Fall 2006 Edition
SPECIAL ELDER LAW ISSUE
Vol.11 – No.2
How to Preserve Your Assets with the New Medicaid Laws
The Medicaid eligibility requirements for long term care were drastically changed by the Deficit Reduction Act of 2005 and the 2006-2007 New York State budget bill. The two most significant changes are expansion of the look-back period to five years and changing the penalty period start date for gifts (see “Life Estates”). You can preserve your assets, while accessing long term care services through the Medicaid program, by doing the following as soon as possible:
- Sign a Durable Power of Attorney to authorize your agent to manage your assets and income if you are unable to do so and implement Medicaid planning to protect your assets (see “Agent Misuses Power of Attorney”).
- Sign a Health Care Proxy and Living Will in which you authorize someone to make medical decisions on your behalf and instruct your family and doctor about life prolonging medical procedures when there is no chance of medical recovery.
- Update Your Will to provide that your estate will not go directly to your spouse if he or she is in a nursing home.
- Create an Irrevocable Living Trust.
- Protect Your Home. There are many ways to protect your home, including the $750,000 equity exclusion, transfers to certain family members (see Summer 2006 newsletter), life estates (see “Life Estates”), reverse mortgages and home equity loans.
- New York State Partnership Long Term Care Insurance Policy allows you to access Medicaid after the insurance runs out, regardless of the amount of assets that you own.
- Set-Up a Prepaid Funeral Account with a Funeral Home (see “New Burial Rights Law”).
- IRAs and Pensions.
- Certain Properly Documented Gifts may not be subject to the Medicaid penalty rules.
- Maximize Spousal Allowances and Transfers. If one spouse enters a nursing home, the other spouse is entitled to protect certain assets and income.
- Establish Caregiver Agreements (Personal Service Contracts) to pay your relatives for helping you.
- Make Transfers for the Benefit of Disabled Friends or Children.
- Spend-Down Your Assets.
- Purchase an Annuity.
For further information, contact Robert Friedman at (716)542-5444.
Free Seminar: “FOURTEEN WAYS TO PRESERVE YOUR ASSETS WITH THE NEW MEDICAID LAWS”
225 Como Park Blvd.
March 20, 2007
6:30 to 8:00 PM
Seating is limited. Reserve your place now by calling 716-542-5444.
Protection from Elder Abuse
The typical elder abuse victim is a widow who is socially isolated, physically and/or cognitively impaired and denies or is reluctant to report abuse. The typical abuser is a family member caregiver with drug, alcohol or mental health problems, a controlling personality and/or ineffective coping skills who is under financial, emotional or marital stress. However, elder abuse occurs in every racial, social and economic group. Most common types of elder abuse are neglect, emotional/psychological, financial/ sexual exploitation and physical abuse. The following are possible symptoms of elder abuse:
- Physical Abuse: Unexplained bruises, falls, fractures, grip marks, pain, swelling or welts.
- Neglect: Malnourishment, bedsores, soiled clothes, oversedation, or lack of medical attention or equipment despite available funds.
- Emotional /Verbal Abuse: Depressed, hopeless, appears shamed, withdrawn, passive, loss of self-determination, invalid guilt, threatened, called names, or fearful.
- Financial Exploitation: Illegal use of elder’s money, possessions, or resources for another’s gain. Examples: elder has no money for food or clothes, is victimized by con artists, has a caregiver who is totally financially dependent upon him, is forced to sign over control or a power of attorney (see “Agent Misuses Power of Attorney”), and has unexplained bills, charge card or banking activity.
The legal options for the victim are an order of protection, having the perpetrator arrested under the domestic violence law or a guardianship to stop financial exploitation. The order of protection may or may not include the expulsion of the perpetrator from the home. A person is eligible to go to Family Court for an order of protection if he or she is married to an abuser, formerly married to an abuser, has a child in common with the abuser or is related by blood or marriage to an abuser. An order of protection can be obtained in town, city or village court if a criminal charge has been filed by a police officer or the victim. The police must arrest for domestic violence when:
- A felony, other than grand larceny crimes, has been committed against a member of the same family or household.
- There is a violation of the Stay Away provision of an order of protection or a family offense is committed in violation of an order of protection; Family offenses include harassment (first and second degree), aggravated harassment, disorderly conduct, reckless endangerment (first and second degree), menacing (first and second degree), and assault.
- A misdemeanor constituting a family offense is committed against another family or household member, unless the victim requests otherwise. However, the officer shall not ask the victim whether he seeks the arrest of the perpetrator. Even if the victim requests no arrest, the officer can use his own discretion as to whether an arrest should be made.
Family or criminal courts can order the abusive behavior to stop (no offensive contact order); the abuser to have no contact with the victim (stay away order); and the abuser to leave the residence (vacate). Victims of elder abuse should contact attorney, their local District Attorney’s office or Adult Protective Services to pursue criminal or civil remedies.
You can transfer your home to your children with a life estate deed which gives you the right to live there for the rest of your life. During your lifetime, you will continue to be considered the owner of the home for most purposes. For example, you will still be responsible for the payment of all taxes, insurance and maintenance of the home. To determine whether the life estate deed will affect eligibility for Medicaid, the following must be considered:
- Look-back period. The look-back period remains 36 months (60 months for trusts) until February 1, 2009 at which time resource documentation for the past 37 months (60 months for trusts) will be required. The look-back will increase by one-month increments until February 2011 at which time the full 60-month look-back period will be in place for all transfers of assets.
- Value. The transfer is not considered to be for the full value of the house but the “remainder interest” in the house. The remainder interest is the right that your children or remaindermen have to receive the home automatically upon your death. The value of the remainder interest is calculated using IRS actuarial tables based on your life expectancy.
- Penalty Period. The number of months of ineligibility or penalty period is calculated by dividing the value of the gift by the average monthly cost of nursing home care. This “regional rate” for Western New York is $6,540.00.
Social Services cannot require you to liquidate the life estate or to rent the life estate interest property. However, if you rent out the property, any net rental income you receive is counted in determining eligibility for Medicaid. Also, if you sell the property, part of the proceeds or fair market value are a countable resource for determining Medicaid eligibility. The life estate deed has many advantages over an outright gift, including: 1) the property will still qualify for any property tax exemptions such as veterans and senior citizens exemptions that were available prior to the transfer as long as you continue to reside in your home; 2) your children can’t make you move out; 3) your children’s creditors can’t take possession of the home; 4) capital gains when your children sell the home will be calculated on a stepped-up basis which is the value at the date of your death rather than your original cost basis; and 5) since the value of the remainder interest is lower than the full value of the house, it will result in a shorter Medicaid penalty period than an outright transfer. You can also purchase a life estate in another’s home or a new home without penalty if you live there for one continuous year (see Summer 2006 newsletter).
Agent Misuses Power of Attorney
By signing a power of attorney, you as the principal, authorize another person or persons known as the “agent” or “attorney-in-fact” to act on your behalf to perform any number of specified acts. Powers of attorney are useful to manage your affairs if you subsequently become incompetent, thus avoiding the need for a more complex and costly guardianship or trust. However, be sure that your agent is someone that you trust. (see “Protection from Elder Abuse”).
George J. Ferrara, single with no children, was retired and living in Florida. He was estranged from his immediate family. He executed a Will in June of 1999 specifically making no provision for any family member, leaving his entire estate to the Salvation Army. He was hospitalized in December of 1999. His nephew then moved him to a New York assisted-living facility. George signed a power of attorney on January 25, 2000, appointing his brother and nephew as agents. A typewritten provision was added to the preprinted form which authorized the agents to make unlimited gifts to his nephew and brother. An attorney who was acquainted with the nephew was present at the signing of the power of attorney. However, she only acted as notary and was not counsel to either George or his nephew. The nephew transferred $820,000 of George’s assets to himself, which was virtually all of George’s assets. George died on February 12, 2000, less than a month after moving to New York and approximately three weeks after signing the power of attorney. The Salvation Army commenced proceedings in Surrogate’s Court to recover $820,000. The New York General Obligations Law provides that a gift may be made to a power of attorney for purposes which the agent reasonably deems to be in the best interest of the principal. This specifically includes minimization of income, estate, inheritance, generation-skipping, transfer or gift taxes. The New York Court of Appeals held that the New York legislature sought to empower individuals to appoint an agent to make annual gifts consistent with the financial, estate or tax planning techniques and objectives, not to create gift-giving authority generally and certainly not to supplant a Will. Noting that the gift-giving virtually impoverished George, the court held that his best interest did not include “such unqualified generosity”. Therefore, the Salvation Army was entitled to the $820,000.
New Burial Rights Law
A new state law allows you to control the disposition of your remains by designating a person to carry out your wishes. Although you can state your wishes in your Will, the Will may not be read or opened until after the funeral services. The new form for the appointment of an agent to make these decisions on your behalf should be kept in a safe place in your home with your other important decision-making papers, such as your durable power of attorney, health care proxy and living will. The new law gives you the ability to specify your wishes and give instructions to the agent. You are also able to indicate whether you have completed a Pre-Need Agreement with your funeral home. If you do not designate an agent, the law names a hierarchy of people who have the right to control the disposition of your remains: (a) surviving spouse, (b) surviving domestic partner, (c) any of the surviving children over 18 years old, (d) either of the surviving parents, (e) any of the surviving siblings over 18 years old, (f) a guardian appointed by the court or (g) the fiduciary of the estate. A simple hand written note is not sufficient. There are certain formalities that must be followed to comply with the law. Contact Friedman and Ranzenhofer, PC at (716)542-5444 for the preparation of an “Appointment of Agent to Control Disposition of Remains”.
While a great deal of care has been taken to provide accurate and current information, the ideas, suggestions, general principles and conclusions presented in this newsletter are subject to local, state and federal laws and regulations, court cases and any revisions of same. The reader is thus urged to consult legal counsel regarding any points of law – this newsletter should not be used as a substitute for competent legal advice. The purpose of this newsletter is to give the reader a general understanding of the law – not to provide specific advice. Every effort has been made to achieve accuracy. The law constantly changes and is subject to differing interpretations. Always consult with your attorney and act only on his or her advice. Victoria Square Publishing Co. Inc. and Friedman & Ranzenhofer, P.C. shall not be responsible for any damages resulting from any inaccuracy or omission. This newsletter is designed to provide accurate and authoritative information in regard to the subject matter covered. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Certain portions of this newsletter may be applicable only to New York State law.