What Every Caregiver Must Know In These Uncertain Financial Times

Introduction to
Elder Law for Caregivers

Caregiving for someone with Alzheimer’s or a related dementia is one of the most difficult jobs in the world. In addition to making sure that your loved one is safe and their daily needs are met, you are also faced with the fact that there are many financial and legal issues that must be addressed. As if that was not enough, you also are trying provide the best quality of care at the least cost to the family. Caregiving is expensive and stressful, especially in these uncertain financial times. Hopefully, this article can provide you the financial and legal answers you need to do a better job.
Elder law is not just for senior citizens who are no longer independent or who are about to enter a nursing home. Elder law is for anyone who is middle aged and beyond — and sometimes even younger.
There are now more than 5 million people in the United States living with Alzheimer’s. This is a 10% increase from 5 years ago, and clearly supports the long forecasted dementia epidemic. One in eight persons age 65 and over have Alzheimer’s disease and nearly half of all persons over the age of 85 have Alzheimer’s. Every 72 seconds someone develops Alzheimer’s disease; by mid-century someone will develop Alzheimer’s every 33 seconds.
You are not alone. There are over 50 million caregivers in this county. Studies show that 12 million people in this country need long term care. Twenty-one percent of American adults provide free caregiving for loved ones. Fiftynine percent of these caregivers either work outside the home, or have worked outside the home, while providing care.
It has been estimated that the value of free services given by caregivers is in excess of $310 billion a year.
Additionally, as a result of caregivers, businesses are also effected by the caregiving epidemic. Specifically, over 60% of caregivers work and dedicate on average 18 hours per week to provide care. Family caregivers account for 73% of early departures and late arrivals in the workplace. Caregiving by an employee costs the average employer $2,100 per employee or for all employers as much as $33 billion annually. These services are provided by family members without regard to cost because of the love and respect they have for their loved ones.
These statistics only represent the economic cost of caregiving. It does not even address the emotional and physical toll on caregivers. The fact is that 70% of all caregivers over the age of 70 die first. People generally do not think about the health of the caregiver or plan for the unthinkable – – the caregiver having health problems or passing away before their loved one with dementia. It is for this reason that we approach each situation from the worst case scenario. We plan for the worst and hope for the best, that way our clients are always protected.
We know that age is the biggest risk factor for Alzheimer’s and dementia related diseases, however, these diseases do not discriminate. We have helped clients who have loved ones suffering from Alzheimer’s and dementia related diseases, some as young as their late 30’s. The time to look down the road and make major decisions regarding your health, well-being and finances is now.
It is important to understand the difference between an elder law attorney and an estate planning attorney. While estate planning attorneys are concerned with what happens to your estate upon your death, elder law attorneys ensure that your affairs can be managed in the event of your disability as well as once you pass away. Specifically, an experienced elder law attorney addresses the following tough questions like:
Who will make my medical decisions when I am no longer able to make them?
If I am unable to care for myself, how can I achieve the greatest quality of care without bankrupting myself or my family?
Who will be able to talk to my doctors and the hospital when I require guidance even though I am able to make my own medical decisions?
Who will make my end of life decisions?
What happens if I get sick and cannot stay in my home anymore?
How am I going to pay for it?
For caregivers of loved ones with Alzheimer’s and related dementia, information regarding Medicaid and estate planning is a necessity. It is our hope that this guidebook will answer many common legal questions and that it will eliminate the belief that it is never too late to plan.
In these uncertain financial times, the proper long term care planning is more important than ever. Families who seek the proper professional advice will be able to protect significant portions of their assets, possibly all of their assets, in spite of these rocky financial times. However, families who fail to do the proper planning, will rapidly deplete their assets with the rising nursing home costs.

Medicaid Basics
We wanted to use this opportunity to explain Medicaid basics and to correct some of the most frequently misunderstood concepts of Medicaid. Please keep in mind, however, that the Medicaid laws are constantly changing. A brief summary of the most recent changes are discussed in the next Chapter. The discussion below is based on the current Medicaid laws as of January 2008. Prior to implementing any of the strategies discussed below, it is imperative that you contact an experienced elder law attorney. There are many common questions we are asked, such as:
What is the difference between a countable asset and a non-countable asset?
A countable asset means that Medicaid looks at it and it effects your Medicaid eligibility whereas a non-countable asset does not effect your Medicaid eligibility.
If I am single and trying to qualify for Medicaid, what assets can I keep?
A single individual can keep:
• $2,000.00 cash;
• a home if it is not owned by a living trust;
• all personal property and jewelry;
• one vehicle;
• life insurance with a combined face value up to $1,500.00;
• an irrevocable funeral contract up to a maximum of $11,072.00;
• burial space plan;
• OBRA ’93 Payback Trust, Pooled Income Trust; and
• in certain circumstances immediate annuities.
If my spouse goes into a nursing home, what assets can I keep?
For 2008, if your spouse goes into a nursing home,
then you may keep one-half of the countable assets, up to a maximum of $104,400.00 and no less than $20,880.00.
These numbers are adjusted annually. Medicaid will make this assessment based upon the value of your assets on the “snapshot date,” which is the first day that your spouse goes into the hospital or nursing home and receives continuous care for 30 days or more or commonly know as the date the last night your spouse slept at home.
Are there any other special planning tools for married couples?
There is very specialized technique called a “Trust for the Sole Benefit of the Community Spouse” that can be used in some circumstances to protect a significant portion of a married couple’s assets. This is an irrevocable trust with many requirements.
If my spouse goes into a nursing home, can I receive his or her Social Security and pension benefits?
It is possible. Sometimes, Medicaid will allow “shelter and utility allowances,” which means that it will divert a portion or all of your spouse’s income to you to help you pay your bills. For 2008, the maximum amount that you can receive as a
shelter allowance is $2,610.00 per month. In some circumstance where this is not enough, a probate court can increase the income allowance.
Does my mother have to wait five years to qualify for Medicaid?
No. The five year period is not a waiting period, but only an examination period. Therefore, if your mother enters a nursing home on November 1st and spends down her assets by January 1st, she may be eligible for Medicaid on January 1st.
Will Medicaid be able to recover the cost of care (Estate Recovery) from the home?
Yes, if you do not plan properly. Michigan recently enacted a probate Estate Recovery, which allows the State to file a claim against any assets that pass through the probate process. However, the residence and any other assets that pass to beneficiaries outside of probate court are not subject to Estate Recovery. Elder law attorneys accomplish this goal of protecting the home, through the preparation of a special deed. This deed allows your loved one to maintain ownership of the home
while living, and avoids probate court and Estate Recovery upon death, while remaining an exempt asset from Medicaid.
My mother applied for Medicaid and even though she had less than $2,000.00 in the bank, she was denied. The Medicaid office informed us that it was because her house was in a trust. Is it true that her house has to be sold before she can qualify for Medicaid?
Her house does not necessarily have to be sold. Your mother could execute a  quit claim deed transferring the home out of her trust. Many people do not realize that when a home is owned by a trust, it is a countable asset. When a home is not owned by a trust, it is a non-countable asset for Medicaid purposes. However, it will then go through the probate court process and be subject to Estate Recovery, unless one plans properly as explained in the question above. It is important to be certain that any attorney you work with is familiar with the Medicaid laws. Additionally, not to complicate matters more, there are circumstances when titling a house in a trust can be very advantageous.
Is it true that if I gift money to my children before applying for Medicaid, it will disqualify me from receiving Medicaid?
Not necessarily; it depends on when the gift was made and how it was done. Even though the laws
regarding gifting and Medicaid have change, it is important to understand that you can make gifts and still qualify for
Medicaid if the gifting is done properly. Gifting should only be done with the advice of an elder law attorney. See the next chapter titled “Recent Changes in Medicaid Laws.”
If my father added my name to his assets and now he needs to qualify for Medicaid, does that mean that I can keep half of the assets? The answer is: it depends. This is a very complicated area of Medicaid planning. It depends on whether the asset is available to your father without another’s consent and when your name was added to it. If your father added your name to his assets and he still has access to them, then the assets remain his irrespective of when he added your name. For instance, joint bank accounts are available to all owners and are countable. On the other hand, if
your father added your name to the cottage over five years ago, the asset may not be available for Medicaid purposes.

Recent Changes in Medicaid Laws
(full of traps and pitfalls for the uninformed)
Every so often, Congress changes the rules of Medicaid eligibility for nursing home coverage. In recent years the rules have been relatively stable, with no changes in federal law since 1993. However, on February 8, 2006, the Deficit Reduction Act of 2005 (“DRA”) was enacted and it substantially changed Medicaid laws.
In our collective experience of 37 years of practicing elder law, we have never seen such drastic changes when it comes to providing benefits to the elderly, disabled, and poor. Michigan enacted the DRA on July 1, 2007, effective retroactively to February 8, 2006. In addition to the drastic changes imposed by DRA, Michigan has implemented additional significant changes in April 2007, September 2007, October 2007 and in January 2008. This Chapter is intended to provide a brief summary and is not meant as a comprehensive summary of the changes.
Here is a brief summary of some of these new laws:
Increased Look-back Period.
All transfers under the new law, whether to individuals or to trusts, will be subject to a
five year look-back period rather than the previous look-back period (three years for individuals and five years for trusts). This has made the Medicaid application process more difficult and could result in more applicants being denied for lack of documentation, given that they will need to produce five years, instead of three years, worth of records. This will be particularly true for families that have a loved one with Alzheimer’s and related dementia as their record keeping skills are likely to have been poor. Keep in mind, if you work with an experienced elder law attorney, there may be ways to reduce the documentation burden of the five year look-back period.
Altered Penalty Start Date.
For asset transfers that are less than fair market value, the penalty period now begins on the
date that the individual would otherwise have been eligible for long term care services (Medicaid as well as the home based community waiver) but for the asset transfers, rather than the previous penalty period start date of the asset transfer itself. Simply put, Medicaid will penalize from the date of the Medicaid application instead of the date of the gift. Further, all transfers during the look-back period will be added together to determine the total transfer penalty.
With respect to asset transfers that occurred prior to February 8, 2006 the old penalty start date, the date of the gift, still applies.
Charitable and political contributions as well as innocent gifts to family members under the tax laws are some of the types of transfers that could result in a Medicaid ineligibility period.
For example, a semi-healthy grandmother gives her granddaughter $20,000 to assist with her college education. Three years later, the grandmother, as a result of Alzheimer’s disease or dementia, requires nursing home care. Over the next eighteen months, she spends her life savings on her own care. Forty-eight months after her gift to her granddaughter, the grandmother has depleted her assets and applies for Medicaid. She will be penalized for about four months before
she receives Medicaid benefits, even though she has no money remaining to pay for her care. How her care will be paid for during that four month period of ineligibility is anyone’s guess.
Hardship Waivers. To mitigate the effect of these new rules, Congress has mandated that each state institute a process for seeking a hardship waiver for those instances when the application of the transfer penalty would result in a deprivation of medical care that would endanger the applicant’s health or life, or for “food, clothing, shelter, or other necessities of life.” Michigan currently considers hardship when a delay in treatment may result in the person’s death or permanent impairment of the person’s health. The current standard is much stricter than that imposed upon by the new. Unfortunately, we do not anticipate that Michigan will change their hardship exception anytime soon.
Home Equity.
Medicaid previously disregarded the value of a primary residence regardless of its value in counting
assets. Under the DRA, individuals with more than $500,000 in home equity are now ineligible for Medicaid nursing home benefits. Keep in mind that under pre and post-DRA laws, any home owned by a revocable living trust is considered a countable asset and must be removed from the trust before the applicant can qualify for Medicaid. The cap on equity does not apply if there is a spouse or child under 21 or a blind or disabled child residing in the home.
These exceptions apply regardless of the equity value of the home.
Treatment of Annuities.
The DRA has set forth changes concerning annuities which are very complex and as of this date, it is unclear how they will be interpreted. The gist of these changes is to provide a requirement that the State of Michigan be named as a beneficiary to the extent medical services have been paid by Medicaid as well as instituting reporting requirements for the annuity companies. Previously, certain annuities were treated as exempt assets and did not require that the State of Michigan be named as the beneficiary. In the event that the Medicaid applicant has a spouse, however, Medicaid will only have to be named as a remainder beneficiary.
Long Term Care Insurance Partnership.
Under the DRA, Medicaid disregards any assets or resources in an amount equal to the insurance benefit payments that are made to or on behalf of an individual who is a beneficiary under a long term care insurance policy. This will most likely be implemented in Michigan sometime in the 2008 calendar year.

Danielle Mayoras • dmayoras@brmmlaw.com •1-877-PLAN-758 •

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