15 Feb 2019
Elder Law Attorneys do more than simply draft wills and trusts, we also plan for future medical and long term care needs. We have very specific knowledge of the various and complex laws and regulations concerning Medicaid, Social Security and income, estate taxes, among others. And it’s our job to implement planning techniques and strategies particular to your circumstances to preserve your assets, maximize benefits available to you, and minimize tax consequences.
The following are some common issues that often arise when we meet with a client who had estate planning documents prepared by an attorney not specializing in elder law:
• Client has no Power of Attorney modifications and/or Statutory Gift Rider. The Power of Attorney (POA) document allows the principal to appoint one or more agents to handle his or her finances. The Statutory Gift Rider (SGR) accompanies the POA, and it provides the agent with powers to make gifts on behalf of the principal above the statutory limit. The statutory POA and SGR forms allow for the drafting attorney to add modifications. Without a SGR, the principal’s agent is limited in making gifts on behalf of the principal up to $500 in total per year.
One of the commonly used techniques to preserve one’s assets in a Medicaid crisis plan is referred to as the ‘gift and note’ plan. Under this strategy the person protects approximately half of his or her assets by gifting them to a loved one, and then creates/purchases a Deficit Reduction Act (DRA) compliant promissory note or annuity with the other half of his or her assets to privately pay the nursing home during the Medicaid imposed penalty period that is caused by the gift. Without a SGR accompanying the POA, your agent may be unable to engage in this type of asset protection planning if the principal no longer has capacity to do so on his or her own.
Similarly, when addressing excess income for community-based (in home) Medicaid, elder law attorneys commonly use Pooled Income Trusts to protect excess income. If the POA does not contain the modifications allowing the agent to purchase promissory notes, annuities, or participate in Pooled Income Trusts, such planning techniques may become unavailable or require a guardianship proceeding. There are numerous other modifications that elder law attorneys add to these documents as well.
• Client has a trust, but it may not serve the client’s needs. Trusts are either revocable or irrevocable, each serving different purposes. Revocable trusts (sometimes called living trusts) are often used to avoid probate, but do not protect assets from creditors, and the trust’s assets are considered available for Medicaid purposes. These types of trusts can be revoked at any time while the grantor (person who creates the trust) is alive. Irrevocable trusts, on the other hand, cannot be revoked and are often used to protect assets from Medicaid. Notably, if one is seeking Medicaid benefits for nursing home care, the transfers into the trust must occur at least five years before the Medicaid application to avoid a penalty period. An experienced elder law attorney will make sure you have the proper type of trust to meet your needs.
• Client gave away money/assets, and now needs to qualify for Medicaid. While the IRS allows a person to give away up to $15,000 per donee (person receiving the gift) without any gift tax implications, Medicaid does not. Often, clients receive erroneous, or misunderstand, information regarding gifts to preserve their assets. When applying for nursing home Medicaid, the local Department of Social Services will review all financial transactions for the past five years and calculate a penalty period for all uncompensated transfers (generally transfers above $2,000), during which time you will be required to privately pay for care. Elder law attorneys are attuned to the complex Medicaid laws, and can provide proper guidance to preserve assets, while still keeping clients Medicaid eligible.
These are only a short list of common issues that may arise when not conferring with an attorney that focuses his or her practice in the area of Elder Law. If you have any concerns about your current plans or potential future long term care needs, an elder law attorney can provide the necessary knowledge.