Medicaid’s Confusing Treatment of Trusts
Not a week goes by in which someone doesn’t call us about Medicaid eligibility as it relates to trusts. The question is usually some version of the following, “I transferred assets to an irrevocable trust. Can you confirm for me that those assets are protected and not countable by Medicaid?” Trusts are very tricky when it comes to Medicaid. It’s one of the reasons I recommend that if the need for Medicaid benefits is at all a possibility, before setting up a trust or if one has already been established, you should sit down with an elder law attorney who has experience with Medicaid laws and regulations. As readers of this blog know, Medicaid is a combination federal and state program. There is a body of federal laws and regulations that is common to all the states. Medicaid, however, is administered on the state level and so there are state laws and regulations that apply here as well. But they must be consistent with, and cannot violate, the federal laws and regulations. One final general point here. We are talking about irrevocable trusts only. Revocable trusts – in which the grantor can revoke or amend the trust terms –
What is a QLAC? (Part 2)
In last week’s post I told you about QLACs, qualified longevity annuity contracts. This week I’ll delve into the pros and cons. As I stated last week distributions under a QLAC begin at a specified starting date that you choose but no later than age 85. There are no benefits under the contract after the owner’s death. The contract must be identified as a QLAC and it cannot be a variable or indexed contract. It may, however, contain a cost of living adjustment. Many insurance companies offer such riders. A QLAC also can offer a return of premium option (ROP). The ROP guarantees that upon the contract owner’s death a designated beneficiary is entitled to receive an amount equal to the original premium paid minus the total annuity payments received by the owner before he/she died. The ROP is paid not later than the end of the calendar year following the year in which the account owner died. If the death occurred after the annuity payments have begun then the ROP payment is considered a required minimum distribution for the year in which it was paid and is not eligible for an IRA
What is a QLAC?
Chances are a QLAC is not something you’ve heard of but over time that may change. It stands for Qualified Longevity Annuity Contract and it’s a relatively new investment option. The term “qualified” may be a tip off to some that it is a type of retirement account investment. That is true. It was designed to address the increasing concern of many Americans that with Social Security estimated to run dry by 2034 unless Congress addresses the problem (and nothing going on in Washington right now gives hope that they will any time soon) they need to look to other ways to try to guarantee a lifetime stream of income. In 2014 the IRS amended the required minimum distribution (RMD) rules, providing more flexibility for owners of qualified (tax deferred) accounts to the extent they are invested in QLACs. The RMD rules are the pesky requirements that make retirement account holders take a minimum amount out of their accounts starting in the year they turn 70 and ½ so the federal and state governments can get their tax on all the interest and growth in the accounts that have built up, in many cases, for years. Let’s first review
The Latest Republican Efforts to Repeal and Replace Obamacare
Several months ago I wrote about the first attempt to repeal and replace Obamacare since the 2016 elections, which failed. The latest attempt, revived by New Jersey Congressman Tom MacArthur, passed thru the House of Representatives. The Senate, in secret meetings that have stirred more controversy, put out its own version which has yet to be voted on. The Congressional Budget Office has estimated that more than 20 million people will lose health care coverage if Obamacare is repealed and the Senate version is adopted. The Senate bill includes cuts in Medicaid funding. Remember that part of Obamacare includes an option for states to expand their Medicaid programs with additional federal funds to support that expansion. New Jersey took full advantage of Medicaid expansion. The question I am repeatedly asked is, “what does this mean for Medicaid?” – meaning the Medicaid programs that cover long term care. It is still too early to tell with any certainty what Congress and President Trump will actually get passed into law – since compromises along the way can dramatically change things. We can, however, look at what is currently on the table. The Senate version of health care reform changes Medicaid to
Assisted Living Medicaid is Still Not Retroactive (Part 2)
Last week I was telling you about an important difference between assisted living Medicaid and nursing home Medicaid. I explained this to my client but she heard – or thought she heard – something different from the facility. I had said that ALF Medicaid is not retroactive, meaning if I apply for Medicaid in June and am financially eligible for June but Medicaid doesn’t approve the application till December I won’t get Medicaid to start paying until December. The 5 month gap is something I or my family must pay at the facility’s private pay rate. My client called me a few weeks later to tell me that the facility said there is “gap coverage” for this period. That didn’t sound right to me so I called the facility. Sure enough there was a misunderstanding. The facility representative was talking about something entirely different. Let me explain. A few years ago New Jersey Medicaid went to managed care. After Medicaid is approved it can take a few months until managed care kicks in – until the MCO starts paying. During that “gap” period the State will cover the cost. As is common with Medicaid, how everything works is so
Assisting Living Medicaid is Still Not Retroactive (Part 1)
There are some very important differences in the Medicaid regulations and coverage for nursing home vs. ALF Medicaid. ALF Medicaid is a community based “waiver” program. It is not part of the basic Medicaid coverage that all states must agree to provide when they accept federal funds. Rather, this is additional coverage that they can choose to offer or not. So, what do I mean when I say that ALF Medicaid is not retroactive but nursing home Medicaid is? Let’s say I apply for Medicaid on June 15 and I want Medicaid to start paying for my care on June 1. I must meet all the eligibility requirements as of May 31 in order to be eligible for coverage on June 1. However, it may take 6 months or longer for the State to review my application and approve it. If my application is not approved until December and I am in a nursing home applying for “nursing home Medicaid” then the approval will be retroactive to June 1. I can even seek coverage back another 3 months to March, again, if I have met all financial and other eligibility requirements as of February 28. On the other hand,