Many people use the terms Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) interchangeably. However, they are actually two different federal programs. Both SSDI and SSI are managed by the Social Security Administration (SSA) and provide assistance to people with disabilities. Although the medical requirements for disability eligibility are the same under SSDI and SSI programs, the way these programs are funded differs. Summarized below are the key differences between these two programs.
Social Security Disability Insurance (SSDI)
Social Security Disability Insurance (SSDI) is an insurance program funded by the Social Security taxes (called “FICA”) paid by employed individuals. Thus, the SSDI program is based on a person’s work experience and is not a welfare program.
Disability benefits are payable to blind or disabled workers, widow(er)s, or adults disabled since childhood, who are otherwise eligible. A disabled person qualifies for SSDI if they are under age 65 and have a significant physical or mental condition that is expected to last for at least twelve months or is expected to result in death.
Individuals must also have earned sufficient work credits to be “insured” for Social Security purposes. One can earn a maximum of four quarters each year. The number of work credits needed for disability benefits depends on the age when the individual became disabled. Generally you need 20 credits earned in the last ten years. Individuals under age 31 when he or she became disabled may qualify with fewer credits.
A disabled person may work and receive SSDI if they are earning less than the amount considered to be the substantial gainful activity (SGA) level. The monthly SGA amount for individuals with disabilities, other than blindness, is $1,000. For blind individuals, the monthly SGA amount is $1,640. The SSA defines substantial gainful activity as work that involves significant physical or mental activities or a combination of both. For work activity to be substantial, it does not need to be performed on a full-time basis. Work activity performed on a part-time basis or work that pays less than one’s regular employment or which has less responsibility may also be substantial gainful activity.
The amount of monthly disability benefits depends upon the worker’s Social Security earnings record. Generally speaking, the higher an individual’s earnings have been and the longer he or she has earned them, the higher the SSDI check will be. The amount one receives may also be reduced by certain other benefits, such as workers compensation or other state or local benefits. However, an individuals’ other sources of income such as dividends from stocks or interest from savings, etc, do not reduce the amount of SSDI payments.
There is a five month waiting period from the onset date of disability under SSDI. This means that an individual will not be paid any benefits until the end of the fifth month after the day the individual became disabled under the Social Security rules. Payments will continue until the individual dies, reaches retirement age at which time SSDI becomes Social Security Retirement Benefits or is able to work again. If an individual is able to work again, SSDI will provide “work incentives” to ease the transition back to work with continued monetary benefits and health care coverage.
If you qualify for SSDI benefits, you also qualify for Medicare.
Supplemental Security Income (SSI)
Supplemental Security Income (SSI) is a need-based welfare program funded by general tax revenues. SSI is based on an individual’s financial need and not on an individual’s work history. Benefits are paid to people who meet the Social Security disability rules and whose income and assets are below the eligibility levels. The SSI program was set up to help the blind, disabled and elderly (over age 65) with little or no income by providing them with a monthly check to pay for food and shelter.
One of the requirements to receive SSI is that the individual’s income must be below certain limits. Income is money received such as wages, Social Security benefits, bank interest, dividends, veteran’s benefits and pensions. Income also includes such things as food and shelter. If an individual is receiving SSDI, he or she may also receive SSI if his or her SSDI check is below the required income level.
The amount of income an individual can receive may vary based on the state in which the individual lives, his/her living arrangement, the number of people living in the residence, and the type of income. Social Security does not count all of an individual’s income when determining eligibility for SSI. SSI disregards the first $20 per month of any income, the first $64 a month earned from working and half the amount of $65, food stamps, shelter received from private nonprofit organizations and most home energy assistance.
If an individual is married, his or her spouse’s income and assets may be included in the determination for benefits. If an individual is younger than age 18, his or her parent’s income and assets may also be included. For individuals who are disabled but work, SSA does not count wages used to pay for items or services that help him or her work.
An individual is eligible for SSI benefits if his or her assets are below $2,000. A married couple is eligible if they have combined assets below $3,000 (whether the spouse is eligible for SSI or not). For a child applicant with one parent living in the household the asset limit is $4,000. Where a child applicant has two parents living in the household, the asset limit is $5,000.
Assets include real estate, bank accounts, cash, stocks and bonds. In determining eligibility, SSA does not count the individual’s primary home, life insurance policies with a face value of $1,500 or less, a vehicle, regardless of its value if it is used for transportation for the individual or immediate family member, burial plots for the individual and members of his or her immediate family, and up to $1,500 in burial funds for the individual and his or her spouse. Conditional benefits may be paid if a substantial portion of the assets are considered non-liquid, i.e. resources that cannot be sold within 20 working days, if they agree to sell the resources at their current market value within a specified period and repay the money after the non-liquid property is sold.
The amount of SSI benefits an individual can receive varies up to the maximum federal benefit rate, which may be supplemented by the State or decreased by countable income and assets. The maximum federal benefit rate is $674 for an individual and $1,011 for a couple (for 2011) to help meet the costs of basic needs of food and shelter. If the individual’s total countable income is greater than the SSI maximum payment levels, he or she cannot get SSI. Thus, the more countable income an individual has, the lower his or her SSI benefit will be.
Individuals who receive SSI are usually eligible to receive monthly food stamps, energy assistance, and section 8 housing. They may also be eligible for Medicaid and supplemental income from the State through its State Supplemental Program. For example, the Commonwealth of Massachusetts increases the cash assistance by $114 for disabled individuals living independently, making the total SSI benefit $788 per month.
SSI benefits will continue for as long as the individual is disabled. If medical improvement of the individual’s condition is possible, his or her case may be review periodically to determine if he or she is still disabled. If the individual has enough credits from his of her work history to receive Social Security retirement benefits, he or she must apply for early retirement benefits at age 62. If the monthly early retirement benefit amount is less than the SSI monthly amount, the individual will receive enough SSI benefits to exceed that monthly SSI amount by $20. When an individual turns 65, his or her SSI benefits will be based on age and not subject to a disability determination.
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Tags: disability benefits, Disability planning, elder law attorney, social security, Social Security Disability Insurance, SSDI, SSI, Supplemental Security Income
There is no doubt that you know your children better than anyone else. But there comes a time when you will no longer be there and will need to turn over his or her care to someone else. While an estate plan can provide for your child’s financial future, there are some matters that cannot be addressed in a will or special needs trust. It is important that parents of a disabled child prepare a Letter of Intent, which is an informal document that outlines your hopes, desires and visions for your child when you can no longer provide for him or her.
The Letter of Intent will help the person caring for your child. By compiling as much information about your child, his or her history, his or her current needs and your visions for his or her future, you will be giving future care providers the knowledge and insight they will need to provide the best possible care for your child. The Letter can also provide valuable information about your child’s personality, his or her likes, dislikes, talents, special problems, strengths and weaknesses. Your child’s caregiver will not have to waste precious time learning the most appropriate behavior or medical management techniques to use
Although the Letter of Intent is not a legal document, the court and others may rely upon it for guidance in understanding your child. It also allows you to continue to speak out on behalf of your child, providing invaluable insight and knowledge about his or her best possible care in the event of your death or incapacitation.
This is an emotional letter and not easy to write. However, it is essential that every parent go through this very difficult step to ensure a well planned future for their special needs child. It is a way to protect your child from unnecessary chaos and turmoil when he or she must depend on someone other than you for the necessary care and support. Once you write the letter, it should be updated annually or when information about your son or daughter changes. This letter should be placed with all of your other relative legal and personal documents concerning your child.
At a minimum, the Letter of Intent should address the following points:
Background and Family History
Where and when you were born, raised, married; names and contact information for siblings, grandparents, and other special relatives and friends; description of your child’s birth, when, where, etc.
General Overview
A brief overview of your child’s life to date, including daily activities, interests, recreation, times of wake, nap, meals, sleep, etc.; personality traits; help needed with daily living functions such as self-care, hygiene, administering medications, cooking, transport; type of caregiver that works best with the disabled person; special activities (fitness, vacations and trips, piano lessons, etc); any services and benefits the disabled person receives.
Education
Summary of educational experiences and desires for future education; highest level achieved, and any specific teaching techniques or emphasis on particular learning or skills that worked or didn’t work; level of basic academic skills, such as reading, arithmetic, writing, as well as any special skills or talents; regular classes, special classes, special schools, related services, mainstreaming, extracurricular activities and recreation; types of educational emphasis, i.e., vocational, academic, total communication, etc.; name of specific programs, school, teachers, related services providers.
Employment
Types of work your child may enjoy; open employment with supervision, sheltered workshop, activity center, etc.; companies that you are aware of that may be of interest to your child and provide employment in the community; prior or current job, including job descriptions.
Residential Environment
Past and current living situations; best overall living situation and why; arrangements for future living situations that would be preferable for the disabled person, such as living with a particular relative, friend, group home or institution in same community; minimum size of home needed and any restrictions or adaptations that are needed for the home; ideal community or neighborhood for the disabled person.
Social Environment
Types of social activities your child enjoys, i.e. sports, dances, movies, etc.; should they have spending money and how they should spend it; favorite foods and eating habits; does your child take and/or enjoy vacations.
Religious and Spiritual Environment
Specify religion; local place of worship your family attends; local clergy that may be familiar with your family; has there been religious education and is this an interest to your child.
Medical Care
Medical diagnosis and care; intellectual functioning; current doctors, therapists, clinics, hospitals etc. and how frequently your child attends and for what purpose; current medications, how given, for what purpose; describe medications that have not worked in the past;
Behavior Management
Describe current behavior management program that is being used; other behavior management programs that have not worked.
Final Arrangements
Desires for your child’s funeral arrangements – including – prearrangements you have made (if any), choice of funeral home, cremation or burial, cemetery, monument, religious service and clergy.
Other Information
Include any other information you feel will help the person caring for your child provide the best possible care, such as values, hopes, wishes, rights, preferences, relationships, etc.
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So you have been nominated to serve as an Attorney in Fact under a Durable Power of Attorney. What does that mean? An attorney in fact is a special type of agent. An Agent is someone authorized to act on another person’s behalf. As an attorney in fact under a Durable Power of Attorney you are authorized to act on the Principal’s behalf in certain financial and related matters. If you have been nominated as an Alternate attorney in fact, this means that you are asked to serve if the primary nominee is unable or unwilling to serve. Below are some frequently asked questions concerning your duties and obligations as an Attorney in Fact.
1. Do I have to agree to accept the appointment?
No, you do not. If you do not agree to serve, you should let the Principal know as soon as possible so other arrangements can be made.
2. Can I quit at any time?
You can generally quit. You should always notify the Principal as soon as possible of your intentions. There might be situations in which you would be held responsible if you abandoned your Principal in the middle of some activity.
3. Can the Principal remove me?
Yes. The Principal can remove you at any time. Once you have been informed in any manner that you are no longer to serve, your authority stops.
4. What can I do as an Attorney in Fact?
You need to read the language of the Durable Power of Attorney. Sometimes Attorneys in Fact are given very broad powers and other times they are given very limited powers. You have no powers beyond those described in the document. If you are unsure whether or not you are authorized to do a particular act, you should consult the attorney who prepared the document.
5. What can’t I do as an Attorney in Fact?
There are a few things that an Attorney in Fact cannot do even if the Durable Power of Attorney says otherwise. You may not sign a document stating that the Principal has knowledge of certain facts. For example, if the Principal was a witness to a car accident, you cannot give a statement for the Principal stating that the light was green. You may not vote in a public election for the Principal, or create or revoke a will or codicil to a will. Nor may you perform personal services for the Principal under a contract (such as writing a book). Likewise, if the Principal is a guardian or conservator for someone else, you cannot take over those responsibilities under the authority of the General Durable Power of Attorney.
6. When can I act?
Your authority to act depends both on the actual language of the Durable Power of Attorney and on the Principal’s capacity to manage his or her affairs. Some documents authorize you to act immediately upon direction of the Principal. Others allow you to act only after some event has happened, such as the Principal becoming incapacitated of making informed decisions. You need to read the document carefully.
7. When can I make decisions on my own for the Principal?
Normally, the Principal makes decisions and you, as an agent, are authorized to act to carry them out. Only when the Principal is so mentally incapacitated that he or she is unable to make informed decisions should you make decisions on your own for the Principal. Even then you have a duty to make them in the best interests of the Principal.
8. Would there be any consequences if I make decisions just because I think it is a good idea?
There could be. If the Principal is not mentally incapacitated and refuses to agree with some decision you made, you could be personally responsible for any costs required to reverse your decision.
9. Can I do anything I wish with the Principal’s property?
No. You are required to make all decisions and perform all actions for the benefit of the Principal and not yourself. An Attorney in Fact is looked upon as a “fiduciary” under the law. A fiduciary relationship is one of trust. If you violate this trust, you could face civil and criminal proceedings. The Principal remains the owner of all of his or her property. Taking anything for yourself, without the clear consent of the Principal, may be a crime.
10. If I agree to serve, am I responsible for the Principal’s debts?
No. Acting as an Attorney in Fact does not make you responsible for any of the Principal’s debts. The only way you become responsible is if you agree to co-sign some obligation.
11. What responsibilities and liabilities do I have as an Attorney in Fact?
You have a responsibility to deal fairly with the Principal and to be prudent in managing the Principal’s affairs. You, as Attorney in Fact, are liable to third parties only if you act imprudently or do not use reasonable care in performing your duties. If ever you are acting as an Attorney in Fact and are unsure as to whether you are doing the right thing, you should seek out professional advice not only to protect yourself but to protect the Principal.
12. I’m ready to do something as an Attorney in Fact. What do I do?
After being certain that the Durable Power of Attorney gives you the authority to do what you want to do, take the Durable Power of Attorney (or a copy) to the third party. Explain to the third party that you are acting under the authority of the Durable Power and are authorized to do this particular act. Some third parties may ask you to sign a document stating that you are acting properly. You may wish to consult your attorney before signing it. When acting as an Attorney in Fact, always make that clear when signing any document.
13. How should I sign when acting as an Attorney in Fact?
You always want it to be clear from your signature that you are not signing for yourself but are, instead, signing for the Principal. If you just sign your own name, you may be held personally accountable for anything you sign. As long as your signature clearly conveys that you are signing in a representative capacity and are not signing personally, you cannot be held accountable. It is best to sign as follows:
Jane Doe, by John Doe as her Attorney in Fact or
Jane Doe, by John Doe as her POA.
In both examples, John Doe is the Attorney in Fact and Jane Doe is the Principal. The exact wording is not important. Just make sure you indicate that you are signing for your principal, not yourself.
14. The third party will not accept the Durable Power of Attorney. What now?
For a number of reasons third parties are sometimes hesitant to honor Durable Powers of Attorney. Still, so long as the Durable Power of Attorney was lawfully executed and it has not been terminated, third parties may be required to honor the document. You should contact your attorney if a third party refuses to honor the document. Under some circumstances, if the third party’s refusal to honor the Durable Power of Attorney causes damage the third party may be liable for those damages.
15. Do I have to report my activities to anyone?
You always have a duty to report to the Principal. Whether you have more specific reporting duties depends on the language of the Durable Power of Attorney. You need to read it carefully to see if you are supposed to give regular written reports to someone else. Even if you are not required to report, it makes good sense to give regular reports to at least some of the Principal’s heirs and beneficiaries. This should protect you if someone later makes a false claim that you took financial advantage of the Principal.
16. Should I keep careful records?
Absolutely. There is increased awareness of the problem of financial exploitation of the elderly. There are new laws that make it easier to prosecute these crimes. You do not want to have to defend yourself against baseless charges. Careful records are your best proof of innocence.
17. Can I ever be forced to explain what I have done to a court?
Normally, you do not have to report to a court. However, if someone complains to a civil court or a criminal court that you have abused your powers, you may be forced to explain what you have and have not done.
18. When does my authority end?
Your authority stops if you quit or if the principal removes you. There are other events that can end your authority also. Your powers as an Attorney in Fact end upon the Principal’s death. At that time, the Personal Representative appointed by the Probate Court takes over. Also, if a court decides that you have not done your job well enough and/or that the Principal needs someone else to manage his or her affairs, the court may appoint a conservator or guardian to take over management duties. The conservator or guardian then steps into the shoes of the Principal and may remove you or may ask you to report to him or her.
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Tags: durable power of attorney, elder law, elder law attorney, estate planning, estate planning massachusetts, probate court, probate law
One of the biggest mistakes that many spouses make when the other spouse enters a nursing home is the failure to get legal advice from an elder law attorney about Medicaid, known in Massachusetts as “MassHealth.” Often, the spouse remaining in the home (referred to as the “community spouse”) relies on unreliable information which can turn out to be financially devastating.
The MassHealth rules have been designed to protect certain income and assets for the community spouse without affecting the nursing home spouse’s eligibility for long-term care benefits. These so-called “spousal protections” ensure that the community spouse has the minimum support needed to continue to live in the community. However, the amounts that are protected are quite modest and can even be inadequate to sustain the at-home spouse’s accustomed standard of living.
ASSETS
Generally, the community spouse is entitled to keep a maximum of $109,560 (2011 figure), excluding the value of the home and car, which is referred to as the community spouse resource allowance (CSRA). This amount is not affected whether the assets are jointly held by the couple or they are all in the name of the nursing home spouse. MassHealth totals the countable assets of both the community spouse and the nursing home spouse as of the date of “institutionalization,” the day in which the nursing home spouse enters either a hospital or a long-term care facility in which he or she stays for at least 30 days. The nursing home spouse becomes eligible for MassHealth when the combined assets for both spouses equal the CSRA plus the $2,000 the nursing home spouse is allowed to keep. For example, if a couple owns $200,000 in countable assets on the date the MassHealth applicant enters a nursing home, the applicant will be eligible for MassHealth once the couple’s assets have been reduced to a combined figure of $111,560 — $2,000 for the applicant and $109,560 for the community spouse. The remaining assets must then be depleted in order to qualify the nursing home spouse for MassHealth long-term care services.
The Probate Court or MassHealth, under certain circumstances, may permit the community spouse to retain more than the maximum protected amount. For example, if the needs of the community spouse are greater than the minimum income level per month he or she is allowed to keep, the community spouse can petition for an increase in the CSRA so that additional funds can be invested in order to generate income to make up the shortfall. The low-income community spouse would then be able to retain a substantial level of savings above $109,560, while maintaining eligibility for the nursing home spouse.
The community spouse can also employ certain financial planning strategies to preserve assets in excess of the CSRA. One means of protecting excess assets is through the purchase of an annuity. Purchasing an annuity transforms excess assets that would otherwise make the nursing home spouse ineligible for MassHealth into a noncountable stream of income for the community spouse. The annuity must meet the following requirements: (1) it must be irrevocable; (2) the term of the annuity must have a guaranteed number of years of payment equal or less than the community spouse’s life expectancy; and the (3) the money paid back by the annuity must be equal to or greater than the annuity’s purchase price. The annuity should also allow for a change in beneficiaries in the event the community spouse later needs nursing home care. Lastly, the annuity should not be purchased until the spouse enters the nursing home.
INCOME
Although the amount of assets a community spouse is entitled to keep is strictly limited, his or her income will continue undisturbed. The community spouse will not have to use his or her income to support the nursing home spouse receiving MassHealth benefits. Further, if the community spouse’s assets increase after the institutionalized spouse is approved for MassHealth benefits, the community spouse will not be required to spend down those excess assets on the institutionalized spouse’s care.
In some cases, the community spouse may be entitled to some or all of the monthly income of the nursing home spouse. The amount the community spouse is allowed to keep depends on what MassHealth determines to be a minimum income level for the community spouse, known as the Minimum Monthly Maintenance Needs Allowance (MMMNA). The MMMNA is calculated for each community spouse according to a complicated formula based on his or her housing and other costs. The MMMNA may range from a low of $1,821.50 to a high of $2,739 a month (2011 figures). The community spouse may seek an increase in his or her MMMNA either by showing hardship or by obtaining a court order of spousal support. If the community spouse’s income falls below his or her MMMNA, the shortfall is made up from the nursing home spouse’s income.
For example, Mr. and Mrs. Smith have a joint income of $3,000 a month, $1,700 of which is in Mr. Smith’s name and $700 is in Mrs. Smith’s name. Mr. Smith enters a nursing home and applies for MassHealth. Suppose MassHealth determines that Mrs. Smith’s MMMNA is $2,000 (based on her housing costs). Since Mrs. Smith’s own income is only $700 a month, MassHealth allocates $1,300 of Mr. Smith’s income to her support. Since Mr. Smith may also keep a $72.80 a month personal needs allowance, his obligation to pay the nursing home is only $327.20 a month ($1,700 – $1,300 – $72.80 = $327.20).
The MassHealth rules are often complex and confusing. Further, nothing in this field is absolutely certain or insulated from further legal or policy change. The Law Office of Stephanie Konarski can help guide you through the multifaceted MassHealth maze to protect assets for the spouse and other family members.
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Tags: asset protection, attorney stephanie konarski, Massachusetts elder law attorney, masshealth, Medicaid, nursing home
On December 16, 2010 Governor Patrick signed a comprehensive revision of the Massachusetts homestead law. This new law provides radical changes to the current homestead law. It will take effect March 16, 2011. Below is a summary of the changes:
- With the new law, every Massachusetts homeowner will automatically have $125,000 of creditor protection for the equity in their principal home, regardless of whether a homestead declaration is filed.
If multiple owners of such real estate own their property as joint tenants or tenants by the entirety, they will each have an automatic Homestead of $125,000 but the aggregate will be capped at $125,000. Multiple tenants in common and beneficiaries of trusts have the $125,000 automatic Homestead allocated in accordance with their percentage interest.
- Homeowners may also obtain a “declared homestead exemption” of up to $500,000 by filing a written declaration at the registry of deeds.
Joint tenants and tenants by the entirety each receive the individual protection of $500,000 but their aggregate protection is capped at the $500,000. Tenants in common who file such a declaration receive protection in the amount of $500,000 multiplied by their percentage interest in the property.
- Any existing homestead (recorded prior to the enactment of the new law) will automatically be considered “declared homestead exemptions” under the new law, without having to do anything.
- For married couples, both spouses now have to sign the form.
- The new law requires the homestead to identify each co-owner to benefit from the homestead (plus the owner’s “non-titled spouse”) and the declaration must state under the penalties of perjury that each person so named intends to occupy the home as their principal residence.
- If you have a homestead as a single person and get married, the homestead automatically protects your new spouse. Homesteads now pass on to the surviving spouse and children who live in the home.
- Transfers among family members will not terminate a previously declared homestead even if the homestead is not reserved in the deed.
- The law provides protection to those who have put their home in a trust, provided that the home is, in reality, the beneficiaries’ principal residence.
- The existing “elderly and disabled” homestead will remain available at $500,000.
- You do not have to re-file a homestead after a refinance. Homesteads are automatically subordinate to mortgages and lenders are specifically prohibited from having borrowers waive or release a homestead.
- Homestead may be declared on two to four family homes, condominium units, co-operative housing and manufactured homes.
- Provides homeowners with additional protection for insurance proceeds acquired from the loss of property due to casualty. In the event of casualty, protection runs until repair is completed, a new home is acquired or two years, whichever occurs first.
- Provided homeowners will additional protection for proceeds derived from the sale of a property which was subject to a Homestead. Sale proceeds are now protected until another home is acquired as a principal residence or one year from the sale date, whichever occurs first.
- Closing attorneys in mortgage transactions must now provide borrowers with a notice of availability of the “declared homestead exemption.”
Now that the protections are enhanced and attorneys are obligated to disclose the availability of the homestead, every homeowner should opt to declare a homestead. Having homestead protection is one of the wisest investments any homeowner can make.
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Tags: attorney staphanie konarski, estate planning, governor patrick homestead revision, Massachusetts homestead laws, real estate laws
PACE, the Program for All-Inclusive Care for the Elderly, is a national comprehensive health care program that enables eligible seniors to continue living at home as long as possible. This program provides valuable community based care and services to seniors who otherwise need nursing home level of care. Services can be provided at home, an adult day health center, and/or inpatient facilities. An interdisciplinary team of doctors, nurses and other health care professionals assess the participant’s needs, develop care plans and deliver all necessary services which are integrated for a total health care plan.
PACE provides all the care and services covered by Medicare and Medicaid. The program also offers additional medically-necessary care and services not covered by Medicare and Medicaid based upon the various medical, social and rehabilitative needs of the participant. The individualized care plans customized by the PACE program are designed to preserve or restore the participant’s independence, remain in his or her home and community and to maintain his or her quality of life.
ELIGIBILITY
In order to be eligible for PACE, applicants must be at least 55 years of age, live in a PACE service area, must be certified as eligible for nursing home care by the state (must require help with two “activities of daily living” and at least one “skilled nursing” need), and must have the ability to safely remain in the community with the additional medical and support services offered by PACE. For eligible individuals, the PACE program becomes the sole source of health care services for eligible enrollees.
SERVICES
Interdisciplinary teams of doctors, nurses, social workers, therapists, nutritionists, personal care attendants, and other medical staff work together to provide all needed medical and supportive services to maximize a participant’s ability to remain in his or her home for as long as possible. Care and services include: primary medical care, home health care, adult day health, rehabilitation services, nursing services, hospital care, restorative therapies, personal care and supportive services, nutritional counseling, recreational therapy, meals, transportation, medications, podiatry, optometry, dental, social services, and anything else the program determines is medically necessary to improve and maintain the participant’s overall health. Services are available 24 hours a day, 7 days a week, 365 days a year. Generally, the majority of PACE services are provided at an adult day center, but these services may be provided in the home when appropriate. If the time comes when nursing home placement is necessary, PACE would pay for the nursing home costs and would continue to supervise the member’s care, so long as the member resides in a PACE facility.
FINANCIAL CRITERIA
PACE providers receive monthly Medicare and Medicaid capitation payments for each eligible participant. Medicaid presently pays $3,497 per member per month, with the Medicare rate dependent on the diagnosis codes of each member.
If the participant meets the financial eligibility requirements for Long–Term Care Medicaid, the program pays for a portion of the monthly PACE premium. For married couples, only the income and assets of the participant are countable. Participants cannot have more than $2,000 in countable assets. The income limit is three times the federal SSI benefit amount. In 2010, the federal SSI benefit amount is $674 per month. Thus, for participants with monthly income of $2,022 or less, there is no monthly spend-down and the participant can keep the entire $2,022. For participants whose income exceeds $2,022 per month, there is a monthly spend-down to $542 to establish eligibility. Participants with monthly income over $4,039 would pay privately, while participants with income below $4,039 would apply for Medicaid in order to keep the $542 monthly. Private pay participants are only charged the monthly premium Medicaid would pay, or $3,497 per month.
In the PACE program there is never a deductible or co-payment for any drug, service or care approved by the PACE team. PACE providers assume full financial risk for participants’ care without limits on amount, duration, or scope of services a participant may need.
LIST OF PACE PROGRAMS IN MASSACHUSETTS
PACE is not available in all cities and towns. Currently, there are only six PACE programs in Massachusetts, each covering a different geographic area.
- Elder Service Plan of the Cambridge Health Alliance
270 Green Street
Cambridge, MA 02139
617-575-5850
Web site: Elder Service Plan of the Cambridge Health Alliance
Allston, Chelsea, Arlington, Everett, Brighton, Malden, Cambridge, Medford, Charlestown, Somerville
- Elder Service Plan of the East Boston Neighborhood Health Center
10 Gove Street
East Boston, MA 02128
617-568-4602
Web site: Elder Service Plan of the East Boston Neighborhood Health Center
East Boston, Revere, Winthrop
- Elder Service Plan of Harbor Health Services
2216 Dorchester Avenue
Dorchester, MA 02124
617-296-5100
Web site: Harbor Health Elder Service Plan
Avon, Brookline, Hyde Park, Norwood, Sharon, S. Boston, Canton, Kenmore, Quincy,
Stoughton, Braintree, Dedham, Mattapan, Randolph, West Roxbury, Brighton,
Dorchester, Milton, Roslindale, Weymouth
- Summit ElderCare of the Fallon Community Health Plan
10 Chestnut Street
Worcester, MA 01608
800-698-7566 (TTY: 800-439-2370)
Web site: SummitElderCare
All towns in Worcester County, Hudson, Marlboro
- Elder Service Plan of the North Shore
37 Friend Street
Lynn, MA 01902
781-715-6608
Web site: Elder Service Plan of the North Shore
Beverly, Ipswich, Marblehead, Salem, Wakefield, Danvers, Lynn, Middleton, Saugus, Wenham, Essex, Lynnfield, Nahant, South Hamilton, Gloucester, Magnolia, Peabody, Swampscott, Hamilton, Manchester, Rockport, Topsfield
- Upham’s Elder Service Plan
1140 Dorchester Avenue
Boston, MA 02125
617-288-0970
Web site: Upham’s Elder Service Plan / PACE
Boston (area codes 02108, 02109, 02110, 02111, 02114, 02115, 02116, 02210), S. Boston, Brookline, Dorchester (area codes 02121, 02122, 02124, 02125), Hyde Park, Jamaica Plain, Mattapan, Roslindale, Roxbury
WHY CONSIDER PACE?
PACE is often an ideal solution for seniors and families who want an alternative to nursing home care, but who need skilled and experienced care services to stay at home. The primary goal of the PACE program is to provide each participant with the medical, social and rehabilitative supports needed to remain in the community and out of an institution for as long as possible.
Another benefit of the PACE program is that it is covered by Community Medicaid rather than Long-Term Care Medicaid. This means that transfers of assets are presently not penalized. For those who have not done prior planning and are suddenly faced with the need for long-term care services, PACE may offer a valuable option. In addition, the application process for Community Medicaid/PACE is significantly less cumbersome and tedious than the long-term care Medicaid application.
A PACE participant is free to disenroll from PACE and resume their benefits in the traditional Medicare and Medicaid programs at any time.
This article is only a brief overview of the PACE program. Additional information can be found on the PACE website at www.npaonline.org. Before making any decisions with regard to long term care, it is best to speak with a qualified elder law attorney to help navigate you through the various options.
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Being named as an Executor of someone’s estate is an honor, but it is also not a task to take lightly. It can be a difficult, complex job. An Executor is responsible for finalizing the affairs of someone who has died. Once appointed, an Executor has full authority and control of the probate assets. He or she must protect the property of the deceased person, make sure the estate pays any debts or taxes owed, and carry out the person’s wishes regarding distribution of whatever assets are remaining. What an Executor can and cannot do may be specified in the decedent’s Will. The time and effort involved in administering an estate varies with the size and complexity of the estate. However, even an Executor of a small estate has important duties that must be performed correctly otherwise he or she may be personally liable to the estate or its beneficiaries.
Following are some of the duties and liabilities of an Executor (these duties and liabilities also apply to an Administrator):
ASSET COLLECTION AND VALUATION
Executors must gather and compile a list of all of the assets and liabilities of the decedent. An appraiser should be hired to determine the value of assets as of the date of death and six months thereafter (if an estate tax may be payable) or upon sale if such sale takes place between these dates. The Executor takes custody of and manages the Probate Estate assets during the period of administration. The Executor must also protect the property from loss and assure that the property is kept safe. The period of administration can be lengthy, depending on the assets held in the estate and the disposition of those assets.
Existing bank accounts held in the sole name of the decedent or in joint name for convenience must be closed and the funds should be deposited into the estate account. The Executor must procure from the IRS an Employer Identification Number (EIN) for the estate. The value of the accounts and any interest accrued and payable at date of death must be determined.
All stocks and bonds held in the sole name of the decedent must be transferred into the name of the estate. The valuation of publicly traded stock is the mean between the highest and lowest selling price on the date of death (if that date occurs on a trading date) or a weighted average if the date of death does not occur on a trading date. Accrued interest and dividends (as well as the value of the securities) are usually includible on the estate tax return and probate inventory. Closely held stock and partnership interests, if any, must be valued and transferred in accordance with the terms of any documents governing their transfer.
If there is real property (real estate), it should be appraised. If it is specifically devised (given to a person or entity under the will), the property should be transferred to the specific devisee as soon as the Executor or estate attorney has determined that the property is not liable for any contribution toward estate taxes or administration expenses. Insurance on the real estate must be reviewed and perhaps updated to reflect the current ownership. Arrangements for securing and safeguarding the property must be made – possibly changing the locks or adding a security system, depending on the ownership and disposition of the property.
The tangible personal property (property that can be touched and moved such as jewelry, furniture, automobiles, etc.) should be appraised and, if necessary, arrangements should be made for securing and safeguarding the property, including proper storage and insurance, until those assets are either sold or distributed to the beneficiaries as the deceased directed.
If the decedent owned life insurance policies, the claims should be processed by the beneficiary of the insurance. If the life insurance proceeds are payable to the decedent’s estate, the proceeds should be deposited into the estate account. A Form 712 must be requested from each insurance company for all life insurance owned by the decedent or payable to the decedent’s estate or trust. This form provides the value to be used on an estate tax return and becomes an attachment to the return.
If the decedent had any retirement, pension or profit plans, 401(k) plans, and/or individual retirement accounts, the benefits to which the decedent and his/her beneficiaries may be entitled should be ascertained, and the most beneficial payout should be determined. The value to include on any estate tax return must be determined as well.
BILL PAYING
Executors, once appointed, must pay bills such as legally enforceable debts of the decedent incurred before death, but not yet paid, such as utility expenses, outstanding real estate taxes, outstanding credit card bills, medical expenses to the extent not covered by insurance, and unpaid personal income taxes; funeral expenses, including the funeral home bill, costs of any reception after the funeral, sympathy cards, stamps for sympathy cards, long distance telephone calls, and the like (either directly or through reimbursement of family members); expenses of administration, including legal fees, accountant’s fees, charges for death certificates, charges for certificates of court appointment, court filing fees, appraisal costs, and the like, incurred while the estate is ongoing.
ESTATE TAX RETURNS
Executors must have Federal and Massachusetts estate tax returns prepared if the estate assets reach a certain threshold. It is important to note that for estate tax purposes, the decedent’s estate includes probate and non-probate assets such as joint tenancy assets, life insurance, 401K and IRA plans and assets held in trust. Federal and state estate tax returns (Forms 706, M-706, etc.) are due nine months after date of death. The returns can be put on extension for six more months, but any taxes are due and payable at nine months.
The estate tax returns reflect deductions allowable by the taxing entities to reduce the “taxable estate”. Deductions are allowed for funeral expenses, debts, expenses of administration, items passing to a surviving spouse (if any) or to charities (if any). The Executor should consult with a tax attorney or accountant to discuss ways to minimize taxes, such as using disclaimers, timing distributions, reviewing for specific terms and possible flexibility, etc. This is often referred to as “post-mortem planning”.
Once the returns are filed, the Executor waits for the taxing authorities to review the returns and issue “closing letters”. Closing letters are the taxing authorities’ agreement that any tax due has been paid. The authorities have up to three years from the date the return is filed to review the return, but typically they proceed with the review sooner – often within one year of receiving the return. Generally, until the closing letters are received, the estate remains open.
INCOME TAX RETURNS
The estate is a separate taxable entity and the Executor must get a separate tax identification number from the IRS by completing Form SS-4. This number is also needed to open estate bank accounts as well as to transfer securities into the name of the estate if they are to be held for any length of time.
If estate assets generate income during the administration of the estate, an Executor must file fiduciary income tax returns (Federal Form 1041 and Massachusetts Form 2) if the estate has any taxable income or has gross income of $600 or more in any taxable year. Estate income tax returns must be filed on or before the 15th day of the fourth month following the close of the taxable year (April 15th if you use the calendar year). The entire tax due must be paid. After the second year, the Executor must file income tax estimates and make quarterly estimated tax payments.
An executor is also required to have the decedent’s final income tax return (Federal Form 1040 and Massachusetts Form 1) prepared, even if the decedent paid no income taxes in recent years.
When a person dies, his taxable year ends on the date of his or her death, and his or her income and deductions are reported through that date. If the decedent was married when he or she died, the estate can join with the surviving spouse in filing a joint income tax return for the year in which the decedent died. Certain deductions may be taken on the decedent’s final income tax return or claimed as an expense of administration on the federal estate tax return. An Executor should talk to a tax attorney or accountant about these elections.
GIFT TAX RETURNS
If the decedent gave gifts over the annual exclusion amount (currently $13,000 in 2011) to any person (except, perhaps a spouse) in any year and did not file a gift tax return, the Executor is obligated to have a gift tax return prepared and filed.
FEES
An Executor is entitled to compensation for the work the Executor performs, subject to approval by the Probate Court. The amount of the fee is subject to a “reasonableness test.” If an Executor chooses to be compensated for his or her duties, he or she must keep a detailed record of the tasks performed and the amount of time spent.
Any fee paid to an Executor is counted as income to that Executor and must be included in the Executor’s income tax return. Executor fees can be deducted on the estate tax return, thus potentially lowering the tax due, if applicable.
DISTRIBUTIONS
The assets of the estate belong ultimately to the beneficiaries and not to the Executor. If there are specific pecuniary bequests (cash legacies) under the will, arrangements must be made to pay them from Probate Estate assets (unless the will specifies that they are payable from a trust). Cash payments under the will must be made within one year from date of death or interest will begin to accrue and be payable. Cash payments under a trust that terminates on the decedent’s death must be paid within six months from date of death or interest will begin to accrue and be payable.
The rest of the Probate Estate must pass in accordance with the will – to individuals, charities or to a trust. The Executor is responsible for distributing that property, after paying administration expenses, funeral costs, debts and taxes under Federal law, amounts expended by Massachusetts under MassHealth, expenses of last illness, debts and taxes under state law, creditor claims and specific gifts under the will.
The Executor may make distributions to the beneficiaries as soon as they can be done safely. Distribution does not have to wait until the estate is closed. However, the Probate Estate should not be fully distributed before one year from date of death because creditors may file claims against the estate up to one year. An Executor is responsible if he or she distributes assts and then later finds out that he or she needs the assets to pay legitimate claims. Distribution to the beneficiaries of the residue of the estate typically occurs after both the Internal Revenue Service and the Commonwealth of Massachusetts (or other state) have issued estate tax closing letters accepting the estate tax returns. Depending on the situation, this can be anywhere from one to three years after the estate tax returns have been filed.
LIABILITIES
When carrying out these specific duties, the law expects an Executor to be impartial. The Executor owes fiduciary duties to anyone who has an interest in the estate and must act in the best interests of the estate. This means that an Executor cannot favor one person or himself or herself over others involved in the estate.
The administration of the estate generally needs to be commenced and concluded within a reasonable period of time. If an Executor fails to do this and, as a result, the beneficiaries under the will are exposed to any form of financial or pecuniary loss, he or she could be held liable for the loss.
An Executor is expected to administer the estate with care and prudence. An Executor is personally liable to ensure that payment of all valid creditor claims, including any taxation liabilities, are made. If an executor acts without due care and prudence, such as in the case of buying speculative securities or disposing of valuable assets substantially below market value, he or she could be held accountable.
An Executor is liable to the beneficiaries for any loss to the estate and for any gain the estate should have realized but did not, or if an Executor was negligent or intentionally did something he or she shouldn’t have (or failed to do something he or she should have). For example, if the Executor mismanages the estate assets, even unintentionally, he or she can be held personally liable and may have to repay the estate for any losses. If the Executor fails to secure and protect the assets of the estate and it results in the assets being damaged, lost or stolen then (in the absence of having adequate insurance over the assets covering the loss) he or she could be held personally liable for the loss or, as the case may be, the reduction in the value of the assets in question. Similarly, if the Executor fails to properly manage, insure or repair real property (whether commercial or residential) he or she could be held liable for any losses including loss of rental income.
While Executors can take professional advice before making investment decisions, the ability to make these decisions is personal to the Executor and cannot be delegated. Therefore any improper delegation of Executor duties, such as giving investment advisors complete scope to make decisions in respect of and deal with the estate’s investments without the Executor’s supervision, could result in liability being imposed on the Executor. The same principle applies to allowing someone to freely manage the deceased’s business or property portfolio, etc. If an Executor engages a professional to manage some aspect of the estate, the Executor must closely supervise the carrying out of those management functions.
An Executor is responsible for ensuring that the correct people benefit from the estate. If an Executor accidently make payments or distributions to the wrong people, he or she could be held personally liable to make good the damage caused by securing the return of the misplaced assets or compensating the beneficiaries accordingly.
Taking actions without the proper approval can also expose Executors to liability. Depending on the proposed action in question, an Executor may require the prior consent of beneficiaries, co-fiduciaries or even the Probate Court.
An Executor’s liability is not limited to the extent of the deceased’s estate; if the claim is more than the value of the assets still held in the estate, he or she will be personally liability for the shortfall.
This article is only a synopsis of the basic responsibilities and liabilities of an Executor. If you have any questions, you should consult with a qualified attorney before making any decisions.
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Tags: asset management, elder law attorney, estate planning, estate planning law firm, estate planning practice, estate planning services, estate planning trust, estate taxes
In some circumstances, MassHealth is entitled to recover the amount of benefits paid for a recipient’s medical care. This right applies only to the extent that MassHealth has provided medical services after the recipient reached the age of 55 or for services provided in a nursing home, hospital or other medical institution at any age.
MassHealth Lifetime Lien
MassHealth may secure a lien against a living MassHealth recipient’s principal residence and any other real estate located in Massachusetts in which the recipient has a legal interest. (i.e, the recipient is the sole owner of the property, he or she owns it jointly with another, or he or she owns a life estate in the property), with certain exceptions. This lien gives MassHealth authority to recover payments for a recipient’s medical expenses if the property is sold while the recipient is living.
A lien may not be placed on the property of a MassHealth recipient if a protected relative lives in the home – a spouse, a child under the age of 21, a blind or permanently disabled child of any age, or a sibling with a legal interest in the property who has lived in the house for at least 1 year prior to the recipient’s admission to a medical institution. The MassHealth recipient may transfer his or her ownership interest in the property to that protected relative without penalty. That is, the transfer will not adversely affect the recipient’s eligibility and the State will be prevented from any future estate recovery on the property.
If the home is not occupied by a protected relative, a lien may not be placed against the property if the institutionalized recipient is expected to return home within 6 months. In this instance, if the recipient indicates on the MassHealth application that he or she intends to return home, MassHealth will mail a form to the recipient’s physician asking if there is a reasonable expectation that the recipient will return home within the following 6 months. If the physician answers affirmatively, no action is taken. However, MassHealth will review the recipient’s status after 6 months and, if the recipient is still institutionalized, ask his or her physician to complete another form assessing whether there is a reasonable expectation that the recipient will return home at that time.
If the physician’s assessment is that the recipient is not expected to return home within 6 months, a notice is mailed to the applicant of MassHealth’s intent to file a lien against the property unless that determination is appealed.
No lien is placed against the property if the MassHealth recipient indicates on the application that he or she does not intent to return home. The property will then be counted as an asset for purposes of MassHealth eligibility. However, its value is disregarded for up to 9 months, provided that the recipient signs an agreement to sell the property for fair market value.
Presence of the lien will insure reimbursement for the medical services provided if the property is sold or transferred during the MassHealth recipient’s lifetime. No sale or transfer can be completed until the MassHealth lien is either paid or the lien is released without payment. This prevents MassHealth recipients from giving away the property in which they no longer reside before its equity can be used to offset long-term care expenses paid on their behalf.
At a real estate closing, the amount of the lien is indicated on the HUD Settlement Statement and must be paid as a condition of sale or transfer. If the lien is greater than the sale amount, a reduced amount will be accepted to satisfy the lien. However, any outstanding mortgages, taxes, amounts due to public utilities, and child support arrears are paid before MassHealth’s is entitled to recover, which may further reduce the amount recovered.
The lifetime lien is no longer valid when the Masshealth recipient is deceased. Masshealth must release the lien after they have received notification of the member’s death and a copy of the death certificate.
Estate Recovery Rules
When a MassHealth recipient dies, MassHealth’s right of recovery is limited to the recipient’s probate estate. A probate estate includes property that a person possesses at the time of death in his or her name alone. Under current Massachusetts regulations, property in joint names, in trust or in a life estate generally passes outside the probate estate and would be exempt from MassHealth’s right to recover. The probate estate may include real property on which a lifetime lien was filed. However, the lifetime lien is no longer valid after the recipient’s death and must be released upon the request of the Administrator or Executor.
Pursuant to Massachusetts law, a copy of any petition to probate a decedent’s will or for administration of a decedent’s estate must be provided to MassHealth’s Estate Recovery Unit, along with a copy of the death certificate, regardless of whether the decedent received MassHealth benefits. Upon notification of a person’s death, the Estate Recovery Unit will file a Notice of Claim against the recipient’s probate estate to recover any payments made on behalf of the recipient for medical benefits. The Executor or Administrator has 60 days from the date the Notice of Claim was filed in the Probate Court to object to the validity of the claim or request a waiver or deferral of the claim.
A waiver may be granted if hardship can be established. Hardship waiver is available if a sale of real property would be required to satisfy a claim against the recipient’s probate estate and the individual using the property as their primary residence (1) lived on the property for at least one year before the deceased recipient became eligible for MassHealth; (2) the individual inherited or received an interest in the property from the deceased member’s estate; (3) the individual is not being forced to sell the property by other heirs; and (4) the individual’s income is less than 133% of poverty level. Documentation must be provided to MassHealth to demonstrate that all of the hardship waiver requirements are met. This grant of waiver is conditional for a two-year waiting period. If these waiver requirements continue to be met during the two year period following the conditional waiver, (i.e. the individual’s income is below the poverty level and the property remains unsold, not transferred and used as the individual’s principal residence), recovery is then permanently waived.
A deferral may be granted if there is a surviving spouse or dependent relative (i.e., a child who is blind, permanently and totally disabled, or under 21 years of age). This deferral will last until the death of the spouse or loss of exempt status of the dependent relative.
If no request is made to object to the validity of the claim, waive or defer recovery within the 60 day period, payment is expected in full. If appropriate documentation is provided to prove that the estate contains insufficient assets to pay the claim in full, the Estate Recovery Unit will accept less than the full claim amount. In such cases the Estate Recovery Unit will request asset information to determine the value of all the assets owned by the decedent. If the estate includes real property, the fair market value of the property must be established. The Administrator or Executor may do so by submitting copies of the current tax bill or most recent tax assessment showing the assessed value of the property and a written appraisal of the fair market value of the value from a knowledgeable source, such as a real estate broker, certified appraiser, or official from a bank or savings and loan association. Once the total value of the real estate and other property has been established, all allowable expenses are deducted from that amount and the remainder must be paid to MassHealth.
Interest on the estate recovery claim begins to accrue 6 months after the appointment of the Executor or Administrator at a rate of 12% per annum. On rare occasions, if the Executor or Administrator refuses to settle the claim, the Estate Recovery Unit may file a motion in court to compel payment.
One final note, MassHealth will not seek estate recovery against the principal residence of MassHealth recipients who owned long term care insurance, provided that the policy meets certain requirements. In order to avoid estate recovery, the recipient must have (1) been institutionalized; (2) notified MassHealth that he or she has no intent of returning home; and (3) had certain level of benefits available to pay for nursing home care as of the day he or she entered the nursing home. One important caveat to remember is that although the long term care insurance policy may meet the minimum coverage requirements at the time it is purchased, the policy may not meet the minimum coverage requirements on the day the recipient enters the nursing home. For instance, depending on the original maximum benefit, if the recipient uses the policy to pay for non-nursing home benefits (e.g., home health care, personal care or assisted living benefits), the amount of benefits remaining available to pay for nursing home care may be less than what is necessary to meet MassHealth’s minimum coverage requirements on the day the recipient enters the nursing home.
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Tags: estate planning
Medicaid VS. Medicare: What are the Differences and how do I benefit?
Many clients are often confused about the differences between Medicare and Medicaid. There are significant differences between these two programs and it is important to understand these differences. Below is a brief synopsis of both programs.
MEDICARE
Medicare is an entitlement-based Federal program that provides health insurance for people age 65 and older, people under age 65 with certain disabilities, and people of all ages with End-Stage Renal Disease. Medicare is not a needs-based health insurance program. Benefits are the same regardless of one’s financial means. Higher income Medicare beneficiaries pay higher premiums than less-affluent Medicare beneficiaries.
There are several parts to Medicare. Medicare Part A helps pay inpatient care in hospitals, including critical access hospitals, a limited benefit for skilled nursing care, hospice and some home health care. Most beneficiaries pay no monthly premium for Part A because it has been paid through payroll withholding taxes. However, for individuals that did not participate in payroll withholding taxes for Medicare, or who were disabled (and thus received Part A), but have now returned to work, Part A can be purchased for $443 per month.
Medicare Part B covers doctors’ services and outpatient care, as well as other medical services that Part A does not cover, such as some of the services of physical and occupational therapists, and some health care. Part B pays for part of these covered services and supplies when they are medically necessary. Part B is optional and may be deferred if the beneficiary or their spouse is still working. There is a lifetime penalty (10% per year) imposed for not enrolling in Part B unless actively working. Part B coverage begins once a patient meets his or her deductible, then typically Medicare covers 80% of approved services, while the remaining 20% is paid by the patient.
Most people pay the standard premium amount for Part B coverage, which is deducted from their Social Security benefit. The Part B premium for 2011 is $96.40 per month for most existing Medicare beneficiaries. For new Part B beneficiaries, the monthly premium is $115.40 in 2011. If an individual’s income is over $85,000 (single) or $170,000 (married couple), then the Medicare Part B premium may be higher.
Medicare Part D is prescription drug coverage insurance that is provided by private companies approved by Medicare. Part D was designed to help people with Medicare to lower their prescription drug costs and to protect against future costs. Medicare Part D is an optional benefit and anyone received Medicare Part A or Medicare Part B is eligible. Most people pay a monthly premium for this coverage, which varies from provider to provider. A penalty may be assessed if Medicare Part D is an optional benefit and anyone with Medicare Part A or Part B can get this coverage.
Each company that’s part of Medicare Part D is privately-run and will vary from the next, but each must meet the standards required by the government. Since each company’s plan is different, there’s a wide variety of drugs covered in Part D health insurance that can be good (or bad) depending what the individual requires. It is important to research the various companies before choosing the one that best fits your needs.
Since Medicare pays for only 100 days or less, only about 2 percent of skilled nursing home expenses in the United States are covered by Medicare.
Medicaid is a health insurance program financed and run jointly by the federal and state governments for low-income people of all ages who do not have the money or insurance to pay for health care. Medicaid is a form of welfare. It provides a variety of medically related assistance at reduced or no cost to those who qualify. Each state sets its own guidelines, subject to federal rules and guidelines. Certain services must be covered by the states in order to receive federal funds. Other services are optional and are elected by states.
Medicaid is based on medical and financial need, with eligibility based on income. If a person has limited income and/or financial resources, Medicaid covers a broader spectrum of services than Medicare does. It covers hospitals, doctors, drugs, x-rays and long term nursing home care. Medicaid usually covers low-income children, pregnant women, families with dependent children, persons 65 or older and persons who are blind or disabled. Generally, to be eligible for Medicaid, an individual can have only nominal resources and income. Medicaid will pay for medical care after all other sources, including Medicare, have been exhausted.
There are many benefit programs which fall under the Medicaid umbrella, and each one has its own set of requirements to qualify for benefits. For the purposes of this article, only Medicaid coverage of long term nursing home care will be discussed.
In Massachusetts, Medicaid is administered by the Division of Medical Assistance (DMA). An individual will not receive coverage unless the Division of Medical Assistance (DMA) determines that the applicant’s medical condition requires nursing home care and the applicant is sufficiently impoverished under the Division’s guidelines. To be medically eligible an individual must require at least one skilled service daily or must require assistance with at least three activities of daily living (including eating, dressing, bathing, transferring in and out of bed, and toileting), one of which must be a nursing service. If an applicant does not require at least this level of care, Medicaid will not pay for his or her nursing home expenses
To financially qualify for Medicaid coverage of nursing home care, a single individual cannot own more than $2,000 in “countable assets”. For a married couple, the applicant’s spouse living in the community is allowed to keep a total of $109,560.00 (2010) in countable assets. This amount is adjusted every year for inflation and may be increased in certain circumstances as a result of an appeal.
Medicaid does not pay the entire cost of a person’s nursing home expense. The person must contribute an amount (“Patient Paid Amount”) based on his or her monthly income and then Medicaid pays the balance of the individual’s care costs. For a single individual, Patient Paid Amount is the individual’s total gross income minus $72.80 for personal needs, and any applicable health insurance premiums. For a married couple, the community spouse may be allowed a portion of the institutionalized spouse’s income to help maintain his or her reasonable standard of living.
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Why Cant I Make a Tax Free Gift?
I often meet with clients who have preconceived notions about gifting assets based on things they have heard from their friends, neighbors, hairdresser, etc. Most of the time the information shared is incorrect, or at least incorrectly applied to their situation. Many clients are unaware that there may be ramifications beyond just making a gift. The purpose of this article is to set the record straight on what you need to be aware of before making that gift you’ve been thinking about.
The most significant advantage to gifting property is that federal estate taxes and probate costs will be reduced because the gifted property is no longer part of your estate. Gifts between U.S. citizen spouses, regardless of amount, are also nontaxable. So, too, are certain tuition and medical expenses that you may make on behalf of another.
For tax purposes, each person is allowed to gift a certain value to any person tax free. The basic rule is that in the year 2011, anyone can give up to $13,000 in money or other property to any number of parties without gift tax. This $13,000 per year, per recipient rule is known as the annual gift tax exclusion. If you are married and one spouse makes a gift of, say, $25,000, to one person, by filing the federal gift tax return the couple can consent to “split” the gift. That way, each spouse is treated as having made a $12,500 gift, so neither will have made a taxable gift. Many clients with significant assets are able to minimize their taxable estate by making such annual exclusion gifts.
Also under the current rules, even if a gift-tax return must be filed because more than $13,000 is given to one person, the giver of the gift will not pay any gift tax until he or she has gifted more than $1 million during their lifetime. Thus, if a person has $100,000 and gives all of it away in one year to one person, they will need to file a gift tax return, but they will not owe any gift tax because the gift does not exceed the lifetime threshold.
In order to achieve the advantages of gifting, however, you must relinquish all control over the gifted property. The gift must be made with no strings attached. This means that the property could be at risk if your child goes through a divorce, becomes sued or files bankruptcy. In addition, you may end up needing the property for your care and be unable to access it. Before making a gift, you must be sure that the assets you retain are sufficient to enable you to withstand any unexpected increases in your own living expenses.
Another factor to consider is possible adverse effect on family members. If you add your child’s name to your bank account because he or she is going to help you pay your bills, you have made a gift. This could count against them if they need to apply for financial aid for their children or for themselves. Family relations may also be jeopardized especially where one child sees the gifts as being made in unequal portions or where the children cannot agree on what to do with jointly held property.
If you give real estate to a child, there may be negative tax consequences for them when the property is sold. For example, suppose you purchased your home for $30,000 but the property is now worth $250,000. Your basis in the property would be $30,000. If you sell the property, you would realize a $220,000 gain. You would not owe any taxes because of the capital gains exclusion. If you were to make a lifetime gift of this property, your children would take your basis in the property. If they were to sell the property for $250,000, they would realize a $220,000 gain which would be taxable. If, however, you were to die owning the property and leave it to your children in your Will, your children would receive a “stepped-up” basis. They would inherit the property as of the date of death value. If the property were valued at $250,000 as of the date of your death, your children would receive it as if they paid $250,000 for it. As such, they could in turn sell it for $250,000 and realize no taxable gain.
Making gifts can also have an impact on your eligibility for nursing home medical assistance. Any transfer of any asset for less than fair consideration within the lookback period of applying for Masshealth (Medicaid) benefits creates a penalty period of ineligibility. This penalty results in being unable to obtain MassHealth benefits for at least five years after such a gift is made. It is important to note that there is no maximum penalty period and the penalty period does not start until the applicant has applied for Masshealth and has been determined to be eligible.
This penalty provision applies without regard to the reason for a gift. Any gifts you make within 5 years prior to applying for MassHealth coverage of nursing home costs, are presumed to be for the purpose of depleting your life savings in order to qualify for MassHealth. Donations to one’s church, writing a check to a family member for a special occasion such as a birthday or graduation, signing a deed over to someone, paying for a grandchild’s college tuition, etc. are all penalized. There is generally no exclusion for these types of transfers no matter how noble or small they may be. Any and every gift is subject to the penalty period whether it is $5,000 or $500. In order to avoid the imposition of the penalty period, either the gifts would have to be returned to the applicant or the applicant must prove that the gifts were for a legitimate purpose and that nursing home care was not foreseeable based on his or her good health at the time the gift was made.
Many people put their children’s names on their homes, bank accounts, stock portfolios, annuities, and other investments to avoid probate on their death. These changes may cause problems in obtaining MassHealth benefits. Another popular transaction is taking a joint account and removing the MassHealth applicant’s name from the account. This is a gift. The MassHealth applicant had unrestricted access to the full value of the account on one day and after his or her name was removed from the account they no longer had access to the account. This transaction results in a period of ineligibility.
It is important to understand that while a person can make a gift of up to $13,000 per person in 2011 without filing a gift tax return, the MassHealth program is not governed by the gift tax rules. Those same gifts that you make to minimize your tax burden with the IRS will be deemed disqualifying transfers for MassHealth purposes, resulting in a penalty period based upon the total amount gifted.
There are a few very narrow exceptions of transfers that do not create a MassHealth penalty. You are allowed to give any amount of your assets to your spouse. And gifts to a disabled child are not considered transfers that cause MassHealth ineligibility. You may also gift your home to certain people without penalty. Moreover, if you wait long enough after making a large gift before applying for MassHealth, the gift will not be counted.
Although well intentioned, a gift may have serious consequences on your future security and eligibility for long-term care benefits. It may also adversely impact the recipient. Before making a gift, it is vital that you seek legal advice so you can go into the transaction fully aware of the consequences of the gift, and the best way to structure the transaction to insure that you, your children and your property are protected.
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