Medicaid Divorces

Posted on March 24, 2012 by David | Permalink 0

Let’s start from the beginning. We do NOT recommend Medicaid divorces. The emotional trauma of ending a marriage for the sake fo saving money can be quite high. Having said that, here is where the concept comes from.

Federal law combines the assets of a married couple for purposes of determining eligibility for EITHER spouse. It does not matter who’s name is on the asset. I regularly hear spouses tell me that one asset or another is only in his or her name so it shouldn’t matter. That’s not how Medicaid sees it. One way to break this eligbility analysis is to terminate the marriage so each spouse is viewed seperately.

The rule comes from 42 U.S.C. 1396r-5(c). That rules was originally designed to protect the poor spouse since older couples formerly placed most assets in the name of the husband. Under that circumstance, the old rule would have impoverished the wife, leaving her with nothing after the husband spent down his assets to get Medicaid. When Congress changed the law, it created a formula that divides marital assets giving the healthy spouse the right to keep all EXEMPT assets, plus an allowance from the countable marital assets. Currently that allowance is $113,640 (plus $2,000 the sick spouse getst o keep).

When couples have substantially more than the allowance amounts, they sometimes consider divorce as a alternative for moving assets from teh sick spouse to the healthy (or healthier) spouse. The reason is because Medicaid evaluates the applicant at the time of application and if a divorce court has shifted all of the assets away from the sick spouse, then he or she has nothing.

We believe there are better planning alternatives. Among them, when there is advance planning, we can seek and order of seperate support (also using the domestic courts), but which leaves the marriage intact. This action was popularized by an attorney named Tim Takacs in Tennessee where he won an action Known as Blumberg v. Tennessee Department of Human Services. This sort of action takes advantage of a little known provision within federal law that requires States to follow a domestic order for support if it was entered PRIOR to the time of the Medicaid application. the specific language relating to income is:
“If a court has entered an order against an institutionalized spouse for monthly income for the support of the community spouse, the community spouse monthly income allowance for the spouse shall be not less than the amount of the monthly income so ordered.”

The specific language relating to assets is:
“If a court has entered an order against an institutionalized spouse for the support of the community spouse, section 1396p of this title shall not apply to amounts of resources transferred pursuant to such order for the support of the spouse or a family member (as defined in subsection (d)(1) of this section).”

Litigation of this sort is not inexpensive, but with advance planning, it can let you keep the marriage intact and protection additional assets that would otherwise have to be spent down.

As a practical matter, when one spouse becomes sick, the healthier spouse files an action for seperate support. The spouse prepares a budget regarding his or her needs and, if it is dones properly, will consider allowing the attorney to engage an expert witness who can testify regarding the spouse’s needs. The State will be given notice of the action. Then, because the sick spouse is unlikely to object to the proceeding, the State will send an attorney to defnd the action, claiming you don’t need more than the default allowance ($113,640). A judge considers the evidence and decides the case. Then, after that proceeding is complete, an application for Medicaid benefits is filed.

If you hav additional questions regarding this or other Medicaid issues, do not hesitate to contact us.

Couples, Eligibility

Medicaid Estate Recovery

Posted on March 24, 2012 by David | Permalink 0

Anyone who has heard stories about the government taking Mom’s home because she was in a nursing home is talking about Medicaid Estate Recovery. The rules are different in almost every state because (1) federal law gives states flexibility in developing their estate recovery programs and (2) because contract law, property law and other laws are different in each state. In Georgia, the Department of Community Health seeks reimbursement of funds it paid toward someone’s medical care by filing a claim in the probate estate. The program is described on the Department’s website. You can also get more information by calling the Department at 770-916-0328 (Technically you are calling a collection company employed by the Department, but that’s who you deal with). Do not, however, think that the Department is looking after your interests or that it is protecting you. It is self-interested. The easiest way to understand this is when you realize that the Estate Recovery program was implemented as a cost-savings measure, essentially a tax on Georgia’s poorest and most frail citizens. If you believe you have a defense to the claim, and you might, then you should speak with an Elder Law Attorney. You may call us at 706-428-0888, or you can use the attorney locator tool at www.naela.org
Georgia Estate Recovery Regulations
Medicaid Estate Recovery in Georgia: An Advocate’s Perspective
Tennessee Medicaid Estate Recovery

Estate Recovery

Trust was countable asset

Posted on March 24, 2012 by David | Permalink 0

Jeanne M. Biagetti established a revocable trust in 1998. According to counsel, it became irrevocable in 2001 when she became unable to manage her own financial affairs. When She applied for Medicaid in 2009, however, the trust was found to be a countable asset and Medicaid eligibility was denied. Jean appealed arguing that the trust assets could not be countable because 60 months had passed since the trust became irrevocable. Unfortunately, the Medicaid rules don’t stop there. A self-settled revocable trust is always countable when applying for Medicaid. Regarding self-settled irrevocable trust, distributions of income or principal are treated as income and the principal is countable to the extent that it COULD BE PAID to or for the benefit of individual. Here, the trust provided that “the Trustee may pay such portions of the principal income of this Trust to said beneficiary or expend the same for her benefit.” On appeal, the Court digressed, finding that the trust was countable because it was a support trust. In light of 42 U.S.C. § 1396p(d)(3)(B)(i), the discussion regarding supports trusts is likely moot.
Biagetti v. R.I. Dep’t of Human Services, 2011 R.I. Super. LEXIS 32 (2/25/2011)
Full case: http://www.courts.ri.gov/superior/pdf/09-7370.pdf

Trusts

What happens to alimony after Medicaid?

Posted on March 24, 2012 by David | Permalink 0

Sometimes people wonder what happens to alimony payments after there is a Medicaid application. The answer is that it depends.

A Medicaid application does not change the terms of a divorce decree. HOWEVER, that does not mean that Medicaid has to respect the terms of a divorce decree either. Medicaid is a cost-share program which requires an applicant to pay all of his or her income toward nursing home care before Medicaid steps in to pay the balance of the bill. So, if Joe Smith has income of $2,000 per month, Medicaid would tell Joe to pay his $2,000 per month (less a $50 personal needs allowance) toward the nursing home bill before its pays the balance. What if Joe was obligated to pay $1,000 per month to his ex-wife? Would Medicaid say that’s ok? The answer is “no.” Medicaid would still tell Joe to pay $1,950 per month toward the nursing home bill. So, Joe is caught in a catch-22. If he pays the alimony, then his nursing home bill will not be completely paid because Medicaid won’t make up the difference and he will get kicked out of the nursing home for non-payment. One the other hand, if he refuses to pay alimony, then he could be held in contempt of court. The answer will likely be that Joe needs to have the domestic order modified and alimony payments will end.

On the other hand, what happens if Joe is healthy, but his ex-wife, Sue, needs nursing home care. Well, in that case, if Joe is making alimony payments, then he continues to do so, but the payments go toward the nursing home bill. It makes no difference to Sue, because Medicaid is paying the balance of her nursing home bill regardless of her income. The more income she gets, the less Medicaid pays. The less she gets, the more they pay. Joe should go back to court and ask the court to eliminate the Medicaid payment. At a minimum, the family should try to have the order modified so alimony payments are made to a special needs trust if Sue is young enough to have one (in most States, Sue would have to be under 65).

But what happens if there is a court order of support (still called alimony) and Joe and Sue are STILL married? Well, in that case the rules are very different. In some cases, the law can be used to increase the Medicaid default allowance for the healthier spouse.

Situations like this are complicated and usually require going to court. You need an experienced lawyer if you want to protect yourself and your family.

Couples, Eligibility

Oral Agreement with Nursing Home Results in Medicaid Denial

Posted on March 24, 2012 by David | Permalink 0

Edward Christensen had been a nursing home resident since 2004. In 2007, after Edward ran out of liquid funds to pay his nursing home bill, the facility sent his attorney in fact a letter stating he would be evicted unless the attorney-in-fact made arrangements to pay the bill. In November 2007, the attorney-in-fact and the nursing home agreed that Edward would sell his interest in 2 parcels of California realty in exchange for not evicting Edward or filing a collection action.

In April 2008, one property sold and, following a July closing, $22,500 went into Edward’s checking account. Edward’s interest in the other property sold for $2,500 in July 2008 and those proceeds also went into the account. On advice of counsel, $1,800 was withheld for capital gains taxes and the remainder was transferred to the nursing home in September, 2008.

In July, 2008, Edward’s attorney-in-fact applied for Medicaid. The Department denied the application due to the California realty Edward owned. Edward was also found ineligible in July and August because he had the proceeds from selling that property. Eligibility was approved commencing in September, when the proceeds were transferred to the nursing home. Edward appealed the denial.

At hearing, the ALJ found the oral agreement with the facility was not binding and therefore the assets remained available until actually transferred to the nursing home. The ALJ agreed that eligibility did not begin prior to September. That decision was affirmed by the Department and then by the district court. On appeal, the North Dakota Supreme Court, on grounds different from the courts below, essentially found that Edward failed to prove his case that the California property was unavailable.

Although Edward had the burden of proof, he did not present evidence at the hearing regarding the details of his agreement; instead, they simply stipulated that there was an oral agreement with the nursing home. He neither deeded the property to the nursing home, nor agreed to pay proceeds into escrow for the nursing home’s benefit. There was no other evidence presented at trial showing that his control over the realty was limited. No evidence was presented at trial regarding the outstanding debt to the nursing home. The evidence presented showed, in fact, that Edward did retain control. The sale proceeds were placed in an unrestricted checking account, where they were held for 2 months and $1,800 was withheld to pay taxes. With this evidence, or lack of evidence, the Court affirmed the decision below because Edward failed to prove the realty was unavailable.

Christensen v. North Dakota Dep’t of Human Servs., 2011 ND 77 (April 12, 2011)

This case underscores the necessity for hiring experienced counsel to assist with any transaction that could impact Medicaid eligibility. If an Elder Law Attorney had been retained to structure this transaction, then payment could have been structured to maintain eligibility. Instead, a home-made plan resulted in the lose of Medicaid eligibility and additional expense for the family.

Eligibility