Chesley Law FirmChesley Law Firm2022-09-20T12:26:08Zhttps://www.chesleylawfirm.com/feed/atom/WordPress/wp-content/uploads/sites/1402125/2020/03/cropped-faviconn-32x32.jpgby Chesley Law Firmhttps://www.chesleylawfirm.com/?p=469122021-06-15T13:45:00Z2021-06-15T13:45:00ZMedical Assistance – Long Term Care. It is not intended to cover non-long term care Medical Assistance. That can be learned somewhere else.
As most people know, long term care is expensive. Long term care can be broken down into three different types, depending on where the care is provided.
Skilled Nursing Facilities
First, long term care can be provided in a skilled nursing facility. These are commonly referred to as “old folks’ homes,” “nursing homes,” etc. Although these used to be very common, nursing homes are becoming more and more uncommon. Nursing homes are closing. No new nursing homes are being built. There has been a moratorium on building nursing homes in Minnesota for more than 20 years. Why? The government does not want elderly and disabled people in nursing homes. Nursing homes are expensive and about 65% of the people in nursing homes receive government assistance to pay nursing home bills.
Assisted Living Facilities
Second, long term care can be provided in assisted living settings. Twenty years ago, these were very rare. Now, every community of any size has one of these. It’s not uncommon for a town of 50,000 people to have a dozen assisted living facilities. The care these provide varies from things called independent living, memory care, assisted living, care suites, etc. They provide a smorgasbord of care. The more one needs the higher the cost. These can range for $2,000 per month up to $8,000 per month, depending on how fancy the place is and how much care is needed. One thing is true about all of these facilities: they do not provide skilled nursing care.
In-Home Care
Third, long term care can be provided at a person’s home. This is probably where the most long-term care is provided. It might be a spouse providing care to another spouse who has dementia. It might be an adult child who is living with and taking care of an aging parent. It might mean a senior living alone who has a public health nurse come once a week to set up medications.
As one might suspect, each of these arrangements carries with it a different price tag. In home care might cost nothing. As such, no government assistance may be needed. But, by the time someone needs assisted living, many people need financial assistance. Many people just cannot pay $3,000, $4,000 or $5, 000 per month.
How can we pay for this?
Different options:
Long term care insurance
About 10% of the Minnesota population has long term care insurance. This percentage has not increased substantially in the last 20 years, despite the government wanting more people to purchase it. Most people who have this bought it through their employment when it was affordable on a group basis. Many of them are government employees or people who belonged to a union.
Veterans Administration
If you are a veteran or married to veteran, you may be able to get long term care benefits. These vary from being able to stay in a veteran’s administration nursing home or staying in a nursing home in your community and have the VA pay part of the cost of your care. You should talk to your Veterans Administration Advocate (there is one in each county) for help with this.
Medicare
Medicare is not to be confused with Medicaid. Medicare, as a rule, does not pay for long term care. It will pay for up to 20 days in a skilled nursing facility following discharge from a hospital after an in-patient stay of 3 days or more. (Staying in a swing bed or on an outpatient basis does not count.) After the 20 days, Medicare will pay additional benefits as follows:
It will pay a co-pay towards your daily cost of care
Payments will be made only as long as you receive rehabilitation with a goal of returning home
You continue to make progress towards going home
The maximum number of days this is good for is 80
At most, Medicare will pay part of the nursing home bills for a maximum of 100 days. Few people ever receive nursing home benefits from Medicare for the maximum 100 days.
Private Pay
Another way to pay for long term care is to use your own funds. As indicated above, long term care can run anywhere from almost nothing to $8,000 per month. For example, $8,000 per month comes to $96,000 per year. While many people can pay this for a few months, most people cannot sustain a monthly payment in this amount for any length of time. Most people have income sources, like Social Security and private pensions. Some retired government workers have generous pensions that throw off a monthly payment. But again, most people cannot sustain a huge monthly payment to a long term care facility.
How much will in-home care cost on a 24/7 basis?
Some people think they will save money by having their loved one stay at home. That may be true if they are going to provide most of the care. However, if they are going to pay for someone else to provide the care, on a 24/7 basis, the cost will exceed $10,000 per month or $120,000 per year.
Medical Assistance
The most popular source of payment for long term care is Medical Assistance. In other parts of the country, this is referred to as Medicaid. Each state has its own version of this. For example, in California it is referred to as Medical.
Medical Assistance is a combination federal and state program to help low income people pay for medical care. Two thirds of nursing home patients receive medical assistance. Medical Assistance is referred to as an entitlement. That is, people have a right to receive Medical Assistance if they qualify under the program’s eligibility criteria.
What if you don’t need skilled nursing facility but need an assisted living facility?
People can get medical assistance at an assisted living facility through a program called Elderly Waiver. Unlike Medical Assistance, Elderly Waiver is not an entitlement. The government makes available a certain number of slots, and if those slots are full, one has to wait for one to open. Also, facilities themselves sometimes have their own restrictions. They might limit the number of beds that can be filled by Elderly Waiver recipients or require that an Elderly Waiver recipient first private-pay for a certain number of months, like 12 months or 24 months.
Medical Assistance Eligibility
To be eligible for Medical Assistance, a person must:
Be a resident of the state in which they apply
Have medical expenses that exceed income
Have available assets of less than $3,000
If married, the spouse cannot have available assets that exceed the community spouse allowance, which can be as low as $33,851 or as high as $119,220 (2015 figures.)
Be 65 years of age or older or be disabled
What is an available asset?
An available asset is any asset that one can convert to money fairly easily and that is not an excluded asset. Excluded assets include a home, one car, household goods and furnishings, clothing, a prepaid funeral, etc. Examples of available assets are: checking accounts, savings accounts, certificates of deposit, stocks, bonds, mutual funds, exchange traded funds, IRAs, 401(k)s, most annuities, and cash surrender value of life insurance policies.
What is a community spouse?
A community spouse is a person married to a person in a skilled nursing facility, assisted living or living at home who is receiving long term care benefits and who himself or herself is not living in a skilled nursing home, assisted living or receiving benefits a home.
Assets: How much can a community spouse keep?
When a spouse goes into a nursing home for example, if payment will be from private funds, the community spouse can keep all assets. However, if the couple applies for medical assistance, there are limits on what she can keep. As a general rule, the community spouse can only keep one half of the assets she and her husband had as of the asset assessment date. However, this formula is subject to maximums and minimums. For example, if the couple had over $240,000 in available assets as of the asset assessment date, the community spouse can only keep the maximum community spouse allowance of $119,220. On the other hand, if the community spouse only had $40,000 in available assets, the community spouse can keep $33,851, the minimum community spouse asset allowance.
Income: How is the income of the ill spouse and the community spouse treated?
Medical assistance requires as much of the income of the institutionalized spouse as is necessary to pay medical expenses. It will allow the recipient to keep $97 a month as a personal needs allowance. This can go to purchase clothing, toiletries, haircuts, nail trimming, etc. Medical assistance does not require the community spouse to contribute any of her income to pay medical expenses of her spouse. If the community spouse has low income (below $1,992 per month) or high shelter expenses, Medical Assistance will allocate some of her spouse’s income to her to prevent her from becoming impoverished.
When are the couple’s assets valued?
When a married person applies for medical assistance, they fill out a form called an asset assessment. They list all of their assets as of a certain date. Oftentimes, the date to value the couple’s assets is considerably different than the date they apply for medical assistance. The date in question is called the asset assessment date. This date is the first date the ill spouse:
was institutionalized for 30 consecutive days in a hospital, skilled nursing facility, or combination of the two, or
had a Mn Choices screen, had been found to need a nursing home level of care, and began receiving home or community based services within 60 days of the screening
So, if John is now in a nursing home and his wife is applying for medical assistance, and he had a new knee inserted 5 years ago, and for this he was hospitalized for 5 days and he spent 26 days in a nursing home, the asset assessment date will be 5 years ago.
What is the 5 year look back period?
The medical assistance rule is that anyone applying for medical assistance has to disclose any gifts made within 5 years of the application. Does this mean there is a 5-year penalty? No. The penalty period for making gifts and the 5 - year lookback period are entirely separate periods. For example, if you made a gift of $10,000 two years ago, and now apply for medical assistance, here is what happens:
You must disclose the gift on the medical assistance application
There will be a period of ineligibility because of the gift
The period of ineligibility will be $10,000 divided by the SAPSNF rate (currently $6,141). The result (1.30 Months) will be the period of ineligibility. However, that period will not start when you made the gift. It will not start until the county finds that you are otherwise eligible, including the requirement that your assets are below asset limits
Can a lawyer help?
That depends. If you are a single person and your available assets are already below $3,000, the only thing a lawyer could do is to fill out the forms for you. You may be able to do this yourself. If, however, you are a single person with more than $3,000 in available assets or you are a married person with more than $40,000 in available assets, a lawyer may well be able to help you. A lawyer may be able to preserve some of your assets that you would not otherwise be able to keep.]]>On Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=459222020-02-14T19:01:03Z2019-12-20T00:43:26ZWe established this blog to share stories and information about topics relevant to our practice. Our intent is to regularly provide posts highlighting legal issues of local, state and national interest that we think you will find interesting. Check back later for updates.]]>On Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=466442020-04-23T12:47:02Z2018-10-29T11:45:40ZOn Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=466462020-04-23T12:47:04Z2018-06-21T12:17:31Z
Mankato is located in Southern Minnesota and Minnesota has a lot of agriculture. Farming is often a family business with farms sometimes staying in the same family for a hundred years (century farms).
Here are some preliminary questions we ask in doing estate planning for farmers:
What kind of retirement income do the parents need?
Who is going to take over the farm? Are one or more children going to take over the farm?
Will there be estate taxes, and if so, how will they be paid? If the farm exceeds $2,400,000 in value, estate taxes should be addressed.
How is the farm owned? Individually or by a business entity?
Estate Taxes
Federal: The federal estate tax exemption for 2018 is $11,180,000 per person. For a husband and wife, that comes to over $22 million. Most Minnesota family farmers don’t have to be concerned with this tax. If the estate exceeds these thresholds, the tax comes in at 40%.
Minnesota: The Minnesota estate tax exemption for 2018 is $2.4 million. Although this can be doubled for a married couple through estate tax planning, it is not doubled automatically. Farmers do get a break if they meet several requirements. They can get an additional exemption of $2.6 million for a total of $5 million if they meet these requirements. The requirements are very specific. If the estate exceeds these thresholds, the tax comes in at 13% and increases to 16%.
Gift Taxes
One strategy is to give the farm or part of the farm to one’s children. In Minnesota, there is no gift tax. As long as the donor lives for three years from the date of the gift, the amount of the gift is not brought back into the donor’s estate. There is no tax to the donor and no tax to the donee.
However, if the donee ever sells the farm during his/her lifetime, there will be federal and state income taxes in the form of capital gains taxes on the value of the farm. If the donee retains the farm for his/her lifetime, there will be no capital gains. Federal capital gains rates are anywhere from 0 to 20%. Minnesota capital gains are taxed at regular income tax rates, which are between 5.35% and 9.85%.]]>On Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=466512020-04-23T12:47:04Z2018-05-17T12:24:13Z
Recently, we had a client call about his Health Care Directive. He had had a heart attack in the past and suspected he would have another heart attack in the future. He wanted health care professionals to “save” him if this happened again, unless of course he would not have any quality of life after the heart attack. He was worried because his Health Care Directive mentioned “no heroic measures.”
There are two concepts to keep in mind regarding a Health Care Directive. First, the most important thing a Health Care Directive does is to name a health care agent. That person will be the one to communicate with your healthcare providers in the event you cannot communicate with them. So, in our client’s case, he has named his wife as his health care agent, and he has shared with her his desires regarding health care. So, he should feel secure in knowing that no life-sustaining treatment would be withheld in the event he cannot communicate with his health care providers.
Second, his Health Care Directive provides health care instructions regarding end of life treatment. These instructions are meant as guidance for the health care agent. Medical professionals will go by the what the health care agent says and not so much on what the health care instructions say. His directive says he wants no life-sustaining procedures if he is in one of the following situations: a terminal condition, a coma with little hope of recovery, a persistent vegetative state, suffering from advanced dementia, or completely dependent on others for all his physical needs and cannot communicate. None of these situations apply to an otherwise healthy person who has a heart attack. So, he should rest assured that no one is going to “pull the plug” simply because he has another heart attack.]]>On Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=466542020-04-23T12:47:04Z2018-04-30T12:29:55Z
Our clients are understandably concerned about the costs of long-term care. They want to pass something on to their children after working all their life. More importantly, they want to provide for themselves and their spouse if they need to go to a nursing home or assisted living. So, naturally, one of the possibilities is to make a gift.
So, can they do gifting without jeopardizing government assistance with long-term care? If so, what assets are best to gift? This blog intends to provide some answers.
First, if you need assistance with long-term care, the program providing the most help is called Medical Assistance. In other areas of the country, it’s called Medicaid. Each state has their own version of this. For example, in California, it’s called MediCal.
As a general rule, there is a five year look-back period for medical assistance. This means that, when you apply for medical assistance, you will be asked if you have made any gifts within the previous five years. If you have not made any gifts in the last five years, you just move on to the next question. If you have made such gifts, the county will ask when you made the gifts and how much they were. Here are some questions and answers about these gifts:
1.Does the county care who you made the gifts to?
No. They do not care who you made the gifts to. They will not contact the donees (the persons receiving the gifts) about the gifts. They really don’t care what the donees did with the gifts.
2. What does the county do with the gift information?
When the amount of the gifts is disclosed, they will calculate a period of ineligibility. For example, at the present time, a gift of $71,060 will translate into a period of ineligibility of 10 months.
3. What is a period of ineligibility?
This means that you will not receive county help for a period of 10 months. Further, it means that you will have to pay for your own care for the 10 month period.
4. When does the period of ineligibility begin to run?
This is important. The period of ineligibility only begins to run when you meet the eligibility requirements for medical assistance. In other words, the period does not begin to run until you are down to $3,000 in available assets for single person and $123,600 for a married person. In other words, a single person cannot start with $200,000 in assets, give away $100,000 to children, go into a nursing home, and apply for medical assistance. The period of ineligibility will not begin to run until the person’s assets are down to $3,000. The county will deny the application and tell you to reapply when your assets are down to $3,000. However, at that time, they will again deny the application because of the gifts. Who will pay for your care at that time?
Let’s Forget about Nursing Home Care
Now, let’s say you are not worried about needing nursing home care in the next five years. You want to protect some assets for your children and to do that, you decide to make some gifts. What should you give? Let’s say you have cash of $200,000 that you do not need and a small farm outside of town. Are there any tax consequences of gifting these assets?
There are no gift tax consequences of simply making the gift or receiving the gift.
However, the tax code has a concept called “basis.” Every asset has a basis. If you buy a stock for $100, and you sell it for $200, there is a gain. In this example, the basis is $100. The gain is determined by starting with your basis (in other words, what you bought it for) and deduct this from the sales price. In this example, the basis would be $100 and the capital gain would be $100 ($200 minus $100 equals $100.) The term for this is “highly appreciated property.” Cash has a basis equal to its value.
So if you give one child $200,000 in cash, he/she will have no capital gain when they dispose of it. On the other hand, if you give another child a small farm worth $200,000, and you bought it for $50,000, and he/she sells it, he/she will have a $150,000 capital gain. They will have to pay income tax on this capital gain.
In the example above, how much income tax would they pay? Well, it depends on their income tax bracket. On the federal side, they get a break because long-term capital gains (for property held in excess of one year) are taxed at a reduced rate. Typical rates are 15-20%. But, the children may also be subject to an additional medicare tax. On the Minnesota side, capital gains are taxed at the same rate as ordinary income. So, a person in a medium tax bracket could pay a total of 25-33% in capital gain taxes and additional medicare taxes.
Practice Pointer
In conclusion, people should think before making gifts. If there are low basis assets, will the donees hold on to the property for their lifetime, or will they sell it? When it comes to highly appreciated property, it is better for the done to inherit it rather than receive it as a gift.]]>On Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=466572020-04-23T12:47:04Z2018-03-15T12:33:36ZNotary
A notary public is a public person (not necessarily employed by a bank or brokerage house) authorized by the state as a person who can guarantee a signature. The notary pays a fee and purchases a device that puts a stamp on a piece of paper. A notary stamp is uniformly accepted by government offices, including courts of law. It is all that is required on deeds. When a notary signs a document, he/she acknowledges that the signer has personally appeared before the notary, that the person was positively identified, and that the signature is of the person who appeared in front of the notary. My experience is that transfer agents for stocks or bonds totally ignore a signature guarantee done by a notary public.
Signature Guarantee
Another form of signature guarantee is called simply “signature guarantee. These are often required to liquidate or transfer securities, e.g. bonds, mutual funds, or stocks. These are done by some banks, savings and loan associations, trust companies, credit unions, and brokerage houses. For example, Wells Fargo, US Bank, Charles Schwab, Edward Jones, Fidelity, and Vanguard all would be able to do a signature grantee. However, many of these will not guarantee a signature unless the signer is a customer of the bank or brokerage. So, that presents a problem.
Medallion Signature Guarantee (MSG)
The third form of signature guarantee is a medallion signature guarantee. This is the same type of guarantee as a regular signature guarantee only the number of institutions that give this is more restricted. A medallion signature guarantee is considered the gold standard of signature guarantees. The institution giving the signature guarantee gives a binding warranty that a) the signature is genuine, b) the signer was an appropriate person to endorse the document, and c) the signer had legal capacity to sign. The financial institution accepts liability for any forgery. Not all MSG stamps are of equal value. A special coded prefix determines how much monetary value can be guaranteed. For example, a stamp with a “D” prefix is only good up to $250,000 whereas a stamp with a “C” prefix is good up to $500,000. Lawyers cannot give either a regular signature guarantee or a medallion signature guarantee. Again, an institution that can do a signature guarantee probably will require that a person have an account at that institution before it will give a medallion signature guarantee.
In my experience, signature guarantees became much harder to come by after 9/11. After that event, congress passed the USA Patriot Act (officially known as the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001”) which contains a section on money laundering.
For an example of institutions that will give a medallion signature guarantee, the attached list is a listing of such institution in the 55044 zip code.
Practice Tip
When transferring securities, find out what the transfer agent requires for a signature guarantee. If a medallion signature guarantee is required, find out where you can get one. If there are three beneficiaries, and only one can get a medallion signature guarantee, have that person obtain the funds and have him/her distribute the funds according to the beneficiary designation or Will.]]>On Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=466602020-04-23T12:47:04Z2018-03-08T13:36:28ZOn Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=466622020-04-23T12:47:04Z2018-01-18T13:38:47ZOn Behalf of Chesley Law Firmhttps://www.chesleylawfirm.com/?p=466642020-04-23T12:47:04Z2018-01-04T13:41:12Z