Quality of Life is Paramount
This is Strategy #25 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
Elder Law planning is an efficient means to a worthwhile end: your future quality of life. Asset protection strategies ultimately serve two functions.
First, they allow you to retain your financial wherewithal so that you can continue to maintain your lifestyle by being able to afford it. The alternative is the dreaded Medicaid “spend down,” compelling you to relinquish your money and assets for the cost of your own care. The inevitable impoverishment has a devastating emotional impact, and doctors will tell you that stress makes everything worse. Do you know people who suffered a major financial blow and subsequently got sick, or whose medical conditions then became worse? Don’t let it be you.
Second, good planning creates options that may avoid serious consequences for your manner of living. For example, by having an Elder Law attorney set up a plan that provides Medicaid coverage of adequate home care, you may avoid or delay eventually having to enter a nursing home. Most people would rather remain as long as possible in the comfort and dignity of their own homes.
Here is an example of how Elder Law planning can make a real difference with quality-of-life concerns. We helped a client who has a terminal illness, is incontinent, and needs assistance with all her activities of daily living. At the time she retained us, she’d already employed a home care assistant she was comfortable with, and for whom she was paying out of her own funds. We filed a Medicaid application for home care, which was approved.
In addition, one of the most important benefits to her was the fact that we were able to “vendorize” her attendant. Through contacts at the home care agency, we arranged for her attendant to become certified and accepted as its employee. The cost of her salary ended up being fully paid by Medicaid.
The happy result was that our client got the home care help she needed and retained her preferred assistant, all completely covered by Medicaid.
Of course, it’s not always possible to eliminate the prospect of a nursing facility stay, because sometimes your health degenerates to the point where it’s just not safe to stay at home. Yet in other cases, around-the-clock home care can supplant the need for a nursing facility. The peace of mind you experience in your own surroundings may have a psychological effect that contributes to keeping your disability stable, so that you never need to enter an institution.
Also keep in mind that if you do have to reside in a nursing home, the availability of extra cash that would otherwise be lost can be a significant factor in making things more comfortable for you.
These are options only good asset protection planning can provide. The rule is: to investigate everything that’s available to you. It can make all the difference in the world for your material comfort in your remaining years.
Competent Counsel Means a Better Shot at Quality Care
This is Strategy #23 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
If you require nursing home care, you’ll have to choose a facility. Experienced Elder Law attorneys can suggest homes in your area you may want to consider. An established firm may also have relationships with some of the better residences, which may facilitate your acceptance at one of them.
Capable firms often receive referrals from many nursing facilities, to assist their prospective residents with preparing successful Medicaid applications. There are lawyers who have worked with quality homes many times, and maintain a strong rapport with their staffs.
One of a nursing home’s primary concerns is getting paid for its services. When a competent Elder Law attorney says a client will get Medicaid, a facility will generally regard it as a reliable recommendation. The nursing home staff knows that if skilled lawyers handle your application, they can be more confident of Medicaid approval. Consequently, there’s an increased chance of the home accepting you as a resident.
It’s like any other business relationship. An attorney can present a solid application on behalf of a client. If there are two applicants for a vacancy, will a home be more responsive to someone whose case is handled by a law firm they know and trust, or a complete stranger? There’s no guarantee of course, however, it’s another benefit of working with experienced Elder Law professionals, and stacks the deck in your favor.
Here’s an example that shows how these relationships can work to your benefit. Lamson & Cutner represented a widow who was residing in a nursing facility on Long Island. We secured her assets and obtained Medicaid approval to pay the cost of her care. Just as important for this client, due to the strong relationship we had with the staff, she was able to keep a room she loved because of its extraordinary view.
Your attorney can also help persuade a nursing home to take you as a new resident with a “Medicaid pending” status. Then, even though Medicaid may not process your application until several months later, the establishment may still feel comfortable enough with potential approval and retroactive payment from Medicaid that they will accept you.
In instances of pending applications, you can see that if a nursing facility is dealing with a law firm they don’t know, or with a person who files his or her own application, the admissions staff may worry about Medicaid approval. If they let you in and Medicaid rejects your application, they may have to go through an extended series of procedures involving hearings and court appearances. These are expensive, time-consuming, and expose them to risk.
Nursing homes don’t want problem cases. If you’re not going to pay for the care yourself, they want to know that you’re eligible for Medicaid. This is another reason why it’s to your advantage to have your application professionally prepared.
If you need home care, these same principles can work on your behalf. Some lawyers have excellent relationships with home care providers also.
Streamline Your Financial Affairs and Record Keeping
This is Strategy #21 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
Streamline your financial affairs. If you apply for nursing home care either now or in the future, Medicaid will request detailed information about your prior financial transactions. Every one of your banking and investment accounts that was open at any time during the “look back” period will be scrutinized. They all need to be documented on your application. Medicaid will want to see if you transferred any of your money or assets to others.
That means if you have many accounts, preparing your application becomes a lot more complicated and time-consuming for you and your attorney. It’s likely to increase the amount of your legal fees. Many banks offer gifts and other incentives to open an account. Some people create numerous accounts, even though they may not have a substantial amount of money, or adequate financial justification. If you don’t need the additional accounts for a good reason, close them. When it comes to dealing with Medicaid, the cleaner and simpler, the better.
Also, the process of gaining approval for Medicaid benefits, and protecting your assets, will be considerably faster and easier if you organize your records. In particular, this includes bank accounts, IRA’s, annuities, stocks and bonds, certificates of deposit, Keogh plans, money market and mutual funds, insurance policies, tax returns with 1099 and K-1 forms, pension information, and Social Security award letters.
The best system is to place each of the last five years’ of records from each financial institution in its own file. Arrange each category of statements chronologically, from the oldest to the most recent.
If you do nothing else, then at least throw all statements and receipts for each year in a box or folder. This way you’ll have a basic annual level of organization, and have all of the documents that may be needed later on.
Health Care Proxy, not a Living Will.
This is Strategy #20 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
A Health Care Proxy is a legal document that authorizes someone you appoint to make medical and health care decisions for you, if you are unable to do so yourself. These include end of life decisions. The idea behind a Health Care Proxy is that someone makes the decisions you would have made, had you been able.
Therefore, it’s critical that your health care agent clearly understands your wishes concerning your medical and health care, and the circumstances in which you may choose not to have your life sustained.
Health Care Proxies are valuable for another important reason. They prevent and help resolve disputes within families. The health care agent has sole discretion in making decisions, and is operating based on your philosophy about medical choices. Legally, family members who disagree will find it extremely difficult to interfere.
The Family Health Care Decisions Act (FHCDA), passed March 2010, gives family members, and others deemed in close relationship to you, the right to make medical and life-sustaining decisions on your behalf, if you become mentally incapacitated. The problem is that, as with any new law, it’s difficult to determine how it will be interpreted and applied. The legislation contains a number of ambiguities, and it also permits others to object, which can lead to delays and litigation.
Since you want to avoid potential court proceedings that could arise from such a dispute, a Health Care Proxy is still essential to good planning. You can choose the specific health care agent you want, instead of leaving it to a statutory table and the discretion of others. Decision-making becomes an easier and more streamlined process.
A Living Will is another vehicle for having your wishes carried out, but can be problematic. With a Living Will, you spell out your instructions in writing. The difficulty is in its interpretation. Common phraseology such as “if there is little hope of recovery, I would not want heroic measures to be taken to preserve my life,” may mean different things to different family members.
Where one sees a hopeless situation, another believes there’s a chance of recovery. Heroic to one, is ordinary to another. Consequently, there is simply no reliable way of writing a Living Will that covers all possible medical contingencies and viewpoints.
For those who are uncomfortable with a Health Care Proxy, a Living Will is seductive because it gives the illusion of control. In fact, a Living Will is likely to create opportunities for conflict, and could lead to a lawsuit. We don’t recommend it.
Instead, choose someone you trust, and who you feel will be committed to making the decisions you would make. Then, make sure you communicate your wishes to that person as clearly and completely as possible. No document can replace the informed judgment of an intelligent, compassionate person.
Spousal Refusal is a Valid and Useful Strategy.
This is Strategy #19 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
When planning involves a married couple, and one of the spouses needs or will soon need long-term care, it’s critical to understand a concept called “Spousal Refusal.”
Under New York law, each spouse has an obligation of financial support for the other. This allows Medicaid to require the well or “community” spouse to contribute to the cost of care from available assets. In New York however, Medicaid cannot legally deny benefits or halt the application process because a husband or wife refuses to provide monetarily for his or her ill spouse. This is why, from an Elder Law planning perspective, a legal document referred to as a “Spousal Refusal” is employed.
Signing a Spousal Refusal and refusing to contribute to your spouse’s care permits the application process to continue, so that your wife or husband can qualify for benefits. At the same time, it also keeps your assets intact, so that strategies can be initiated to protect them.
Signing a Spousal Refusal doesn’t mean you’re automatically exempt from economic support of your husband or wife. It just means Medicaid can’t deny benefits to your spouse because you’ve refused support. In these cases, Medicaid can and usually will pursue legal remedies to enforce your obligation and recoup the cost of the benefits they provided, to the extent possible.
It is important to note, however, that Medicaid will only ask for reimbursement of their costs. Medicaid costs are already well below what people pay privately – so the reimbursement would already be at a significant discount. It is also possible to negotiate with Medicaid in most of these instances, since they’d rather come to a reasonable settlement than initiate legal proceedings. Needless to say, in negotiations with a government agency, you are better off being represented by experienced Elder Law legal professionals than going it alone.
Not Just Any Power of Attorney
This is Strategy #17 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
A Durable Power of Attorney is a legal document that allows a trusted person to make decisions for you, even if you lose mental capacity. While many people already have a Power of Attorney, most are unaware of the fact that their particular version is ineffectual for Elder Law planning purposes.
Effective June 13, 2021, former Governor Andrew Cuomo signed into law a new Power of Attorney. The new form is a single, shorter document, instead of the “Short Form” and the “Statutory Gifts Rider.” There are significant changes to this form.
- First, language that substantially conforms to the prescribed statutory language will be sufficient to make the POA valid. Insignificant mistakes in wording, formatting, punctuation, and the like, will not affect the validity of the document. A POA that has been properly signed will have a presumption of validity.
- Second, a Principal who is physically incapable of signing and initialing the document can have another person do it at his or her direction.
- A third and especially important feature of the new POA is that financial institutions are held accountable by the State to accept valid documents without delay. Banks and financial institutions that refuse to accept a valid POA will be subject to penalties and paying attorney’s fees.
Although some people are tempted to prepare their own POA’s by copying forms found online or elsewhere, this decision can lead to serious and unfortunate consequences. A POA with a wide scope of authority is crucial to ensure that any and all steps an agent may need to take are permitted. A POA form from before June 2021, that is signed after June 2021, is invalid.
A broad and well-crafted Power of Attorney may allow your agent to set up trusts, open new bank accounts, apply for and manage government benefits, and transfer or gift large sums of money. Due to this broad range of authority, it is essential that you clearly understand the meaning and scope of the document prior to signing it.
These are all critical reasons why it’s to your advantage to have a lawyer discuss the POA with you and draft your Durable Power of Attorney. As a foundational element in Elder Law planning, it’s simply too important not to give it the attention it deserves. The bottom line is you may be authorizing another person to do anything you could do with regard to your money and property. There are few decisions in life with more serious implications than that.
Many feel that in signing a Power of Attorney they are losing control or power over their own lives. In fact, the opposite is true. Effective planning gives you more influence over what will happen in the future than you’d otherwise have. If you do not have a comprehensive Durable Power of Attorney for Elder Law planning purposes, and you become unable to manage your own affairs, decisions will still have to be made for you. Except then, they’ll be made only after expensive guardianship proceedings in court, which will create delays and could deplete your savings dramatically or even completely.
Additionally, going to court means that a judge, who is a distant and unrelated third party, will be making decisions about your welfare. In that instance, you have less control than you would have had by effectively planning now to prepare in case there is a circumstance in which you’re mentally incapacitated.
For these reasons, we believe that in most cases the advantages of a Durable Power of Attorney outweigh the risks of potential abuse. Needless to say, you’ll want to pick someone you trust to carry out your wishes. One way to be secure and feel more comfortable with the arrangement is to retain the document in your possession, and advise the person you appoint as agent where it can be found if it is needed. It is not necessary to deliver it to your agent immediately.
A Durable Power of Attorney is a cornerstone of all effective elder and special needs planning. It allows you to specify who you’d like to be in charge, in the absence of being able to make your own choices. Having one that’s properly drafted creates options for the best possible action to be taken on your behalf in a difficult situation, as opposed to closing off support and creating problems for your family.
Analyze Whether to Take the Lump Sum Option
This is Strategy #12 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
If you are approaching retirement, and have an option to receive either a stream of income or a lump sum distribution from a pension or retirement account, it may be better to take the lump sum. Here’s why.
If you eventually need nursing home care, any income streams you receive from your pension, deferred compensation, or other plan, will go to the nursing facility. It’s a Medicaid requirement, and a way of forcing you to pay for at least part of your care.
If you take the lump sum option, the payout will be considered your asset. You’ll have the opportunity to protect that money by putting it in an asset protection trust.
Legally, once the money is in a trust, you don’t own it anymore. Yet the trust can be constructed so that money can be made available for your needs. In this way, although by law the money is no longer yours, you can still benefit from it. That means it helps you maintain your quality of life, and whatever is left after you pass on can go to your loved ones.
By transferring your lump sum distribution to a trust, you may no longer have to use that money to pay for a nursing facility. Then you’ll be eligible for Medicaid to pay all or a significant part of the cost, depending on whether the transfer was made beyond the “look back” period (see Strategy No. 3), or other planning was done (see Strategy No. 14).
In a case involving a widow in her 70’s, suffering from Alzheimer’s disease and other health problems, Lamson & Cutner assisted her in successfully obtaining Medicaid home care using this lump sum strategy. Money was taken from an IRA, and the after-tax balance was placed in a protective trust. Excess income was transferred to a Pooled Income Trust. With this planning, she was able to retain the benefit of her financial reserves, instead of having to “spend down” her resources under Medicaid eligibility requirements.
We then filed a Medicaid application for home care, which was approved. This allowed her to maintain her sense of personal dignity, by receiving the health services she needed in the comfort and security of her own environment. Down the road, she may need nursing home care, but by then the money that she took from her IRA will remain protected, as long as it was put in the trust beyond the “look back” period (discussed above in Strategy No. 3).
Evaluate Your 401k or IRA Carefully for Medicaid Purposes
This is Strategy #11 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
Medicaid will count your IRA or 401k as an available source of funds to pay for your care unless it is in payout status. “Payout status” means that you are taking at least the required minimum distribution out of your plan on a monthly basis or annually.
If it’s not in payout status, it may be beneficial to withdraw the entire amount and pay the income tax on it, and then transfer it to a trust. This avoids your retirement account being counted as a resource that you will have to “spend down” under Medicaid eligibility requirements. Instead, your money can be used for your benefit during your lifetime, and whatever is left can be passed on to your beneficiaries through the trust.
If the account is in payout status, your retirement assets are not counted as resources, but the monthly payments that you receive are considered income. If you are receiving Medicaid home care benefits, any excess income can be protected by a Pooled Income Trust (discussed in Strategy No. 9). However, if you’re getting Medicaid nursing home benefits, the nursing facility is entitled to all of your monthly income except $50.
If you are receiving Medicaid benefits in a nursing home and your life expectancy is not very long, it may be to your children’s financial advantage to leave the retirement plan in payout status and allow the nursing home to collect the income from your IRA or other plan while you are still alive. Upon your death, your children, as your beneficiaries, can withdraw the balance in a lump sum or over time.
As you can see, finding the best solution for retirement assets demands careful analysis.
Cooperative Apartments Require Special Handling.
This is Strategy #10 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
If you currently reside in a co-op and want to implement an asset protection strategy that involves transferring it to a trust, you will need the co-op board’s approval. This is another good reason to retain an Elder Law firm that is well equipped and experienced in addressing these matters. If the board says no, a knowledgeable attorney may still be able to persuade them to move ahead with the plan.
There are several approaches we’ve found have a consistent track record of success with co-op boards:
- explaining the Elder Law plan and why it is important to change the title to the apartment
- proving ability to pay the co-op maintenance
- agreeing to put money in an escrow account to cover a certain amount of maintenance
- entering into an agreement that the trust will be responsible for the co-op’s collection expenses if there’s a dispute
- making a commitment as to who will or will not live in the apartment
- agreeing to specific conditions of sale after the owner dies
The goal is to convince the board that the transaction can be consummated in a way that won’t expose the building to any additional risk. While no firm can guarantee getting board approval every time, a competent Elder Law attorney should succeed in a large majority of cases.
Don’t Fill Out Your Own Medicaid Application
This is Strategy #7 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
Some people think they can save money on legal fees by preparing their own Medicaid applications. However, the application is a complicated document, and a complete application may be thousands of pages long. Eligibility can often only be won with complex legal and financial planning, to overcome Medicaid obstacles. Even nursing home professionals, who deal with Medicaid daily, will frequently refer prospective residents to an Elder Law firm for this reason.
Trying to complete your own application can be daunting and frustrating. If you make mistakes due to unfamiliarity with government regulations, you may compromise or lose your ability to qualify for benefits. Loss or delay of eligibility may ultimately have a devastating financial impact on you. A delay of even one month in gaining eligibility could cost more than the fee an Elder Law firm would charge to complete a Medicaid application – and the responsibility will be on your shoulders. Professional assistance will relieve your stress and make it more likely the process will move smoothly.
In addition, sometimes there are unusual issues, requiring special handling that only an Elder Law attorney can provide. In one case of this sort, Lamson & Cutner helped a middle-aged, single woman who immigrated to the United States, and was subsequently diagnosed with cancer. She needed chemotherapy and medication, as well as physician and hospital coverage.
We transferred her assets out of her name and filed a Medicaid application on her behalf. She was approved for a level of benefits that gave her 100% coverage and allowed her to choose her own doctors. Without the extra attention her case received, it is likely she would only have been covered by a Health Maintenance Organization (“HMO”).
If you are an extremely organized person, the applicant has few or no assets and few bank accounts, and you have no time pressure, it is possible to complete a Medicaid application yourself. However, in most cases people quickly realize that it is better to hire someone who does this for a living.