Legal Issues Concerning Medicaid & Estate Planning

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1 Legal Issues for Seniors Presenter: Radha Chanderraj, Esq.

2 Key Issues Estate Planning Trusts, Wills Advanced Directives & POLST Durable Powers of Attorney Probate Long term care Medicaid LT Care Insurance Reverse Mortgages Chanderraj Law Offices Senior Issues 2

3 Estate Planning Revocable Trusts Ø Flexibility and control q Especially important for blended families Ø Avoidance of probate Ø Privacy Ø Difficult to challenge Chanderraj Law Offices Senior Issues 3

4 Estate Planning Irrevocable Trust Come in many different flavors Generally need beneficiary consent for changes Types of Irrevocable trusts Ø Irrevocable trusts to reduce taxes Eg. GRATs, Life- Insurance Trusts, Qualified Personal Residence Trusts, Q-Tip Trusts Ø Irrevocable trusts for Medicaid planning/asset protection Ø Specials Needs Trust to enhance quality of life for beneficiary without effecting eligibility for public assistance Chanderraj Law Offices Senior Issues 4

5 Estate Planning - Special Needs Trusts Disability Trusts Funded with beneficiary s own assets Must be under age of 65 Medicaid payback provision Pooled Trusts Must be established by a non-profit with sub accounts for the sole benefit of individual beneficiaries No age restrictions Modified payback provision Third-party discretionary trusts Funded with assets that do not belong to beneficiary Extremely flexible and no Medicaid payback provision Chanderraj Law Offices Senior Issues 5

6 Estate Planning - Wills Less expensive and may be all that is needed for persons with modest estate (no real estate) Needed even when you have a revocable trust provides for probate assets to be transferred into trust Except for electronic and holographic wills, must be in writing and signed by 2 witnesses (NRS ) Devices to subscribing witnesses void(nrs ) Chanderraj Law Offices Senior Issues 6

7 Estate Planning - Wills Holographic & Electronic Wills Holographic will a will in which the signature, date and material provisions are handwritten No requirement for witnesses or notarization Electronic will Written, created and stored in electronic record Date, electronic signature and at least one authentication characteristic Allows for one authoritative copy that is stored in a way that makes attempted alterations readily identifiable Impossible to comply with requirements of statute because there is no software capable of meeting these requirements. Chanderraj Law Offices Senior Issues 7

8 Estate Planning - Wills Revocation Will may be revoked by destroying it or by writing a new will If you only want to make minor changes, you may create a codicil, Marriage after making a will revokes will as to surviving spouse unless provisions made outside the will or spouse is provided for in the will or will shows omission is intentional Divorce revokes every devise to former spouse Will can be changed at any time as long as you are of sound mind cancellation or revocation of a 2nd will does not revive 1st first will unless terms of the revocation show intention to revive the 1st will, or the 1st will is re-executed Chanderraj Law Offices Senior Issues 8

9 Estate Planning Adv. Directive & POLST Advanced Directive Living Will governs withholding or withdrawal of life sustaining treatment (NRS ) Medical Durable Power of Attorney (NRS ) ü Necessary to appoint health care agent ü Provides instructions for future treatment ü DNR (NRS 405B.420) need to apply for DNR card POLST ü Should accompany Advanced Directive ü Designed for seriously ill or frail patients ü Guides action by EMP when made available Chanderraj Law Offices Senior Issues 9

10 Estate Planning Advanced Directives Living Will States your desire when terminally ill or injured and unconscious, comatose or incompetent (Doctors do or do not ) pull the plug no relation to the conventional will or living trust Medical Durable Power of Attorney Allows you to name a trusted person to make medical decisions for you Person named to make these decisions -your agent or attorneyin-fact. DNR Do Not Resuscitate alerts emergency personnel that you do not wish to receive cardiopulmonary resuscitation (CPR) sometimes made to supplement other health care directives Can make application for DNR identification card with SNHD Chanderraj Law Offices Senior Issues 10

11 Estate Planning - Living Will Lockbox Secure web based registry maintained by NV SOS A copy of advance directive will be kept confidentially and readily available to you and your authorized health care provider, when needed, You choose who may have access to the documents filed in your lockbox Registration forms available at or by calling (702) Registrants receive a wallet-size card with their password for accessing their advanced directives Providers (e.g. hospitals, hospices) who register with the NV SOS can log in and access your documents. More than 6,500 registrants, 50 hospitals and medical groups use the Living Will Lockbox. For more information call NV SOS at (775) Chanderraj Law Offices Senior Issues 11

12 Estate Planning -Durable POA Advantages Cons ü Advance planning tool for possible future incapacity Gifting power ü Springing Power of Attorney ü Should prevent possibility of future court proceeding to declare grantor incapacitated and appointment of surrogate ü Assures that grantor s choice of person is able to act ü Extremely broad and opportunity for misuse or abuse ü Person selected must be completely trustworthy ü Consideration may be given for co-agents/requirement to consult with attorney when gifting assets. Chanderraj Law Offices Senior Issues 12

13 Personal Organizer Provides heirs with guidance if you die or become incapacitated Some items that should be included: ü List of organizations/people to contact when you die ü Location of estate planning documents and list of beneficiaries of your estate plan ü List of all your assets (e.g. bank a/c., insurance policies, pension plans, deeds) ü Location of safe deposit box (if any) ü List of credit card accounts and debts ü List of passwords for all your electronic accounts ü Contact information for accountant, attorney, insurance agent, etc. Chanderraj Law Offices Senior Issues 13

14 Probate Court proceeding to formally transfer assets belonging to deceased person Probate estate all assets not passing by operation of law or under the terms of a contract. governed by will or intestate succession Non-probate estate Assets in joint tenancy Under terms of contract with designated beneficiary Nevada probate law Process Affidavit of Entitlement Set Aside Assets w/o Admin. Summary Administration Value of Probate Estate $20,000 or less $ 100,000 or less $200,000 or less Regular Administration > $200,000 Chanderraj Law Offices Senior Issues 14

15 Long term care Quick facts Average life expectancy: Ø Men 84 years; Women 86 years 70% will require some form of long term care Of those requiring long-term care Ø 50-60% will need it for > 1 year Average cost of care in 2014: Ø $6,753 per month/$81,036 per year Avg. costs in Nevada $6,692 per month (double occupancy) $7,300 per month (single occupancy) Chanderraj Law Offices Senior Issues 15

16 Long Term Care - costs Care Type National Avg. daily cost National Avg. monthly cost Adult day care $ 61 $ 1,322 Assisted living $ 110 $ 3,330 Home care $ 162 $ 3,432 Nursing home (double occupancy) Nursing home (single occupancy) $ 200 $ 6,083 $ 222 $ 6,753 Chanderraj Law Offices Senior Issues 16

17 Paying for long term care Personal assets Medicaid Medical eligibility Income eligibility Asset eligibility Long term care insurance Medicare covers only a limited period of skilled nursing care post hospitalization 20 days of full coverage (after at least 3 days inpatient hospital) 80 days of partial coverage Chanderraj Law Offices Senior Issues 17

18 Medicaid Planning Asset eligibility Assets Up to $2,000 Primary home $536,000 Personal belongings & household goods One car or truck Burial space and related items for applicant & spouse Burial fund Up to $1,500 Life Insurance Face value $1,500 or less Chanderraj Law Offices Senior Issues 18

19 Medicaid Planning (contd.) Nevada Medicaid numbers Income cap $2,163 Min. MMNA (as of 7/1/14) $2, Max. MMNA $2,931 Min. CSRA $23,448 Max. CSRA $ 117,240 Community spouse monthly housing allowance $ Home equity limits $543,000 Chanderraj Law Offices Senior Issues 19

20 Medicaid Planning Division of Assets Division of Assets Examples Bob is in need of LTCF services. Bob and Jane have following countable assets: B -$ 10,000, Jane - $125,000, Joint - $115,000: Total - $250,000 spousal share - $125,000; CSRA amount - $117,240 No court petition needed Kris is going into LTCF. Kris and Ana have the following counted assets: Kris - $45,000, Ana $55,000, Joint - $10,000: Total - $110,000 Spousal share - $55,000; CSRA amount - $55,000 Ana can petition court to keep $110,000 Chanderraj Law Offices Senior Issues 20

21 Medicaid (contd.) Gifting of Assets Look back period and ineligibility penalties Estate Recovery Lien on home Spend down o Pay off mortgage o Purchasing new car or burial o Income only Trust o Medicaid eligible annuities Chanderraj Law Offices Senior Issues 21

22 Long term care insurance Pay fixed benefit for each day spent in nursing home Common concerns about LT care policies: Ø Level of care Ø Pre-existing conditions Ø Benefit rate and inflation protection Ø Maximum benefit Ø Activities of daily living Ø Life insurance Chanderraj Law Offices Senior Issues 22

23 Reverse Mortgage on Home Reverse Mortgages Ø 62 or older Ø Uses equity in home Ø Cannot be outlived Ø No credit scores required Ø Has to be repaid after death of last borrower Ø Debt limited by value of home if home is sold to repay loan q If other funds used to repay loan need to repay full loan balance Chanderraj Law Offices Senior Issues 23

24 Reverse Mortgage Property Requirements Must be primary residence Loan due if living in nursing home or assisted living for 12 months Must be the primary debt against house Can use proceeds to pay off existing mortgage Limit on amount that can be borrowed (around 70% of home value up to maximum of $625,500) Must be single family home, or one of 1-4 unit homes or HUD approved condo or FHA approved manufactured home Borrower must continue to pay property taxes and insurance on home and maintain the home Chanderraj Law Offices Senior Issues 24

25 Home Equity Conversion Mortgage HECM only FHA insured reverse mortgage and likely to cost less Amount of loan depends on age, interest rate and home value and MIP Loan amount can be taken in one of following ways: Tenure- equal monthly payments (one borrower has to occupy) Term- equal monthly payments for a fixed period of months selected. Line of Credit (creditline grows by rate on loan + ½%) Single Disbursement Lump Sum (rising debt and lower equity) Some combination of above options Must talk to a HUD counselor Chanderraj Law Offices Senior Issues 25

26 Reverse Mortgage costs Besides interest on loan, additional costs on reverse mortgage include: Origination fee - varies by lender Mortgage Insurance Premium Third party closing costs (generally ranges from 2,000 3,000) Servicing fee All of above costs are relatively high (2-8% of loan amount) and can be financed (added to loan balance) Chanderraj Law Offices Senior Issues 26

27 Reverse Mortgage Questions to consider Do you really need a reverse mortgage or there other cheaper options (e.g. home equity loan)? What will you use the cash for? Can you afford to start using up your home equity now? Have you considered the impact of a reverse mortgage on your heirs? Information available at portal.hud.gov and Chanderraj Law Offices Senior Issues 27

28 Reverse Mortgage cautionary note Can leave a elder homeless if elder has to move into nursing home If elder fails to pay property taxes or insurance or maintain home, he/she is in default and lender can foreclose Spouse may have to leave the house if elder goes into assisted living and spouse is not on deed. Compound interest is calculated not only on the amount received but on the interest previously assessed (rising debt and falling equity) Chanderraj Law Offices Senior Issues 28

29 Thank you for your attention! QUESTIONS? Chanderraj Law Offices Senior Issues 29