Asset ProtectionWhat is A Living Trust?A Living Trust is created by a written agreement between you and the person you choose to manage the assets in the Trust. The Trust AgreementThe terms of the Trust Agreement should be tailored to meet your specific needs. A Trust Avoids ProbateOn your death, your trust assets will be distributed directly to your named beneficiaries without the costs, problems, publicity, or delays of Probate. Revocable Versus Irrevocable Living TrustsA Revocable Trust does not protect a person's assets in the event of a catastrophic illness. Since you can revoke the Trust, Medicaid can force you to revoke the Trust and withdraw all the Trust assets and use those assets towards the cost of care. The only type of Trust that will truly protect resources in the event of a catastrophic illness is an Irrevocable Trust where the language of the Trust Agreement appropriately complies with the federal and state Medicaid requirements. Long Term Care Insurance is an important estate planning option for protecting your life savings in the event of a catastrophic illness. Long Term Care Insurance does not in itself provide comprehensive estate planning. In conjunction with such insurance, you should also consider having the following legal documents: Long Term Care InsuranceThere are many insurance companies selling Long Term Care Policies. There are many options and considerations which must be reviewed: Two Basic Questions: 1. Can I Afford Such a Policy Based on My Income / Resources? 2. What Type of Coverage Should I Purchase? Once You Have Determined That You Wish to Purchase a Policy, Then The Following Options on The Type of Coverage Must Be Reviewed:
If you are already ill, Long Term Care Insurance will normally not be an option. You should review your immediate crisis asset preservation options in the Medicaid section of this Web Site. If you cannot afford the premiums for a Long Term Care Policy, you may want to review the option of establishing an Irrevocable Trust. It is also possible to purchase a Long Term Care Insurance Policy to protect you during the Medicaid transfer penalty period after making gifts or establishing an Irrevocable Trust. The Koldin Law Center, P.C. is available to help you review your various estate planning options based on your situation including the advisability of Long Term Care Insurance. Life EstateAs a form of estate planning, you may decide to transfer your home or other real property to your children and reserve a life estate to yourself. The retained life estate has a value and is considered to be an asset for Medicaid eligibility purposes. Therefore, the treatment of the life estate at the time of the Medicaid application is critical. There are important rules involving life estates which should be reviewed. When you transfer assets to another person, there is a Medicaid transfer penalty period of ineligibility. There are important issues to review when deciding whether to transfer property and whether to reserve a life estate:
There are many advantages and disadvantages to transferring property to other people with the reservation of a life estate. You should also review the option of transferring assets to a Revocable or Irrevocable Trust. You may also want to consider purchasing Long Term Care Insurance. The Koldin Law Center, P.C. is available to review your options. GiftsGifts can be a method of asset preservation when you are in a crisis and sometimes can be advisable for estate tax planning. However, there are many disadvantages to making gifts which should be carefully reviewed: (1) Transferring Assets can Create Feelings of Discomfort and Loss of Control for the Parents (2) Gift Tax Consequences of Transfers (3) Transfers Can Increase the Children's Income Tax Liability (4) Transfer of Family Home Could Have Tax Consequences (5) Transferring Assets Could Affect Grandchildren's Financial Aid for College (6) Child Could Become Involved in a Divorce, File for Bankruptcy, Be Sued, or Predecease a Parent (7) Child Could Become Ill and Need Long-term Care Transferring assets to another person can be appropriate short-range emergency planning under certain circumstances. The Koldin Law Center, P.C. is available to review the advisability of making gifts as compared to other asset preservation options based on your situation. YOU CAN PURCHASE AN ANNUITYUnder the Medicaid Laws in New York State, the community spouse (healthy spouse) is entitled to retain a minimum of $74,820 and a maximum of $109,560 of the couple's life savings. The community spouse is also entitled to retain $2,739 of the couple's combined income. A single individual in a nursing home is entitled to retain $13,800 of his/her life savings and $50 per month of income. (These are 2009 figures). If the couple's or single person's resources exceed $74,820 or $13,800, then the excess normally must be spent on the cost of care before Medicaid eligibility can be established. The excess resources can be protected by purchasing an annuity. By purchasing an annuity, you are converting your life savings into an income stream. Any monthly payments you receive from the annuity are considered income and will be subject to the Medicaid income contribution rules, but will not be subject to the resource depletion rules. Medicaid must be designated as the primary beneficiary of the annuity. The annuity contract must fully comply with Federal and State Medicaid laws and regulations. JOINT ACCOUNTS AVOID PROBATEJoint bank accounts (or other joint assets) are often created for convenience and to avoid probate. Normally, either joint owner can make deposits and withdrawals to the account. Joint accounts are typically treated by state law as being survivorship accounts. This means that when one person dies, the other joint owner becomes the sole owner of the account. MEDICAID TREATMENT OF JOINT ASSETS IS VERY COMPLEXMaking your assets joint with another person will not necessarily protect you in the event of a catastrophic illness. In New York State, a joint savings account is presumed to belong entirely to the Medicaid applicant. There are different rules for joint bank accounts, joint securities, and jointly owned real estate. These rules have changed over time and some Medicaid agencies have misinterpreted the law and improperly counted joint stock brokerage accounts as belonging entirely to the parent. In an Administrative Hearing in the Fall of 2001, the Koldin Law Center successfully argued that a joint parent/child brokerage account is owned one-half by the parent and one-half by the child thereby saving the child a substantial sum of money. The Medicaid agency involved had counted the entire joint brokerage account as belonging to the parent for the purpose of Medicaid eligibility. If you have joint accounts or joint assets, the rules are complex and a comprehensive review of your legal options is recommended. |
