by Jerrold Bartholomew on April 2, 2009
Many people have heard of the annual exclusion for gift tax, but there are several points on this issue that are easily confused. In order for an estate plan to be effective, various concepts must be taken into account. First, for most people gift tax will never be a concern. While it is true that there is a limit ($13,000.00 per person per year) that can be gifted each year without technically requiring a gift tax return, you must exceed $1 million in gifts above the annual exclusion during your lifetime before you will actually have to pay any gift tax. Estate tax will only apply to estates with more than $3.5 million in 2009 and there will be no estate tax in 2010. In 2011, the estate tax exemption is scheduled to go down to $1 million per estate. So these rules apply to very few people. The problem is that many people hear about these rules and believe that they apply to the Medicaid gifting rules.
Nursing home Medicaid rules in Michigan about gifting are completely separate from the tax concerns. For Medicaid purposes, any gifts made within five years of needing nursing home care will cause the state to deny Medicaid benefits for a period of time equal to the total gifts given divided by the average monthly cost of care. For 2009, that number is $6,362.00. So for example, if someone gave away $63,620.00, they would not receive state assistance with the cost of long-term care for 10 months.
On the often related issues issues of gifting, Medicaid, and taxes, it is very important to understand that giving away appreciating assets during your lifetime can have dramatic tax consequences. When an asset that increases in value is sold, there can be capital gains tax on the difference between the purchase price and the sale price. If an asset is given away at a person’s death, the person receiving that gift only has to pay a tax on the increase in value after the original owner’s death, not on the increase in value since purchase, regardless of whether the asset passes through probate or a revocable living trust. It is therefore important to consider tax consequences when doing any Medicaid planning. Gifting to a trust can typically eliminate the negative tax consequences of gifting during life while at the same time protecting the asset from the cost of long-term care.
by Jerrold Bartholomew on March 31, 2009
Many people are not aware that long-term care costs are tax deductible medical expenses. Nursing home costs, defined as “necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services” for the care of a chronically ill individual and prescribed by a licensed health care practitioner, are fully deductible. Additionally, assisted living expenses can also be deducted under many circumstances. For those who are using tax-differed assets to pay for care, the savings of this deduction can be especially substantial. Discerning which expenses are tax deductible can be tricky. You should consult with your accountant or a Detroit area elder law attorney to be sure you receive your full deduction.
by Jerrold Bartholomew on March 25, 2009
When both spouses of a married couple need nursing home care, the most immediate result is a catastrophic bill of $12,000.00 per month or more. Without the advice of an elder law attorney, the couple will continue to spend down assets until their assets reach just $4,000.00 in cash. Substantially better results can be achieved with some planning, but understanding how to proceed in these circumstances is a delicate matter. The rules are counter-intuitive. [click to continue…]
by Jerrold Bartholomew on February 14, 2009
Dying without a will, or intestate, means that your estate will be distributed according to the default provisions of state law. For a variety of reasons, this can make the administration of your estate take longer, cost more, and create divisions within a family. Why? Without an up to date will, it is easy for arguments to arise about your true intentions. Furthermore, simply going through the probate process will require payment of an inventory fee and compliance with state law regarding the administration of your estate. State procedures can often be cumbersome and time-consuming. Creating a will is a simple step toward taking responsibility for your affairs and reducing the turmoil that can result for your survivors from an unplanned estate.
by Jerrold Bartholomew on February 1, 2009
The Department of Human Services for the State of Michigan has announced new numbers for 2009. Every year the numbers concerning Medicaid eligibility for long-term care are adjusted to reflect increases in the cost of living.
The new community spouse resource allowance is a minimum of $21,912.00 and a maximum of $109,560.00. This number is important for married persons with a spouse in the nursing home. It determines how much in cash and otherwise non-exempt assets the spouse living in the community will have to spend down before qualifying for Medicaid.
The community spouse income allowance, which is the income that the community spouse can keep each month and not have to pay to the nursing home has been increased from a minimum of $1,750.00 to $2,739.00. The new utility allowance (which provides additional income protection for the community spouse above the minimum protected amount) is $550.00 per month. However, it is important to note that these numbers do not adjust until April of this year. [click to continue…]
by Jerrold Bartholomew on January 29, 2009
It is very common to hear annuities described as “Medicaid friendly.” Most people hearing the words “Medicaid friendly” would assume that assets placed in such an annuity will be protected from the cost of long term care and indeed, they may even be told so by an insurance professional or financial advisor. But under Michigan law, an annuity by itself does nothing to protect assets from the cost of long term care. In fact, without careful planning, simply investing in a Medicaid friendly annuity may result in the unnecessary loss of assets. Understanding why this is the case requires some understanding of estate planning, elder law, and annuities. But taking the time to understand these things can easily save tens if not hundreds of thousands of dollars. Moreover, understanding these points can help you to see why your estate plan must work in conjunction with your financial plans in order to receive the full benefit of an annuity.
Estate planning is traditionally thought of as the field of law concerning the distribution of assets at the time of one’s passing. Modern estate planning encompasses planning not only for distribution on death, but also planning for disability and asset protection. Planning for disability will greatly increase the likelihood of having something to pass on to heirs, while at the same time reducing stress and maximizing one’s own independence. But in order to effectively manage a one’s affairs through a period of disability, there must be a close relationship between the estate plan and the financial arrangement, including the types of investments used. [click to continue…]
by Jerrold Bartholomew on December 19, 2008
The Centers for Medicare and Medicaid Services (CMS) has published their long-anticipated 5 star rating system for nursing homes. The breadth of the new rating system is astounding: in Michigan alone, complete information can be found on 425 nursing homes. The system offers information on the number of beds available, the types of payment accepted and, most importantly, several indices of nursing home quality. Each nursing home is given an overall rating, as well as ratings on health inspections, staffing, and quality measures.
One quickly wonders how accurate the system really is. Given how much information is in the system, and how many people collected data, it seems difficult to believe that the system will be completely fair, objective and accurate. And indeed, several ratings for facilities that I know well have lower ratings than I would expect. CMS provides this Note to Nursing Homes to explain their methodology in collecting information. It is also helpful to note CMS’s policy that:
Each nursing home is also required by law to have the latest survey results on hand for the public to review. For the most recent survey results, contact the State Survey Agency. Their phone number is in the Helpful Contacts section of this website.
CMS also provides a number of useful publications related to nursing homes and care of the elderly generally. For instance, there is Medicare’s Guide to Choosing a Nursing Home, the Nursing Home Checklist, and a guide to Your Rights as a Nursing Home Resident.
And for those families seeking to avoid nursing home care, CMS has published resources on alternatives to nursing home care.
Private resources are also available to families seeking assistance with care management, financing, nursing home selection and other related issues. For instance, www.wheretofindcare.com is an extensive resource where patients and their families can both locate and comment on a wide variety of medical care providers. As an attorney who works with the elderly regularly, I publish several guides to Nursing Home Care, Hospice Care, and Medicaid Planning. Families with aging members can quickly become overwhelmed with the stress of caring for an aging person and our maze of a health care system. These resources are intended to help families find the information they need as quickly as possible.
by Jerrold Bartholomew on November 20, 2008
The Center for Medicare and Medicaid Services (CMS) has apparently rejected Michigan’s proposed estate recovery program. Michigan’s proposed legislation was unique not only for being last in the union to be enacted, but also for being exceptionally lenient. It is therefore reasonable to assume that Michigan will be required to enact a more aggressive approach to estate recovery.
This issue has been appealed by the state of Michigan with a hearing set for January. There will be much more to say on this issue as it develops.
by Jerrold Bartholomew on October 16, 2008
Medicaid qualification is full of its own jargon that can make the process a mystery to almost anyone. One key concept to understand is the “community spouse resource allowance.” To speak in the jargon of Medicaid for a moment, the community spouse resource allowance is the value of non-exempt assets that a married couple is permitted to keep and still qualify for Medicaid long-term care assistance. That definition is quite a mouthful, so I will break it all down and put it into context.
When one member of a married couple requires long-term care for more than 30 days, an inventory of the couple’s assets as of the day the institutionalized spouse first entered the hospital or nursing home must be prepared. This is done using form DHS 4574-B, the Asset Declaration. This form must accurately describe a couple’s assets, under penalty of law. From this form, a determination is made of how much the couple will be permitted to keep and qualify for Medicaid. Eventually, assets that are retained by the couple will have to be separately titled in the name of the spouse who is not institutionalized. That spouse is called the community spouse. Therefore, the amount the couple can keep is called the community spouse resource allowance. “Resource” means basically the same thing as “asset” for most purposes. The process of dividing assets between what must be spent down and what the community spouse may keep is referred to as the division of assets. Generally speaking, the community spouse will be permitted to keep one half of all countable assets, but no less than $20,800.00 and no more than $104,400.00.
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by Jerrold Bartholomew on September 19, 2008
Many veterans are unaware of the Aid and Attendance Pension that is available to help them with their medical expenses, which include the cost of assisted living. Some veterans are simply unaware of this benefit. Others have been told that they do not qualify based on “having too much money.” It is important to understand the scope of the Aid and Attendance pension as a starting point. It is also important to realize that veterans who meet the service requirement and who have significant, reoccurring medical expenses can be eligible for this valuable and well-deserved benefit with proper estate planning.
The aid and attendance pension is available to veterans who served during a time of war. It is not necessary to have participated in combat, but simply to have been in the military during a time of war. In addition to the service requirement, it is also necessary to be medically eligible and to meet the income and asset test. [click to continue…]
