Mon, 31 August 2009
Long term care for people suffering from Alzheimer’s Disease and other progressive, degenerative neurological diseases comes in many forms. In past posts I have discussed nursing homes, assisted living facilities, adult day care and home care administered by professionals and family members. Another type of care that you may or may not have heard of is called respite care. This type of care is as much for the caregiver as it is for the ill family member.
For so many people care is provided by family members. As anyone who has provided this level of care for any length of time knows, it is an exhausting task, both mentally and physically. It is a full time job, but not one typically limited to 9 to 5 hours. It is often a 24/7 task and the toll, especially if the caregiver is a healthy, but elderly, spouse, can be harsh. That’s why respite care is so important.
Respite care is a form of short term relief for the primary caregiver. That caregiver may need time away to “recharge the batteries” or to address his/her own health issues. There are various programs and services available to provide care to the ill loved one while the caregiver is taking a break. This can range from home health care to adult day care to overnight care in a licensed facility such as an assisted living facility or nursing home. The care is temporary, usually a period of days or weeks at a time. Financial aid for respite care may also be available through the Alzheimer’s Association’s Greater New Jersey chapter. The program will provide reimbursement of up to $1000 in respite care expenses incurred during the 3 month period beginning on the date of acceptance into the program. Eligibility is not limited to people with Alzheimer’s but is open to individuals suffering from other related progressive, degenerative, neurological dementia. While funding for the Caregivers Respite Care Assistance Program is limited it does not require disclosure of financial information. And there is no downside to applying. If funds are not available when you apply, your application will be kept on file for 12 months. For more information go to www.alznj.org. If you live outside the Northern and Central New Jersey area check with your local Alzheimer’s Association chapter to determine if a similar program is available where you live.
Category:Long term care planning
-- posted at: 6:00am EDT
|
Mon, 24 August 2009
Mary calls with the following problem. Her father recently passed away and left a sum of money to each of his grandchildren, including Mary’s son, John. “So, what’s the problem”, you ask. John is 25 and mentally challenged. He is disabled, doesn’t work and receives Medicaid. Mary is concerned because she heard that receiving the inheritance will cause John to lose his benefits. She’s correct if John’s assets exceed $2000. “Is there anything that can be done?” she asks desperately. The answer is to set up a special needs trust, but the timing of doing so is critical. The law has established certain safe harbor trusts that allow recipients of Medicaid and other needs based government benefits to keep those benefits and place their assets into a trust to be used for their “special needs”. These trusts, however, have very technical and specific rules surrounding their set up and administration. For example, the trust must be irrevocable and established by a parent, grandparent, guardian or court. The disabled individual cannot set it up him/herself. The trust must provide that the disabled individual is the only beneficiary and that the assets can only be used for special needs and not for food, clothing or shelter. The trust may also need to include a “payback provision”, which states that any assets left in the trust when the beneficiary dies will be used to pay back government benefits first. Oh, and the trust cannot be set up if the disabled person is over the age of 65. These are just some of the many restrictions and requirements. So, let’s go back to Mary and her problem. We can absolutely place John’s inheritance in a special needs trust. It probably is best to have the court act as the grantor so we’ll need to make an application to the court. It is also important that we do this before assets are ready to be distributed from the grandfather’s estate. Once the inheritance is made available to John he may lose some months of benefits before the court establishes the trust. He doesn’t actually have to receive the assets for them to “be available”. A typical estate can take several months or longer to administer so while the executor is gathering estate assets and paying debts and taxes is the best time to get the trust set up. Keep in mind that the laws in this area are very technical so it is always best to hire an elder and disability attorney who is very familiar with these types of trusts. And, where possible, it is better for the family member leaving assets to the disabled relative to set up a special needs trust in his/her will or leave the gift to a trust that already has been established by another family member. That is what we call a “third party special needs trust”, but that’s a discussion for another day.
Category:addNewCategory
-- posted at: 6:00am EDT
|
Mon, 17 August 2009
The recent deaths of two wealthy men, one very well known, the other not, illustrates yet again the complications and costs of not preparing an estate plan. The media has focused in the last few months on the story about Michael Jackson’s death and its aftermath. No doubt we will be bombarded with this story for months and years to come. Jackson left a mountain of debt, assets that in death are probably worth more than when he was alive, and a less than traditional family. Jackson did, however, do some things right. He left a will which included trusts for his children and a clear indication of who he wished to be appointed as their guardian. Then there is Yung-Ching Wang. Most people probably never heard of Wang but he ranked among Forbes Magazine’s top 200 wealthiest people in the world when he died last year at the age of 91. Wang was a true success story, born into poverty, the son of Taiwanese farmers, he turned a $700,000 loan from the United States government during the height of the Cold War into a multi billion dollar international manufacturing conglomerate. His company, Formosa Plastics, became the largest manufacturer of the ubiquitous plastic materials that we find in all kinds of products today. By all accounts, Wang was a management guru and a visionary. His personal life was a little bit more, shall we say, messy. He left a wife, to whom he was married for 72 years and 9 children. None of those children, however, were born to his wife. Oh, and he didn’t have a will. No written plan of distribution from a man whose rightful heirs is now open to interpretation and who left property and other assets around the United States and around the world. One of his sons has filed a complaint in New Jersey state court (he was a part time resident there) seeking to be appointed administrator, the official estate representative charged with gathering assets, paying all debts and taxes and distributing the balance to his heirs. He already has a fight on his hands from two of his sisters. Had Wang executed a will appointing someone this initial fight could have been avoided. The battle promises to last for years and drain the estate of countless dollars. One of the big questions is who the rightful heirs should be, not an easy answer since Wang fathered his children with several different women. New Jersey’s intestacy laws address distribution of estates when no valid will exists but the laws are not perfect and there, no doubt, will be issues for which clear cut answers don’t exist. Legal battles will ensue. The lessons learned from the Michael Jackson and Yung-Ching Wang cases are clear for all of us. You can save your family much heartache and expense by leaving a clearly thought out estate plan. In Jackson and Wang’s cases, their estates are so complicated that courts will need to step in at some point to assist in the distribution. However, Jackson’s family will have a much easier time than Wang’s since Jackson at least took care to express his wishes in writing. For the average estate that usually is enough to eliminate the fighting the typically ensues when a loved one passes away.
Category:Estate Plan
-- posted at: 6:00am EDT
|
Mon, 10 August 2009
Mrs. Jones came in to see me. Her husband was diagnosed with Alzheimer’s three years ago and the disease has progressed to the point where he needs long term nursing home care. At the time of the diagnosis she talked to some family friends and they told her to go ahead and add the kids’ names to her bank accounts and mutual funds to protect those assets from Medicaid. Now that her husband is in a nursing home she wonders whether she did the right thing. Unfortunately, she did not. In New Jersey, Medicaid says that adding someone else’s name to a bank account or mutual fund does not transfer the ownership on that account. In other words, if Mrs. Jones had a bank account with $50,000 and she added her daughter Mary’s name to the account, the State would say that she did so for convenience purposes. The entire account still belongs to Mrs. Jones. So even though Mary’s name has been added, the practical effect, from a Medicaid standpoint, is that there has been no gift and the entire account still belongs to Mrs. Jones. This is true whether we are talking about bank accounts, certificates of deposit, savings bonds, mutual funds or any other liquid asset. The law says there is no gift until, and unless, the child actually takes the money out of the account. Using this same example, if Mrs. Jones added Mary’s name to the account three years ago, there has been no gift made, even if Mary’s Social Security number is used for the account and she pays the taxes on all income. If Mary later takes some money out of the account, and moves it into her own name, then the gift is made at that point in time. This general rule is not true where real estate is concerned. That’s because if someone’s name is added to real estate, at the time the deed is signed and recorded, then a completed gift has been made. For instance, let’s say that Mrs. Thompson is a widow and she owns a house valued at $200,000. If she adds her son’s name to the house and then has the deed recorded, at that time she has made a completed gift. A gift in the amount of $100,000 would cause her to be ineligible for Medicaid for 13 months. At the end of that time, however, the Medicaid ineligibility would cease... and one-half of the house’s value would be protected.
Whether or not it makes sense to add someone’s name to real estate or financial assets depends upon the facts and circumstances of each particular case. Be sure to seek the advice of a competent elder law attorney before proceeding.
Category:Medicaid
-- posted at: 6:00am EDT
|
Mon, 3 August 2009
Joe calls me because he wants to understand how Medicaid works. I start to explain how you have to spend down your assets before you can qualify for benefits. That the spend down has to be for value, meaning that you are spending your money and receiving something of equal value in product or service in return. Joe listens and then perks up. "Wait a second", he says. "I can make a gift of $10,000 per person so that doesn’t count, right?". "Wrong", I reply. What Joe has done is make a very common mistake by confusing the annual gift tax exclusion with the Medicaid rules. So let’s run through the basics and clear it up. Gift tax is paid when you make a sizable gift to someone who isn’t your spouse. One of the purposes of the gift tax law is to protect the estate tax. For example, if I know that my estate of $2,000,000 will be taxed when I die, then why don’t I just transfer all my assets to my loved ones shortly before I die. The gift tax eliminates this estate tax avoidance strategy. A certain amount, however, is exempt from the gift tax. There is a lifetime exclusion of $1,000,000, meaning I can transfer up to that amount, in one lump sum or in smaller increments, over my lifetime. In addition, I can gift up to $13,000 per person per year (everyone remembers it as $10,000, but several years back an inflation adjustment was added so the number now is $13,000). Yes, there is no gift tax owed when you make that gift but it does carry a Medicaid transfer penalty. How so? Because the gift tax rules have nothing to do with the Medicaid rules. On the one hand, the government is telling us its OK to gift some amount of money without paying tax, but only up to a point. On the other hand, if we need nursing home care the government doesn’t want to pay for that care unless we spend all of our own money on that care first. Every $13,000 gift, therefore, carries a Medicaid transfer penalty, a period during which you are not eligible for Medicaid. That penalty, expressed in months, is calculated by taking the transfer for less than fair value (the gift, as we have been discussing) and dividing by the average monthly cost of nursing home care. This number is set by each state and in some states it varies by region. Here in New Jersey that number right now is $7282. This means every $13,000 tax free gift carries a Medicaid penalty of almost 2 months. Now, does that mean that you should never make gifts? No, not necessarily. It just means that in today’s increasingly complicated world, you have to understand that making those gifts can result in long term consequences, which you may not recognize until it’s too late. That’s why a carefully thought out long term care plan is critical and getting the proper advice and guidance well before that care is needed is always the best approach.
Category:Medicaid
-- posted at: 6:00am EDT
|