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Trusts, Estates, and Elder Law Update
O’Connell & Aronowitz Attorneys at Law
Trusts, Estates, and Elder Law Update First Quarter 2014
Pictured above are the attorneys of our Trusts, Estates, and Elder Law Department, left to right: Matthew J. Dorsey, Esq. William A. Favreau, Esq. Heidi Dennis, Esq. Fred B. Wander, Esq. Jami Durante Rogowski, Esq. Not pictured: Brittnay M. McMahon, Esq.
Inside This Issue: • Medicaid Eligibility After Gifting Has Occurred • Tax Changes to Keep In Mind for 2014 Albany Office: 54 State Street Albany, NY 12207 518.462.5601 Fax: 518.462.2670
Saratoga Springs Office: 1 Court Street Saratoga Springs, NY 12866 518.584.5205 Fax: 518.584.5441
Attorney Advertising Plattsburgh Office: 206 West Bay Plaza Plattsburgh, NY 12901 518.562.0600 Fax: 518.562.0657
www.oalaw.com
Ask the Lawyer: How Do Medicaid Penalty Periods Work? As we explained in the article on the front page of our newsletter, penalty periods are generally calculated if a Medicaid applicant gifts property to someone else in the five years prior to their Medicaid application. There are certain cases, however, where the gift is an “exempt transfer” and a penalty period doesn’t apply. Does the penalty period apply if I gift my home to someone? Yes, unless the transfer is to certain allowable persons. If you transfer your home to your spouse, your child under age 21, your child who is disabled or blind, a sibling who had an equity interest for at least one year before the transfer, or to a caregiver child, then the transfer is exempt. Who qualifies as my caregiver child? A caregiver child is an adult child who has resided in your home for at least two years prior to your most recent institutionalization and who provided
care to you during that time period which and the note cannot be cancellable upon permitted you to stay home instead of your death. It may be appropriate to being transferred to a medical facility. consider a “Note and Gift” strategy to reduce your assets and qualify for What if I make gifts of assets other Medicaid. This strategy was discussed in than my home? our 3rd Quarter Newsletter of 2012, The gifts will result in a penalty period, which is available on our website at unless they are gifts that otherwise www.oalaw.com. qualify as exempt transfers. Exempt transfers include: gifts to a spouse, gifts Could holiday gifts to my family result for the sole benefit of a spouse, gifts from in a penalty period? a spouse to another for the sole benefit They should not, provided that you’re of the spouse, gifts to your disabled or not making the gifts in order to qualify blind child, and gifts to a trust established for Medicaid. As discussed in our feature solely for the benefit of a disabled article on page 1, such gifts might result individual under the age of 65. in a penalty period that could be challenged in a Medicaid Fair Hearing. Is it a gift if I loan money to a friend or It can be very difficult to determine what family member? gifts are allowable and what gifts might Potentially yes. For a loan not to be result in a Medicaid penalty period. With considered a gift, it has to meet several proper planning, you can use allowable requirements: the repayment terms gifting techniques to reduce your assets must be actuarially sound (they can’t last and qualify for Medicaid. Please contact beyond your life expectancy), the loan the experienced Elder Law attorneys at payments must be in equal amounts O’Connell and Aronowitz to help you with with no deferral or balloon payments, an effective gifting plan.
In This Issue: • Medicaid Eligibility After Gifting • Elder Abuse: What Is It and What Can You Do To Prevent It? • Tax Changes to Keep in Mind for 2014 • Spotlight On Our Bankruptcy Practice Area • Ask the Lawyer: How Do Medicaid Penalty Periods Work? • O&A Events • General Information about O’Connell & Aronowitz
Medicaid Eligibility After Gifting Has Occurred Does a Penalty Period Have to Apply?
When applying for Medicaid to pay for a loved one’s nursing home stay, families must contend with an intimidating application process, which calls for up to two dozen different pieces of information, including five years of statements for all bank and financial accounts.
Exceptions to the Penalty Period There are certain exceptions to this rule, such as gifts to spouses or caregiver children (see more about penalty period exceptions in our “Ask the Lawyer” column on page 4). In the absence of such an exception, the penalty period will apply.
The Department of Social Services (DSS) requires five years of statements because of the five year “look back period”. This is the period of time before the application when DSS is looking to see if the applicant made any transfers of their assets to other people.
However, if the gifts were not made in contemplation of becoming eligible for Medicaid, you may be able to argue that the penalty period shouldn’t apply.
If DSS looks back five years and discovers that the Medicaid applicant made gifts of their assets, DSS will then assess a “penalty period” that will delay the start of Medicaid coverage. Penalty Period Calculation The penalty period is calculated by taking the sum of the gifts made by the applicant and dividing that figure by the current “transfer rate”. The transfer rate for our region is currently $9,212/month. For example, if DSS discovers that a Medicaid applicant made $92,120 in gifts in the past five years, DSS will then take the amount of the gifts and divide them by the transfer rate to come up with a penalty period of 10 months ($92,120/$9,212 = 10). This penalty period will postpone the Medicaid eligibility of the applicant for 10 months. The Medicaid applicant will then have to attempt to come up with private funds to pay for their nursing home costs for 10 months until they become Medicaid eligible. Saratoga Office: 1 Court Street Saratoga Springs, NY 12866 518.584.5205 Fax: 518.584.5441
For example, if a grandmother gave money to her grandson who was in financial trouble to prevent the grandson from having to declare bankruptcy and she was not motivated by a desire to reduce her assets for Medicaid planning purposes, then such a gift should not result in a penalty period being assessed against the grandmother if she later seeks Medicaid to pay for nursing home costs. Despite the innocent intentions of the generous grandmother, the likely result is that a penalty period will be assessed by DSS in such a case. With the assistance of a lawyer, however, the penalty period can potentially be overturned in a Medicaid Fair Hearing by showing that the gift was not motivated by a desire to qualify for Medicaid. If you or a loved one have made prior gifts and now face a penalty period that delays the receipt of Medicaid benefits, O’Connell and Aronowitz may be able to help you overturn the penalty period and reinstate Medicaid benefits. Please contact our office nearest to you for a free case consultation. Follow us on:
Albany Office: 54 State Street Albany, NY 12207 518.462.5601 Fax: 518.462.2670
www.oalaw.com
Plattsburgh Office: 206 West Bay Plaza Plattsburgh, NY 12901 518.562.0600 Fax: 518.562.0657