to their children.  The giving of these assets to the applicant’s children often gives the applicants a great deal of emotional relief because it allows some of their money (the results of their working lives) to outlive them.  Most parents want to leave something to their children and grandchildren.  Finding a way to allow these applicants to give some of their assets is what most elder law attorneys try to do.

The trick is finding a way to cover the applicant’s long term care costs during the time that Medicaid will not (i.e., during the “penalty period” aka the “Restricted Medicaid Coverage Period.”)  There used to be 4 different ways to cover such a penalty period.  During 2016, Ohio Medicaid changed the rules on covering this penalty period.  Today’s installment will discuss the use of short-term annuities to cover a penalty period in long term care Medicaid benefits.

Medicaid rules allow a person who gave away assets to use an annuity to cover his/her long term care costs during the associated penalty period.  The annuities must meet a number of criteria:
– The annuity remainder beneficiary must be the state of Ohio.  (Ohio may be named after the spouse or a dependent child.);
– The annuity must be Irrevocable and non-assignable;
– The annuity must be “actuarially sound” by paying out over a time period equal to or shorter than the annuitant’s life expectancy as determined by the Social Security Administration (usually found via a certain online calculator); and
– The annuity must pay out in equal monthly payments with no anticipated lump sum (except, potentially, to a remainder beneficiary.)
An annuity that meets these requirements is often called a Medicaid-Compliant Annuity.

Satisfying these requirements is relatively easy. They can all be set at the time of the purchase of the annuity.  The trickiest part is determining the monthly payment and the number of monthly payments from the annuity. The annuity payments should be large enough to almost cover the monthly difference between the client’s monthly income and monthly costs.  The number of months should be long enough to cover the penalty period.

Short term annuities are available (to my knowledge) from two sources, Krause Financial Services (MedicaidAnnuity.com) and Safe Harbor Annuity (SafeHarborAnnuity.com.) I have used Krause for such annuities. I became aware of Safe Harbor’s participation in this market in August 2016 and have not yet used Safe Harbor.

Until recently, Cuyahoga County’s Medicaid office had espoused the position that “actuarially sound” meant that the annuity must pay out for the ENTIRE life expectancy of the annuitant rather than for a period of time equal or less than the annuitant’s life expectancy. This position posited that any designed payout shorter than the life expectancy set forth in the Social Security tables referenced in the rule made the purchase of the annuity an improper transfer. (I do not know whether any other counties or individual caseworkers did so.)  Two appeals of this position ruled against the county’s policy.  Then, in November 2016, Cuyahoga County announced that it would accept annuities that were as long as or shorter than the person’s life expectancy.

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Penalty Recovery through a Special Needs Trust

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This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017.  The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.)  The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system.  The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care.  The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month.  The June 23, 2016installment discussed the difficulty in understanding the need for a Miller Trust.  The July 1, 2016 installment discussed the need to empty the Miller Trust account every month.  The July 7, 2016 installment discussed the need to balance the Miller Trust with the desire to have health insurance.  The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts.  The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document.  The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust.  The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic.  The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust.  The August 18, 2016 installment discussed  the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums.  The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust.  The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust.  The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice.  The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.)  The September 22, 2016 installment discussed keeping the house with an intent to return to home.  The September 29, 2016 installment discussed keeping the house while a dependent family member lives there.   The October 6, 2016 installment discussed the home that is co-owned by someone else (other than the spouse.)  The October 27, 2015 installment discussed real property that is “essential for self-support.”  The November 10, 2017 installment discussed the retirement funds belonging to the spouse who does not seek Medicaid’s help with long term care costs.  The November 17, 2016 installment discussed the 2016 changes in how Ohio Medicaid will allow applicants to give away some of their assets cover the resulting penalty period through a return of part of the assets.  The December 1, 2016 installment discussed Ohio Medicaid’s new prohibition on using promissory notes to recover from an applicant giving away assets.  Today’s installment will discuss the possibility of using a Special Needs Trust to recover from assets given away creating a Medicaid penalty period.

Note:  What I am calling “assets” Medicaid calls “resources.”  In Medicaid’s terminology, “assets” includes both “resources” and “income.”  Because most of the public thinks of “resources” as human resources or natural resources, and thinks of money in the bank as “assets,” I will use the term “assets” in this installment to refer to money in the bank and other similar things of value (like real estate, life insurance, etc.) that may be included in the applicant’s life savings.

Generally, when an applicant for Medicaid for long term care services gives away something of value (aka “assets,”) Medicaid will not pay for services for the amount of time that the given-away assets would have covered.  This “penalty” is found within the “transfer of assets” rule in Medicaid’s regulations.

Despite the penalty, some Medicaid applicants wish to give away some of their assets.  Usually, the applicants wish to give assets to their children.  The giving of these assets to the applicant’s children often gives the applicants a great deal of emotional relief because it allows some of their money (the results of their working lives) to outlive them.  Most parents want to leave something to their children and grandchildren.  Finding a way to allow these applicants to give some of their assets is what most elder law attorneys try to do.

The trick is finding a way to cover the applicant’s long term care costs during the time that Medicaid will not (i.e., during the “penalty period” aka the “Restricted Medicaid Coverage Period.”)  There used to be 4 different ways to cover such a penalty period.  During 2016, Ohio Medicaid changed the rules on covering this penalty period.  Today’s installment will discuss the use of a Special Needs Trust to cover a penalty period in long term care Medicaid benefits.

Prior installments have introduced the Special Needs Trust.  The April 2, 2015 installment discussed Special Needs Trusts as part of the series on qualifying for Supplemental Security Income (SSI) and Medicaid.  The April 9, 2015 installment introduced the Pooled Trusts, a Special Needs Trust for a number of people simultaneously, also as part of the series on qualifying for SSI and Medicaid.  Either of these kinds of trusts, a stand-alone Special Needs Trust and a Pooled Trust, are possible vehicles for helping to cover a penalty period.

Special Needs Trusts can be useful for covering a penalty period because a deposit into a Special Needs Trust is not an “improper transfer” triggering a penalty period.  Likewise, the contents of a Special Needs Trusts do not count as “resources” or “assets” for someone who is trying to qualify for long term care Medicaid.  These two rules concerning Special Needs Trusts make the trusts useful for “riding out” a penalty period during which Medicaid won’t pay for long term care.

To make an improper transfer (i.e., to shelter part of one’s assets from the costs of long term care,) someone who needs long term care would give away some of his/her assets and then place enough money into a Special Needs Trust to cover the monthly costs during the penalty period that results from the assets given away.  Then, enough money could come out of the Special Needs Trust each month to cover that month’s costs.

The bringing money back each month from the Special Needs Trust is just like getting money back each month from a family member in Partial Give-Back method described in the November 17, 2016 installment.  There is a big difference between the Partial Give-Back method and the Special Needs Trust method, though.  The money given away in the Partial Give-Back method (part of which money came back each month) is part of an “improper transfer” that creates a penalty period.  (The penalty period got reduced each month because of the partial give-back in that method (until the January 2016 rule change.))  Depositing money into a Special Needs Trust is not considered an “improper transfer,” so it does not increase the penalty period for Medicaid coverage.

If the plan to give away assets when applying for Medicaid includes leaving a large amount in the Special Needs Trust after the penalty period has ended, the applicant might wish to use a stand-alone Special Needs Trust (as discussed in the April 2, 2015 installment.)  If the plan to give away assets includes leaving nothing or leaving a small amount in the Special Needs Trust after the penalty period has ended, the applicant might wish to use a Pooled Trust (as discussed in the April 9, 2015 installment.)

HOWEVER, I would prefer that Special Needs Trust not be used in this manner.  A Special Needs Trust is a very important shelter for assets to benefit people with special needs.  As discussed in prior installments, a Special Needs Trust can give a great deal of life enjoyment to someone who might otherwise be able to have nothing because of the financial limitations of government income and health programs for people with disabilities.  That enabling of life enjoyment is what a Special Needs Trust should, in my opinion, be used for.

Unfortunately, government policy makers who do not like to spend money on people with special needs repeatedly launch attacks on the Special Needs Trust law and rules, especially focusing on Pooled Trusts.  The use of Special Needs Trusts to counterbalance an improper transfer of assets when applying for Medicaid gives such hard-hearted government officials another reason to attack Special Needs Trusts.  Because other methods are available to cover a penalty period that accompanies an improper transfer of assets, I urge you NOT to use Special Needs Trusts for that purpose.

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Penalty Recovery through a Promissory Note

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Friends, I didn’t write a blog last week.  I was celebrating Thanksgiving with my family.  I hope you too enjoyed your Thanksgiving weekend.

This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017.  The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.)  The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system.  The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care.  The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month.  The June 23, 2016installment discussed the difficulty in understanding the need for a Miller Trust.  The July 1, 2016 installment discussed the need to empty the Miller Trust account every month.  The July 7, 2016 installment discussed the need to balance the Miller Trust with the desire to have health insurance.  The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts.  The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document.  The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust.  The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic.  The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust.  The August 18, 2016 installment discussed  the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums.  The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust.  The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust.  The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice.  The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.)  The September 22, 2016 installment discussed keeping the house with an intent to return to home.  The September 29, 2016 installment discussed keeping the house while a dependent family member lives there.   The October 6, 2016 installment discussed the home that is co-owned by someone else (other than the spouse.)  The October 27, 2015 installment discussed real property that is “essential for self-support.”  The November 10, 2017 installment discussed the retirement funds belonging to the spouse who does not seek Medicaid’s help with long term care costs.  The November 17, 2016 installment discussed the 2016 changes in how Ohio Medicaid will allow applicants to give away some of their assets cover the resulting penalty period through a return of part of the assets.  Today’s installment will discuss Ohio Medicaid’s new prohibition on using promissory notes to recover from an applicant giving away assets.

Note:  What I am calling “assets” Medicaid calls “resources.”  In Medicaid’s terminology, “assets” includes both “resources” and “income.”  Because most of the public thinks of “resources” as human resources or natural resources, and thinks of money in the bank as “assets,” I will use the term “assets” in this installment to refer to money in the bank and other similar things of value (like real estate, life insurance, etc.) that may be included in the applicant’s life savings.

Generally, when an applicant for Medicaid for long term care services gives away something of value (aka “assets,”) Medicaid will not pay for services for the amount of time that the given-away assets would have covered.  This “penalty” is found within the “transfer of assets” rule in Medicaid’s regulations.

Despite the penalty, some Medicaid applicants wish to give away some of their assets.  Usually, the applicants wish to give assets to their children.  The giving of these assets to the applicant’s children often gives the applicants a great deal of emotional relief because it allows some of their money (the results of their working lives) to outlive them.  Most parents want to leave something to their children and grandchildren.  Finding a way to allow these applicants to give some of their assets is what most elder law attorneys try to do.

The trick is finding a way to cover the applicant’s long term care costs during the time that Medicaid will not (i.e., during the “penalty period” aka the “Restricted Medicaid Coverage Period.”)  There used to be 4 different ways to cover such a penalty period.  During 2016, Ohio Medicaid changed the rules on covering this penalty period.  Today’s installment will discuss the use of a promissory note between the Medicaid applicant and a family member.

First, let’s explain a promissory note.  A promissory note is a legal document that contains a promise to repay a loan.  For example, anyone who has mortgaged a home has probably signed a promissory note as an agreement  to pay back the borrowed money.

In the context of Medicaid for long term care context, the person needing care can give away some of his/her assets.  Then, to pay for care during the penalty period that results from the give-away of assets, the person who needs care must set up a flow of income to pay the monthly care costs.  (The assets given away are protected from long term care costs and from Medicaid as long as the flow of income to pay for the penalty period is calculated correctly.  It really is a big math problem.)

Monthly installments to repay a loan can be just the flow of income to appropriately cover such a penalty period.  So, the person who needs long term care can lend money to someone (usually a family member, but it can be someone else.)  Then, the family member (as the borrower) would repay the loan in installments of an appropriate size to cover the monthly care costs during the penalty period.  To document the repayment terms (and to ensure that the “loan” wasn’t actually given away, which would result in a longer penalty period,) the lender (the person needing care) and the borrower (the family member or friend who offering to make the monthly payments) would have to sign a promissory note.

Remember, there’s no need for a promissory note if it isn’t used to cover a penalty period.

Before Ohio Medicaid’s August 1, 2016 rule changes, the acceptability of promissory notes was a bit unpredictable.  Some county Medicaid offices would accept promissory notes.  Some county offices would not accept them.  And then, even within some county Medicaid offices, some caseworkers would accept promissory notes and some would not accept them.

Now, after the August 2016 rule changes, Ohio Medicaid has (supposedly) prohibited the use of promissory notes for penalty recovery.

So, if promissory notes are prohibited, why would I even write about them?  I’m not sure that Ohio’s prohibition on promissory notes in Medicaid cases is permanent.

The federal Social Security law allows promissory notes to be used as described here, and the Medicaid program (at both the federal and state level) are part of the Social Security law.  One would think, that something allowed by the Social Security law would be allowed by the Medicaid rules that exist only because of the Social Security law.  So, at some point, some elder law attorney will probably challenge Ohio’s prohibition of promissory notes as a violation of the Social Security law.

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Penalty Recovery through Partial Give-Back

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This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017.  The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.)  The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system.  The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care.  The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month.  The June 23, 2016installment discussed the difficulty in understanding the need for a Miller Trust.  The July 1, 2016 installment discussed the need to empty the Miller Trust account every month.  The July 7, 2016 installment discussed the need to balance the Miller Trust with the desire to have health insurance.  The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts.  The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document.  The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust.  The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic.  The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust.  The August 18, 2016 installment discussed  the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums.  The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust.  The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust.  The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice.  The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.)  The September 22, 2016 installment discussed keeping the house with an intent to return to home.  The September 29, 2016 installment discussed keeping the house while a dependent family member lives there.   The October 6, 2016 installment discussed the home that is co-owned by someone else (other than the spouse.)  The October 27, 2015 installment discussed real property that is “essential for self-support.”  The November 10, 2017 installment discussed the retirement funds belonging to the spouse who does not seek Medicaid’s help with long term care costs.  Today’s installment will discuss the 2016 changes in how Ohio Medicaid will allow applicants to give away some of their assets and still qualify for Medicaid.

Note:  What I am calling “assets” Medicaid calls “resources.”  In Medicaid’s terminology, “assets” includes both “resources” and “income.”  Because most of the public thinks of “resources” as human resources or natural resources, and thinks of money in the bank as “assets,” I will use the term “assets” in this installment to refer to money in the bank and other similar things of value (like real estate, life insurance, etc.) that may be included in the applicant’s life savings.

Generally, when an applicant for Medicaid for long term care services gives away something of value (aka “assets,”) Medicaid will not pay for services for the amount of time that the given-away assets would have covered.  This “penalty” is found within the “transfer of assets” rule in Medicaid’s regulations.

Despite the penalty, some Medicaid applicants wish to give away some of their assets.  Usually, the applicants wish to give assets to their children.  The giving of these assets to the applicant’s children often gives the applicants a great deal of emotional relief because it allows some of their money (the results of their working lives) to outlive them.  Most parents want to leave something to their children and grandchildren.  Finding a way to allow these applicants to give some of their assets is what most elder law attorneys try to do.

The trick is finding a way to cover the applicant’s long term care costs during the time that Medicaid will not (i.e., during the “penalty period” aka the “Restricted Medicaid Coverage Period.”)  There used to be 4 different ways to cover such a penalty period.  During 2016, Ohio Medicaid changed the rules on covering this penalty period.  Today’s installment will discuss the “partial give-back” method.

Before January 2016, the Medicaid applicant could give away substantially all of his/her assets and then receive back enough each month to pay for his/her long term care for that month.  (The conveyance back of  pieces of the gift leads to call this the “partial give-back” approach.)  The penalty period would be reduced a little bit at a time because the net amount given away went down a bit each month with the monthly return of part of the gift.  At the same time, with the passage of a month during which Medicaid didn’t have to pay for the person’s long term care, part of the money still held by the applicant’s children is forgiven  (The amount of the gift that is forgiven each month that Medicaid doesn’t have to pay for long term care is equal to the average amount that it pays to nursing homes throughout the state.  That amount is adjusted from time to time with as the care costs go up with inflation.)

In January 2016, Ohio Medicaid enacted a rule that completely ended this partial give-back strategy.

The end of partial give-backs is an inconvenience but not a tragedy in the practice of elder law.  It has, however, led to some Medicaid applicants getting caught in a penalty period without knowing it would happen.

Some Medicaid applicants have given gifts of money to family members within the five years before asking for Medicaid’s help.  If someone makes gifts to family and then fails to account for the resulting penalty period before applying for Medicaid, the Medicaid caseworker will probably find a record of the gift in the person’s bank records.  Then, the caseworker will have to impose a penalty period.  By the time the person applies for Medicaid, however, he or she will have reduced assets to $2,000 through spending or other gifts.  If the reduction of assets leading up to the application doesn’t include a way to cover the penalty from the prior gifts, the person will be left without a way to pay for care for the unexpected penalty period.

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Spouse’s Retirement Fund

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This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017.  The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.)  The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system.  The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care.  The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month.  The June 23, 2016installment discussed the difficulty in understanding the need for a Miller Trust.  The July 1, 2016 installment discussed the need to empty the Miller Trust account every month.  The July 7, 2016 installment discussed the need to balance the Miller Trust with the desire to have health insurance.  The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts.  The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document.  The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust.  The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic.  The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust.  The August 18, 2016 installment discussed  the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums.  The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust.  The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust.  The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice.  The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.)  The September 22, 2016 installment discussed keeping the house with an intent to return to home.  The September 29, 2016 installment discussed keeping the house while a dependent family member lives there.   The October 6, 2016 installment discussed the home that is co-owned by someone else (other than the spouse.)  The October 27, 2015 installment discussed real property that is “essential for self-support.”  Today’s installment will discuss the retirement funds belonging to the spouse who does not seek Medicaid’s help with long term care costs.

Before July 31, 2016, when a married person asked for Medicaid’s help to pay for long term care, all assets (Medicaid calls them “resources”) of both spouses were counted when determining eligibility for Medicaid coverage.  It didn’t matter whether the assets belonged to the spouse seeking coverage, or to the spouse who wasn’t seeking coverage, or to both of them jointly.  After August 1, 2016, that changed for retirement funds belonging to the spouse who doesn’t need care UNDER CERTAIN CIRCUMSTANCES.

The exclusion of the spouse’s retirement account is set forth in the amended version of Ohio Administrative Code section 5160:1-3-05.20(E)(1) that took effect on August 1, 2016.  It applies to retirement funds that are public pensions, private pensions, disability plans, defined benefit employer pension plans, employee stock ownership plans, 403b plans, money purchase pension plans, profit sharing pension plans, IRAs, KEOGH plans, Roth IRAs, SEP-IRAs, and 401k plans, as well as any other pension or retirement plans under sections 401, 403, or 408 of the federal income tax law. (Ohio Administrative Code section 5160:1-3-03.10(B))

Here’s the catch.  The spouse’s retirement funds are excluded from the asset calculation for Medicaid eligibility only if the couple is living together.

When one of them needs long term care, a married couple will probably live together only if the person receiving care is receiving that care in the home (frequently called aging in place) or is receiving care in an assisted living community.  A couple living together in a nursing home when one of them doesn’t need nursing home care is a extremely unlikely.  For that matter, living together in assisted living when only one of them needs long term care is unusual.

Because of the “living together” requirement, this recent rule change seems to create an incentive for the couple remain in the home or in assisted living, both of which are less expensive for Medicaid than full nursing home care.  That incentive to remain in a less expensive setting to receive long term care is all well and good as long as the home or assisted living can provide appropriate care.  For many, if not most, people, the home or assisted living community may not be able to provide appropriate care for the rest of the person’s life.  At some point, the person is likely to need to move into a nursing home.

If the spouse receiving Medicaid’s help for home care or assisted living care needs more care and moves into a nursing home to receive such care, then the spouse’s retirement funds are no longer exempt.  The loss of this exemption will lead to the loss of Medicaid eligibility for the person who needs care.

The likelihood that the exemption of the spouse’s retirement funds is a temporary exemption creates a Catch-22 for the couple.  They must either try to maintain the exemption for the retirement funds  by remaining where they can live together, or, they must spend a potentially large portion of the retirement funds to to allow the provision of more care.

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Dependent Family Member in the Home

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This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017.  The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.)  The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system.  The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care.  The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month.  The June 23, 2016 installment discussed the difficulty in understanding the need for a Miller Trust.  The July 1, 2016 installment discussed the need to empty the Miller Trust account every month.  The July 7, 2016 installment discussed  the need to balance the Miller Trust with the desire to have health insurance.  The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts.  The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document.  The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust.  The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic.  The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust.  The August 18, 2016 installment discussed  the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums.  The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust.  The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust.  The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice.  The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.)  The September 22, 2016 installment discussed keeping the house with an intent to return to home.  Today’s installment will discuss keeping the house while a dependent family member lives there.

Before July 31, 2016, a single person who asked for Medicaid’s help to pay for long term care costs and who owned a home had 13 months after the beginning of Medicaid coverage during which to put the home up for sale.  (If the Medicaid applicant were married and the spouse still lived in the home, there was no obligation to sell.)  That 13-month time period is gone.  As part of the big August 1, 2016 change in rules, Ohio Medicaid rescinded the 13-month rule.  Now, the person must decide to keep the house or to sell the house before applying for Medicaid.

If the person decides to sell, then the rules regarding real estate discussed in the September 15, 2016 installment apply.

If the person decides not to sell, then one of a number of certain conditions must apply.  Under the new rules, if a dependent family member lives in the home, the person may keep it and still receive Medicaid coverage for long term care.

The new rule that describes whether and how to count the house as an asset of the Medicaid applicant/recipient (Ohio Administrative Code section 5160:1-3-05.13) creates a new way for someone to live in a nursing home or assisted living facility AND receive Medicaid’s help with the nursing home/assisted living costs AND to keep his/her home.  Subsection (C)(4)(a) allows the person to keep the home and excludes the value of the home from the count of the person’s assets if a spouse or dependent relative lives there.

Now, protection of the house while the spouse lives there is not new.  This is a long-standing rule in Medicaid.  (Imagine the news headlines and the political fallout if Medicaid evicted spouses from their homes.)

The dependent relative exclusion is largely new.  (A blind or disabled child living in the home made it excludable under the old rules, but that was a more limited exclusion than this new one.)

The new rule defines “relative” to include children, stepchildren, grandchildren, parents, stepparents, grandparents (Remember, some people who need long term care are not elderly.), aunts, uncles, nieces, nephews, brothers, sisters, stepbrothers, stepsisters, half brothers, half sisters, cousins, and in-laws.  Look at the list.  “Relative” includes lots of people.

The new rule states that “dependency may be of any kind” and lists as examples, “financial, medical, etc.”  Look at how wide open “dependency” is.  It can be of “any kind.”  I assume that future rulemaking and possibly litigation will provide more details, but for now, “dependency” is enormously broad.  A so-called boomerang child (one who comes back home after having previously moved out) can be described as “dependent” because it’s less expensive to live in a house where Mom and Dad don’t charge rent.

But, THERE’S A CATCH.  And, it’s not in the rule regarding the house.

If the Medicaid recipient dies while still owning the house, Medicaid estate recovery will lead to a lien being placed on the property.  Medicaid estate recovery (as discussed in previous installments) is the federally-mandated effort to recover from Medicaid-covered people who have died whatever assets can be recovered as a way to replenish (perhaps even a little bit) the Medicaid fund.  If Medicaid spent a great deal of money on the deceased homeowner’s care, the lien could easily surpass the value of the property.  (The rule is so new that no cases of Medicaid estate recovery have yet occurred under the new system.  We’ll have to wait to see if a Medicaid lien results in an eviction of the “dependent family member” from the house.)

If, in an attempt to avoid Medicaid estate recovery, the Medicaid applicant/recipient gives away the house, Medicaid will call the gift an “improper transfer” and will not pay for the person’s care for the amount of time that the value of the house would have paid.

Thus, the “dependent relative” rule on the house is a wide open opportunity to keep the house for a while.  It is not, though, a way to keep the house forever.

 

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Intent to Return Home

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This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017.  The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.)  The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system.  The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care.  The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month.  The June 23, 2016 installment discussed the difficulty in understanding the need for a Miller Trust.  The July 1, 2016 installment discussed the need to empty the Miller Trust account every month.  The July 7, 2016 installment discussed  the need to balance the Miller Trust with the desire to have health insurance.  The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts.  The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document.  The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust.  The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic.  The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust.  The August 18, 2016 installment discussed  the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums.  The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust.  The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust.  The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice.  The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.)  Today’s installment will discuss the intent to return to home.

Before July 31, 2016, a single person who asked for Medicaid’s help to pay for long term care costs and who owned a home had 13 months after the beginning of Medicaid coverage during which to put the home up for sale.  (If the Medicaid applicant were married and the spouse still lived in the home, there was no obligation to sell.)  That 13-month time period is gone.  As part of the big August 1, 2016 change in rules, Ohio Medicaid rescinded the 13-month rule.  Now, the person must decide to keep the house or to sell the house before applying for Medicaid.

If the person decides to sell, then the rules regarding real estate discussed in the September 15, 2016 installment apply.

If the person decides not to sell, then one of a number of certain conditions must apply.  The most likely condition that Medicaid recipients will invoke is the “intent to return home.”

If the person intends to return home, he/she is not required to sell the house before getting Medicaid coverage.  The intent to return must be expressed in a written, signed statement.  This exemption of the house ends if the person establishes a “principal place of residence” anywhere else.  This new “principal place of residence” is, in my opinion, how people will be tripped up in obtaining or keeping Medicaid coverage.

If a person has been in a nursing home or assisted living community for many months (unless on rehab,) I doubt that the house can be called the “principal place of residence.”  If the person’s health isn’t likely to improve, the “principal place of residence” has probably become the nursing home or assisted living community.  Even if the “intent to return home” is real, it may not be realistic.  The “principal place of residence” allows Ohio Medicaid to avoid covering someone whose intent to return home is not realistic.

Now, during this first year or two under the new rules, I’m not sure that Medicaid will challenge an applicant’s written statement of an intent to return home.  (There are so many changes, and they are so complex, that I expect the county Medicaid offices to be overwhelmed trying to keep up with new applications and annual renewals.  For example, the computer changes that the new rules necessitated have not gone well.  Some county Medicaid offices have been unable to process applications for weeks.)  At the person’s annual renewal, however, if he/she is still in the nursing home or assisted living community, the Medicaid office can decide that the house is no longer the “principal place of residence.”  (By the time of the first annual renewal, the person will have been out of the house for at least a year, after all.)  Medicaid coverage can be suspended until the house is sold and the proceeds spent.

Even if the Medicaid office allows the person to keep the house (i.e., Medicaid accepts the person’s statement of intent to return home even if it’s not likely that the person can ever return,) the person will not have money to keep up the house.  Medicaid rules allow the person to keep only $2,000 in savings and $50 of monthly income.  The person can’t keep up with property taxes, insurance, and maintenance on the house with that low amount of money.

In addition, if the person keeps the house until he/she dies, Medicaid will place a lien on the house for the amount of money that Medicaid spent on the person’s care.  (A lien on real estate is one of the methods of “estate recovery” after a Medicaid recipient dies.)

For a single person who needs Medicaid’s help to pay for long term care who owns a home, I suggest that the person decide what will happen with the house before applying for Medicaid rather than kicking the can down the road.  The statement of “intent to return” might be a way to delay making a decision, but the inability to pay to keep up the house will put the person in a financial bind quickly and also might cause the house to lose value.  In addition, the risk of Medicaid estate recovery always looms over the house.  For these reasons, I suggest dealing with the house (or at least deciding what to do with the house) sooner rather than later.

Letting go of the house is terribly emotional.  Still, I think it’s better to deal with it sooner rather than later.

Legal Issues when someone has Dementia – Seek out an Elder Law Attorney

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This week’s blog continues the discussion of Legal Issues when someone has Dementia.  The introductory installment (April 30, 2015) put forth the issue of “Who can speak for someone with dementia?”  The May 14, 2015 installment discussed the situation where the person with dementia has Advance Directives in place.  The May 21, 2015 installment discussed the legal issues in determining whether a dementia sufferer can choose to have new Advance Directives prepared.  The May 30, 2015 installment discussed options in preparing a Health Care Power of Attorney.  The June 4, 2015 installment discussed how to decide whether to prepare a Living Will.  The June 11, 2015 installment discussed some of the basic issues in preparing a General Power of Attorney.  The June 18, 2015 installment discussed the importance of making the General Power of Attorney “durable.”  The June 25, 2015 installment discussed the importance of NOT making the General Power of Attorney “springing.”  The July 2, 2015 installment discussed revoking prior Powers of Attorney.  The July 9, 2015 installment discussed Do Not Resuscitate orders.  The July 16, 2015 installment discussed the Right of Disposition designation.  The July 23, 2015 installment discussed the Will (or Last Will and Testament.)  The July 31, 2015 installment discussed beneficiary designations on life insurance policies, IRAs, annuities, etc.  The August 6, 2015 installment discussed whether to pre-plan a funeral.  The August 14, 2015 installment discussed choosing a final resting place.  The August 28, 2015 installment discussed pre-planning the funeral ceremony.  The September 3, 2015 installment discussed when and how to pay for the pre-planned funeral.  The September 10, 2015 installment discussed medical insurance choices.  The September 17,2015 installment discussed long term care insurance.  Today’s installment will discuss obtaining the services of an elder law attorney.

Today’s installment continues the discussion of issues to manage when someone finds out that he or she has a disease that causes dementia.  These issues should be managed before the dementia gets worse, before the disease takes away the person’s ability to make decisions.  Along with the issues previously discussed, someone who has dementia (or his or her family) should seek the help of an elder law attorney.

Someone who has a disease that causes dementia is very likely to need long term care in the future.  The costs of that long term care can use up all of the person’s life savings.  If the person has a spouse, the costs of care can use up the spouse’s savings as well.  An elder law attorney may be able to shelter a portion of that savings.

In addition, an experienced elder law attorney can help identify other resources or services that can help the person with dementia and his or her family.  These services may allow the person to stay in his or her home longer, for example.  Alternatively, certain services may help family members in understanding the disease and its symptoms, making life easier for both the person with dementia and the family.

An elder law attorney can help with the important decisions that this blog has discussed over the last several weeks.  The elder law attorney can be a guide through the labyrinth of uncertainty into which the dementia has thrust the person and family.

The sooner the person with dementia and his or her family start to work with an elder law attorney, the more good can come of it.  A delay is seeking out an elder law attorney takes options and opportunities off the table.

Legal Issues when someone has Dementia – Consider how to Pay for a Funeral

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This week’s blog continues the discussion of Legal Issues when someone has Dementia.  The introductory installment (April 30, 2015) put forth the issue of “Who can speak for someone with dementia?”  The May 14, 2015 installment discussed the situation where the person with dementia has Advance Directives in place.  The May 21, 2015 installment discussed the legal issues in determining whether a dementia sufferer can choose to have new Advance Directives prepared.  The May 30, 2015 installment discussed options in preparing a Health Care Power of Attorney.  The June 4, 2015 installment discussed how to decide whether to prepare a Living Will.  The June 11, 2015 installment discussed some of the basic issues in preparing a General Power of Attorney.  The June 18, 2015 installment discussed the importance of making the General Power of Attorney “durable.”  The June 25, 2015 installment discussed the importance of NOT making the General Power of Attorney “springing.”  The July 2, 2015 installment discussed revoking prior Powers of Attorney.  The July 9, 2015 installment discussed Do Not Resuscitate orders.  The July 16, 2015 installment discussed the Right of Disposition designation.  The July 23, 2015 installment discussed the Will (or Last Will and Testament.)  The July 31, 2015 installment discussed beneficiary designations on life insurance policies, IRAs, annuities, etc.  The August 6, 2015 installment discussed whether to pre-plan a funeral.  The August 14, 2015 installment discussed choosing a final resting place.  The August 28, 2015 installment discussed pre-planning the funeral ceremony.  Today’s installment will discuss when and how to pay for the pre-planned funeral.

Today’s installment continues the discussion of issues to manage when someone finds out that he or she has a disease that causes dementia.  These issues should be managed before the dementia gets worse, before the disease takes away the person’s ability to make decisions.  Following on the previous discussions [(1) whether to pre-plan a funeral, (2) choosing a final resting place, and (3) planning the funeral ceremony,] this week’s discussion will focus on paying for the funeral.

There are three choices for paying for a pre-planned funeral:  Don’t pay until the funeral, pay the funeral home in advance, or buy funeral insurance.  Each has some advantages and some disadvantages.

PAY AT THE TIME OF THE FUNERAL

Payment at the time of the funeral has the advantage of allowing the family to pay only for what funeral services are actually used.  A pre-planned funeral is important, but the actual funeral might be smaller (i.e., less expensive) than the original plan.  As we age, we outlive more of our friends and loved ones, making the cost of a funeral smaller often because of shorter calling hours and a smaller repast.  Payment at the time of the funeral allows the payment to fit the actual services without the need to adjust plans to fit the pre-paid budget.

Payment at the time of the funeral also has the advantage of delaying the discomfort of dealing with the funeral any more.  Pre-planning the funeral may be tough enough emotionally.  Taking the extra step of paying at the time of the planning might add to the emotional weight of the task.

The disadvantage of waiting until the funeral to pay is that there may be no money left to pay for the funeral.  The person’s cost of living may have used up all available funds, especially if the person needed long term care before passing away.  Then, the family has to find money to pay for the funeral.

PRE-PAY THE FUNERAL HOME

Pre-paying the funeral home might lock in the costs for many of the funeral services, at least those that the funeral home provides directly.  Some funeral homes make this promise for pre-paid plans.  (On the other hand, some of my clients who believed that they had locked in their funeral costs by pre-payment did not, in fact, receive such a lock-in.  The families had to pay more money at the time of the funerals.)

A pre-planned funeral with pre-payment at the funeral home is the easiest for the family to manage.  Most of the services and most of the payment are already arranged and at the same place.  It’s as close as one can get to “one stop shopping” for a funeral.

Pre-paying a funeral also has the advantage of being an allowed expense by the Medicaid rules for long term care.  A person who needs long term care and who needs Medicaid coverage to pay for it is allowed (encouraged, even) to pre-pay his or her funeral.  As long as the payment matches the funeral cost estimate and as long as the payment is irrevocable, the funeral fund isn’t considered an “asset” that would make the person financially ineligible for Medicaid.  Pre-paying at the funeral home fits Medicaid’s requirements for a pre-paid funeral.

A disadvantage of pre-paying at the funeral home is that the funeral home may go out of business or may change ownership (to an owner whom the family may not want involved in the funeral.)  Legally, the family can ask for the money in the pre-paid fund to be transferred to another funeral home.  Making such a request, however, while a family member is grieving the loss of a loved one may be more difficult than the family wishes to pursue.  In addition, while most pre-paid plans at a funeral home are supported by a type of funeral-specific life insurance policy, the family tends to think of the pre-payment with the funeral home, not the insurance company.  If the funeral home goes out of business, the family may have no thought to look for an insurance policy.  Similarly, if the person moves, the funeral may not take place at the funeral home where it was planned (because the person’s friends are near the new home.)

Another disadvantage of pre-paying at the funeral home comes from the possibility that the deceased may have been on Medicaid for long term care.  (This is a little complicated.)  A person in a nursing home usually has a personal account at the nursing home.  It tends to be used for hair care, field trips, and visits to the snack bar.  A person on Medicaid is allowed to keep some of his or her monthly income to save into this personal account.  As the person ages and becomes weaker, his or her use of the personal account decreases, but the monthly deposits into the account continue.  When a Medicaid recipient passes away, nursing homes (at least in my area) believe that they can pay that personal account to the person’s funeral home or to Medicaid (as a small repayment toward the amount that Medicaid had paid for the person’s care.)  If the funeral home has received full payment for its services because of a pre-payment at the funeral home, the nursing home will send the contents of the personal account to Medicaid (because there isn’t an easily identified shortfall in the costs at the funeral home to which the personal account can be dedicated.)

The third disadvantage of pre-paying the funeral home is that the funeral home may not wish to accept pre-payment for expenses that are not directly for the funeral and burial.  For example, some family members may need to travel to attend the funeral and to stay overnight in a hotel.  In my experience, funeral homes do not wish to accept pre-payment for these expenses that are not run of the mill.

PRE-PAY VIA INSURANCE

The funeral-specific life insurance mentioned above in which the funeral home usually places the funds it receives for pre-payment is available (in Ohio anyway) for direct purchase by the public.  Pre-paying the funeral through the purchase of such insurance has some of its own advantages and disadvantages.

Direct purchase funeral insurance can cover any identifiable funeral-related cost, including unusual costs like travel for out-of-town family.  A cost for such unusual items must be documented at the time the insurance is purchased, but the coverage is available.

Direct purchase funeral insurance isn’t tied to any one funeral home.  It can be used for any funeral service provider.  This gives the family greater flexibility to use the pre-payment at any funeral home, protecting against a change of funeral home ownership or a funeral home going out of business.  This flexibility also protects the pre-payment from the insured person moving to a new home after planning the funeral.

As discussed above, pre-paying a funeral is an allowed expense in the eyes of Medicaid.  Medicaid does not care whether the pre-payment is at a funeral home or to a funeral insurance policy.

Because the funeral insurance isn’t tied to a particular funeral home, the family can capture the money in the personal account at the person’s nursing home.  The family should ask the nursing home to pay the personal account to the funeral home.  Then, the family uses the insurance policy to pay the rest of the funeral home’s costs and also any other insured costs.

As an added advantage, if the nursing home personal account is large and the projected costs haven’t gone up too much, the added money might exceed the planned costs.  This gives the family a cushion to cover the cost of a service that was left out of the plan (and something is almost always left out at the pre-planning stage.)

Using funeral insurance does give up the opportunity to lock in the funeral home costs at the pre-paid level.  (The funeral home may or may not offer such a lock-in, but the use of an outside insurance policy will not lock in the costs.)

Also, the use of outside funeral insurance makes it slightly (and I do mean slightly) more complicated to carry out the funeral plan.  It’s not the one stop shopping like pre-paying the funeral home, but it’s not much less convenient.

MY PREFERENCE

I tend to have my clients use the funeral insurance.  (Apologies to my friends at funeral homes that sell pre-paid funeral arrangements.)  Remember, my clients hire me to help them save money on their long term care.  As a result, I like the ability to capture the nursing home personal account.  I also like the ability to pre-pay for the non-traditional funeral costs so that the family doesn’t have to pay for them at the time of the funeral.

NOTE

I want to offer a final note about the relationship between pre-paid funerals and Medicaid.  If the person pre-planning the funeral isn’t suffering from a dementia-causing disease too badly yet so that long term care doesn’t look like it will be necessary soon, the person should go ahead and pre-pay the funeral (assuming that the emotional difficulty in dealing with the funeral plans isn’t overwhelming, as discussed above.)  If, though, the disease is advanced and it seems that long term care will be necessary soon, delay the pre-payment for a bit.  An elder law attorney can get shelter more of the person’s assets from the costs of long term care by arranging the TIMING of the funeral payment.  (There is no right or wrong time to pre-pay a funeral.  There is, though, a more advantageous time to pre-pay a funeral.)  The timing is very specific to each client, so I do not intend to discuss it in detail.

Legal Issues when someone has Dementia – Pre-Planning a Funeral Ceremony

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This week’s blog continues the discussion of Legal Issues when someone has Dementia.  The introductory installment (April 30, 2015) put forth the issue of “Who can speak for someone with dementia?”  The May 14, 2015 installment discussed the situation where the person with dementia has Advance Directives in place.  The May 21, 2015 installment discussed the legal issues in determining whether a dementia sufferer can choose to have new Advance Directives prepared.  The May 30, 2015 installment discussed options in preparing a Health Care Power of Attorney.  The June 4, 2015 installment discussed how to decide whether to prepare a Living Will.  The June 11, 2015 installment discussed some of the basic issues in preparing a General Power of Attorney.  The June 18, 2015 installment discussed the importance of making the General Power of Attorney “durable.”  The June 25, 2015 installment discussed the importance of NOT making the General Power of Attorney “springing.”  The July 2, 2015 installment discussed revoking prior Powers of Attorney.  The July 9, 2015 installment discussed Do Not Resuscitate orders.  The July 16, 2015 installment discussed the Right of Disposition designation.  The July 23, 2015 installment discussed the Will (or Last Will and Testament.)  The July 31, 2015 installment discussed beneficiary designations on life insurance policies, IRAs, annuities, etc.  The August 6, 2015 installment discussed whether to pre-plan a funeral.  The August 14, 2015 installment discussed choosing a final resting place.  Today’s installment will discuss pre-planning a funeral ceremony.

Today’s installment continues the discussion of issues to manage when someone finds out that he or she has a disease that causes dementia.  These issues should be managed before the dementia gets worse, before the disease takes away the person’s ability to make decisions.  Continuing the current topic of pre-planning a funeral, this week’s discussion will focus on the steps to take when planning the funeral ceremony itself.

The plan for the funeral should be written down.  The person choosing his or her own funeral arrangements won’t be available to provide clarification.  (In addition, in our ongoing discussion of someone with dementia, the person making the funeral arrangements may not be able to remember them very long after making them.)  It can be written down anywhere on anything, as long as it can be FOUND when needed.  The plan should also include projected costs so that pre-funding can be considered as well.  (The next installment will discuss payment options.)

The first part of the written funeral plan is to find a pre-need funeral checklist or shopping list.  There are pre-need checklists online.  (You can find many of them through a search engine.)  Funeral homes (and funeral providers that don’t have a funeral home) have pre-need checklists available as well.  Pre-need checklists are often a sales tool for funeral services, so they focus on the services offered by funeral homes.

Unless the person trying to pre-plan the funeral can find a satisfactory checklist online, the person should identify a funeral home that he or she would like to use.  The choice of funeral home at this point isn’t necessarily final for the eventual funeral services.  The family can choose a different funeral home, if they wish, when the person eventually passes away.  When that funeral home has been identified, the person should visit (if possible) and get a pre-need checklist.

The person planning the funeral can use the pre-need checklist for a large portion of the planning necessary for the funeral.  If the pre-need checklist came from a funeral home, it will almost certainly make available all of the services that the funeral home offers.  The person planning the funeral can choose or refuse most of those services,  but if the funeral home offers a service, the pre-need checklist will probably include it among the choices.

Depending on the final resting place chosen (discussed in the August 14, 2015 installment,) certain services may be required.  These potentially mandatory services include enbalming and a burial vault.  (The vault may or may not appear on the pre-need checklist and may depend on whether the funeral home has a long-standing relationship with one particular or a few particular cemeteries.)

One of the items almost certain to be on the pre-need checklist is a choice of casket.  A funeral home will have many models available (in full-size versions, child-size versions, or photographs) from which to choose.  When choosing a casket, the model name will usually be written on the checklist  I suggest that a photograph be taken of the inside and the outside of the casket as well.  The model chosen may no longer be in production at the time of death.  The photographs will help identify a substitute that is close the the original choice.  (I assume that caskets go out of production because a less expensive material or manufacturing process was devised.  A casket isn’t like a car which people replace every three or four years.  Styles don’t seem to have changed much over the years either.  Nonetheless, casket models do go out of production, so photographs are a good addition to the pre-need checklist.)

The clothing chosen for the deceased is usually listed on the pre-need checklist.  In addition, the list also usually includes places to list readings and songs that the person would like.  If the pre-need checklist does not include these, the written plan should include them.

In addition to the burial vault and enbalming mentioned above, a few other items may or may not be included on the pre-need checklist.  (If the funeral home doesn’t make money from a particular funeral-related service, the funeral home does not have an incentive to include that service on the checklist.)

For example, flower arrangements are usually purchased from a florist.  If floral arrangements aren’t listed on the pre-need checklist, the planner should visit a florist and choose what he or she wants.  (Flowers are a staple of funerals, so most pre-need checklists include them.  Some lists don’t, though.)

Pre-need checklists don’t always include a minister as an available choice.  (This is rare, but it does happen sometimes.)  If the funeral needs a particular minister or a minister of a particular denomination, the plan should make sure to include that choice.  (If a particular minister is desired, the plan should include a back-up.  That one particular minister may not be available.)

Similarly, the pre-need checklist may or may not ask about a place of worship.  If there is a particular place where the funeral should be held, that place should be listed on the funeral plan.  If a memorial service is preferred over a funeral, that choice should be made clear on the plan.  (Obviously, a place of worship and a choice of minister often go hand-in-hand, but not always.)

If there will be a burial or placement into a mausoleum, there will probably be a charge for opening and closing the grave.  Unless the funeral home is affiliated with a particular cemetery, this item is unlikely to be included on the pre-need checklist.  To avoid a last-minute surprise, this cost should be obtained from the cemetery and included on the plan.

The repast (the meal after the funeral and sometimes called the funeral breakfast) is often left off the pre-need checklist.  This can be a big cost if catered or can be no cost at all if provided by church members or friends.  The planner should think about the meal plans and include the necessary description (and likely cost, if any) in the funeral plan.

Travel needs should also be considered.  If the deceased person will need to be transported for burial (most often back to a family home,) the arrangements should be described in the plan and cost projections included.  If loved ones will need to travel to the funeral, the plan should include how those loved ones will travel and how much that travel will cost.

Finally, the plan should include a list of people who must be told of the person’s death.  If possible, the plan should include contact information for those people.

Similarly, the plan should include a draft death notice.  The person planning his or her own funeral should get a chance to have the death notice say what he or she wishes.

Planning a funeral can be traumatic, or it can be cathartic.  Either way, a person facing dementia should get a chance to plan the funeral he or she wants before that chance is taken away by the dementia.

With dementia already affecting the person and, because of the dementia, long term care likely in the future, planning a funeral is more important and more pressing.  If the costs of long term care force the person to seek Medicaid coverage, the Medicaid application process will almost certainly ask about funeral plans and also about pre-payment.