Alert – Veterans Administration New Regulations Propose 3 Year Look Back
On January 23, 2015, the VA took the initiative in proposing new regulations that would penalize wartime veterans and their spouses up to 10 years for making gifts, if they wish to qualify for the VA’s Aid and Attendance program. As many readers of this blog know, this non-service connected pension can provide as much as $2120 per month in tax free income to help pay the cost of long term care. This program is means tested with an asset limit of about $80,000. Currently, there is no look back as there is for Medicaid so that transfers for less than fair value to individuals or trusts do not result in a waiting or penalty period for benefits. Federal legislators introduced two bills since 2012 seeking to impose a 3 year look back but neither bill has yet passed both houses of Congress. The VA has instead tried to take matters into its own hands. A penalty of up to 10 years would result from uncompensated transfers. The penalty would be calculated by dividing the amount of the transfer by the claimant’s pension rate. A married veteran, therefore, would
Retitling Assets to Healthy Spouse to Qualify for Medicaid (Part 2)
Last week we were discussing Mary’s dilemma. Her husband, George, has Alzheimer’s Disease and is going to need some care at home. Mary is concerned that soon he will need nursing home level care and she wants to preserve their primary home and their second home. The problem is that George does not have long term care insurance so will have to privately pay for care until Medicaid eligibility. Mary can keep the primary home and $119,220 in assets but everything else needs to be spent down before Medicaid will cover his care. She can’t simply take George’s name off the deed to their shore home. So, what are their options? It may still be possible to transfer the second home to a trust and try to get through the 5 year look back. George doesn’t yet need nursing home level care and it may be possible to pay for the care he needs for 5 years if his decline in health is slow rather than rapid. This would mean spending other savings during that time frame and if they can’t quite make it, maybe a family member can
Retitling Assets to Healthy Spouse to Qualify for Medicaid
It’s something I have written about in past blog posts but just last week we received a call from Mary on this exact issue. Her husband, George, has Alzheimer’s and now needs care at home. She is concerned that as his condition worsens it won’t be long before he needs nursing home care. At $120,000 a year she doesn’t have sufficient income to pay that kind of expense. A few years ago Mary spoke with her attorney about planning for the possibility of needing Medicaid for George. She wanted to insure that her primary residence and shore home would be protected, that they would not need to be sold and spent down for care. Her attorney told her not to worry. “We’ll transfer George’s interest in the homes to you.” So that’s what they did. “Unfortunately”, I told Mary, “that is not going to protect the shore property.” That’s because under Medicaid’s division of asset rules, while Mary can keep their primary residence, all other assets, including the second home, are considered “countable” assets. Mary is entitled to keep ½ of those assets but only up to a maximum
The ABLE Act – The Drawbacks
Last week I told you about the ABLE Act that was passed by Congress and signed by President Obama just before the Christmas holiday. It sounds great, allowing disabled individuals to set up savings accounts, similar to a 529 plan, without losing government benefits. But is it all its “cracked up to be”? Maybe not. There are some serious flaws. First of all, the accounts are to be set up in the name of the disabled individual giving that person complete access to the account. This might work fine for people whose disability is of a physical nature, however, families may be reluctant to fund these accounts where the disability is such that the person cannot exercise good judgment or fiscal responsibility. The security of a trust may still be desirable. Additionally, what Congress never highlighted, and understandably so, is the fact that there is a payback provision in the law. Under estate recovery laws, if there is any money left in the account at the time of the individual’s passing, any state providing benefits is entitled to be reimbursed up to the amount of benefits paid out on
The ABLE Act Passes
Just before the Christmas holiday break, Congress passed, and then President Obama signed into law, the Achieving a Better Life Experience Act (“the ABLE” Act). The ABLE Act allows people with disabilities to open special accounts, similar to 529 college savings plans. The interest earned on these accounts will be tax free and the funds in the account can be used to pay for education, transportation, healthcare, housing and other expenses. This allows disabled individuals to keep their needs based government benefits, such as SSI and Medicaid and use the funds to cover what the benefit programs won’t. As with any government act or program there are rules and restrictions. Only the first $100,000 in an ABLE account is exempted for SSI eligibility purposes. Additionally, these accounts can receive only up to the annual gift tax exemption amount of $14,000. Finally, only individuals, whose disability occurred before they reached age 26 may establish an ABLE account. Now that the law is a reality, there is still work to be done. Each state must now establish regulations before financial institutions can make these accounts available,
The Importance of a Well Crafted POA (Part 2)
Last week we were talking about the importance of a well drafted power of attorney or looking at it from the flipside, the problems caused by an inartfully drafted one. Two recent examples in our office highlight the dangers. In the first case, we drafted the client’s power of attorney. It contains language permitting the agent “to enter any safe deposit box or vault on which [the principal is] a signer and withdraw or add to its contents”. The agent wanted to close the account and surrender the box. The bank employee reading the clause concluded that this power did not include the ability to close out the box (although she agreed the agent could close the bank account). This is a situation I have come across frequently, an evaluation of the document limited to the express language, rather than examining the document as a whole. Courts have reasoned that the whole document must be examined. Each clause should be used to interpret the others. If the agent has the power to remove and add contents to the safe deposit box then he has