If your loved one is facing admission to a nursing home for long-term care and you’re concerned that you won’t have enough money to cover their expenses, there are a few things you should consider. With an average cost of over $5,600 per month for a semi-private nursing home room in Kansas (2019 Genworth Cost of Care Survey), very few of us could afford to private pay for a nursing facility for very long. KanCare is the Kansas Medicaid Program that you will apply to if you need government benefits to assist with payment in Kansas.
Too often, well-intentioned friends, neighbors and non-elder law attorneys or other professionals make recommendations on how to apply for Medicaid benefits to cover nursing home expenses that result in a denial or extended delays in benefits, both of which result in unnecessary expenses to the applicant. To prevent this from happening to you, we’re sharing some things to consider:
Now that you are armed with more knowledge, remember to consult with an experienced elder law attorney should you need to file for Medicaid benefits in the future. More than one client has told us after we corrected an inaccurately filed Medicaid application, “I wish I would have just come to see you first!”
If you have questions about Kansas elder law or Medicaid planning, contact Davis & McCann, P.A., Dodge City, Kansas at 620-225-1674. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.
Q: My brother-in-law told me that his assets are safe from any Medicaid claims that he might encounter in the future for nursing home care because he has a Revocable Trust. I also have a Revocable Trust, but I didn’t think it protected my assets from Medicaid claims. Who is correct?
A: You are. A Revocable Trust does NOT protect your assets from a Medicaid recovery claim against you. A Revocable Trust allows the creator/grantor (you) to make any changes to the Trust at any point in their lifetime, as long as they are competent. Because you have so much control over a Revocable Trust and are the beneficiary of the trust during your lifetime, Medicaid law allows for a claim to be made against assets held in a Revocable Trust just as they could make a claim over assets owned in your individual name. If you or your brother-in-law are concerned about protecting your property and/or other assets from future Medicaid claims related to nursing home or hospital expenses, you need to visit with an estate planning attorney well versed in elder law matters.
Generally speaking, if you want to protect certain assets from creditor claims, including Medicaid, your assets must be owned by an IRREVOCABLE Trust, which CANNOT be controlled by you in any way. There are Irrevocable Trusts designed specifically for individuals who are concerned about protecting family assets, such as farm and ranch property that has been in the family for generations, and minimizing the risk of losing those assets to pay for long-term nursing home care. Be aware that this type of planning typically involves making a gift and triggering the 5-year look-back for Medicaid eligibility, so time is of the essence. Postponing planning until it appears that long-term nursing home care is inevitable can significantly decrease your ability to protect many of your assets. However, if you are currently in such a situation where you are facing immediate nursing home admission, don’t despair, there may be other options available to you.
If you have questions, it is critically important that you seek out an attorney who understands the Medicaid system as it relates to elder care matters in your State. If you have questions about any estate planning or Medicaid planning matter in Kansas, contact Davis & McCann, P.A., Dodge City, Kansas at 620-225-1674. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.
Q: My mother is a relatively healthy 80 year old. A neighbor suggest that we transfer her home to me and have her retain a life estate interest, so she could avoid losing out on benefits from Medicaid, should she need nursing home care in the next few years. I am an only child and my father passed away years ago. What do you think about this idea?
A: If the life estate deed is recorded at least five years before your mother requires a full-time nursing home care, this transfer should not bar her from Medicaid qualification. The rules on Medicaid qualifications for this type of situation are complicated to say the least. However, an overly simplified answer would be that her life estate interest will not be counted as a resource for KanCare (Medicaid program in Kansas) qualification purposes.
Maintaining your mother’s home while she is in the nursing facility could potentially strain your finances. If she uses a life estate deed, there are other issues you both should consider, including:
1. Sale. If you plan to sell your mother’s home while she is alive, be aware that selling the house will require your and your mother’s consent. Your mother’s life estate interest has a value and such interest likely will then disqualify her from receiving KanCare benefits for a period of time, during which she will have to private pay for her nursing home care.
2. Gifting and Capital Gains Tax. Remember, that even though you don’t have a tangible asset yet due to your Mom’s life estate interest, you have still been gifted the residuary value of the home. Property that is gifted during your mother’s lifetime does not get a step-up in basis at her death, meaning you will likely have to pay capital gains tax on the property if you sell it. The tax you will owe after the sale could be substantial and will depend on factors such as what your mother paid for the property when she purchased it and what you sell the home for. Additionally, this will result in a penalty if your mother goes into a nursing facility and needs to become Medicaid eligible within 5 years of making the gift.
3. Death of Residuary Owner. What happens if your mother gifts you her home, maintains her life estate and then you die before she does? The property would then go to your estate, which may not be what your mother would want.
Instead of deeding the house to you and having your mother retain a life estate interest, your mother may want to consider creating an irrevocable trust and deeding the house to the trust. This gives you a lot more flexibility. The trustee could sell the house and the sale proceeds would not disqualify your mother from KanCare benefits. If the house is not sold, then when your mother passes away, the trust could be set up in such a way that you would receive a “stepped-up basis”, resulting in no capital gains taxes if and when you sold the house.
Be aware, that this type of trust is very complicated and not something that should be attempted on your own or without expert guidance. Please see an experienced long-term care estate planning attorney to determine the best course of action for your mother’s unique situation.
For more information on Real Estate and Medicaid planning, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and focus our practice on providing clients with the best legal advice on estate planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.
If you’re age 65 or older, issues like retirement and long-term care planning are probably more frequent topics of your conversation. Even if you’re not in this population group, chances are you know and care for someone who is. Research from the U. S. Department of Health and Human Services suggests that if you are age 65 or older, you’re most likely going to need long-term care at some point in your life. Unless you are sufficiently wealthy or exceptionally poor, it would seem wise to do some advanced planning to cope with the increasing health care costs that will accompany long-term care stays.
Options you may want to investigate include, but are not limited to:
1. Long-term Care Insurance. The older you are and the longer you wait to obtain insurance, the more expensive it will become. Costs for long-term care insurance (LTCI) tend to be expensive and premiums will most likely rise over your lifetime. With average premiums running at $2,700 a year (per industry research firm, LifePlans), seniors may find LTCI too cost prohibitive to be a realistic option. Additionally, your age or current health condition may disqualify you from obtaining this type of insurance.
2. Life Insurance. Some insurance companies offer life insurance with long-term care riders. With this type of policy, your beneficiaries may still receive a death benefit even if you use long-term care rider benefits. With traditional LTCI, there is no death benefit paid to your beneficiaries after your death.
3. Family Members. Your immediate or extended family members may be able and willing to care for you or pay for your health care costs. With annual semi-private nursing home room costs running on average at $90,000 annually, according to a 2019 Genworth study, few families can afford to cover these costs for a year, let alone for multiple years.
4. Medicare. Kansas Medicare program (KanCare) does NOT cover long-term care expenses for patients requiring full nursing home care, except for very limited circumstances.
The month of May is recognized as National Elder Law Month and Older Americans Month. Davis & McCann, P. A., acknowledges the growing need for legal services for senior citizens in rural Kansas and has expanded its practice to include Elder Law. To facilitate this, the firm has invested significantly in specialized training for their attorneys in the areas of long-term care planning and Medicaid.
“As baby boomers enter their advanced senior years, we’ve seen a spike in the need for assistance with long-term care planning and Medicaid applications. It’s our goal to provide affordable, high-level legal advice to our clients, without them having to leave the area. We’ve increased our long-term care planning services, including completing advanced training in this area to ensure we can fulfill our commitment to our clients,” attorney Megan L. McCann says. “We develop long-term care plans that support the client’s overall estate plan. Our discussions with a client might include private pay options for long-term care, gifting, long-term care insurance or annuities, caregiver expense allowances, spend down options, or a Medicaid Asset Protection Trust. Each families’ needs are different. One may only need to discuss available options, while the next needs us to take the lead on filing for Medicaid benefits, including helping to determine allowable expenses and payments.”
Tamara L. Davis, the firm’s President, is pleased with the firm’s expansion efforts. “We’ve seen significant growth in our long-term care planning and Medicaid planning practice over the past two to three years,” Davis says. “One of our goals as a firm is to make these essential services accessible to Western Kansas families. Our practice already included estate planning, business formations and contracts, real estate transactions, and probate. It just made sense to expand our practice to include long-term care planning and Medicaid planning, as more and more families look to us for help in this area. Based on the number of clients we’ve already aided, we’ll continue to explore the expansion of services in this area.”
McCann and Davis are members of Wealth Counsel, a national consortium of Estate Planning Attorneys. McCann is also a member of the National Academy of Elder Law Attorneys (NAELA), an association designed to assist in education and training on elder law matters and special needs planning. In addition, McCann acts as an advisory committee member to the Southwest Kansas Area Agency on Aging and Davis is a long-standing board member for Hospice of the Prairie and Prairie Home Health in Dodge City.
Davis & McCann, P. A. also offers services in simple and complex estate planning, special needs planning, business and farm succession planning, business formation, probate, trust administration, real estate, 1031 exchanges, and more. The firm represents clients from most of the counties in Western Kansas.
With all the restrictions imposed by COVID 19, those of us with family and friends residing in nursing homes have become acutely aware of the importance of quality nursing home care. Not only are sanitation and quality medical care important, but so are social, physical, and spiritual opportunities. The COVID virus has put a microscope on nursing homes and forced all of us to rethink the definition of quality care for our seniors. While not all older Americans require nursing home care, the vast majority do or will at some point in their life. Because May is designated as National Older Americans Month, this is a good time to focus on ways we can make life a little better for the generation who paved the way for us, particularly for those who are more vulnerable and require nursing home care. If you or a loved one are considering a move to a nursing home, here are some specific questions you should ask each facility:
1. What services do you provide? Specially, what type of social programs are offered and with what frequency; are there worship sessions and, if so, how often do they occur; what type of physical activities are available; are beauty services provided; etc…
2. What is the staff to resident ratio on each shift? It’s also important to ask about skilled staff turnover rate. A well run institution will have a lower staff turnover rate. Be sure to inquire about screening for criminal records, drug use, etc... for employees.
3. How much time do nurses and aides spend with residents daily?
4. What services are available for the resident as their nursing care requirements increase? Is there a separate unit for advanced dementia care?
You’ve just come from taking your elderly mother to her doctor and learned that she needs to be admitted to a long-term care facility. Your mother isn’t a wealthy woman and you have no idea how she is going to pay for long-term care. This would be a good time to consult an elder law attorney and here’s why:
A good elder law attorney can help you devise a plan to pay for your mother’s long-term care, make suggestions on ways your mother can preserve some of her assets and which assets need to be liquidated, sold, etc. If your elder law attorney determines that your mother will immediately qualify for Medicaid benefits, she will need to provide the following information as part of the Medicaid application process:
1. Non-Financial Documents
a. Identification – picture ID (driver’s license, state ID)
b. Social Security card(s)
c. Birth verification (birth certificate, baptismal certificate or school record with date of birth)
d. Marriage license or death certificate/divorce decree of spouse
e. Health Insurance Identification Card (for all insurance coverage including Medicare, Medicare Supplemental, etc.)
f. Military discharge records including original Form DD-214
g. Names, addresses, phone numbers of all children
h. Listing of assets sold or given away in the last 5 years
2. Legal Documents
a. Most recent Health Care Power of Attorney, Living Will, General Durable Power of Attorney, Will
b. Trust documents
c. Business entity/partnership agreements
d. Resident admission agreement (if in assisted living or nursing home)
Q: My husband and I are in reasonably good health and although we are in our 60s, we have had conversations about the day when we may need to move to a nursing home facility. How can we preserve most of our assets for our children?
A: There are several things you can do before one or both of you need nursing home care. Before we begin, make a comprehensive list of all your assets, including their current value, the name of the company and/or adviser, location of the asset, legal description of any real estate, minerals, wind or water rights, how ownership is titled, and current beneficiary information. This list should include any assets that are non-income producing such as inherited mineral interests, business interests, insurance policies, etc. You will need to share this information with an experienced long-term care planning attorney for their recommendations.
Below is a list of options you may want to consider:
1. Meet with your long-term care planning attorney and accountant to discuss if your financial situation will allow you to begin transferring assets to your children now, either in part or in whole. Ideally, you would transfer as many assets to your children as possible at least five years before your admission to a full time nursing facility, as you will be penalized for any gifting done in the five years preceding an admission, which increases your overall out-of-pocket expense. Be aware that just because you gifted assets to your children with the expectation that they help with any financial problems you may encounter in your later years, they are under no legal obligation to comply. Gifting can be done to your children outright or in a trust. A trust is more costly, but gifting outright to your children means your newly-gifted assets are subject to your children’s possible divorce settlement, lawsuit or bankruptcy.
2. Continue to age at home and attempt to avoid nursing home care altogether. If you have not already developed a healthy routine of diet and exercise, begin immediately. Consult with your physician to see what suggestions they have to improve your odds of remaining independent at home.
3. When you need assistance, move in with one of your children. This may not be a popular option for either you or your child, but if you wish to preserve as many assets as possible from nursing home expenses, this strategy can be an answer. You may need to provide some fair compensation to your care-giving child, as they are taking on the additional responsibility of caring for you and will incur additional expenses and loss of personal freedom as a result. Consult with your long-term care planning attorney to structure compensation to the care-giving child so that it won’t be considered a gift and factored against you when computing your nursing home costs if that becomes necessary at a later date.
4. Depending on your age and your ability to pay, you may be able to purchase long-term care insurance. Long-term care insurance is expensive and may not pay the full amount of your nursing home care, but it can cover a large portion of the expense. Be sure to thoroughly research the insurance agent and company before purchasing any policy. Additionally, be sure to inquire about the policy’s inflation protection and waiting period you must incur prior to payment being issued to the nursing home. We advise getting 2-3 quotes for long-term care insurance to avoid an inferior product.
5. If you have a disabled child, you may want to consider making donations to fund a special needs trust on their behalf. These donations are not considered a gift when the nursing home calculates your expected expense. Donations to a special needs trust are irrevocable and cannot be used for the benefit of anyone other than the disabled individual for whom the trust was established until such time as the disabled individual is deceased.
If you and your family have questions about long-term care planning and asset protection, please contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on estate planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, 1031 Exchanges, and related matters.
The last of the children have moved away from home. You’re officially an empty nester! If you’re like many parents, adjusting to this new found freedom and income will take some time. Here are some great tips to keep in mind as you plan for your future:
1. Schedule an appointment with a reputable financial planner or accountant to review your retirement plan and make any necessary adjustments to your savings and investment plan to accommodate the lifestyle you want to have in your post-retirement age. For example, you may want to lower your household budget because you no longer have expenses related to raising children, but possibly increase your personal spending because you would like to travel.
2. Examine your estate planning documents, old will and powers of attorney and make sure they still reflect what you want to happen if you can’t act on your own behalf. A few things you should consider: (a) Do any of your children have legal or marital concerns that might put their inheritance at risk? (b) Are any of your beneficiaries receiving government benefits, whose eligibility might be jeopardized by an inheritance from you? (c) Do you still want the same people acting as your health care or business powers of attorney? (d) If you plan to become a “snowbird” and travel out of state for extended stays, do you know if your current estate planning documents will be honored in your secondary state of residence? (e) Has your net worth increased significantly since you signed your will or trust? (f) Do you still want the same people named in your original will or trust as beneficiaries? (g) Have any deaths or births occurred within the family that would require an amendment to your will or trust? (h) Have you acquired any titled assets since you did your original estate plan (real estate, minerals, investments, vehicles, business interests, etc.)?
One of the most common concerns of our aging clients is the fear of losing their family home if they need full time nursing care. There seems to be an inclination to transfer the family home to someone else, usually a family member, as quickly as possible to keep the home from being sold. This may sound like a smart idea, but it simply doesn’t work in most circumstances.
Losing the family home is a legitimate concern but one that you should not try to address without the assistance of an experienced elder law attorney. Here are a few of the problems you can encounter if you don’t abide by Kansas law and Medicaid rules:
1. Gift Tax Consequences. Unless the appraised value of your family home is $15,000 or less (the 2019 annual gifting allowance), when you transfer your family home to someone else, you will be required to file a gift tax return and may be subject to a gift tax.
2. Medicaid Reimbursement Claim. If you require full time nursing home care and are counting on Medicaid benefits to cover the cost of your care, transferring your residence to someone else shortly before moving to a nursing home facility will likely result in a problem. Medicaid works on the theory that assets (your family home, for example) that otherwise could be used to pay for your care should not be given away within the five year period prior to requesting the government (Medicaid) pay for nursing home benefits. This period is called the five year look-back. Unless the gift recipient fits certain, clearly specified exceptions, the government will assess a penalty period before they will contribute to your nursing home care if you have made a gift within the five year look-back. During the penalty period, you will be required to private pay for the cost of any nursing home care that you receive.
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