The Connecticut Elder Law Blog

The "Pick-Up Date" for Medicaid Coverage

There is some confusion among my cilents as to when exactly Medicaid coverage "kicks in" for their loved one.  There are a couple of misconceptions on this issue.  Some think it's the date the application is submitted while some think it's the day that the "spend-down" is completed (which would actually make sense), but neither is correct.

The basic rule is that Medicaid coverage starts on the first day of the month that the spend-down is accomplished.  So if you officially spent-down at any time during this month, your Medicaid "pick up" date is June 1st, meaning that the Medicaid program will cover your nursing home costs (home care costs, in some cases) starting on June 1st and going forward.

But be careful!  DSS doesn't consider the writing of a check as something that contributes to the spend-down...money has to actually leave the account. 

So...if you are a single person and you have $2,000 and you write a $500 check to the nursing home today in order to get under the $1,600 level during the month of June, then you will not be eligible for Medicaid as of June 1st.  It will probably be July 1st instead.  That's because the money doesn't physically leave your account when you write the check; that does not occur until the check is actually cashed.  A good way to avoid this problem is to use a bank check or cashier's check which immediately pulls the money from the account. 

Young Families Should Consider Second-to-Die Life Insurance

Many of my clients, particularly younger clients, may have very little in the way of liquid assets and precious little equity in their house.  Nonetheless, if you fall into this category and you have young kids then getting an estate plan in place is still essential and you can still leave a significant estate for your children's benefit by using life insurance.

The perfect life insurance product for a young family may be a "second-to-die" policy.  These types of policies do not pay out any proceeds until both spouses die.  And since two deaths must occur before the insurance company is forced to shell out any money, the premiums on such policies are surprisingly low...a nice feature for young parents who are still in the early stages of their careers with relatively low salaries.

But be careful...a second-to-die policy may not be ideal when one of the spouses stays at home with the kids.  In that situation the working spouse should probably look at a single-life policy to create an income stream for the family if that working spouse is suddenly no longer around to generate income.

In any case, every young family should sit down with a trusted insurance agent and look at the different life insurance options to ensure that the kids can maintain their standard of living by having a support trust funded with life insurance proceeds.  And feel free to contact me if you need a life insurance agent referral in the Hartford County area.

But no matter what you do (and I've already written about this) if you have young kids, don't procrastinate with your estate planning.

Estate Planning for the Disabled: Special Needs Trusts (Part II)

So...what makes "Special Needs Trusts" so special?  It is, in a way, an opportunity for your disabled child (or non-child beneficiary) to have her cake and eat it too.  This is because the funds held in the name of the trust are there for the benefit of the child, yet it is not a "countable asset" when determining her eligibility for government benefits.  This allows a situation where the government benefits cover her basic needs while the special needs trust can pay for the "luxuries" (things that the government will not pay for), thereby maximizing her quality of life.  This is, of course, the ultimate goal of my special needs clients; making sure that their disabled child has the very best life possible if they are suddenly not there to help her out.

The restrictions are, first, that the child would have absolutely no control over the trust funds; she cannot write checks or make any type of withdrawal, make investment decisions or compel the trustee to make distributions.  The trustee has absolute and full discretion over what happens with the trust funds. 

Second, the trustee is given strict instructions in the trust language that he/she is not to make any distributions that would jeopardize government benefit eligibility.  That is to say that the trustee cannot duplicate any spending that the government is already doing on the disabled child's behalf.  So if the child is receiving Medicaid benefits then the trustee cannot pay for the basic medical costs that Medicaid covers.  If the trustee does so, then the State could say that government benefits are no longer needed since the trust is covering basic medical costs.

These trusts are, obviously, complicated estate planning documents.  My objective in this post and the previous post is to give you a very general overview of what special needs trusts are all about.  But stay tuned for future posts where I will get into the nitty-gritty details of these trusts, such as how to select a trustee, different types of special needs trusts and other important issues.

Estate Planning for the Disabled: Special Needs Trusts (Part I)

If you have minor or adult children (or non-child beneficiaries) who are either receiving government benefits currently, or may receive them in the future due to a mental or physical disability, then you need to know about special needs trusts.  These trusts are certainly important enough to spend the next two posts discussing them.

These types of trusts are much more well-known than they were just a few years ago, but I find that too of my clients are not familiar with them.  The most common disabilities among my clients' beneficiaries are conditions like autism, down syndrome, Alzheimer's and mental retardation, but special needs trust planning is usually vital regardless of what the specific disability may be.  If there is a chance that your beneficiary may not be able to support himself/herself if you are suddenly not there to help out, then you need to at least discuss special needs trusts with an estate planning attorney.

When we talk about government benefits for the disabled then we're usually talking about Medicaid (Title 19), which covers basic medical care, and SSI (Supplemental Security Income), which covers basic food, clothing and shelter needs.  These types of benefit programs have asset limitations: $1,600 in Connecticut for Medicaid and $2,000 for SSI.  In other words, anyone with assets that exceed these limits are ineligbile and must spend their assets down on their care until they are under the asset limits, at which point they can apply.

So...this means that if you leave an outright inheritance to a disabled beneficiary then you are likely doing them a disservice.  The inheritance will either render them ineligible for the government benefits they are already receiving or it will make it harder for them to qualify in the future because there are suddenly more assets that need to be spent down.

In tomorrow's post I'll explain how these important trusts operate and why they are usually the best option for disabled beneficiaries.

The Ideal Way to Amend Your Will...

One of the more popular questions posed by my estate planning clients is "What is a 'codicil'?"  It's certainly not a word you encounter on a a regualr basis.  It is essentially a fancy way of saying "a change to your last will and testament".  As I've mentioned before, a will should not be conceptualized as a permanently static document.  It is a document that, ideally, evolves over time as your family's situation changes over time.

The traditional method of updating your will is by having your attorney draft a codicil which usually indicates something like "I hereby delete Article II and substitute the follwing language..."  In other words, it only addresses a certain provision, or provisions, and spells out the new language you want to add.

My own policy is that I do not prepare codicils.  I simply re-print the original will with the new provisions and have the client execute the new will.

Why?  There are basically two reasons.  First, it makes it easier for the client in regards to document management.  If you sign a separate codicil then you will need to keep the codicil and the original will for your records.  You must have both when you pass away.  In contrast, if you just have the new will with the new provisions then that's the only document that you need to maintain.

Second, the legal fee should be lower because the attorney does not need to create a brand new document from scratch.  My practice is very technology-oriented and all of my clients documents are saved in my computer archives (as is the case with most estate planning attorneys).  This allows me to pull up a client's old will on my computer, re-type the provision the client wants to amend, change the date to the current date, print it out and voila!  The new will with the updated information is ready to be executed.  Needless to say, this does not take much time (most of the time this is a same-day service) and therefore the legal fee is minimal.

If you need to change your will I recommend that you suggest this approach to your attorney and make the process as simple as possible for you and the attorney.

Lawyer Joke!

How many lawyers does it take to roof a house?

It depends on how thin you slice them.

Life Insurance: A Medicaid Application Land Mine

I have worked on many Medicaid (also known as "Title 19") applications, and I have heard a lot of Medicaid application stories over the last ten years, and from my experience nothing trips up an application more often than life insurance issues.

Part of the problem is that the Medicaid eligibility rules regarding life insurance are a bit confusing.  First of all, any "term" insurance is completely exempt under Medicaid rules.  You can have an enormous term policy and it's not a problem for Medicaid.  This is because a term policy does not pay interest or dividends and it has no cash surrender value.  DSS is only interested in assets that you can liquidate into cash and spend on your care, and term insurance does not fall into that category. 

Now, here's the tricky part: all other types of insurance, known as "whole", "permanent" or "universal" (the types of insurance that can generate income and carry a cash value) are exempt as long as the face value of all the policies combined totals $1,500 or less. 

The problem is that "face value" is often confused with "cash value" (a.k.a. "cash surrender value").  Remember that "face value" is what your beneficiaries will collect upon your death.  "Cash value" is what you can get back in cash if you voluntarily terminate the policy.  These numbers are usually very different.

So, under Medicaid rules, applicant #1 could have a universal policy with a face value of $1,500 and cash value of $5,000 and the policy is exempt...no need to cash it out and spend it down to become eligible for Medicaid even though there is a significant cash value that could be used to pay for the applicant's care.  Meanwhile, applicant #2 could have a policy with a face value of $1,501 and a cash value of $1,000 and the policy is a "countable asset" for Medicaid eligibility purposes.  I don't make these rules, I just report them to you!

I refer to life insurance as a Medicaid application "land mine" because an applicant who is confused by these rules could file an application thinking that he's eligible because the cash value for life insurance is under $1,500.  Then four months later, when the DSS caseworker takes a good look at the life insurance, she announces that since the face value is over $1,500 the policy is countable and the applicant is over-assets (after adding the cash value to the other countable assets).  Therefore, the applicant has been inelgible for the last four months and the nursing home has a $30,000+ unpaid bill that is not going to be paid by Medicaid.  That's when the nursing home administrator calls the facility's attorney, and the rest of the story is never pleasant.

So if you are applying for Medicaid, make sure you fully understand the life insurance rules and that you are crystal-clear on the face value and cash value of your policies.

Connecticut's Statutes Online

A couple of nights ago I was watching Suspect, an old 1987 legal thriller starring Cher and Dennis Quaid.  As I was watching a scene where the protagonists were collecting and flipping through books in an enormous law library I mentioned to Amy that this is clearly a 20 year-old movie because all the stuff in that library is online these days.

When I mentioned that, I realized that many of my clients probably don't know that Connecticut, like many states, offers full access to its general statutes online.  Click here for the site which is updated to January 1, 2007 and offers both browsing and search options. 

If you're someone who likes to do your homework and you're faced with a legal issue, then this site is a great candidate for a bookmark.  Enjoy! 

A Very Scary Blog for Elders

I wish that all of my clients and their children would take just a few minutes to read a new blog called "Steal an Estate".  The June 15th post is a very long and comprehensive "how to" list of instructions on how to financially swindle the elderly, and if you're an elderly person or have elderly parents living alone in the community, it's a downright terrifying read. 

When I first read it I was outraged because it reads like an advertisement to encourage financial predators.  But when you click "about Steal an Estate" in the upper right-hand column you will see that the purpose of the post is to educate readers on the types of strategies a skilled predator will employ against the elderly.

And don't kid yourself...these types of crimes are becoming more and more common as the population gets older and more adult children are moving farther away from their parents.  I wrote about an extreme case in an earlier post.  I've also written about legislation that Massachusetts has passed to address this issue.

So take a peak at this unsettling yet informative blog and take steps to protect yourself or your loved ones.

Lawyer Joke!

How about we kick the week off with a good laugh...

What is black and tan and looks great on a lawyer?

A Doberman Pinscher.