This is the question we get asked most often. The question is based on concerns regarding the ruinous cost of long term care, which can literally deplete your estate. The answer is different for each client. If you are healthy, we will show you how even a modest amount of long term care insurance can make a big difference. If insurance is not an option, we’ll also review how Asset Protection Trusts and asset transfers can enable you to qualify sooner for Medicaid (Title XIX, Title 19) if you believe you will need long term care in the future. If you need care now, you can leverage your resources by qualifying for Medicaid through exempt assets, spousal protections, targeted spend-down and exempt transfers (see Avoid Medicaid’s Look-Back Period), and by qualifying for VA Aid and Attendance pension benefits through transfers, trusts, annuities and personal service contracts. You also can reduce the cost of care by planning for the tax deduction of your care by a family member with higher income and returning the extra savings to you as needed. These techniques can help you avoid running out of funds, so you can afford home care or assisted living and protect your lifestyle and life’s savings
If you want to set the stage for future Medicaid eligibility, we’ll show you how an Asset Protection Trust can enable you to transfer assets without causing capital gains taxes to your children, and protect those assets from your children’s creditors. Some clients will then become eligible after the 5-year look-back period, but others can intentionally trigger a shorter penalty period that ends much sooner (see Avoid Medicaid’s Look-Back Period). If you need Medicaid now (for home care, assisted living care or nursing home care), spousal protections apply, certain transfers are exempt from penalty, and some assets can be converted into exempt assets (see Spousal Medicaid Asset Protection). Over-income clients can qualify through a Pooled Trust (see Medicaid Income Protection). You can protect assets from VA Aid and Attendance in some of the same ways, and qualify from an income standpoint by deducting medical expenses and family care services under a Personal Services Contract. By developing the optimal combination of strategies, you can qualify for valuable benefits to greatly mitigate the cost of long term care.
The simple answer is: the same way you would want your children to talk with you about it. You can’t parent your parents, so don’t try. They also have accumulated more wisdom than you have. Be respectful and patient, and reassure them that they are in control of the decisions. Tell them that the discussion is all about them and providing for their needs as those needs increase. Having said that, if you recognize that changes are occurring, your instinct that these matters should be looked into now probably is correct. Encourage them to seek expert advice, just as they’ve done before during each stage of life (regarding childrearing, financial planning, medical care, etc.). Remind them that this is their present stage of life, it is normal, and it requires the same degree of attention. Help them understand that procrastination can lead to risk of injury, depletion of resources, and unnecessary stress on the whole family, whereas proper planning can protect their safety and enable them to preserve their independence, resources and dignity.
If you are concerned about the cost of long term care, an Irrevocable Asset Protection Trust can hold assets and enable you to qualify sooner for Medicaid and VA Aid and Attendance pension benefits, while preventing capital gains tax to your children, and while protecting those assets from your children’s creditors. If you would prefer to avoid probate, a Revocable Living Trust can enable you to invest and spend your assets as you wish, and then distribute them to your loved ones upon your death, without having to probate your will. If you have a disabled family member or spendthrift child, you can incorporate a Special Needs Trust or a Discretionary Support Trust, respectively, into your will. We all hope for the best, but planning for the realities of life ensures your hard-earned resources will be available for you and your loved ones when they are needed the most.
Select an attorney as you would select a doctor. Everything is a specialty now, and these areas of the law are very complicated and fast-changing. You want someone who spends most of his or her time practicing the types of matters you have, and has done so for many years. Immersion in these areas of the law can be reliably inferred from membership in relevant professional organizations, a reputation among those who provide other services to the same population, and a background or education which is particularly well-suited to these areas of practice. The lawyer should be able to say that he or she currently is handling many matters similar to yours, to answer detailed questions off the top of his or her head, to give you the names and phone numbers of key players in the system, to quote facts and figures without opening a book, and to cite a long track record of success with your type of matter. You should also feel personally comfortable with your attorney, because these areas of the law are very personal, and you will achieve your goals only if you trust your attorney enough to follow his or her advice.
This decision involves weighing important relative risks. If you transfer your home or other assets and then need them back to pay for home care, assisted living, etc., your children might not cooperate or might not be able to cooperate due to financial problems, creditor issues, divorce, death, etc. On the other hand, if you do not transfer assets and then require long term care, you could lose those assets before qualifying for Medicaid. There are also major tax issues. If you hold your house until death, you pass it to your children with a stepped-up cost basis, allowing them to later sell it with little or no taxable gain. If you transfer it during life, you give your kids your original cost basis, causing them to pay tax on the full gain upon sale. To balance the issues, many clients choose to transfer the house to an Asset Protection Trust. Such a trust prevents your children’s creditors from getting at the house, preserves the stepped-up cost basis at death, and avoids probate as well. Your house probably represents a large portion of your life’s savings. Any decision should be made only after careful consideration of all of the legal ramifications and how they apply specifically to you.
This question deals with Conservatorship in a Connecticut probate court. Anyone can apply for the appointment of a conservator, but there has to be a good reason to do so. And, the applicant (“petitioner”) has to prove by clear and convincing evidence that you are incompetent to manage your affairs or care for yourself, and that there are no less restrictive means of providing the assistance you need. The easiest way to avoid conservatorship is to execute a Durable Power of Attorney, a Living Will, and an Appointment of Health Care Representative, and to make sure that they contain all the powers needed to accomplish your goals. If your goals include Connecticut Medicaid asset protection, many document forms available online and through many attorneys do not include the necessary powers. A qualified Connecticut Elder Law Attorney can carefully prepare documents tailored to your needs.
In general, you have no liability for the costs of someone else’s long term care, and nursing homes cannot ask you to assume liability. However, there are different ways in which you can inadvertently become personally liable for the care of a loved one. One is if you promise to do so, expressly or impliedly even (possibly) through just reviewing the contracts with the admissions staff. Another is if you are serving as Conservator and don’t properly plan the transition from private-pay to Medicaid eligibility, leaving a payment gap. A third is if you sign as responsible party and the contract provides for third-party liability (they usually don’t). New cases create new potential pitfalls without notice. The safest practice is to have the patient sign all admissions paperwork, even if just with an X, and to have the documents reviewed in advance by a Connecticut elder law attorney. It’s ok to make changes, and we frequently do exactly that. Remember, those forms are valuable contracts and, with the high cost of nursing home care, you should make sure your rights are protected.
The primary purpose of Medicaid asset protection is to protect your lifestyle. Protected assets can be used to preserve your independence longer. Let’s say you require home care or assisted living. If you pay for it out-of-pocket, your money will last only so long. But, if you protect assets and accelerate your eligibility for Medicaid home care, the State will pay for home care (even a live-in!), and your assets can be used only for your other expenses and will last longer. Likewise, if you need assisted living, you can protect assets and qualify for the State of Connecticut Assisted Living Pilot Program, which will pay a portion of assisted living charges and extend your assets. In other words, you leverage your resources with Medicaid benefits to support home care or assisted living longer. Even if you are in a nursing home, you could benefit from certain individualized services or non-essential purchases, and protected assets can be used toward those non-Medicaid costs. Of course, protected assets have a better chance of being left upon your death, and then benefit your loved ones as you would wish.
You don’t need a lawyer to do anything in life. The real question is, will you benefit from using a lawyer? Benefits from using lawyers in any legal matter typically include reduced stress, savings of time (versus going it alone), and improved financial results. By using a Connecticut Elder Law attorney, you probably will enjoy a substantial reduction of stress compared with confronting the State of Connecticut or VA on your own. You probably will also save a great deal of time versus researching issues and doing all the legwork yourself. And, the financial benefit (relative to the fee paid) can be quite large given the fact that Medicaid (Title XIX, Title 19) and VA Aid and Attendance benefits can be worth thousands of dollars per month. A good rule of thumb is that, if your elder law attorney gets your application granted just one month sooner than you would have on your own, you’ve probably profited already. Every month of benefits thereafter would be pure profit to the family. Medicaid and VA laws change frequently, and new strategies are being developed continually. The difference between the optimal plan and a close-second can be your house, or the assets you transferred a year or two ago, or the State’s ability to collect from your estate upon death, or some other result representing a large portion of your life’s savings. Your nursing home may offer to file your Medicaid application for you at no charge. But, they are not always on the cutting edge of asset protection strategies. As Connecticut Elder Care lawyers, we will place your interests first and zealously advocate on your behalf.
You should apply for nursing home admission any time you think you might require a nursing home bed within a year or so. There is no harm to applying, because there is no application fee and the information required on the forms will have to be disclosed to the Connecticut Department of Social Services anyway if and when you apply for Medicaid (Title XIX or Title 19). And, if a bed becomes available before you need it, you can simply decline and remain on the wait list. In fact, you can apply to two or three homes to maximize the chances of having a bed when you need one. The application process should be conducted as part of a broader Connecticut elder law planning and Medicaid Asset Protection process. And, when a bed becomes available, you should review the admissions agreement with a Connecticut elder care lawyer to avoid inadvertently making family members liable.
Medicaid (Title XIX, Title 19) won’t affect your admission if you know what you’re doing. First of all, all the local facilities accept Medicaid. It’s true that Connecticut law allows nursing homes to admit private-pay patients ahead of Medicaid-eligible applicants if most of the home’s beds are occupied with Medicaid patients (and they usually are). However, the fail-safe is to make sure that you can apply as private-pay whenever you want to, by having a family member hold protected assets and use some to pay for the first couple of months. Doing so can be perfectly consistent with Medicaid asset protection planning. You’ll be admitted to a semi-private room, and then all the care is the same. You’ll be cared for by the same nursing staff, eat the same food, and receive the same therapies as anyone else, because the caregivers don’t know your payment source.
Any gratuitous movement of money or assets to another person is a transfer of assets (a gift) and has potential Medicaid and tax consequences. It’s true that any amount up to the annual gift tax exclusion (currently $14,000 per person) will result in no gift tax, but all gifts are subject to Medicaid penalty within the five-year look-back period. Proper Medicaid Asset Protection planning can enable you to make transfers in ways that lead to eligibility in less than five years (see Avoid Medicaid’s Look-Back Period). Many gifts can cause capital gains tax consequences to the recipient upon future liquidation, but Asset Protection Trusts can hold those assets until after your death and give your loved ones a stepped-up cost basis and eliminate the tax.
Most of the nursing homes in this area provide excellent care, but that does not make them experts on Medicaid law. They are not always aware of some of the opportunities seniors have for protecting assets and income, especially since the laws change frequently. Any decision to liquidate assets is a legal conclusion which should be based on a comprehensive review of your options. If you consult with a Connecticut elder care lawyer, you will learn all the opportunities you have, and you will have an advocate to help you implement them.
The Connecticut Home Care Program for Elders is actually a combination of benefits programs, each of which provides a different level of home care and has different eligibility criteria. The first two levels are referred to as “State Funded” home care, because they are paid for entirely with State of Connecticut funds. They are generally (not always) easier to qualify for, but provide fewer hours of care than the third level. The third level is called Medicaid “waiver” home care, because it originates under certain waivable provisions of federal Medicaid law (it’s still considered Title XIX, or Title 19). It follows the same eligibility criteria that the Medicaid long term care program uses regarding nursing home benefits, but provides up to live-in (!) home care.
The Medicaid home care program has a strict monthly income cap. If your income exceeds the cap, you are ineligible, but you can establish a Pooled Trust to receive the excess income and apply it toward your monthly household bills. Then, each month, just send the trustee a check for the excess income and household bills of the same amount, and the trustee will use your income to pay the bills. It’s like bouncing money off a wall and getting it back, but it enables you to qualify for valuable benefits to help you stay home longer.
The look-back period is the period of time the State will look back into your financial history when you apply for benefits. It currently is five years. If the State finds a transfer of assets (gift) during that time, they will impose a penalty period, during which you are disqualified from Medicaid (Title XIX, Title 19). The length of the penalty period is calculated based on the value of your gifts during the look-back period, and can be much shorter than five years. You can use that methodology to calculate the amount of assets you can transfer and wait out the resulting penalty period before applying for Medicaid, but certain requirements must be met to start the penalty period so that it will end when you need to start receiving Medicaid benefits. (See Avoid Medicaid’s Look-Back Period.)
There currently is no look-back, but VA has proposed new regulations under which a three-year look-back would apply to transfers of non-exempt assets. Of particular concern is the fact that the proposed rules do not provide for grandfathering transfers made prior to the effective date of the rules. Therefore, veterans and surviving spouses who purchased annuities or made innocent gifts to family members (for college tuition, a car, a down-payment on a house, or any other reason) could face a lengthy penalty period of up to ten years upon applying for benefits. The new rules also change the amount of exempt assets and the types of medical expenses that can reduce countable income to qualify. Now, more than ever, it is critical to develop individualized strategies based on both Medicaid and VA Aid and Attendance rules to provide the most valuable benefits when you need them.
We have litigated cases in probate court in which no one knew the wishes of, or had authority to make health care decisions for, a loved one. Such cases can involve lawyers for each family member, cost a lot of money, and pit family members against each other. There is a better and less costly way! A proper Living Will instructs your doctors to withhold the forms of life support treatment you don’t want if you are in certain conditions you don’t want to be in (terminal, permanently unconscious, etc.). An Appointment of Health Care Representative names the person(s) of your choice to communicate your wishes to your doctors when you can’t do so (if circumstances arise which were not written into your Living Will). Reviewing your wishes with a lawyer, versus downloading internet forms, helps you understand each decision, and provides you with customized documents reflecting your wishes (and notes in the lawyer’s file which can help if a challenge arises). These are life-and-death decisions—namely yours—and therefore warrant proper consideration.
The State of Connecticut Assisted Living Pilot Program pays the care portion of assisted living. It can help your resources last longer and prevent you from losing your independence. Not all facilities participate, so you have to ask. “Over-asset” residents can transfer assets to children, Asset Protection Trusts or certain annuities, thereby triggering a penalty period which can end much sooner than the 5-year look-back (see Avoid Medicaid’s Look-Back Period). “Over-income” residents can use Pooled Trusts to reduce countable income while still using that income to pay your bills (see Medicaid Income Protection). There usually is a long wait list, but you can be added to it upon admission to the facility, and work toward qualifying while on the list.
Probate is the default process for passing property to your heirs that has no other way of reaching them. It applies to any property which is not automatically paid to a designated beneficiary, joint owner, etc. It requires that your Will be admitted, takes many months, and requires several court filings. Some people try to avoid probate by owning assets jointly or by designating beneficiaries, but those arrangements can cause unequal distribution depending on how your assets are managed or consumed if you become incompetent. A much safer way is through a Revocable Living Trust, which holds your assets and uses them for your benefit during your lifetime (with yourself as trustee), then safely distributes them upon your death according to your wishes without probate, saving time and money.
Many of our new clients have preexisting Durable Powers of Attorney (DPOAs) which were prepared by attorneys who are general practitioners, or which were found on the internet. Although they are “valid in all 50 states” (as the TV commercials say), most of them are statutory or general forms which do not grant the powers needed to protect seniors’ estates. If you want to accelerate eligibility for VA Aid & Attendance or Medicaid, your DPOA must contain an unlimited gift power (to transfer assets to your spouse or children if necessary). If you want to protect your assets through an Asset Protection Trust, your DPOA must contain the power to establish and fund trusts. Most “form” DPOAs lack those critical powers and can cause you to lose up to your entire estate in a long term care situation. The safer route is a Connecticut-specific DPOA prepared by an attorney who handles VA and Medicaid applications regularly, and therefore knows which powers the authorities look for.
Although Wills don’t expire, changes in the law and in your family dynamics and finances necessitate revisions periodically. The obvious triggers are marriage, divorce, birth of a child, and death of a spouse, but there are less obvious reasons as well. Changes in your children’s circumstances (disability, divorce, financial problems) can warrant including a testamentary trust in your will to protect that child’s share of your estate from his creditors. If your Will names your spouse executor and your child as alternate executor but your spouse has died, then your child is the executor and you have no alternate. Also, if you have added a child to certain bank accounts or designated assets as POD (payable on death) to a certain child, you would need to change the distribution under your Will to equalize the total assets passing to each child. Or, if your spouse is likely to require long term care if you predecease her, you might want to leave your estate to your children or a trust, so that the assets don’t get consumed on her care before she qualifies for Medicaid or VA Aid and Attendance.
Under current law, the threshold for federal estate taxation is over $5.3 million, and couples can double that amount with proper guidance. However, the threshold for Connecticut estate taxation is only $2 million, and that includes everything: home equity, savings, IRAs, life insurance, etc., valued upon your date of death regardless of today’s values. Therefore, even if your estate is only valued at, say, $1.5 million today, it could increase to over $2 million in the years ahead. Fortunately, couples can easily double the threshold to $4 million with proper Estate Tax Planning. Single persons with over $2 million and couples with over $4 million can reduce their taxable estates through lifetime gifts, trusts, etc. and can reduce the impact of the tax with life insurance trusts and charitable trusts.
Anyone can challenge anything. The real question is: can they win? The good news is that most Will challenges fail. However, Probate Litigation can force the beneficiaries named in your will to settle with the challenging party, and, of course, legal fees are incurred. Most challenges center on lack of mental capacity at the time the Will is executed, or undue influence from someone who is benefitting from the Will. The safest bet is to make sure that your Will is prepared by a knowledgeable attorney who clearly documents your estate planning decisions, and follows the formalities for executing your Will so that your mental competence and lack of undue influence are established.
If you leave part of your estate to a disabled family member who receives SSI, Medicaid (Title XIX, Title 19) or other public assistance benefits, those assets will displace those benefits until the assets are consumed. If you leave that part of your estate to another family member to use for the disabled family member, the funds may never be used as intended if the person holding the funds goes through a divorce, lawsuit, financial problems, or college financial aid applications. However, if you leave those assets in a carefully drawn Special Needs Trust (also called a Supplemental Needs Trust), those assets will be protected from creditors, and can be used to improve the disabled family member’s quality of life while the public programs continue to pay benefits. With the public programs paying their benefits, the assets you leave can last a lifetime and provide for a better life.
If you leave an estate which gets probated, the State of Connecticut will file a claim against that estate for any Medicaid benefits you received during your lifetime. The State also sometimes challenges non-probate arrangements, and the law on such recoveries changes with each court case. Fortunately, Connecticut Elder Law Attorneys can recommend strategies which will protect your assets not only at the time you apply for Medicaid, but also upon your death. Therefore, you can preserve your resources for your other needs during life and for your loved ones’ benefit after you’re gone.
If you are over-income for the Connecticut Home Care Program for Elders (CT Medicaid/Title XIX/Title 19 Home Care), you can’t get home care benefits unless you reduce your countable income. Fortunately, you can reduce countable income without reducing your actual income. A Pooled Trust is a trust which has been established by a Connecticut not-for-profit entity just for this purpose. If you “subscribe” to the trust, you can send the trustee your excess monthly income, and they will use that income (minus a modest administrative fee) to pay some of your household bills. Therefore, you are getting use of the income while qualifying for life-altering home care benefits. And, if you use the full contribution each month, little or nothing will be forfeited upon your death.
A Revocable Living Trust serves two main purposes. The most well-known purpose is to avoid probate. If you place all your assets in the trust, the trust distributes those assets upon your death without the costs and delays of probate. The other, less-known purpose is to provide continuity of management during your incapacity. If you become incapacitated, a family member can act on your behalf under a Durable Power of Attorney (DPOA), and it’s critical that you have one. However, the DPOA is very broad and gives you family member the authority to do just about anything for you, whereas a Revocable Living Trust gives your family member the responsibility and guidance to use your funds as the Trust directs. And, because such a Trust is revocable, you can use your funds for anything you like, invest them however you want, and amend or revoke the Trust as long as you are competent. It’s very flexible and very beneficial.
If a loved one named you Executor of his will and then died, you have no authority until you “admit” the will to probate (which you must do), at which time the court will appoint you as Executor. You then must secure all estate property, as well as appraise and insure certain assets. Then, you must follow the required timetable for probate court filings, estate tax returns, and income tax returns for the decedent and the estate. In the process you may need court approval to ascertain heirs, sell real estate or make partial distributions from the estate. You also will have to pay any legitimate creditors’ claims, and possibly litigate others. Failure to follow proper procedure can expose you to liability. When the estate has been fully administered, you must obtain court approval for distributing it and then do so. (Also see Estate Administration.)