Michigan Elder Law & Estate Planning

Help for Michigan Seniors on Estate Planning, Disability Planning, Medicaid and Nursing Homes

Gift taxes, estate taxes, Medicaid planning, and more

Posted by Jerrold Bartholomew on April 2, 2009

Many people have heard of the annual exclusion for gift tax, but there are several points on this issue that are easily confused. In order for an estate plan to be effective, various concepts must be taken into account. First, for most people gift tax will never be a concern. While it is true that there is a limit ($13,000.00 per person per year) that can be gifted each year without technically requiring a gift tax return, you must exceed $1 million in gifts above the annual exclusion during your lifetime before you will actually have to pay any gift tax. Estate tax will only apply to estates with more than $3.5 million in 2009 and there will be no estate tax in 2010. In 2011, the estate tax exemption is scheduled to go down to $1 million per estate. So these rules apply to very few people. The problem is that many people hear about these rules and believe that they apply to the Medicaid gifting rules.

Nursing home Medicaid rules in Michigan about gifting are completely separate from the tax concerns. For Medicaid purposes, any gifts made within five years of needing nursing home care will cause the state to deny Medicaid benefits for a period of time equal to the total gifts given divided by the average monthly cost of care. For 2009, that number is $6,362.00. So for example, if someone gave away $63,620.00, they would not receive state assistance with the cost of long-term care for 10 months.

On the often related issues issues of gifting, Medicaid, and taxes, it is very important to understand that giving away appreciating assets during your lifetime can have dramatic tax consequences. When an asset that increases in value is sold, there can be capital gains tax on the difference between the purchase price and the sale price. If an asset is given away at a person’s death, the person receiving that gift only has to pay a tax on the increase in value after the original owner’s death, not on the increase in value since purchase, regardless of whether the asset passes through probate or a revocable living trust. It is therefore important to consider tax consequences when doing any Medicaid planning. Gifting to a trust can typically eliminate the negative tax consequences of gifting during life while at the same time protecting the asset from the cost of long-term care.

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Nursing home expenses are tax deductible

Posted by Jerrold Bartholomew on March 31, 2009

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Many people are not aware that long-term care costs are tax deductible medical expenses. Nursing home costs, defined as “necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services” for the care of a chronically ill individual and prescribed by a licensed health care practitioner, are fully deductible. Additionally, assisted living expenses can also be deducted under many circumstances. For those who are using tax-differed assets to pay for care, the savings of this deduction can be especially substantial. Discerning which expenses are tax deductible can be tricky. You should consult with your accountant or a Detroit area elder law attorney to be sure you receive your full deduction.

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FAQ: What happens when two spouses both enter the nursing home?

Posted by Jerrold Bartholomew on March 25, 2009

When both spouses of a married couple need nursing home care, the most immediate result is a catastrophic bill of $12,000.00 per month or more. Without the advice of an elder law attorney, the couple will continue to spend down assets until their assets reach just $4,000.00 in cash. Substantially better results can be achieved with some planning, but understanding how to proceed in these circumstances is a delicate matter. The rules are counterintuitive.

Michigan’s Program Eligibility Manual (which is used by the Department of Human Services to determine eligibility for Medicaid) does not have any clear policies on point to help families facing this situation. The rules allowing a healthy spouse to shelter assets above $2,000.00 do not apply because both spouses are in the nursing home. There is therefore no community spouse. Read the rest of this entry »

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FAQ: What happens if I die without a will?

Posted by Jerrold Bartholomew on February 14, 2009

Dying without a will, or intestate, means that your estate will be distributed according to the default provisions of state law. For a variety of reasons, this can make the administration of your estate take longer, cost more, and create divisions within a family. Why? Without an up to date will, it is easy for arguments to arise about your true intentions. Furthermore, simply going through the probate process will require payment of an inventory fee and compliance with state law regarding the administration of your estate. State procedures can often be cumbersome and time-consuming. Creating a will is a simple step toward taking responsibility for your affairs and reducing the turmoil that can result for your survivors from an unplanned estate.

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New Medicaid Numbers for 2009

Posted by Jerrold Bartholomew on February 1, 2009

dollar-signThe Department of Human Services for the State of Michigan has announced new numbers for 2009. Every year the numbers concerning Medicaid eligibility for long-term care are adjusted to reflect increases in the cost of living.

The new community spouse resource allowance is a minimum of $21,912.00 and a maximum of $109,560.00. This number is important for married persons with a spouse in the nursing home. It determines how much in cash and otherwise non-exempt assets the spouse living in the community will have to spend down before qualifying for Medicaid.

The community spouse income allowance, which is the income that the community spouse can keep each month and not have to pay to the nursing home has been increased from a minimum of $1,750.00 to $2,739.00. The new utility allowance (which provides additional income protection for the community spouse above the minimum protected amount) is $550.00 per month. However, it is important to note that these numbers do not adjust until April of this year. Read the rest of this entry »

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FAQ: What does it mean for an annuity to be “Medicaid friendly”?

Posted by Jerrold Bartholomew on January 29, 2009

It is very common to hear annuities described as “Medicaid friendly.” Most people hearing the words “Medicaid friendly” would assume that assets placed in such an annuity will be protected from the cost of long term care and indeed, they may even be told so by an insurance professional or financial advisor. But under Michigan law, an annuity by itself does nothing to protect assets from the cost of long term care. In fact, without careful planning, simply investing in a Medicaid friendly annuity may result in the unnecessary loss of assets. Understanding why this is the case requires some understanding of estate planning, elder law, and annuities. But taking the time to understand these things can easily save tens if not hundreds of thousands of dollars. Moreover, understanding these points can help you to see why your estate plan must work in conjunction with your financial plans in order to receive the full benefit of an annuity.

Estate planning is traditionally thought of as the field of law concerning the distribution of assets at the time of one’s passing. Modern estate planning encompasses planning not only for distribution on death, but also planning for disability and asset protection. Planning for disability will greatly increase the likelihood of having something to pass on to heirs, while at the same time reducing stress and maximizing one’s own independence. But in order to effectively manage a one’s affairs through a period of disability, there must be a close relationship between the estate plan and the financial arrangement, including the types of investments used. Read the rest of this entry »

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CMS publishes new nursing home rating system

Posted by Jerrold Bartholomew on December 19, 2008

The Centers for Medicare and Medicaid Services (CMS) has published their long-anticipated 5 star rating system for nursing homes. The breadth of the new rating system is astounding: in Michigan alone, complete information can be found on 425 nursing homes. The system offers information on the number of beds available, the types of payment accepted and, most importantly, several indices of nursing home quality. Each nursing home is given an overall rating, as well as ratings on health inspections, staffing, and quality measures.

One quickly wonders how accurate the system really is. Given how much information is in the system, and how many people collected data, it seems difficult to believe that the system will be completely fair, objective and accurate. And indeed, several ratings for facilities that I know well have lower ratings than I would expect. CMS provides this Note to Nursing Homes to explain their methodology in collecting information. It is also helpful to note CMS’s policy that:

Each nursing home is also required by law to have the latest survey results on hand for the public to review. For the most recent survey results, contact the State Survey Agency. Their phone number is in the Helpful Contacts section of this website.

CMS also provides a number of useful publications related to nursing homes and care of the elderly generally. For instance, there is Medicare’s Guide to Choosing a Nursing Home, the Nursing Home Checklist, and a guide to Your Rights as a Nursing Home Resident.

And for those families seeking to avoid nursing home care, CMS has published resources on alternatives to nursing home care.

Private resources are also available to families seeking assistance with care management, financing, nursing home selection and other related issues. For instance, www.wheretofindcare.com is an extensive resource where patients and their families can both locate and comment on a wide variety of medical care providers. As an attorney who works with the elderly regularly, I publish several guides to Nursing Home Care, Hospice Care, and Medicaid Planning. Families with aging members can quickly become overwhelmed with the stress of caring for an aging person and our maze of a health care system. These resources are intended to help families find the information they need as quickly as possible.

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Tougher estate recovery coming to Michigan?

Posted by Jerrold Bartholomew on November 20, 2008

The Center for Medicare and Medicaid Services (CMS) has apparently rejected Michigan’s proposed estate recovery program. Michigan’s proposed legislation was unique not only for being last in the union to be enacted, but also for being exceptionally lenient. It is therefore reasonable to assume that Michigan will be required to enact a more aggressive approach to estate recovery.

This issue has been appealed by the state of Michigan with a hearing set for January. There will be much more to say on this issue as it develops.

Posted in Asset Protection, Estate Planning, Estate Recovery, Flint Elder Law, Gladwin Elder Law, Medicaid, Michigan Elder Law, Pre-Planning for Long Term Care, Roscommon Elder Law, Your Home | Tagged: , , , , , , , , , , | Leave a Comment »

FAQ: What is the community spouse resource allowance?

Posted by Jerrold Bartholomew on October 16, 2008

Medicaid qualification is full of its own jargon that can make the process a mystery to almost anyone. One key concept to understand is the “community spouse resource allowance.” To speak in the jargon of Medicaid for a moment, the community spouse resource allowance is the value of non-exempt assets that a married couple is permitted to keep and still qualify for Medicaid long-term care assistance. That definition is quite a mouthful, so I will break it all down and put it into context.

When one member of a married couple requires long-term care for more than 30 days, an inventory of the couple’s assets as of the day the institutionalized spouse first entered the hospital or nursing home must be prepared. This is done using form DHS 4574-B, the Asset Declaration. This form must accurately describe a couple’s assets, under penalty of law. From this form, a determination is made of how much the couple will be permitted to keep and qualify for Medicaid. Eventually, assets that are retained by the couple will have to be separately titled in the name of the spouse who is not institutionalized. That spouse is called the community spouse. Therefore, the amount the couple can keep is called the community spouse resource allowance. “Resource” means basically the same thing as “asset” for most purposes. The process of dividing assets between what must be spent down and what the community spouse may keep is referred to as the division of assets. Generally speaking, the community spouse will be permitted to keep one half of all countable assets, but no less than $20,800.00 and no more than $104,400.00.
Read the rest of this entry »

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Getting the most from veterans’ benefits

Posted by Jerrold Bartholomew on September 19, 2008

Many veterans are unaware of the Aid and Attendance Pension that is available to help them with their medical expenses, which include the cost of assisted living. Some veterans are simply unaware of this benefit. Others have been told that they do not qualify based on “having too much money.” It is important to understand the scope of the Aid and Attendance pension as a starting point. It is also important to realize that veterans who meet the service requirement and who have significant, reoccurring medical expenses can be eligible for this valuable and well-deserved benefit with proper estate planning.

The aid and attendance pension is available to veterans who served during a time of war. It is not necessary to have participated in combat, but simply to have been in the military during a time of war. In addition to the service requirement, it is also necessary to be medically eligible and to meet the income and asset test. Read the rest of this entry »

Posted in Asset Protection, Estate Planning, Pre-Planning for Long Term Care, Transition to Nursing Home / Medicaid | Tagged: , , , , | Leave a Comment »

FAQ: Is my annuity protected from the cost of nursing home care?

Posted by Jerrold Bartholomew on September 17, 2008

Question: I purchased an annuity in 2007 in the hope that it would be protected from nursing home costs. I have heard some things in the news that make me wonder whether that money will have to go to the cost of nursing home care. What is the truth?

Answer: By itself, an annuity is either an asset, in which case it will be subject to the asset test for Medicaid qualification or an income stream, in which case it will be subject to the owner’s monthly patient pay amount. There is nothing about an annuity that protects it from the cost of nursing home care. But annuities can be valuable tools in asset protection planning.

Exactly how the annuity is treated will depend on whether the annuity has been annuitized (turned into a monthly income stream). As noted in Wikipedia:

There are two possible phases for an annuity, one phase in which the customer deposits and accumulates money into an account (the deferral phase), and the annuity phase in which the insurance company makes income payments until the death of the customers (the “annuitants”) named in the contract. It is possible to structure an annuity contract so that it has only the annuity phase; such a contract is called an immediate annuity. Annuity contracts with a deferral phase are similar to bank CDs and have a growth phase prior to distribution of income, and are called deferred annuities. The newest incarnation is the fixed, equity indexed product which can be either a fixed annuity or pure life insurance.

Annuities in the deferral phase would be treated as an asset and accordingly subject to either the $2,000.00 asset limit for individuals or the more complex rules for spouses.

This situation is complicated further by the new rules under the Deficit Reduction Act that requires you to name the state of Michigan as a beneficiary in order to avoid having the annuity treated as a gift and subject to a penalty period.

Does this mean that annuities cannot be used to shelter assets from the cost of long-term care? No. There are still viable methods of planning with annuities, but a successful outcome will require a thorough understanding of the rules for Medicaid qualification. It makes sense to have annuities reviewed by an elder law attorney prior to purchase. If you have already purchased an annuity and have questions about your exposure to the cost of long-term care, it makes sense to have your annuity contract reviewed by an elder law attorney.

Posted in Annuities, Asset Protection, FAQ, Financing A Nursing Home Stay, Medicaid Qualification, Michigan Elder Law | Leave a Comment »

Blogging continues apace among lawyers

Posted by Jerrold Bartholomew on September 17, 2008

Two blawgers contacted me over the weekend. I am pleased to report that both have interesting blogs. Jeremy Richey offers the East Central Illinois Criminal Law and DUI Weblog. Jeremy is a sharp writer and offers keen analysis of the latest developments in case law and popular culture related to his specialty. Meanwhile, Sean Sweeney continues his Milwaukee Business Law Blog with posts such as The Anatomy of Contract (a three part series). Sean’s blog is just recently underway, but he is off to great start. Best of luck to both of these gentlemen in their law practices.

Posted in Michigan Elder Law | Leave a Comment »

New book about one family’s eldercare journey

Posted by Jerrold Bartholomew on September 16, 2008

Mary Ellen Geist, formerly a high-powered New York radio journalist, has written about her experiences as a caregiver for her father. Her book, Measure of the Heart, tells her story of returning home to Michigan to care for her father suffering from Alzheimer’s. MSNBC recently interviewed Mary (video here) and provided a number of excerpts from her new book here.

Perhaps the most stunning aspect of her story is her first-hand account of the breadth of the care-giving generation. Statistics show that the population with Alzheimer’s or some other disabling condition is increasing with the aging of the population. The consequence is that the number of caregivers is also increasing. As Mary Ellen Geist writes:

It is safe to say that each day in the United States dozens of daughters and sons are contemplating transferring jobs or quitting them altogether to respond to the needs of aging parents.

She describes a hidden community of caregivers who know each other at first sight:

We find each other easily in crowds. The daughters — we look each other in the eye, as if to ask, Where’s your husband? Where are your children? Are you single, too? Did you leave your life in a big city to come home to help your parents, too?

We often have unkempt hair, no makeup, and a look of exasperation in our eyes. We are trying to hide the fact that we have just wrestled our parents into tennis shoes after coaxing them to finish their cereal and explaining to them what pills are and why they have to take them, and where we are going today. I see faces that look like my mother’s that seem to say, This shouldn’t be happening to me. I don’t deserve this. This was supposed to be the best time in our lives….

Mary Ellen Geist seems to be at her best when she relates how the time with her father is redeemed. Helping him to through his illness has its own unexpected, bittersweet rewards:

He’s always so glad to hear about the history of our family, and each time it is brand new. After I tell him that each of us went to college and what has transpired since then in our lives, he says, “Aren’t we lucky?”

Indeed, the title of the book is taken from the transformation of her own values and outlook that has taken place since she gave up her city life and moved back home to be with her family:

Some of us realize that we are coming home not only to help do the remembering for our Alzheimer’s-afflicted parents, but also to remember something very important about ourselves. We are coming home to learn how to measure our lives by new standards that we’ve never explored before, to measure our lives in a different way. Instead of defining ourselves by our careers, we’re defining ourselves by the amount of love our hearts can hold.

Posted in Alzheimer's, Caregiving, Disability Planning, Michigan Elder Law | Tagged: , , , , , , , , | Leave a Comment »

Drew Sygit on the takeover of Fannie Mae and Freddie Mac

Posted by Jerrold Bartholomew on September 7, 2008

Drew Sygit, a certified mortgage specialist from the Lending Edge Team in Rochester Hills, Michigan sent me some interesting thoughts regarding the government takeover of Fannie Mae and Freddie Mac over the weekend. Drew offers several helpful points:

  1. Look for mortgage-based lending standards to become even stricter in the coming months.
  2. Look for increased flexibility in workouts and mortgage rehabilitation for distressed homeowners. Cash flow means everything under the present circumstances and policies geared toward keeping people in homes and making some payment may become more widespread. Drew explains that the irrational policies of the past that left properties vacant when the homeowner could have made substantial partial payments were largely a consequence of privity of contract. Going forward from the takeover, it appears possible that partial forgiveness of debt or debt-restructuring will be considered in order to keep people in their homes and keep some cash moving.
  3. The federal takeover is calculated to produce stability in the real estate and lending markets.

Drew Sygit’s complete email can be read in pdf here.

The fact that previous policies protected the contractual rights of the purchasers of mortgage debt on the secondary market makes me wonder whether the new policies have the potential to harm the purchasers of mortgage backed securities (MBS)—like pension funds and insurance companies. In other words, it appears likely that the mortgage meltdown will expand to other financial markets. The question for most seniors is whether the failure of Fannie and Freddie will be significant enough to impact their savings in life insurance products like annuities or whole life insurance. Comments are open.

Posted in Annuities, Asset Protection, Detroit Elder Law, Estate Planning, financial planning, Michigan Elder Law, Mortgages | Tagged: , , , , , , , | Leave a Comment »

Losing your group health insurance

Posted by Jerrold Bartholomew on September 4, 2008

Many seniors receive group health insurance coverage from their spouse’s retirement plan. What many seniors don’t realize is that losing one’s spouse can also mean losing that group health insurance coverage. For seniors on a fixed income, the additional health insurance premium can be an unpleasant surprise. This article from AARP explains that there are several options when group health coverage is lost. First, check into COBRA coverage. It might be possible to extend the less expensive group policy that was available under your spouse’s employer. Second, your rights under HIPAA may allow you to continue coverage from one group policy to the next. Third, it may be that you belong to an organization of some kind that will allow you to get group coverage, such as a local chamber of commerce. If all else fails, you may need to get individual coverage. Be sure to check all of your options and to speak with an insurance agent that you trust.

The loss of group coverage for health insurance could have a significant impact on your cash-flow and monthly budgeting in retirement. Your estate plan should take into account the possible need for individual health coverage in the future and the anticipated costs of meeting that need.

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