Understanding the Basics of Medicaid Planning

August 25, 2011 by · Leave a Comment 

By Adil Daudi, Esq.

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It has become quite evident that more and more aging Americans are beginning to rely on governmental assistance for their health care needs. In fact, Medicaid is officially the country’s largest health program when it comes to recipients – serving approximately 56 million Americans.

Although the laws of Medicaid continue to evolve each year, the planning and focus given should also adjust accordingly to ensure the recipients are keeping up-to-date. It is always important to learn the new laws in the event you have a loved who is considering being entered into a nursing home.

The following are three (3) basic questions that are often misunderstood when it comes to planning for Medicaid:

Do I have to give up all of my assets to qualify for Medicaid?

No. With careful planning, you can help increase the number of assets you are allowed to keep. Medicaid applies differently depending on the marital status of the applicant. However, in general terms, any applicant applying for Medicaid is allowed to keep the following “exempt assets”:

Vehicle

Home

Personal belongings

$2000 cash

Life insurance with total face value of $1500 or less.

Prepaid irrevocable funeral contract

Exempt asset are assets that are not countable for Medicaid eligibility purposes. Any remaining assets are considered “non-exempt” assets, and these must be “spent down” in order to become eligible for Medicaid. However, it is always advised to consult with a professional when applying for Medicaid as any experienced attorney would be able to guide you and recommend ways for you to increase your “exempt” assets.

What does it mean to “spend down” my assets?

Once you’ve determined your “exempt” assets, anything remaining is considered “non-exempt” and thus counted towards your eligibility. However, with crafty planning and proper advice, there are ways to lower your “non-exempt” assets and that is by spending down the value you carry. For example, purchasing a home, renovating your home, buying personal property, buying a new vehicle, purchasing an SBO trust (“Sole for the benefit of”) or a single premium immediate annuity. These are all permissible ways of “spending down” your countable assets.  

What does Medicaid pay for?

The average cost of a nursing home in Michigan is approximately $6500 a month. A person who enters into a nursing home Medicaid certified, the government will cover the cost of the care, less the patient-pay amount, which is based on a formula.

The formula itself begins with the Medicaid beneficiary’s monthly income that they receive from Social Security and any possible pension. In addition, the beneficiary can keep $60 for their personal needs and any money needed to pay for private health insurance.

Please note that the above information is simply a guide providing you with the basic understanding of Medicaid. It is always advised to seek professional advice when applying as you would learn how to maximize the assets you can keep and receive assistance in spending down the assets you can’t. Despite the government’s generousity in providing such assistance, it is always best to find ways to preserve your own money for your benefit.

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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Special Amenities Trust: Preserve Governmental Benefits and Protect Your Inheritance

August 11, 2011 by · Leave a Comment 

By: Adil Daudi, Esq.

In the unfortunate situation of having a child with a certain disability, the stress on the parents can be overwhelming. Families in such situations face unique challenges when it comes to planning for their estate planning; as not only are they concerned about their child receiving their inheritance, but they carry the additional concern of not knowing whether their child will continue to receive their governmental benefits (Social Security Disability, Medicaid, or Supplementary Security Income).

It is imperative for any parent who has a disabled or mentally ill child to be proactive by developing a sound estate plan that takes these needs into consideration and helps ensure that their child’s inheritance will not interfere with their government benefits. One way of handling such a situation is through the use of a Special Amenities Trust (SAT). An SAT is a specific trust created to ensure that beneficiaries who are on governmental assistance can continue to receive their inheritance without losing their governmental benefits.

How Does a Special Amenities Trust Work?

There is one primary rule when it comes to a SAT: the trust funds in the trust can’t be used for food, clothing or shelter for the beneficiary. In other words, the Trustee of the trust can pay for anything the beneficiary would want for personal purposes, as long as it is not in the category of food, clothing or shelter. The rationale behind this restriction is that the funds received from the government should suffice for the beneficiary’s ability to provide food, clothing and shelter. Outside of this restriction, the trust is able to purchase any other item it deems necessary, or even luxurious. If the beneficiary wishes to go on a vacation, the trust funds could be used to cover the entire trip.

Who Manages the Trust?

One thing to note when setting such a trust is that it is deemed irrevocable. That means that once it is created, it cannot be changed, altered or amended.  If done properly, this irrevocability is not an issue because this type of trust has proven to effectively assist families and protect their beneficiary’s interests.

As part of the creating process, the individual who manages the trust would be a Trustee. The Trustee’s sole responsibility is to ensure that the funds in the trust are being distributed to your beneficiary as they request it (as long as the request is not for one of the above-listed limitations).

The Trustee, who should be a trusted family member or friend, carries absolute discretion over the distributions to the beneficiary. Prior to any funds being withdrawn, the beneficiary must seek the permission from the Trustee who would make sure that the funds would be used for the proper purpose. However, this does not limit the beneficiary from receiving their funds, it simply ensures the trust is being maintained for its primary purpose. It is very common for the beneficiary to ask the Trustee for certain items they wish to purchase, and any purchases made should be paid directly from the trust. It is important for the Trustee to make sure that the beneficiary does not have any direct access to the funds, as that would negate the purpose of the trust and possibly have the government stop their aid.

If you have a special needs child receiving governmental benefits, then there is no better planning you can do than by obtaining a Special Amenities Trust. Knowing that your child’s inheritance can impact their ability to receive public assistance is enough to take a proactive approach and build an estate plan that is carefully tailored and monitored to meet your needs and objectives that goes beyond the mere avoidance of probate and tax minimization. Be sure to speak to your local Attorney to learn the many advantages of setting up such a trust.

Every parent intends to support their child well after they have passed. Take the time and sit down with an attorney to better develop your estate plan and guarantee your child continues to receive care throughout their lifetime without having their government assistance disqualified.

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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