The need to protect your assets is always at hand. Planning for long-term care with an elder law attorney can help protect your assets for the in home spouse and heirs. Medicaid Planning or Life Care Planning helps to ensure that you or your loved one get the best possible long-term care and the highest possible quality of life, whether at home, in an assisted living facility, or in a nursing home. The following article brings this issue to light.
To Collect Debts, Nursing Homes Are Seizing Control Over Patients.
Lillian Palermo tried to prepare for the worst possibilities of aging. An insurance executive with a Ph.D. in psychology and a love of ballroom dancing, she arranged for her power of attorney and health care proxy to go to her husband, Dino, eight years her junior, if she became incapacitated. And in her 80s, she did.
Mr. Palermo, who was the lead singer in a Midtown nightclub in the 1960s when her elegant tango first caught his eye, now regularly rolls his wife’s wheelchair to the piano at the Catholic nursing home in Manhattan where she ended up in 2010 as dementia, falls and surgical complications took their toll. He sings her favorite songs, feeds her home-cooked Italian food, and pays a private aide to be there when he cannot.
If you have it to give, you certainly can, but there may be consequences should you apply for Medicaid long-term care coverage within five years after each gift.
The $14,000 figure is the amount of the current gift tax exclusion (for 2014 and 2015), meaning that any person who gives away $14,000 or less to any one individual does not have to report the gift to the IRS, and you can give this amount to as many people as you like. If you give away more than $14,000 to any one person (other than your spouse), you will have to file a gift tax return. However, this does not necessarily mean you’ll pay a gift tax. You’ll have to pay a tax only if your reportable gifts total more than $5.43 million (2015 figure) during your lifetime.
Many people believe that if they give away an amount equal to the current $14,000 annual gift tax exclusion, this gift will be exempted from Medicaid’s five-year look-back at transfers that could trigger a waiting period for benefits. Nothing could be further from the truth.
The gift tax exclusion is an IRS rule, and this IRS rule has nothing to do with Medicaid’s asset transfer rules. While the $14,000 that you gave to your grandchild this year will be exempt from any gift tax, Medicaid will still count it as a transfer that could make you ineligible for nursing home benefits for a certain amount of time should you apply for them within the next five years. You may be able to argue that the gift was not made to qualify you for Medicaid, but proving that is an uphill battle.
If you think there is a chance you will need Medicaid coverage of long-term care in the foreseeable future, see your elder law attorney before starting a gifting plan.
For more on Medicaid’s asset transfer rules, click here.
Reversing a trial court, a Louisiana appeals court determines that a nursing home resident improperly transferred close to $50,000 to his caregiver nephew and the nephew’s wife because the payments were not made pursuant to a valid personal care agreement. David v. State of Louisiana Department of Health and Hospitals(La. Ct. App., 1st, No. 2014 CA 0791, Dec. 23, 2014).
Widley David entered a Louisiana nursing home in 2008. Between 2008 and 2010, Mr. David wrote six checks to his nephew and his nephew’s wife totaling $49,195. According to Mr. David, the checks were intended to repay his closest living relatives for the daily care that they provided him in the nursing home. When Mr. David applied for Medicaid in December 2010, the Louisiana Department of Health and Hospitals (DHH) assessed a nearly 15-month penalty period due to the transfers.
Mr. David did not appeal the initial imposition of a penalty period, but in July 2011 he requested a change in status from private pay to full Medicaid pay. DHH denied this request, stating that pursuant to the initial denial, Mr. David was ineligible for Medicaid until January 2012. Mr. David appealed the denial of his change in status, arguing that the payments to his relatives were reimbursement for care provided and not to qualify for Medicaid. DHH claimed that the payments would be valid only if made pursuant to a written personal care agreement, which Mr. David had never executed. After a trial court found in favor of Mr. David, the state appealed.
The Louisiana First Circuit Court of Appeal reverses the trial court, finding that the lack of a personal care agreement made the transfers to the relatives improper. The court states that a “payback arrangement or personal care agreement was necessary to validate this alleged arrangement; however, Mr. David did not offer any type of tangible or documentary evidence of an agreement, contract, or Personal Care Agreement to substantiate and validate his argument. The record is void of any evidence that complied with Medicaid eligibility requirements to validate the resource transfers.”
To read the full text of this decision, click here.
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