Louisiana Long Term Care Medicaid Planning Blog

What is the Penalty Period for Transferring Assets?

"Should we put our house in our kids' names?" "Should we put our CD's in our kids' names?" Those are questions we always get because families want to find out what they need to do to qualify for Louisiana's long term care Medicaid program if they ever go into a nursing home.

We start with the fact that there's a penalty period. It’s a time period penalty. If you ever take anything out of your name, you're going to be penalized from being eligible for Medicaid for a certain period of time. Here's the complicated mathematical calculation. Let's say mom transferred $80,000 to her daughter. She’s going to be penalized for being eligible for Medicaid for 20 months. You divide the amount transferred ($80,000) by 4,000 which is a special Louisiana number. Do that calculation. For 20 months mom is ineligible for Medicaid. When does that 20 months start? Well it doesn’t start when mom did the transfer. It starts when mom is in the nursing home because she's ill and she has no other assets. She would qualify for Medicaid except for the fact that she had made this transfer. So that’s when the 20 months begins. So be aware of that. The Medicaid manual is complicated and there’s more to it than that.

 If you plan ahead, ideally, 5 years before you go in to a nursing home you can really protect the family’s entire life savings. So if you want to plan in advance and protect what you have for your family you may want to talk to us  866-491-3884. Read through all the other posts in this blog and get yourself familiar with some of the things that you can do and you'll be ready to act once you get in touch with us to get things protected. I’m Paul Rabalais and have a great day.

Donate Home for Medicaid?

 

I was speaking with another Louisiana lawyer from another part of the state yesterday. He called to ask me my advice on whether families should transfer their home to their children before they die in attempt to preserve that home from long term care nursing home costs.

 

I said there are two reasons why you should not transfer your home to your children. First, you will lose your homestead exemption. This is something very valuable to Louisiana residents. Second, your family will lose what’s called a step-up-in-basis and will likely pay a lot more capital gains tax when they sell that property in the future. So those are two big reasons why you should not transfer your property to you children. There are other ways to structure things to protect the value of the home even if you have to go into a nursing home and still qualify for Medicaid. Be aware of this and don't make those mistakes that may cause your family to have to pay a lot of extra tax whether it is property tax or capital gains tax.

 

Paul Rabalais

Medicaid Planning with a Medicaid Living Trust

 

 

I want to take a moment to talk about some important long-term care Medicaid eligibility issues. There’s a lot of Louisiana residents concerned that they'll have to deplete their life savings if they ever go into a nursing home. So these people are rushing to put all of their assets into their children's names. There's another alternative that allows you to retain control over what you have and there are also some tax advantages to it as well. We call this our Medicaid Living Trust. You can put stuff in your kid’s names and you can put stuff into a very particular type of trust that has all the necessary Medicaid language in there. There are some pros and cons of each that I want to go over with you for just a second. Furthermore, you have to do this five years before you go into the nursing home so don't wait until the last minute.

 

There are several reasons to not put assets in your kid’s names. First, you lose control of those assets. It's not yours anymore to control.  The second reason to not put your assets in your kid’s names is that they will have to pay taxes if it produces income. So now you're adding tax consequences to your children. The third reason to not transfer assets to your children is because of what is called a step-up-in-basis. If you give them appreciated assets then when they sell them at some point in the future, there's going to be capital gains tax to pay.

 

By putting it into your Medicaid Living Trust that we create for you, number one, you stay in control of your assets as the trustee of your trust. You control the buying and selling all those assets. Number two is that there are no income tax consequences to your kids when you put it in your Medicaid Living Trust. It's called a grantor trust for tax purposes. You get all the income, you pay tax on all the income and the tax consequences don't change. The third reason is that your children will benefit from a step-up-in-basis when you die if you have some assets that have appreciated in value. If those assets are in your name or are in what is called a grantor trust when you die, those assets get a step-up-in-basis. So there will be no tax for your children to pay when they sell those assets.  

 

So be aware that there are some pros and cons of putting assets in your kid’s names and losing control versus putting things into a trust where you retain control but structure those assets in a way where you qualify for Medicaid in the future.

Paul A. Rabalais

Louisiana Medicaid Planning: Divorce v. Depleting Life Savings

 

Just this past Friday I was working with a husband and his son. They were about to put his wife in a nursing home. This family has to decide on either getting a divorce for Medicaid eligibility or depleting their life savings that they've worked hard for 70+ years to build.

Bottom line is if you plan ahead by starting this process at least 5 years before you go into the nursing home, you can enable your family to avoid very difficult decisions that this family is going through. Usually when you are about 65 or 70, that's when families start considering Medicaid planning. So get the information now, plan and do what you have to do to protect your family.

There May Be Hope For Individuals Entering The Louisiana Nursing Home With Assets

On October 14, 2010, at 4:05pm, I received an email from the Louisiana Medicaid Eligibility Policy Unit. It stated that the Louisiana Medicaid Eligibility Manual was clarified.

For the past several months I had thought that the Medicaid office was applying our laws incorrectly. It appears though with this clarification I was right all along. I applaud the State for clarifying this uncertainty.

It all has to do with what happens when a person makes a transfer and then part of the transferred resources are returned. The bottom line is that the penalty period that started does not stop, and that the penalty period can be reduced by the return of transferred resources. The following is the example given straight from the Medicaid Eligibility Manual:

"Applicant for LTC is determined eligible for Medicaid on October 1, 2008. However, a transfer of property valued at $70,453.00 occurred on September 1, 2008. A transfer of resource penalty was applied and the applicant was ineligible for vendor payment for 17 months and 18 days beginning October 1, 2008. On September 01, 2009, it was reported that $23,000.00 of resources were returned to the individual in August, 2009. The returned resources were used to pay the facility fee and his countable resources were below the resource limit as of September 1, 2009. ** The penalty period should be recalculated using the un-refunded portion of the $47,453 of the uncompensated transfer. ** The re-calculated penalty period of 11 months and 26 days begins September 1, 2008 with vendor payment beginning September 27, 2009."

What does all this mean? It means there is hope for people who are either in the nursing home with liquid financial resources, or are on the doorstep of the nursing home with financial resources. The way the math usually works out, we can typically help a family save about half of their life savings.

Come see us five years prior to entering the nursing home and we can likely save the whole kit and kaboodle.

Of course every set of circumstances is different, and we won't know what you can protect until you come in to any one of our three offices in Louisiana for your no-cost initial visit. Find us in Baton Rouge, Mandeville or New Orleans. We have attorneys full-time in all three areas who are committed to helping families like yours sort through rules like this. Don't try this at home!

Paul Rabalais

Crisis Planning for Medicaid

In order to qualify for long term care Medicaid in Louisiana, individuals may only have up to a meager $2,000 in total assets. People with more than $2,000 in total assets are often forced to pay all of their long term care costs or their children are forced to carry this burden. The cost of long term care in nursing home facilities averages $5,000 a month. This cost adds up quickly and often eats away at an individual's entire estate before they die, leaving little for their heirs.

The conventional medicaid planning strategy is to get all the assets out of a long term care candidate's name long before they will need to enter a long term care facility. Any time a person transfers assets out of their name, there is typically a 5 year penalty period from the date of the most recent transfer until that person can qualify for medicaid.  However, often times the need for long term care services can spring up unexpectedly, and many are left to bear the full brunt of the long term care bill for during this five year penalty period.

At the Rabalais Law Firm we have developed systems for achieving medicaid eligibility in half the time even if a long term care candidate has made transfers in the last five years. Our crisis planning is aimed at cutting your long term care costs in half at salvaging a great portion of your estate for your descendants.

If you or your family members are interested in discussing your medicaid eligibility feel free to call or email me in the New Orleans/Metairie Area at (504) 247-1980 or chris@rabalaislaw.com. On the Northshore, contact Brent Durham at (985) 246-3020 or brent@rabalaislaw.com. In Baton Rouge, contact Paul Rabalais at 225-329-2450 or paul@rabalaislaw.com.

Chris Kane, Attorney

Director, New Orleans Office

        

 

Louisiana Long Term Care Medicaid Laws Clarified Regarding Transfers of Assets

I received an email on Thursday, October 14, 2010, from Louisiana's Medicaid Eligibility Policy Unit. Sections of the Eligibility Manual have been clarified. This is good news for people who are going into the nursing home and want to protect their life-savings. It's technical stuff but it's good for Louisiana families. Here's how I read it:

• If you are in a nursing home and you transfer all your money out of your name, you will be penalized for one month from Medicaid eligibility for every $4,000 of value that you transfer. For example, Dad transferred his $80,000 out of his name as he went into the nursing home. This transfer will incur a 20 month penalty period.
• Here's where our unique "Transfer and Return Protection Plan can save at least half of a family's savings. Let's say Dad's children return half ($40,000) of the "Transferred Resources."
• Until October 14, Louisiana Medicaid Eligibility rules were less than clear on whether the penalty period start date changed when assets were returned to the Medicaid applicant.
• The new rules from last week clarified that once a penalty period begins, the start of the penalty period cannot be changed - only the length of the penalty period is modified.

Again, this appears to be good news for individuals and families that want to protect assets when a loved one goes into the nursing home.

If you are interested retaining our Medicaid Planning legal services, and would like a no-cost initial visit to discuss protecting your families assets, feel free to contact us. We have attorneys that serve Louisiana families in the Baton Rouge area (paul@rabalaislaw.com), the Northshore area (brent@rabalaislaw.com), and the New Orleans/Metairie area (chris@rabalaislaw.com. Or, you can call our office toll free at 866-491-3884.

Paul Rabalais  

6 Easy Steps To Medicaid Planning - In Layman's Terms

At our office we like to keep things simple for our clients. In my more than 20 years as a practicing attorney working with more than 5,000 families, I've never heard anyone say, "We'd really like a long, confusing, hard to understand legal document with tons of legalese."

On the contrary, people tell us all the time that they like the way we explain things in easy to understand terms and they like the way our documents minimize the legalese.

So, consistent with our "simple" approach, I'd like to present a simple overview of Louisiana Long Term Care Medicaid Planning. Here are the steps that we often take people through to protect their assets and qualify for Louisiana Long Term Care Medicaid:

1. Know the Basic Asset Rules. If you have more than $2,000 of Countable Resources when you are in the nursing home and you apply for Medicaid, you won't qualify for Louisiana Long Term Care Medicaid. Common types of Countable Resources include bank accounts, investments, IRAs, annuities, and land.
2. Know the Basic Penalty Rules for Making Transfers. If you transfer assets out of your name, you will be penalized from Medicaid Eligibilty for up to five years. For every $4,000 of value that you transfer out of your name, you will be penalized for one month. The penalty period starts when you are in the nursing home and you have less than $2,000.
3. Asset Review. Make a list of everything you own. Pretty much everything you own is a Countable Resource except for your home and your car. Having more than $2,000 worth of Countable Resources will prevent you from becoming eligible for Medicaid, which means you have to fork out $5,000 per month for the nursing home.
4. Create a Trust. You will want to create a very specific type of trust so that you can control your life savings but protect it from nursing home costs. The trust must be irrevocable and you cannot be a principal beneficiary of the trust. You can be the trustee of your trust.
5. Transfer Assets to Your Trust. Assets you want to protect should be transferred - in kind - to your trust. The transfer starts the five year period which must expire before you become eligible for Medicaid. You can keep enough assets in your name to spend on your care and get you through the next five years. Be aware that you cannot transfer IRAs to a trust without first taking a distribution from the IRA - maybe you leave the IRA in your name and spend it over the next five years.
6. Stay Educated and Monitor Your Situation. You may have to make adjustments over time due to our life changes and due to law changes. That's why it's important to work with professionals like us who understand the issues and want to maintain a lifetime relationship with you and your family.

As you might imagine, there's often more to it than that but now you have the basics. Every Louisiana family has a unique story and unique circumstances, so our job is to apply our Medicaid Planning Systems to your unique family story.

If you would like to participate in our no-cost legacy planning family visits, call our office at 225-329-2450, or email our Chief Administrative Officer, Laura Bittel, at laura@rabalaislaw.com, to set that up. Procrastination in this area literally destroys families. Take action today. Have a good one!

Paul Rabalais

 

Going Into the Nursing Home with Cash

Options are limited on what someone can do to protect their cash if they are already in the nursing home. I worked with a family yesterday for a couple of hours helping them.

A woman entered a nursing home a couple of weeks ago. This week she received a lump sum check from her retirement plan. Her nursing home costs are $4,800 per month. She also has a home, a car. She owes on the car and she has some credit card debt.

Her loved ones are going to pay use her funds to pay off her car, pay off her credit cards, and prepay her funeral. Family and friends are providing care and other services for her so we customized some Personal Care Agreements so that payments to these family member/service providers would not be deemed transfers which would penalize her further.

If structured properly and in the right circumstances, Personal Care Agreements can protect cash that one has when one is either in the nursing home or about to enter the nursing home. There are super-strict rules in our Louisiana Medicaid Eligibility Manual regarding what services can be provided and how payment for these services can be provided, so get someone who knows their stuff to help you with this.

Of course let our office know if we can provide our customized legal services to help your family. 225-329-2450. Thanks, Paul

How Much To Transfer Can Be a Guess

Was working with a family today on their Medicaid planning. Grandma wanted to protect her assets from long term care nursing home costs. We formed a trust for certain members of the family and Grandma is going to transfer assets to certain family members and to the trust.

The question was, "How much should Grandma transfer?" Essentially Grandma wanted to keep enough money in her name to pay her expenses for the next five years during the penalty period, and then transfer the remainder and protect that from nursing home costs which run $70k per year.

Since no one can accurately predict one's future living and medical expenses, the family made an educated guess. But there is little question that Grandma's actions today will save her and her family tens of thouands (probably hundreds of thousands) of dollars in the future.

This family took this action at the right time - which is long before the individual needs to reside in a long term care nursing facility.

If you would like our law firm to provide legal services to you and yours in the area of Louisiana Long Term Care Medicaid eligibility, you can call us at 225-329-2450, or send me and email at paul@rabalaislaw.com. Put in the subject line: need to hire Medicaid lawyer