Long Term Care Planning, Uncategorized

Should You Complete The Medicaid Application Yourself?

stethoscope-on-dollarsSimply stated, the answer is “No”, “No”, and “No”.  There are no instructions to explain how to fill-out the Medicaid Application.  Consequently, this results in many hidden traps that could have been avoided.  I have a retired attorney friend who believed he could help his family member complete the Medicaid Application–he ended up receiving a “first-look denial” of benefits for that family member.  Medicaid workers, at most offices, do not know how to fill-out the application, nor do they have a vested interest in your cause.  Remember, it is the function of the Medicaid office to deny you benefits that you are entitled too!  It can become very adversarial at times.  Medicaid wins when you get frustrated with the system and drop your claim for benefits.  The private pay rate for a local nursing home is typically anywhere from $7,000 to $10,000 per month depending upon services needed.  Mistakes can be very costly.

If you are facing a long-term care situation in your family, please do not hesitate to contact our office at (888) 829-0894 to disuss your matter–we are here to help.

Asset Protection, Special Needs

Are You Disabled? Do you have a Disabled Child? If so, did you know an inheritance could cost you your benefits?

Special-Needs-Trusts-resized-600People with disabilities have special needs. Often the person on disability relies on certain governmental benefit programs such as Medicaid or Supplemental Security Income (SSI) for support and medical insurance. These programs have strict income and asset eligibility requirements. A well intended inheritance could in fact cause the person to lose important benefits. Proper planning can avoid these problems.

In our office, we often have parents of a disabled child tell us that they plan to disinherit the disabled child and leave their estate to another “well” child whom they expect will “look after” the disabled child. While these parents have good intentions, this can be a recipe for disaster. The healthy child has no obligation of support for the disabled child and could, without any legal consequences, keep all of the inheritance.

Parents will then tell us “my child would never do that.” But then we ask: what if your child gets divorced, dies, is disabled or is in a car accident? The money could then be lost through no fault of the well child. Are you willing to take this chance when there is a safer solution?

The safer solution is to create a Supplemental Needs Trust (SNT) for the benefit of the disabled child. In the parent’s Will or Trust the parent leaves the disabled child’s share to the SNT rather than directly to the disabled child. The funds in a properly crafted SNT should not disqualify the disabled child from benefits. The funds should then be available to help pay for services and “extras” not paid for by the programs. It creates a nest egg for the disabled child and should be protected from the claims of the Trustee’s creditors.

For example, Mom and Dad, in their Wills, leave $50,000 to a SNT created by them for the benefit of their child, Mary, who has Down’s Syndrome and is dependent upon Medicaid for her health insurance. The Trust assets should not disqualify Mary and can be used to pay for things such as extra medical care not covered by Medicaid, or a vacation, or clothing, or perhaps even a car! After Mary dies, any money remaining in the trust will be paid out to whomever Mom and Dad designated when they created the SNT.

A competent elder and special needs attorney can guide families through the difficult issues to create an estate plan that follows the family’s wishes, cares for the disabled individual properly and allows for continuation of government benefits. If you have a loved one dependent on government benefits for support, we encourage you to call our office because we have experience in special needs.

Long Term Care Planning

Can a Tax-Deferred Annuity be Converted into a Medicaid-Compliant Annuity?

Stacked CoinsYes, a tax-deferred annuity can easily be converted into a Medicaid Compliant Annuity.

If the current carrier does not provide a Medicaid Compliant Annuity, the tax-deferred annuity can be “transferred” to the desired carrier by way of a 1035 exchange.

A 1035 exchange refers to the section of the tax code that allows investors the flexibility to exchange one annuity for another without incurring any immediate tax liabilities. Generally, the surrender of an existing insurance contract is a taxable event since the contract owner must recognize any gain on the old contract as current income. However, under IRC § 1035, when one life insurance, endowment, or annuity contract is exchanged for another, the transfer will be nontaxable, provided certain requirements are met.

Requirement One: Ownership
The owner and insured, or annuitant, on the new contract must be the same as under the old contract. However, changes in ownership may occur before the change is completed.

Requirement Two: Like for Like
Any type of contract cannot be exchanged for any other type of contract. The following rules must be followed in order to avoid tax consequences:

  • Old Life Contract » New Life Contract
  • Old Life Contract » New Annuity Contract
  • Old Endowment Contract » New Annuity Contract
  • Old Annuity Contract » New Annuity Contract

The exchange process can be initiated by simply completing a transfer form with the new Medicaid Compliant Annuity application.

These are highly specialized financial products and only a select few firms in the industry have expertise in this area. Because qualification (or potential ineligibilty) for Medicaid benefits and, possibly, one’s life savings are at stake, you should only consult with a qualified professional advisor. The Wall Law Group welcomes your inquiries in this regard.