“If Donald Trump wanted, he could be eligible to receive Community Medicaid in New York State,” Mr. Binyomin Drew tells Hamodia. “As long as he places his assets in an irrevocable trust and his income in a ‘pooled trust,’ he can be eligible to receive this form of Medicaid, which covers the cost of home healthcare aids. However, for those who require nursing home care, the eligibility requirements are must more restricted, and I guess Mr. Trump might have some difficulty meeting those.”
Aging Seniors planning for their futures are often besieged with a deluge of information concerning benefits they may be eligible for in the event they are chas v’shalom incapacitated in some way by illness or injury. Hamodia spoke with several experts in the field of Elder Law: Mr. Sheldon (Shimi) Mayer, a partner at Greenwald Weiss Attorneys at Law, which focuses on trusts and estates and Elder Law in Brooklyn, Monsey and Lakewood; Mr. Gershon H. Fluk, a Brooklyn-based attorney whose practice focuses on estate planning and eldercare; and Mr. Binyomin Drew, a certified Medicaid specialist with Majestic Eldercare.
“There is a lot of misinformation circulating,” says Mr. Drew, “which causes much misunderstanding of the regulations governing eligibility for certain benefits. Those planning for eldercare situations should consult with an expert in the field and follow their guidance in order to safely protect their assets and be eligible for programs which can offer them security and comfort in their golden years.”
Can a person do the necessary planning by himself, or are the services of a professional required?
Mr. Binyomin Drew: I’ve been asked this by clients, and I usually respond, “Do you prepare your own taxes?” For a great majority of people, the guidance of a professional, who knows the rules and how to navigate the system, is indispensable. In the same way that a CPA not only unburdens you from preparing your taxes but also prevents you from making costly errors, so too an Eldercare professional will help give you peace of mind, knowing that your assets have been properly protected.
If a person is enrolled in Medicare, as most seniors are, why should they need to enroll in Medicaid to cover their medical care?
Mr. Sheldon (Shimi) Mayer: Most seniors are enrolled in some version of Medicare, the government medical insurance program that helps defray the cost of their regular medical needs. Medicare is not designed to provide for custodial care, which includes providing home aides or extended nursing home care. A person who requires a nursing home stay for rehabilitation purposes may receive up to 100 days from Medicare, but after that, they will either have to self-pay, which is prohibitively expensive, or they will have to be enrolled in Medicaid in order to have their care paid for.
Mr. Gershon H. Fluk: To plan for all eventualities, including the possibility they will require nursing home or home-aide care, seniors should begin planning their asset protection while they are still healthy and have the ability to implement the best strategies, to allow for maximum safeguarding of their assets. In the event that they require these services, failure to plan ahead may force them to utilize other means, which can preclude them from protecting their assets for themselves and their heirs.
Now that we understand the need for Medicare, what are the eligibility guidelines for Medicaid?
Mr. Mayer: The applicant will have to prove the need for care, which will involve verifying their need for assistance with two or more of the six activities of daily living, as well as proving financial eligibility. In addition, depending on the level of care required, there are regulations concerning the amount of assets a person may retain in order to be eligible.
What are the different types of Medicaid?
Mr. Mayer: In New York, Community Medicaid covers care for seniors 65 and older who require nursing care in their own homes, but do not require nursing home care. To be financially eligible, the person may not have more assets than allowed, and must fit other criteria set by the state.
Mr. Binyomin Drew: An applicant who requires care in an in-house nursing facility will need Chronic Medicaid, which has different eligibility rules than Community Medicaid.
What is the income eligibility threshold for Community Medicaid?
Mr. Mayer: In 2019, an individual beneficiary of Community Medicaid can retain income of $859 per month, in addition to a small unearned income credit of $20. Couples who are both receiving Medicaid have an income limit of $1,267. This will not leave them with much money to live on or to pay for their daily living expenses.
Applicants who exceed the income limits have the option of directing excess income to a pooled trust, where the trust pays for the daily living expenses of the applicant.
Mr. Drew: The justification for the government to allow the transfer of assets to trusts is beneficial for the states. The cost of providing nursing home care for an impoverished person is far more than the cost of home care. Allowing the applicant to keep some funds in a trust and finance their own living expenses at home actually saves the state considerable amounts of money. However, it would not surprise me if, before long, the regulations change.
What assets may the applicant for Community Medicaid and the spouse retain?
Mr. Mayer: The threshold for assets for Community Medicaid for the applicant is $15,450 in non-exempt resources ($22,800 for a married couple who are both receiving Medicaid). Up to $878,000 of equity value in a person’s primary residence is exempt and is not included in the resource calculation. Qualified retirement accounts are also exempt, provided the applicant is taking the required periodic distributions, which are counted as income. A prepaid cemetery plot, personal property such as jewelry, clothing and a car, are other examples of exempt assets. However, assets which fall into probate upon the demise of the applicant may be subject to recovery efforts by Medicaid.
The assets the non-applicant spouse is permitted to retain is referred to as the Community Spouse Resource Allowance (CSRA). The standards are set by the federal government, and as of 2019, the standard ranges from $25,284 and $126,420. The states are permitted to set their own standards within those parameters, and New York State is more lenient, with New Jersey being stricter.
Since the threshold for eligibility is low, and it is difficult to cover living expenses while staying beneath the threshold, why can’t seniors just transfer their assets to family members, and become eligible?
Mr. Fluk: Many states, including New Jersey, have a five-year look-back on asset transfers, even when applying for home care. This means that in those states, if a person transferred assets within a five-year period before applying for Medicaid, the state will review those asset transfers and assess penalties when deciding on eligibility. However, New York’s State Community Medicaid does not have the five-year look-back period.
Mr. Drew: While this holds true in New York State for Community Medicaid, an applicant who requires care in an in-house nursing facility will need Chronic Medicaid. The first thing you must be aware of is that for Chronic Medicaid, there is a five-year look-back period, even in New York State. This means that assets that were transferred within the five-year period that precedes the application will be considered as assets when considering the applicant’s eligibility.
In which way is it permissible to transfer assets within the five-year period and remain eligible for Community Medicaid?
Mr. Mayer: In the event that an applicant has assets that exceed the limit, the applicant may transfer these assets to an irrevocable trust, which will prevent them from being counted as assets for the applicant.
A trust can be viewed as a locked safe. By placing one’s assets in a trust, a person may protect these assets from being lost to pay for nursing expenses. This, in effect, allows the assets to be inherited by the family at a time when the trust is no longer needed.
How is this trust work set up, and how does it operate?
Mr. Mayer: For a basic understanding of how a trust is set up and how it functions, we must understand the various components of a trust: the grantor, the trustees, the beneficiaries and the governing document.
In our situation, the grantor — the person who owns the assets and places them in the trust — is the potential Medicaid applicant. He designs the trust in a manner that accomplishes his objectives, which in this case is to protect his assets for the purpose of Medicaid eligibility.
Trustees who will administer the trust must be appointed, and generally between one and three children of the Grantor are chosen as Trustees. We can view a trustee as the apotropus, or the gabbai, who has the keys to the safe and can disperse trust funds to the trust beneficiaries.
Together with a lawyer, the governing documents — the legal rules by which the trustees are bound in their administration of the trust — are drawn up. The trustees then administer the trust for the benefit of the beneficiaries in accordance with those governing documents.
Mr. Fluk: The beneficiaries, or the people who receive the funds from the trust, cannot be the applicant himself, because if that would be the case, the funds would be considered assets as far as Medicaid eligibility is concerned. In the same vein, the applicant cannot have control of the trust since this, too, would render trust assets as available (for Medicaid purposes) as assets. The trust must be structured in a way in which the control and the disbursement are done independent of the applicant.
However, trust beneficiaries (i.e., the Grantor’s children) will generally do anything in their power to help their parents. Because the children are beneficiaries of the trust, they can receive distributions from the trust and are then free to use those distributions as they deem appropriate — which includes assisting their parents. There is, of course, no prearrangement or legal requirement for children to use the distributions for their parents’ benefit. However, in practice, this method generally works well for all those involved.
Since the disbursements cannot be made to the grantor, and are paid out to other beneficiaries who use the funds to pay the daily living expenses of the grantor, is there any financial consequence for these beneficiaries? Will the funds they receive be considered income?
Mr. Mayer: The funds the beneficiaries receive from the trust is considered a gift by the IRS, and not income. Therefore, by and large, there is no tax consequence for receiving these funds. However, it may very well affect the eligibility of the beneficiaries in regard to other government programs, such as Supplemental Nutrition Assistance Program (SNAP) — commonly known as food stamps — or Section 8 housing.
What happens to the trust after it is no longer needed to pay for the expenses of the Grantor?
Mr. Mayer: I like to explain that this type of trust can be divided into phase 1 and phase 2. In phase 1, which is during the lifetime of the Grantor, the trust disburses the funds in a manner which is appropriate at the time. For Phase 2, which is the time after 120 years, the trust will have instructions, or a “built-in Will,” directing the trustees how to divide and disburse the remaining trust funds among the Grantor’s heirs.
Mr. Fluk: Although the trust is irrevocable, there can be some latitude to alter the “Will” portion of the trust. If a Grantor is worried that one of the trustees may neglect their duties or try to take advantage by altering the trust for their own benefit, there are ways to prevent this. Besides appointing more than one trustee, the governing documents may state that the terms are not completely discretionary, and the Grantor may insert a clause that no changes may be made without the consent of a third party such as a Rav, a trusted friend or a lawyer.
So far, we’ve explained how to protect assets the person already has from being consumed by Medicaid. What about protecting income, such as pensions or social security? Is there any way to transfer them so they won’t be considered for Medicaid eligibility?
Mr. Mayer: If an applicant has a stream of income, as with a pension, the pension itself is not counted as assets, but there is a requirement for it to make distributions. These distributions would be considered income for the applicant, which may very well put him over the income allowance for Medicaid.
To protect the pension income, there is a legal solution: to transfer this income to a “pooled trust,” which will manage the income and pay the daily living expenses of the applicant. These expenses may include rent or mortgage, groceries, utilities and the like, while Medicaid pays for the nursing care.
The pooled trust is managed by a nonprofit organization, and they charge a fee for managing the funds of the trust. Fees vary from trust to trust; some charge a larger monthly fee and a smaller per-check fee, while others charge smaller monthly fees and larger per-check fees.
Any funds remaining after the demise of the applicant are generally kept by the nonprofit organization running the trust, or paid back to Medicaid. Considering that the funds are, on a monthly basis, contributing only the income above the Medicaid threshold, the maximum amount kept by the trust is usually not so much.
If only one spouse requires nursing care, how will the other spouse be able to pay for his or her living expenses?
Mr. Mayer: In a situation when only one spouse is applying for Medicaid long-term care, there are federal spousal impoverishment rules to prevent the non-applicant spouse from having too little income or resources to live on. Without it, a married couple might end up in the situation when one spouse requires nursing care and the other spouse has no money on which to live.
Minimum Monthly Maintenance Needs Allowance (MMMNA) allows applicant spouses to transfer a portion of their income to their non-applicant spouses, which is called Community Spouse Resource Allowance. In New York State, the MMMNA for 2019 is $3,150.60. Income in excess of the limit can be deposited into a pooled trust (discussed previously) and be used to pay for the beneficiary’s needs, such as food, clothing and housing.
What happens if the applicant requires a greater degree of care and must be housed in an in-house nursing facility? What will Medicaid pay, and how can applicants protect their assets?
Mr. Drew: As mentioned earlier, an applicant who requires care in an in-house nursing facility will need Chronic Medicaid, which has different eligibility rules than Community Medicaid. And there is a five-year look-back period .
Mr. Mayer: If a person did transfer assets during that five-year period, Medicaid will penalize the applicant. There is a number called a divisor, which Medicaid sets as the estimated cost of a month of nursing home care. The total amount transferred is divided by this divisor, with the quotient being the number of months of which the nursing home care is denied.
As an example, if the divisor is 10,000 and the amount transferred is one million dollars, the quotient is 100. So, for one hundred months, or nine years and four months, the applicant will be denied nursing home benefits. The applicant will then have to pay out of pocket, or delay his entrance to the nursing home for what may be an extended period of time.
Mr. Fluk: If the applicant spent the money on personal expenses, it would not cause any problem. But if he gave it as a gift to a child or relative, that would be considered a transfer, and be subject to being counted toward assets for Chronic Medicaid. Now, if the applicant gave this gift and the recipient spent it, there may be no way to retrieve it, and the applicant would be precluded from receiving nursing home care for quite a while.
What happens if a person is suddenly faced with the need to enter a nursing home, but did not transfer assets before the five-year look-back period?
Mr. Mayer: It’s always preferable to be prudent and plan ahead, but in the event of a crisis, where one spouse suddenly takes ill and requires nursing home care, there is a process which can protect the assets of the community (healthy) spouse.
Although one spouse is legally responsible to support the other, if the community spouse refuses to contribute his or her income towards the support of the institutionalized spouse, the Medicaid agency is required to determine the eligibility of the nursing home spouse based solely on the applicant’s income and resources, as if the community spouse did not exist. This is commonly referred to as “spousal refusal,” and it can often be a lifesaver in New York State (but not New Jersey) and several others in case of a crisis.
Mr. Fluk: It is not a total solution, since Medicaid does have the option of beginning a legal proceeding to force the community spouse to support the institutionalized spouse. Additionally, even if the Medicaid agency chooses not to sue the community spouse for support, it can still file a claim for reimbursement against the community spouse’s estate following his or her death.
However, even assuming Medicaid will go after the community spouse, the case will settle for much less than the private pay rate — which is the amount it would have cost the family to simply pay out of pocket. Additionally, this is not always done, and even when such cases do go to court, courts in New York generally allow the community spouse to keep enough resources to maintain the spouse’s former standard of living.
When should a person begin planning for Eldercare?
Mr. Fluk: In order to plan for all eventualities, a couple should begin planning their asset protection while they are still healthy and have the ability to implement the best strategies to allow for maximum safeguarding of their assets. Failure to plan ahead may force them to utilize other means, which can preclude them from protecting their assets for themselves and their heirs.
There are people who are psychologically afraid to lose control of their hard-earned assets to others, even of ceding jurisdiction to their own children. Often, it takes time until they overcome their insecurities. Many are afraid that their family may misappropriate the funds in the trusts, and I have some suggestions which can reassure them that their needs will always be primary.
“I explain to my clients that the most important thing is their comfort level,” Mr. Fluk stresses. “If you will not be able to sleep at night, then don’t transfer all your assets; transfer just some of them, and see how it goes. However, I tell them it is important for them to plan early, and not when they are already in failing health, which may not leave them enough time to set everything up in time to maximize the protection and the benefits.
Mr. Drew: When elderly clients come to me, I try to explain to them that in many cases there is no alternative. Long-term health care insurance at their age can be prohibitively expensive, and often there is no way to guarantee the stability of the premiums. Indeed, there is nothing to gain by retaining full control. To the contrary, they have everything to lose, as their entire savings can be used up in a short period of time.
“Al tashicheinu l’eis ziknah — do not cast us away in old age.” We daven that we should not be thrown into a situation where we are left old and powerless. With the strategies discussed and proper guidance from a qualified planner, seniors can position themselves to remain financially secure during their golden years.
A Family’s Experience With a Pooled Trust
“I did some research, and then decided which pooled trust suited our families needs,” said Chaim, whose father required extensive nursing care at home. “At the end, we went with the one who charged smaller monthly fees, and we managed to combine all the expenses, so a minimal number of checks per month were needed.
“At the beginning, it was a bit of a challenge, since we had to submit to the pooled trust the bills for each expense. After awhile, we got the hang of it and it went smoothly. We got a credit card on which we charged all the purchases we made for his home, including the food, transportation and even the doctors. We were able to submit the monthly bill, and generally every item was approved for payment by the trust.
“When Abba was no longer able to care for himself, we transferred his pension to a pooled trust,” said Bentzy. “While Chaim took care of that portion of Abba’s care, I was in charge of bringing him to his doctor’s appointments. When I returned from the first doctor’s visit in Manhattan, Chaim asked me if I had a receipt for the parking garage.”
“What’s the problem? I paid for it with Abba’s credit card,” I replied. “Why do I need a receipt?”
“I’m worried that the trust may not recognize this expense as one of Abba’s daily expenses, and they may deny it,” Chaim told me. “If we have a receipt, we can show it was to pay for his transportation to the doctor’s office.”
“Luckily, I still had the receipt in my pocket, and it was duly paid by the trust. From time to time, things like this came up, and it took getting used to holding on to receipts to show what the payment was for.
“During over two decades, Dad was at home, surrounded by family, and he was able to enjoy their company and lead a productive life. Without the trusts, we would have been forced to institutionalize him and we would have missed out on those happy memories that we now cherish.”