Trusts can undermine Medicaid eligibility even if they accomplish other goals

A “Trust” is an estate-planning structure that has many different uses and purposes. Fundamentally, to be valid, there needs to be (a) a Trustee — the manager, who is not the owner of the assets; (b) a Beneficiary – the party that the trustee can spend assets on, who is not the owner of the assets, (c) terms and conditions – usually contained in a legal document which could be a Will or could be another document that creates the Trust. Until a Trust receives assets, it is an unfunded trust and may be referred to as a “dry trust.” Some trusts are irrevocable, others are revocable. Sometimes the Trust is assigned its own taxpayer EIN# which is obtained from the IRS. Sometimes the Trustee is also the Beneficiary; other times the assets are placed in Trust as a gift, for benefit of other family members. . Certain trusts are designed to provide “creditor protection” by shielding the assets from those who might be coming after the beneficiary’s creditors. Certain Trusts are designed to preserve the Beneficiary’s eligibility for means-tested disability-related services. Certain trusts give total discretion to the trustee, whereas others place obligations on the Trustee (such as “pay all the income to the beneficiary for 5 years” or “give the beneficiary 1% of the principal every year in January”). How it is written depends on what the purpose is.

The Medicaid program has strict, low financial restrictions for eligibility. As readers of this blog know, a resource is defined as something that the applicant (or his spouse) owns and which can be converted to cash to be used for the applicant’s support and maintenance. Other than a properly-structured  first-party Special Needs Trust, a residence, one car, an irrevocable funeral trust, a burial place and a life insurance policy whose face value is less than $1,500, pretty much anything else that meets this criteria is treated as a  countable “resource.”  There are special regulations concerning when the assets in a Trust are counted as a resource of the individual.

Section 4.11 of the State Medicaid Manual describes the treatment of Trusts. It applies to trusts that were created by an applicant, his or her spouse, or another party who has legal authority to act on their behalf (Guardian, Agent under Power of Attorney, or Court). It does not apply to trusts created by a spouse of the applicant in their Will (but keep in mind, e.g., the requirements of the DeMartino case and the elective share statute). If assets of the individual or their spouse form any part of the Trust and the individual or their spouse are beneficiaries,  100% of the Trust is a countable resource if the Trust is revocable (such as a “Revocable Living Trust” that some people use to “avoid probate”), and if it is an irrevocable trust, the portion of income or principal that could be paid to or for benefit of the individual (or spouse) continues to be counted as income or as a resource. Either way, any of this could adversely affect eligiblity.  A person might be treated as a Beneficiary without even realizing it.

We see many different Trusts in our practice, and we write Trusts when they are useful. I am frequently asked by new elder care clients, “do I need a trust?”  (and even more often, “I heard that I need a Trust so the nursing home doesn’t take it all”). The response of course is, “what do you want to accomplish, who do you want to protect, how’s your health, and what do we have to work with?”

The problems caused when a Trust is deemed to be a “countable resource” can create substantial financial jeopardy for an applicant, particularly because after the Medicaid application is filed, it may be many months before that bad news is received from the agency.  When discussing a trust strategy later in life, it is a good idea to talk with the attorney about the impact of the Trust on Medicaid eligibility as well as its efficacy for whatever other issues are being addressed. Forewarned is forearmed.

Call us for advice on trusts and Medicaid eligibility and for individualized estate planning strategies …. 732-382-6070

For Qualified Income Trusts, Not All Bank Accounts Are Created Equal

Medicaid Long Term Services and Supports (MLTSS) in New Jersey pays for nursing home care for people with alzheimers disease, catastrophic disabilities and other serious difficulties with self care. The program requires any applicant with more than $2205 (three times the SSI amount–new for 2017) of gross income to make a Qualified Income Trust.  Our office assists applicants with this process all the time.  After the Trust document is completed, we usually send the trustee to the applicant’s bank to set up a QIT bank account.  But things can get hairy here.  Most people, reasonably, want to open bank accounts that avoid fees and penalties.  However, QIT accounts are not most accounts.  They are for the applicant’s gross regular monthly income ONLY, and the income is supposed to go into the account and leave the account every month.  Medicaid allows up to $20 per month in fees as a deduction from the applicant’s income; trustees should therefore pick the checking account product with reasonable fees but no minimum deposit.  If the account is set up with $0 in it, even if that costs a little money, that’s good; the assigned income will go in and fund the trust account in the month of the application date sought–this is what caseworkers are looking for initially.  Some banks will waive even these costs if you show proof of a regular direct deposit.

Unfortunately, many applicants’ Medicaid eligibility has been tripped up by technical processes related to Qualified Income Trusts since they began in December of 2014.  To do better, we all need to up our game and learn exactly what the caseworkers want before they ask.  Come talk to us about this and your other Medicaid questions.  We’re here to help.

Call us for Medicaid applications and senior care planning … 732-382-6070

Disability Integration Act would mandate that states provide home care services

Senator Chuck Schumer introduced S-2427, the Disability Integration Act, on December 5, 2015,  to counteract discrimination in Medicaid funding which is disproportionately allocated towards nursing home services. One effect of the bill could be to force States to allocate funds within their Medicaid budgets for Home and Community-Based Services (MLTSS-HCBS) for Medicaid applicants who can reside in the community with adequate long-term services and supports. Some States have no HCBS program at all because it is a “waiver” of the federally-mandated institutional Medicaid program, which pays for nursing home care for eligible individuals. Other States have so few slots that a person who applies will never come off of the waiting list.

According to the gov.track summary, “States, local governments, or insurance providers may not discriminate against such individuals in the provision of community-based services by: (1) imposing prohibited eligibility criteria, cost caps, waiting lists, or payment structures; (2) failing to provide a specific community-based service; or (3) requiring an individual to receive a service in a congregate or disability-specific setting.”

This Bill is an important step to get Congress talking about how to implement a community-integration mandate that dates back to the U.S. Supreme Court’s decision in Olmstead. It is a crying shame that a Medicaid-eligible frail disabled or aged person has to leave their community and move into a nursing home — or remain in a nursing home after their post-hospital care rehabilitation — when they could thrive in the home environment, just because the Medicaid dollars are only available in the nursing home.

New Jersey has an HCBS program for Medicaid applicants, but it is only a part-time program. It used to be called “Global Options,” and previously, there was an income cap which barred people whose monthly income exceeded three times the federal poverty rate. Fortunately, that restriction was lifted, so now, home care applications are expanding. Read my next post for more about the process.

For legal advice and help with your Medicaid application or appeal, call us at … 732-382-6070