What is Elder Law? Elder law is really a misnomer in my opinion as it means more than planning for elderly people. It also encompasses planning for individuals that are under the age of 65 whom due to illness, accident or injury are no longer able to take care of themselves and support themselves through their own efforts.
What is “Special Needs Planning? “ The special needs trust occurs in two instances.
First, this type of planning is for individuals that receive money as a result of an injury suffered at the hands of another, such as an automobile accident, bicycle accident, etc. The purpose of this planning is to allow the injured party to collect for his or her injuries while still being able to receive Medicaid benefits during their lifetime. The “special needs trust” then allows for items to be purchased for the individual that Medicaid wont pay for such as an electric wheelchair instead of a manual wheelchair.
Second, a parent or grandparent or another individual may set up a special needs trust for an individual in their living trust or perhaps in their will. A living trust is preferable, since those assets don’t have to go through probate.
What is Medicaid Planning?
There are two types of permissible Medicaid Planning. The two types are broken down into planning for someone under the age of 65 and planning for someone over the age of 65.
Planning for someone under age 65: These individuals are disabled prior to or as the result of either an intentional or negligent act. Medicaid has paid benefits for that individual and the individual then receives settlement proceeds or a jury award that would normally make him or her ineligible to receive Medicaid benefits. Through proper planning the proceeds can be held separate from the individual’s assets, so that they remain eligible for Medicaid. The proceeds are then used to provide for the individuals needs that are not covered by Medicaid. This is referred to as a “supplemental needs trust” or a “special needs trust”. If anything is left in the trust upon the death of the individual, the proceeds first go to reimburse the state or states that have provided benefits and then any remaining balance goes to the individual’s heirs or beneficiaries. There is no requirement that there be any money inside the trust at the time of the individual’s death.
Medicaid planning for someone over the age of 65: First, they have to qualify under the Medicaid “asset test”, and then they have to qualify under the “income test”.
For a single individual, the assets are allowed to be no more than $2,000.00. But there are ways to legally reposition assets to meet this test. After qualifying under the asset test, an individual may only have $2,022.00 (2010 same as 2009) in monthly available income. However, through the use of a “Miller Trust” or “Qualified Income Trust” it is possible to divide excess income into “available income” and “non-available Income” thereby passing the income test as well.
For a married couple, the rules are different. Again, the Medicaid Applicant can only have $2,000 in assets and the spouse can have $109,560.00. Medicaid rules allow unlimited transfers (both in number and in amount) between husband and wife to qualify for Medicaid. These transfers between husband and wife are called “exempt transfers”. If the “community spouse” (otherwise known as the well-spouse or non-applicant) still has more assets that take him/her over the limit there will still be planning to do to assure qualification for Medicaid. Depending upon who is counting there are as many as 20 different ways to handle excess assets and still qualify the Medicaid Applicant for Medicaid. Many of these solutions can be completed within 30 days or less depending upon the asset. Only as experienced Medicaid lawyer can tell you exactly how long it will take to complete the necessary transfers.
In many instances, the “spend down” that most people fear can be substantially reduced or totally eliminated by proper Medicaid planning. No longer is the individual facing the possibility of exhausting their assets and then applying for Medicaid.
The most powerful legal document is the Medicaid compliant Durable Power of Attorney. Many people already have Durable Powers of Attorney (DPOA) from their previously drawn estate plan. However, estimates range from 90% to 95% of those DPOAs will be inadequate in the Medicaid situation. You should consult with an Elder law attorney to be sure that your DPOA will allow you or your agent to carry out Medicaid planning on your behalf or your spouse’s behalf.
The second most powerful document that can be affective in Medicaid planning is a proper Medicaid planning will. It does no good to get someone qualified for Medicaid only to have them disqualified later on when the community spouse passes away unexpectedly.
The third most powerful document that can be affective in Medicaid planning is the Enhanced Life Estate Deed (aka “Lady Bird” Deed, named after Lady Bird Johnson the widow of President Lyndon Baines Johnson). This allows the homestead to bypass probate upon the death of the surviving spouse. (Remember sometimes the surviving spouse could turn out to be the Medicaid patient.) In addition to avoiding probate, the property will also bypass Florida Medicaid Recovery.
As mentioned above, there are additional legal ways and additional legal documents that can be a part of Medicaid planning. Please contact me with your Medicaid questions.