Elder Law Answers
Frequently Asked Questions About Houston Elder Law
Many individuals miss opportunities to plan for incapacity, protect assets or gain eligibility for long term care benefits because of misunderstandings and bad information when it comes to elder law issues. To help remedy that, the lawyers at Galligan & Manning have provided some simple elder law answers to common questions.
How is an Elder Law Attorney Different from Other Attorneys?
Elder law attorneys handle many of the same matters as other planning attorneys, but also incorporate planning for aging. Elder law attorneys address long term care living such as nursing homes, assisted living, community care centers, how to pay for it and prepare estate plans specifically for these concerns, which even most estate planners do not do.
For example, elder law attorneys consider potential future needs for Medicaid in preparing powers of attorney, trust plans to avoid Medicaid estate recovery and obtain benefits eligibility. They also assist with Medicaid eligibility by advising families on eligibility, assisting with crisis planning and preparing appropriate Medicaid applications.
At What Age Should I Start Working with an Elder Law Attorney?
There is no magic answer to this question, but 65 is a good estimate as far as elder issues are concerned (you’ll want an estate plan long before that). The key is to plan before age affects your daily living or incapacity becomes an issue. If you wait too long, you may not have as many options for protecting assets or utilizing government benefits.
Do I Need to Plan for Long Term Care?
Long term care planning is for everyone. As our population ages, families are confronted with the choice of where to live and how to make that medically and financially possible. A major study suggested that almost 70% of individuals 65 or older would need a long term care stay at some point in their lives, so this is an issue that affects everyone and property planning is critical.[i] In 2019, the annual national median cost for a private room in a skilled nursing facility was $102,200, or about $8,517 per month.[ii] The average stay is slightly more than two years. When faced with this obstacle, clients, or their loved ones, are stuck paying for care and rapidly spend their hard-earned assets. So, considering long term care planning is critical for everyone.
How does Long Term Care Insurance Work?
Long term care insurance covers extended long term care stays, incidental costs such as in-home care providers for medications and daily assistance, medical equipment and day sitting. It is designed to cover your long term care expenses so that you don’t have to pay everything out of pocket.
Some policies have premiums paid routinely that cover a per diem amount with a lifetime limit. Now, many policies are “hybrid” policies which are essentially life insurance or annuity policies with riders for long term care. They often have one large initial premium and whatever is not used as insurance is paid to beneficiaries you designate. People often find these policies attractive to avoid premium increases and to ensure the value will not be lost if they do not use long term care.
What is the Difference between Medicare and Medicaid?
Medicare is an entitled federal healthcare insurance program which most people enroll in when they reach age 65. Because it is an entitlement program, clients do not need to be financially eligible for it. Medicare has multiple parts which pay for things like extended hospital stays, hospice and some nursing homes for a limited time.
Medicaid on the other hand is a program that provides benefits to eligible participants. It is a joint federal and state program often used with long term care benefits, and participants must be medically and financially eligible. In Texas, Medicaid is administered by the Human and Human Services Commission. Whereas Medicare pays for limited long term care, Medicaid pays for extensive long term care and is the primary government benefit for these needs. The financial requirements for Medicaid are very strict, so in order to utilize benefits, clients must carefully follow the financial guidelines and properly plan.
Are There any Other Government Benefits for Long Term Care?
The Veterans Benefits Administration does have some benefits for veterans with qualifying service based upon financial eligibility, medical eligibility and whether they are disabled based upon service history. For elder law purposes, many veterans have access to benefits for assisted living and to help pay for medical care if they met income and total asset guidelines. As of 2019 and depending on the exact program used, a single veteran with no dependents must have either less than $16,540 or $22,577 in annual income as well as have total net worth of less than $123,600. Obviously these are very strict guidelines, but can be very useful to clients, especially where Medicaid is unavailable.
Isn’t it True I Can’t Own Anything for Medicaid?
Medicaid has asset limits depending on the program and the marital situation as low as $2,000 of countable assets, or in married situations, half of the marital assets with a minimum of approximately $26,000 and maximum of approximately $126,000.
Now, these numbers rightly scare people, but they are of “countable assets.” Many assets are exempt, which means clients typically have far more assets than these limits suggest.
What are some exempt assets?
The exemptions vary and don’t apply to all benefits in all situations, but here are some typically exempt assets:
The homestead up to an equity limit of approximately $600,000 (if married, no equity limit)
Irrevocable pre-need burial plan
Most retirement accounts in pay out status
Personal belongings and household furnishings
Don’t I Have too Much Income?
Medicaid also has income limits for eligibility. For a single individual the income limit is approximately $2,300. However, income seldom prevents someone from using Medicaid long term care benefits in Texas.
For example, the individual’s income for Medicaid purposes is their own income (not spouse’s). In fact, you are allowed to divert income from the applicant to a spouse without sufficient income of his or her own in some cases.
Even better, Texas permits the use of a Qualified Income Trust or a “Miller’s Trust” for most benefits. This form of trust is used at the time you apply for Medicaid eligibility and it intercepts the income of the applicant. The trustee then spends that money on a monthly basis for certain purposes to spend it down. This means the income isn’t saved, but it does mean that an applicant may use Medicaid despite having income higher than the allowable limit.
Am I Allowed to Give Everything Away to my Children?
Definitely not. Part of long term care planning may be making gifts to family members, but transfers without adequate consideration may affect Medicaid eligibility if made within the look back period. Client often ask if they can sell their home to their children for “a dollar,” which is not adequate consideration. There are some exceptions, such as transfers to disabled children, but those should only be done with careful consideration at the advice of an elder law attorney.
But Wait, aren’t I Allowed to Give $15,000 Per Year?
A very common misconception is that someone can give $15,000 each year to someone else without it affecting Medicaid eligibility. The $15,000 per year (as adjusted for inflation in later years) is the annual Federal gift tax exclusion amount. It is the amount you can gift to someone without using your lifetime exemption for gift and estate tax. It has no bearing on Medicaid.
What is the Five Year Look Back?
The five year look back is the process by which Medicaid reviews transactions for the five years preceding needing and applying for most Medicaid programs. Medicaid “looks back” at all of the applicant’s financial transactions for the prior five years to determine whether any of the transfers were not for full value. Essentially, the rule is designed to prevent people from gifting what they own right before using government assistance, although there are some exceptions, such as permitting gifts to spouses.
Even if that is the case, clients can still use benefits, but might have to wait before they do. In these situations, an applicant is assessed a penalty period during which they have to private pay before Medicaid benefits will begin. For example, if a client gives away $5,000 one year before applying for Medicaid, the gift is subject to the five year look back. The applicant’s gift of $5,000 is divided by a penalty amount which Medicaid sets each year designed to be a daily cost of a nursing home. The result of that equation is how long the applicant needs to wait before Medicaid begins.
It is worth noting that Veterans benefits have a three year look back as well.
What is the Medicaid “Spend Down”?
Most clients are not immediately eligible for Medicaid at the time they medically need to apply, typically because of excess assets or income. So, with the assistance of an elder law attorney, applicants will start to “spend down” which means that the applicant will either use excess resources in a way that won’t disrupt eligibility, convert countable assets into non-countable assets or utilize other legal techniques to become eligible when they need benefits. This is one of the main areas where elder law attorneys provide benefit to clients.
What is Medicaid Recovery?
A lot of people say “the nursing home will take my house if I use Medicaid!” That isn’t true, but it is true that Texas has a federally-required recovery program by which they seek reimbursement for some Medicaid benefits from your probate estate. Medicaid makes a claim against the estate, and becomes a creditor to be paid before the beneficiaries are paid. Often the residence is the primary residence left and it will be sold to pay the debt, which leads to the misconception. There are some exceptions to Medicaid estate recovery however, such as when a surviving spouse is the beneficiary.
Now, it is critical to recognize in Texas that recovery is currently limited to the probate estate, which means property passing by a Will or estate process, and not by a trust, beneficiary designation or contract. So, by working with an elder law attorney at Galligan & Manning, you can prepare an estate plan designed to pass assets in a way that will protect the assets from Medicaid recovery, even if you aren’t using Medicaid when you prepare the plan. Read our article on Why an Attorney Should Help with a Medicaid Application.
More Elder Law Questions?
Learn more on our Elder Law practice page.
Be sure to join Attorney Kevin Horner for his live broadcasts on Facebook every Thursday as he hosts Kevin’s Korner and check out our blogs, articles and speaking engagements on our Resource page for more information.