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Monday, December 02, 2013

14 Costly Misconceptions About Planning for Your Senior Years

A Minneapolis Estate Planning and Probate Lawyer Discusses Estate Planning Issues Specific to Seniors

Misconception #1: Most seniors move into nursing homes as a result of minor physical ailments that make it hard for them to get around.  Wrong!  A large percentage of admissions to nursing homes is because of serious health, behavior, and safety issues caused by Alzheimer’s disease and dementia.

Misconception #2: Nursing home costs in Minnesota average $1,500 to $2,500 per month per person.  Hardly.  Current nursing home charges for one resident typically run $6,000 per month, or $72,000 per year, which does not include prescription drugs -- and those costs continue to rise.

Misconception #3: Children can care for a parent with Alzheimer’s disease at home, without the need for nursing home care.  Not true!  Many patients with Alzheimer’s disease end up in nursing homes because children are simply unable to provide the level of care their parent needs.  In most cases, the children want to care for their parents.  But, as a practical matter, they simply can’t.  Moving a parent into a nursing home is an intensely personal issue and should not be labeled as a right or wrong decision. In many cases, it’s the only realistic option.  The rare exception is when the family has enough money to pay for skilled nursing care at home.

Misconception #4: Standard legal forms are all you need for a good estate plan.  Not true.  A competent estate plan begins with clearly defined goals, supported by well-drafted legal documents, and the repositioning of assets, as needed, to protect your estate from taxes, probate costs, and catastrophic nursing home costs. But you MUST PLAN EARLY.

Misconception #5: Your child will never move you into a nursing home.  Wrong.  Most children consider all options before moving a parent into a nursing home.  But, sadly, children usually find they have no other alternative.  As a result, parents who never expected to live in a nursing home soon discover that a nursing home is the only place with the staff and equipment to provide the care they need.

Misconception #6: As payment for nursing home care, the government will take your family home.  Not true, if you plan ahead.  Many people fear that the government will take their home in exchange for nursing home care, but you can avoid this with proper planning.  You’ll be glad to know there are some ways you can protect your home so it won’t be taken.

Misconception #7: You will never end up in a nursing home.  That’s hard to predict.  Your odds are roughly 50/50.  Of Americans reaching age 65 in any year, nearly half will spend some time in a nursing home.  And a surprising number will require care for longer than one year.  That means every year, tens of thousands of seniors will face costs of $48,000 or more ($60,000 in Minnesota), which does not include the cost of prescription drugs.

Misconception #8: If your spouse enters a nursing home, all of your joint savings will have to be spent on his or her care.  No.  With proper planning you can keep half of your combined “countable” assets up to approximately $103,000 (increasing each year).  In some circumstances, you may be able to protect nearly all of your life savings.  In fact, it is often possible to protect much more than the $103,000 maximum.  “Countable” assets are those assets such as cash, checking accounts, savings, CDs, stocks, and bonds that the government considers available to be spent on the cost of nursing home care.

Misconception #9: Legally, you can give away only $14,000 to each of your children each year.  Not true.  You can give away any amount, but you have to report to the IRS gifts in excess of $14,000 per recipient per year ($28,000 if both husband and wife make a gift).  However, there is no requirement that you pay any gift tax unless you have exhausted your lifetime exclusion amount, which is currently set at $2,000,000 for an individual. But, there is a "look back" period so you must work with a qualified attorney before gifting away any assets as you age.

Misconception #10: You can wait to do long-term planning until your spouse or you get sick.  Yes, to some degree.  However, you and your spouse will be much better off if you have taken important planning steps in advance, before a crisis occurs.  What stops most people from being able to effectively plan when they are in the middle of a crisis is that the ill person is unable to make decisions and sign the necessary legal documents.

Misconception #11: All General Durable Powers of Attorney are created equal.  Completely false!  A General Durable Power of Attorney is a highly customized legal document -- and NOT a form!  Most Durable Powers of Attorney don’t contain even the most basic gifting authority.  Without a gifting power, your agent is usually limited to spending your money on your bills and selling your assets to generate cash to pay your bills.  Some Durable Powers of Attorney contain a gifting provision, but the Minnesota Statutory Power of Attorney it is limited to $10,000 per year.  This is particularly concerning for unmarried couples as the IRS considers ANY exchange of money/assets between them to be a gift.  The annual limit of $10,000 is too small for effective asset protection planning, and relates to a completely different type of federal estate and gift tax issue.  Unique Estate Law has created an enhanced power of attorney to get around that limit.

Misconception #12: Since you are married, your spouse will be able to manage your property and make financial decisions without a general durable power of attorney.  Not true.  If you become incapacitated and your spouse needs to sell or mortgage the family home -- or gain access to financial ac-counts that are in your name only -- your spouse will need a general durable power of attorney.  Without one, your spouse will have to go to Court and get the judge’s permission to act on your behalf by way of a conservatorship proceeding.

Misconception #13: You can hide your assets while you become eligible for Medicaid (Known as Medical Assistance in Minnesota).  False!  Intentional misrepresentation in a Medicaid application is a crime and can be costly.  The IRS shares any information concerning your income or assets with the local Medicaid eligibility office.  You -- or who-ever applied for Medicaid -- may have to repay Medicaid to avoid prosecution.

Misconception #14: Medicaid rules that applied to your neighbor when he went into a nursing home will also apply to you.  Maybe not.  Medicaid rules change.  Don’t assume the law that applied to your neighbor will also apply to you.  In addition, there may have been facts about your neighbor’s situation that you just don’t know.


Monday, October 14, 2013

Helping the Family Prepare for Loved Ones in Advancing Age

Advance Planning Can Help Relieve the Worries of Alzheimer’s Disease

The “ostrich syndrome” is part of human nature; it’s unpleasant to observe that which frightens us.  However, pulling our heads from the sand and making preparations for frightening possibilities can provide significant emotional and psychological relief from fear.

When it comes to Alzheimer’s disease and other forms of dementia, more Americans fear being unable to care for themselves and burdening others with their care than they fear the actual loss of memory.  This data comes from an October 2012 study by Home Instead Senior Care, in which 68 percent of 1,200 survey respondents ranked fear of incapacity higher than the fear of lost memories (32 percent).

Advance planning for incapacity is a legal process that can lessen the fear that you may become a burden to your loved ones later in life.

What is advance planning for incapacity?

Under the American legal system, competent adults can make their own legally binding arrangements for future health care and financial decisions.  Adults can also take steps to organize their finances to increase their likelihood of eligibility for federal aid programs in the event they become incapacitated due to Alzheimer’s disease or other forms of dementia.

The individual components of advance incapacity planning interconnect with one another, and most experts recommend seeking advice from a qualified estate planning or elder law attorney.

What are the steps of advance planning for incapacity?

Depending on your unique circumstances, planning for incapacity may include additional steps beyond those listed below.  This is one of the reasons experts recommend consulting a knowledgeable elder law lawyer with experience in your state.
 

  1. Write a health care directive, or living will.  Your living will describes your preferences regarding end of life care, resuscitation, and hospice care.  After you have written and signed the directive, make sure to file copies with your health care providers.
     
  2. Write a health care power of attorney.  A health care power of attorney form designates another person to make health care decisions on your behalf should you become incapacitated and unable to make decisions for yourself.  You may be able to designate your health care power of attorney in your health care directive document, or you may need to complete a separate form.  File copies of this form with your doctors and hospitals, and give a copy to the person or persons whom you have designated.
     
  3. Write a financial power of attorney.  Like a health care power of attorney, a financial power of attorney assigns another person the right to make financial decisions on your behalf in the event of incapacity.  The power of attorney can be temporary or permanent, depending on your wishes.  File copies of this form with all your financial institutions and give copies to the people you designate to act on your behalf.
     
  4. Plan in advance for Medicaid eligibility.  Long-term care payment assistance is among the most important Medicaid benefits.  To qualify for Medicaid, you must have limited assets.  To reduce the likelihood of ineligibility, you can use certain legal procedures, like trusts, to distribute your assets in a way that they will not interfere with your eligibility.  The elder law attorney you consult with regarding Medicaid eligibility planning can also advise you on Medicaid copayment planning and Medicaid estate recovery planning.

Monday, October 07, 2013

8 Dangers of Owning Property as Joint Tenants

Minneapolis Estate Planning Lawyer Cautions Clients on Joint Ownership of Property

One of the most common questions I am asked is whether someone should add another person to the deed to their home (or other property).  Below I discuss some of the concerns I have with joint ownership of property.

“Joint Tenancy With Right of Survivorship” means that each person has equal access to the property. When one owner dies, that person’s share immediately passes to the other owner(s) in equal shares, without going through probate. We’ve all been told that Joint Tenancy is a simple and inexpensive way to avoid probate, and this is sometimes true. But the tax and legal problems of Joint Tenancy ownership can be mind-boggling. The dangers of Joint Tenancy include the following:

Danger #1: Only Delays Probate. When either joint tenant dies, the survivor -- usually a spouse or a child -- immediately becomes the owner of the entire property. But when the survivor dies, the property still must go through probate. Joint Tenancy doesn’t avoid probate; it simply delays it.

Danger #2: Two Probates When Joint Tenants Die Together. If both of the joint tenants die at the same time, such as in a car accident, there will be two probate administrations, one for the share of each joint tenant in the Joint Tenancy property as well as any other property they each may own.

Danger #3: Unintentional Disinheriting. When blended families are involved, with children from previous marriages, here’s what could happen: the husband dies and the wife becomes the owner of the property. When the wife dies, the property goes to her children, leaving nothing for the husband’s children.

Danger #4: Gift Taxes. When you place a non-spouse on your property as a joint tenant, you make a gift of property every time that joint tenant takes property out of the account. For example, when a mother retitles her $80,000 home in Joint Tenancy with her son, she makes a gift to her son every time he makes withdrawals. This may not be the most efficient use of her $14,000 annual exclusion. The main point is that the gift is unintentional and not well planned. Worse, Minnesota now has a state gift tax that requires the person giving a gift of more than $14,000 in a year to file a state gift tax return.

Danger #5: Right to Sell or Encumber. Joint Tenancy makes it more difficult to sell or mortgage property because it requires the agreement of both parties, which may not be easy to get.

Danger #6: Financial Problems. If either owner of Joint Tenancy property fails to pay income taxes, the IRS can place a tax lien on the property. If either owner files for bankruptcy, the trustee can sell the property even though the other joint tenant is not otherwise involved in the bankruptcy.

Danger #7: Court Judgments. If either joint tenant has a judgment entered against them, such as from a car accident or business dealings, the holder of the judgment can execute the judgment against the Joint Tenancy property.

Danger #8: Incapacity. If either joint owner becomes physically or mentally incapacitated and can no longer sign his name, the Court must give its approval before any jointly owned property can be sold or refinanced -- even if the co-owner is the spouse.


Monday, September 30, 2013

12 Problems That Could Cost Your Family a Fortune – and Their Solutions

Minnesota Estate Planning Attorney Discusses Frequent Issues/Concerns that Arise When Handling Someone's Estate

Problem #1: Probate. Probate is the Court-supervised process of passing title and ownership of a deceased person’s property to his or her heirs. The process consists of assembling assets, giving notice to creditors, paying bills and taxes, and passing title to property when the judge signs the order. Probate can cost your loved ones a sizeable portion of your estate. The biggest portion of the costs are the fees charged by attorneys and personal representatives for their services for the estate, in addition to filing fees, costs of publication, fees for copies of death certificates, filing and recording fees, bond premiums, appraisal and accounting fees, and so on. Often the fees of attorneys and personal representatives are based on a hourly rate, and while they can tell you what their hourly rate is, they cannot tell you the number of hours their services will take, so they cannot tell you what their total fees will be. Like surgery, probate can be simple and easy, but frequently probate can have very drastic and damaging results. Accordingly, like surgery, because of its uncertainty in terms of both the potential for problems and high costs and fees, probate is something best to prepare for if you can. You can avoid a substantially larger probate process by having an estate planning lawyer set up and fund a Revocable Living Trust. Since the Trust actually owns your assets, no significant probate of the estate will be required, saving your family many thousands of dollars.

Problem #2: Lawsuits and Creditors. Protect the property you leave to your partner/spouse and children from the claims of their creditors, ex-spouses, and the IRS. This can best be done with proper creditor protection provisions in a Revocable Living Trust.

Problem #3: Estate Taxes. For married couples, protect your assets from state and federal estate taxes by setting up and funding a tax-saving Credit Shelter Trust. Under current law, a Credit Shelter Trust will completely protect your assets from estate taxes for estates valued up to a certain amount will have to pay federal estate taxes. What is that amount? No one knows right now. The current exemption is $5,000,000 a person or $10,000,000 for a married couple.

Further, in Minnesota, the estate limit is $1,000,000 so your estate will pay taxes TO THE STATE for anything over $1,000,000. The tax rates generally comes out to 10% of the assets over that 1,000,000 mark.

Most couples don’t realize that the value of their estate for purposes of determining estate taxes includes their life insurance death benefit proceeds. Your estate includes EVERY asset you own at the time of death: real estate; cash, stocks, bonds, life insurance, retirement accounts, automobiles and personal property. It is not difficult to reach the $1,000,000 mark once all these assets are added up.

A well-designed estate plan costing between $3,000 and $6,000 will save a significant amount in federal estate taxes. Other ways you can avoid or reduce estate taxes include setting up (1) an Irrevocable Trust for your children, grandchildren or other heirs, (2) an Irrevocable Life Insurance Trust, (which detaches your life insurance benefits from your estate), (3) a Charitable Remainder Trust, and (4) Second-to-die Life Insurance so you can pay estate taxes for pennies on the dollar.

Problem #4: Income Taxes. A family can lower its overall income taxes by setting up a Family Limited Partnership to own income-producing property. A parent can do this by setting up a Family Limited Partnership and making gifts of limited partnership interests to the other limited partners, normally their children or grandchildren who pay income tax at lower tax rates. A Family Limited Partnership is an excellent tool to shift income to partners who pay taxes at lower rates. It is also an effective way to make gifts and still keep total control of the property owned by the partnership.

Problem #5: Lawsuits. Protect your assets from lawsuits by doing any or all of the following, as appropriate: (1) purchasing an umbrella liability insurance policy, (2) setting up a Family Limited Partnership, (3) setting up a program for lifetime gifting, (4) setting up a Limited Liability Company, and (5) incorporating. Further, you can protect your children from lawsuits by putting their inheritances into a Discretionary Trust. This is especially important if your children are likely to become professionals subject to potential malpractice actions or, on the other hand, are spendthrifts!

Problem #6: Inexperienced Beneficiaries. Protect your assets from being wasted by young or inexperienced family members. Most beneficiaries spend their entire inheritances in less than two years, regardless of the size of the estate or the heir’s socio-economic background. Your lawyer can set up your Family Trust with protective provisions that provide guidance and safeguard your life savings.

Problem #7: Guardianships. Protect your assets from the high costs of incapacity by (1) setting up a Living Trust so you avoid the need for a guardianship, (2) drawing up an Advance Healthcare Directive, and (3) drawing up a Health Care Power of Attorney.

Problem #8: Nursing Home Care. Protect joint assets from the high costs of nursing home care. Buy insurance that covers nursing home care and provides a death benefit that returns the money spent on nursing home care to your heirs.

Problem #9: Unwanted Medical Care. Protect your assets from unwanted and costly medical care by having an Advance Healthcare Directive and Health Care Powers of Attorney that spell out your instructions, including which medical care, treatment and procedures you want -- and which you don’t want.

Problem #10: Unwanted Emergency Care. Protect your assets from unwanted emergency care. If you have a terminal illness, you can draw up and sign a Pre-hospital Medical Directive that will tell emergency personnel not to resuscitate you in the event of a medical emergency. This directive is often referred to as a “Do Not Resuscitate Order”.

Problem #11: Ineffective Estate Plans. Protect your assets from an ineffective estate plan. Don’t depend on pre-printed “cookie cutter” form kits or document preparation services for your estate plan. Contrary to what you may have heard or read, one size does not fit all! You may think you have precisely what you need. But you will never know -- because your family members will have to clean up the mess. You see, after you die, your family members will try to use your documents to settle your estate. And if the documents weren’t drafted correctly, they will cause additional expense and long delays because a probate will have to be done to convey title to your assets.

Problem #12: Unqualified Lawyers. Many attorneys are getting into estate planning because it’s less stressful than other areas of law. Not surprisingly, most of these newcomers focus on the needs of senior citizens and almost never deal with issues affecting young families. If you have young children, make sure you choose an independent attorney who focuses their law practice on asset protection and estate planning for young families. This will help insure that the lawyer you choose has the knowl­edge, skill, experience and judgment necessary to fully protect your family and your assets, and to give you advice and counsel that is in your best interests.


Monday, September 17, 2012

Making your home senior-proof

A Minnesota Elder Law Attorney Discusses Ways to Make Your Home Safe When Caring for an Aging Parent

Let’s face it – it’s tough getting old. The aches, pains, and pills often associated with aging are things that many members of the baby-boomer generation know all too well by now. Though you might not be able to turn back time, you can help an aging loved one enjoy their golden years by giving them a safe, affordable place to call home. If an aging parent is moving in with you and your family, there are many quick fixes for the home that will create a safe environment for seniors.

Start by taking a good look at your floor plan. Are all the bedrooms upstairs? You may want to think about turning a living area on the main floor into a bedroom. Stairs grow difficult with age, especially for seniors with canes or walkers. Try to have everything they need accessible on one floor, including a bed, full bathroom, and kitchen. If the one-floor plan isn’t possible, make sure you have railings installed on both sides of staircases for support. A chair lift is another option for seniors who require walkers or wheelchairs.

Be sure to remove all hazards in hallways and on floors. Get rid of throw rugs – they can pose a serious tripping hazard. Make sure all child or pet toys are kept off the floor. Add nightlights to dark hallways for easy movement during the night when necessary. Also install handrails for support near doorframes and most importantly, in bathrooms.

Handlebars next to toilets and in showers are essential for senior safety. Use traction strips in the shower, which should also be equipped with a seat and removable showerhead. To avoid accidental scalding, set your hot water heater so that temperatures can’t reach boiling. You may also want to consider a raised seat with armrests to place over your toilet, to make sitting and standing easier.

This applies to all other chairs in the house as well. Big, puffy chairs and couches can make it very difficult for seniors to sit and stand. Have living and dining room chairs with stable armrests, and consider an electronic recliner for easy relaxation.

To keep everyone comfortable and help avoid accidents, store all frequently used items in easily accessible places. Keep heavy kitchen items between waist and chest height.

Even with appropriate precautions, not all accidents can be avoided. Purchasing a personal alarm system like Life Alert can be the most important preparation you make for a senior family member. If they are ever left alone, Life Alert provides instant medical attention with the push of a button that they wear at all times.

Amidst all the safety preparations, remember that it’s important to keep the brain healthy, too. Have puzzles, cards, large-print books and magazines, computer games, and simple exercises available to keep seniors of healthy body and mind.

These simple preparations can not only help extend the life of your loved one, but help to make sure their remaining years are happy and healthy.


Thursday, August 30, 2012

Minnesota Asks Federal Government for Medicaid Waiver in Attempt to Save Millions m

Gov. Mark Dayton is seeking a waiver from the Federal Government that will allow Minnesota to put into place its own bipartisan plan that should make it easier to connect people to services, steering them out of institutions and into home-based care. In seeking the wavier, the state asserts that instead of paying the astronomical cost of institutional care, the ability to go into a Medicaid recipient's home and install ramps, or bring in home-care workers who could allow the person to stay at home comfortably and will provide services at a more affordable price for the state. Rather than waiting until a worker loses a job because of a disability, the reforms would allow the state to reach out to employers and craft a plan to keep them working.

The Governor feels that this reform could save the state $151 million over the next five years. Minnesota estimates it could save another $9.2 million over the next five years by giving families more options for home-based care, and $15 million by expanding counseling and other support to people faced with a choice between expensive nursing home care and more affordable home care. At the center of the waiver request is the state's plan to offer incentives to health care providers that make preventive care available to Minnesotans on Medicaid.

The U.S. Department of Health and Human Services will respond to the state's proposal after a 30-day public comment period. If approved, the reforms would go into effect in 2014.


Thursday, June 28, 2012

Minnesota Sees Increase in Number of Those Needing Medicaid

An article in the Star Tribune reported today that the number of Minnesotans on Medicaid - called Medical Assistance in Minnesota - shot up at nearly twice the national rate over the past two years, while state costs increased by 40 percent.  The total number of Minnesotans enrolled in the state-federal health insurance program increased by 125,000 in the last to years to reach a total of about 733,000.

The National Governors Association and the National Association of State Budget Officers issued a report this week stating that the growing Medicaid budget - approximately $450 billion this year - will place a large burden on sates trying to climb out of the most recent recession.

A large part of the rise in Minnesota's portion of the cost -- from $2.9 billion in 2011 to an estimated $4.05 billion this year -- is due to two things: 1) enrollees who transferred into Medicaid and out of programs that were funded solely by the state; and 2) the end of the federal government's economic stimulus package, which for a time raised the federal Medicaid match from about 50 percent to 60 percent.

Medicaid was set up by Congress in 1965 to provide health care to low-income adults and children, including some people with disabilities; it also covers about two-thirds of people in nursing homes who have outlived their savings. While low-income families represent the majority of people on Medicaid, most of its outlays go to long-term care for the elderly and disabled.

Minnesota's program is expected to add another 60,000 people by the end of 2014 with further expansion of the federal Affordable Care Act, if the law's expansion of Medicaid rolls survives the recent Supreme Court challenge.

In 2014, Minnesota's Medicaid costs are expected to rise by about 10 percent, surpassing $4.4 billion, while the federal share is forecast to soar 23 percent to $5.1 billion with the program's expansion.

In many states, Medicaid is the largest single portion of state spending, at nearly a quarter of state budgets, and some states are struggling to control costs by cutting provider payments, drug costs and other benefits, the report said,

With all this uncertainty, people should think about the possible long-term care needs not just for themselves but for parents or even grandparents.  We can't rely on government programs to be there 2, 5 or 10 years from now.  I meet people weekly who are having to make decisions on what to do for Dad or Mom - in some cases a spouse - when they can no longer care for themselves and neither can the family.  Please plan now.

 

 


Tuesday, January 03, 2012

Joint Bank Accounts and Medicaid Eligibility

Joint Bank Accounts and Medicaid Eligibility

Like most governmental benefit programs, there are many myths surrounding Medicaid (called Medical Assistance in Minnesota) and eligibility for benefits. One of the most common myths is the belief that only 50% of the funds in a jointly-owned bank account will be considered an asset for the purposes of calculating Medicaid eligibility.

Medicaid is a needs-based program that is administered by the state.  Therefore, many of its eligibility requirements and procedures vary across state lines.  Generally, when an applicant is an owner of a joint bank account the full amount in the account is presumed to belong to the applicant. Regardless of how many other names are listed on the account, 100% of the account balance is typically included when calculating the applicant’s eligibility for Medicaid benefits.
    
Why would the state do this? Often, these jointly held bank accounts consist solely of funds contributed by the Medicaid applicant, with the second person added to the account for administrative or convenience purposes, such as writing checks or discussing matters with bank representatives. If a joint owner can document that both parties have contributed funds and the account is truly a “joint” account, the state may value the account differently. Absent clear and convincing evidence, however, the full balance of the joint bank account will be deemed to belong to the applicant.
 

 

 


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From within Hennepin County Unique Estate Law represents estate planning and elder law clients throughout Minnesota, including Minneapolis, Edina, Bloomington, St. Louis Park, Minnetonka, Plymouth, Wayzata, Maple Grove, St. Paul, and Brooklyn Park. The Minnesota law firm of Unique Estate Law focuses on all aspects of estate planning, including specialized wills, trusts, powers of attorney and medical directives for married couples, young families, blended families, single parents, gay families and those going through a divorce. Unique Estate Law also handles probate administration, asset protection, Medical Assistance planning, elder law, business succession planning, adoptions and cabin planning.



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