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Proposed Changes to the VA Pension Eligibility Rules

in Articles, Newsletters by Greg McIntyre Comments are off

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Introduction

On January 23, 2015, the Department of Veteran Affairs (hereinafter “VA”) issued proposed changes to

the regulations affecting VA Pension eligibility, a needs-based program.[1]  In support of the proposed changes to the regulations, the VA points to the results of a 2012 Government Accountability Offices (GAO) report.[2]  That report recommended changes in order to “maintain the integrity of VA’s needs-based benefit programs.” 

The proposed changes come on the heels of two bills:  H.R. 2189 proposed by the House of Representatives; and S.944 proposed by the Senate.  Both bills were proposed in 2013 and no action has occurred with regard to them since late that same year.  The VA’s proposed changes are strikingly similar to the two proposed bills, which Congress failed to pass. 

In this issue of the ElderCounselor™ we will review the proposed regulatory changes and discuss how they might affect wartime Veterans over the age of 65 and surviving spouses of wartime Veterans.  

How the Law Currently Reads

VA Pension benefits are a major focus of the proposed changes.  These benefits are available to wartime Veterans (and their surviving spouses) who meet certain criteria.  Prior to September 1980, the Veteran must have served at least ninety (90) days of active duty with at least one day being during a wartime period (as set by Congress).  After 1980, the Veteran must have generally served at least twenty-four (24) months of active duty with at least one day being during a wartime period.   The Veteran must not have been dishonorably discharged. 

There is a disability requirement for the VA Pension benefit, which is satisfied if the Veteran is sixty-five (65) years of age or older, or permanently and totally disabled.  If the Veteran or surviving spouse has additional medical needs then additional allowances may be awarded, like an aid and attendance allowance.

An applicant for VA Pension must also meet certain financial requirements. The current law reads that an applicant’s net worth must not be excessive, taking into consideration the applicant’s age, income and expenses, life expectancy, and rate of depletion of the applicant’s net worth .  The financial rules also require that household income must be less than the benefit the applicant is seeking; however, income may be reduced by out-of-pocket medical expenses. 

Proposed Changes

Net Worth

The proposed changes include a bright-line limit on “net worth” that an applicant is allowed to have when qualifying for VA Pension.  The limit is the same as the maximum community spouse resource allowance (CSRA) for Medicaid purposes (currently $119,220).  This amount would increase annually at the same rate as the cost-of-living increase for Social Security benefits.  Income is also counted toward the net worth limit under the proposed rules. 

Treatment of Income

The proposed rules would include income in the applicant’s net worth calculation.  In other words, if a Veteran has assets worth $117,000 and receives an income of $2,000 per month, the Veteran’s “net worth” is calculated at $117,000 + $24,000, which is well over the “net worth” limit allowed.

Determining Asset Amount

The proposed regulations define assets as, “fair market value of all property that an individual owns, including all real and personal property, unless excluded under paragraph (b) of this section, less the amount of mortgages or other encumbrances specific to the mortgaged or encumbered property.  VA will consider the terms of the recorded deed or other evidence of title to be proof of ownership of a particular asset.”

Asset Exclusions

A primary residence, whether or not the claimant resides there, is an excluded asset for calculating “net worth” and will continue to be so under the proposed regulations.  However, the proposed rules cap the “reasonable lot area” that the home sits on at 2 acres, a limit that does not exist under current law.

Transfer of Assets and Penalty Periods

The proposed regulations include the addition of penalty periods for assets that an individual transfers prior to applying for VA Pension.  Any “covered assets” (one that is used in calculating “net worth”) that are transferred will be subject to a penalty period. The penalty provisions are not limited to actual gifts, but also apply to the purchase of an annuity or a transfer to a trust (revocable or irrevocable).

The actual penalty period (the time period that the claimant will remain ineligible for the Pension benefit due to the transfer) may not be longer than ten (10) years.  The penalty period will be calculated by using the amount of the transfer over and above the “net worth” limit and dividing it by the maximum annual Pension rate.  This penalty period begins to run the month after the last transfer was made.

To illustrate:  A married Veteran applies for VA Pension with an aid and attendance allowance.  The monthly benefit she is trying to qualify for is $2,120.  During the past 3 years, the Veteran contributed $10,000 to The Wounded Warriors Project, a nonprofit organization.  She also gave her only child $1,000 on each birthday the past 3 years.

As a result of the charitable contribution and the cash gifts to her child ($13,000 total in 3 years), this Veteran will be penalized for 6.13 months when she applies for VA Pension.  If this same Veteran was not married, the penalty would be 11.3 months.

Lookback Period

The lookback period for all transfers, is thirty-six (36) months immediately preceding the date of application for the VA Pension benefit?  There is a presumption that any transfer made during this thirty-six (36) month period of time was made for the purpose of qualifying for the VA Pension benefit.  As an exception to this presumption, the claimant must prove by clear and convincing evidence that the transfer was the result of fraud, misrepresentation or other bad act in the marketing or sale of a financial product.  Otherwise, the presumption is non-rebuttable.

In the example above, the Veteran, whose transfers had nothing to do with VA Pension eligibility, would not be able to rebut this presumption and would have to take the penalty imposed.

Medical Expense Deductions from Income

Medical expenses are those that are either medically necessary or improve a disabled individual’s functioning.  These medical expenses are deducted from income.  This becomes more complicated when the claimant is receiving home care or is in an independent or assisted living facility, as the proposed rules seek to limit the circumstances under which room and board expenses may be counted, as well as the amount paid.  There are very specific rules as to which services qualify as medical expenses and the claimant will have to be able to identify those in his/her application.

The proposed rules also limit the hourly amount that can be paid to a home health care provider.  The amount is based on a national average, rather than local costs for care. 

Burden on Surviving Spouses

The surviving spouse of a wartime Veteran can make a claim for the Pension benefit if the Veteran meets the service criteria and the spouse meets the financial requirements.  However, the proposed rules put the surviving spouses at a disadvantage.  The proposed regulations allow surviving spouses little flexibility in planning due to the calculation method of the penalty period.  Where a married Veteran applying for VA Pension with an aid and attendance allowance could transfer $10,000 and incur a penalty period of 4.7 months, a surviving spouse transferring the same amount would incur a penalty period of 8.7 months.  As illustrated earlier, the gifting that many people do to benefit their children on birthdays, holidays or other reasons, charitable contributions or donations to places of worship will create a penalty period under these rules.

Negative Effects of the Proposed Regulations

Below are just a few of the potential negative effects of the proposed regulations if they pass as currently written.  We would be happy to speak to you further about additional harmful effects of the rules as written.

1. As mentioned above, surviving spouses will be penalized more harshly than Veterans for making transfers prior to applying for VA Pension – even if those transfers had nothing to do with qualifying for VA Pension.

2. Applicants in rural areas will be treated unfairly by the 2-acre limit on the reasonable lot area.  Currently, an applicant’s home and reasonable lot area that is immediately adjacent to the home is not counted for net worth purposes. 

3. Transfers made prior to an application for VA Pension will be penalized regardless of the reason for the transfer.  Therefore, a cash birthday gift to a child, a contribution to a charity, or a donation to a place of worship will all be penalized if the Veteran or surviving spouse later applies for VA Pension.

4. Basic estate planning, like establishing and funding a revocable living trust, will be subject to a penalty if that same individual applies for VA Pension within 3 years. 

Status of the Proposed Rule Changes and a Call to Action

The regulations proposed by the VA are currently up for public comment until March 24, 2015.  Until that deadline, the public is free to comment and the VA is required to respond to those comments before passing the regulations.  If you would like to comment on the proposed rules, please include this information in your response:  Subject: RIN 2900-AO73, Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits.  You can read the full text of the bill, a summary of the bill and you can post your comments online (see the blue “Comment Now” text in the top right corner) using this link: http://www.regulations.gov/#!documentDetail;D=VA-2015-VBA-0003-0001.

You may also consider reaching out to your local representatives in Congress to let them know about some of the negative effects of the proposed changes. 

If you would like more information or would like to discuss the impact of these changes on wartime Veterans and surviving spouses in more detail, please feel free to contact our office.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.

 



[1] The proposed change would amend 38 CFR Part 3, which covers net worth, asset transfers and income exclusions for needs-based benefits.

[2] The 2012 GAO report is one prepared for Congress.  http://www.gao.gov/products/GAO-12-342SP

Proposed Changes to the VA Pension Eligibility Rules

 

Introduction

On January 23, 2015, the Department of Veteran Affairs (hereinafter “VA”) issued proposed changes to

the regulations affecting VA Pension eligibility, a needs-based program.[1]  In support of the proposed changes to the regulations, the VA points to the results of a 2012 Government Accountability Offices (GAO) report.[2]  That report recommended changes in order to “maintain the integrity of VA’s needs-based benefit programs.” 

The proposed changes come on the heels of two bills:  H.R. 2189 proposed by the House of Representatives; and S.944 proposed by the Senate.  Both bills were proposed in 2013 and no action has occurred with regard to them since late that same year.  The VA’s proposed changes are strikingly similar to the two proposed bills, which Congress failed to pass. 

In this issue of the ElderCounselor™ we will review the proposed regulatory changes and discuss how they might affect wartime Veterans over the age of 65 and surviving spouses of wartime Veterans.  

How the Law Currently Reads

VA Pension benefits are a major focus of the proposed changes.  These benefits are available to wartime Veterans (and their surviving spouses) who meet certain criteria.  Prior to September 1980, the Veteran must have served at least ninety (90) days of active duty with at least one day being during a wartime period (as set by Congress).  After 1980, the Veteran must have generally served at least twenty-four (24) months of active duty with at least one day being during a wartime period.   The Veteran must not have been dishonorably discharged. 

There is a disability requirement for the VA Pension benefit, which is satisfied if the Veteran is sixty-five (65) years of age or older, or permanently and totally disabled.  If the Veteran or surviving spouse has additional medical needs then additional allowances may be awarded, like an aid and attendance allowance.

An applicant for VA Pension must also meet certain financial requirements. The current law reads that an applicant’s net worth must not be excessive, taking into consideration the applicant’s age, income and expenses, life expectancy, and rate of depletion of the applicant’s net worth .  The financial rules also require that household income must be less than the benefit the applicant is seeking; however, income may be reduced by out-of-pocket medical expenses. 

Proposed Changes

Net Worth

 

The proposed changes include a bright-line limit on “net worth” that an applicant is allowed to have when qualifying for VA Pension.  The limit is the same as the maximum community spouse resource allowance (CSRA) for Medicaid purposes (currently $119,220).  This amount would increase annually at the same rate as the cost-of-living increase for Social Security benefits.  Income is also counted toward the net worth limit under the proposed rules. 

Treatment of Income

The proposed rules would include income in the applicant’s net worth calculation.  In other words, if a Veteran has assets worth $117,000 and receives an income of $2,000 per month, the Veteran’s “net worth” is calculated at $117,000 + $24,000, which is well over the “net worth” limit allowed.

Determining Asset Amount

The proposed regulations define assets as, “fair market value of all property that an individual owns, including all real and personal property, unless excluded under paragraph (b) of this section, less the amount of mortgages or other encumbrances specific to the mortgaged or encumbered property.  VA will consider the terms of the recorded deed or other evidence of title to be proof of ownership of a particular asset.”

 

Asset Exclusions

A primary residence, whether or not the claimant resides there, is an excluded asset for calculating “net worth” and will continue to be so under the proposed regulations.  However, the proposed rules cap the “reasonable lot area” that the home sits on at 2 acres, a limit that does not exist under current law.

Transfer of Assets and Penalty Periods

The proposed regulations include the addition of penalty periods for assets that an individual transfers prior to applying for VA Pension.  Any “covered assets” (one that is used in calculating “net worth”) that are transferred will be subject to a penalty period. The penalty provisions are not limited to actual gifts, but also apply to the purchase of an annuity or a transfer to a trust (revocable or irrevocable).

The actual penalty period (the time period that the claimant will remain ineligible for the Pension benefit due to the transfer) may not be longer than ten (10) years.  The penalty period will be calculated by using the amount of the transfer over and above the “net worth” limit and dividing it by the maximum annual Pension rate.  This penalty period begins to run the month after the last transfer was made.

To illustrate:  A married Veteran applies for VA Pension with an aid and attendance allowance.  The monthly benefit she is trying to qualify for is $2,120.  During the past 3 years, the Veteran contributed $10,000 to The Wounded Warriors Project, a nonprofit organization.  She also gave her only child $1,000 on each birthday the past 3 years.

As a result of the charitable contribution and the cash gifts to her child ($13,000 total in 3 years), this Veteran will be penalized for 6.13 months when she applies for VA Pension.  If this same Veteran was not married, the penalty would be 11.3 months.

Lookback Period

The lookback period for all transfers, is thirty-six (36) months immediately preceding the date of application for the VA Pension benefit?  There is a presumption that any transfer made during this thirty-six (36) month period of time was made for the purpose of qualifying for the VA Pension benefit.  As an exception to this presumption, the claimant must prove by clear and convincing evidence that the transfer was the result of fraud, misrepresentation or other bad act in the marketing or sale of a financial product.  Otherwise, the presumption is non-rebuttable.

In the example above, the Veteran, whose transfers had nothing to do with VA Pension eligibility, would not be able to rebut this presumption and would have to take the penalty imposed.

Medical Expense Deductions from Income

 

Medical expenses are those that are either medically necessary or improve a disabled individual’s functioning.  These medical expenses are deducted from income.  This becomes more complicated when the claimant is receiving home care or is in an independent or assisted living facility, as the proposed rules seek to limit the circumstances under which room and board expenses may be counted, as well as the amount paid.  There are very specific rules as to which services qualify as medical expenses and the claimant will have to be able to identify those in his/her application.

The proposed rules also limit the hourly amount that can be paid to a home health care provider.  The amount is based on a national average, rather than local costs for care. 

Burden on Surviving Spouses

The surviving spouse of a wartime Veteran can make a claim for the Pension benefit if the Veteran meets the service criteria and the spouse meets the financial requirements.  However, the proposed rules put the surviving spouses at a disadvantage.  The proposed regulations allow surviving spouses little flexibility in planning due to the calculation method of the penalty period.  Where a married Veteran applying for VA Pension with an aid and attendance allowance could transfer $10,000 and incur a penalty period of 4.7 months, a surviving spouse transferring the same amount would incur a penalty period of 8.7 months.  As illustrated earlier, the gifting that many people do to benefit their children on birthdays, holidays or other reasons, charitable contributions or donations to places of worship will create a penalty period under these rules.

Negative Effects of the Proposed Regulations

 

Below are just a few of the potential negative effects of the proposed regulations if they pass as currently written.  We would be happy to speak to you further about additional harmful effects of the rules as written.

1. As mentioned above, surviving spouses will be penalized more harshly than Veterans for making transfers prior to applying for VA Pension – even if those transfers had nothing to do with qualifying for VA Pension.

2. Applicants in rural areas will be treated unfairly by the 2-acre limit on the reasonable lot area.  Currently, an applicant’s home and reasonable lot area that is immediately adjacent to the home is not counted for net worth purposes. 

3. Transfers made prior to an application for VA Pension will be penalized regardless of the reason for the transfer.  Therefore, a cash birthday gift to a child, a contribution to a charity, or a donation to a place of worship will all be penalized if the Veteran or surviving spouse later applies for VA Pension.

4. Basic estate planning, like establishing and funding a revocable living trust, will be subject to a penalty if that same individual applies for VA Pension within 3 years. 

Status of the Proposed Rule Changes and a Call to Action

 

The regulations proposed by the VA are currently up for public comment until March 24, 2015.  Until that deadline, the public is free to comment and the VA is required to respond to those comments before passing the regulations.  If you would like to comment on the proposed rules, please include this information in your response:  Subject: RIN 2900-AO73, Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits.  You can read the full text of the bill, a summary of the bill and you can post your comments online (see the blue “Comment Now” text in the top right corner) using this link: http://www.regulations.gov/#!documentDetail;D=VA-2015-VBA-0003-0001.

You may also consider reaching out to your local representatives in Congress to let them know about some of the negative effects of the proposed changes. 

If you would like more information or would like to discuss the impact of these changes on wartime Veterans and surviving spouses in more detail, please feel free to contact our office.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.



[1] The proposed change would amend 38 CFR Part 3, which covers net worth, asset transfers and income exclusions for needs-based benefits.

[2] The 2012 GAO report is one prepared for Congress.  http://www.gao.gov/products/GAO-12-342SP

Our eDocs Access System Keeps Your Important Documents at Your Fingertips

in Articles, Newsletters by Greg McIntyre Comments are off

edocsaccess1Hi, I’m Greg McIntyre, and it’s very good to see you on the blog.

My feature today is our eDocs Access System, which I’m extremely proud of. It’s an online, bank-level security system that allows you to store your important legal documents. That’s a value we offer to every client, and we’ll even upload them for you.

You’ll be able to share your documents with any family member, whether they be next door, out-of-state, or on the other side of the planet. It doesn’t send the files as an e-mail attachment or across the open internet and airways. It prompts them to log-on, create a username and password, and allows them to see only the documents you make available.

Your documents are secure and held to international security standards. It’s maintained with the same precautions as when you log into your online bank account.

This works great for clients that I have in other states. You can access it on your iPhone or other mobile device, your iPad or other tablet device, or use the laminated eDocs Access Card that we’ll give you for your wallet. It has your username, name, and even a place for your password on there. Though you can always keep that password safe in your memory or any other place that you prefer, of course.

Say you’re traveling out of state, and you and your wife or husband have to go to the hospital. You need to access some healthcare power of attorney documents, living will, or something like that – heaven forbid.

If you don’t already have your documents with you, you could simply pull out this card, and go straight to the eDocs Access web link. Put in your username and password, and pull up those documents right there in the hospital or wherever you are. It works really, really well.

 

How Did We Come Up With This?

Explore eDocs Access in 5 easy steps.

Explore eDocs Access in 5 easy steps.

You may know that I have a bit of a tech background. I used to be a programmer, graphic designer, and 3D modeler in the Research Triangle Park area between 2000 and mid-2002, working for two separate companies.

One, 3D Village, did 3D online walkable worlds using the Vertis Technology gaming engine, whichwas really cool stuff. We’d go model New York, Charleston, the Citadel, or Chapel Hill and put those online for different vendors and purposes.

We had a really good time with that and got a lot of press. We even modeled Area 51, before the Department of Defense came out and admitted that it existed later that year. So pretty cool work we did there.

Then I became an attorney, but I still try to bring technology to the client in a way that’s usable, user-friendly, and really matters. This eDocs System is one way we’re doing that.

I don’t see many other firms using anything like it. It’s something that I think is light-years in the future.

The Log-In Process Couldn’t Be Easier

 

Let’s go over the log-in process.

First, we’re going to go to McElderLaw.com. The actual card will also provide a link to get straight there, but from the website, you can just click ‘Log In’, and it will take you to our eDocs Access page, which explains a little bit about it.

Then log-in for ‘Full Document Access’. It’s going to bring you to a log in screen. Now, when our office shares these documents with you, it’s going to shoot you an e-mail. This will prompt you to log on to create a username. It’s going to send you a link saying ‘Welcome to the system’.

You’ll then enter your phone number and password. Then it will ask ‘Do you agree’? Finally, ‘Create my user’.

‘Welcome to the Smart Vault System’.

Once you’ve close that, you’re now in the McIntyre Elder Law eDocs Access System. You’ll see a deed, a general durable power of attorney, a healthcare power of attorney, a last will and testament, and a living will.

If you want to share these, you can do a couple of things right now. You could download the file, e-mail it and send an individual file link to someone, or copy the file to another destination.

But the really cool feature is that you can select as many of these documents as you want and send a link to the entire folder or only individual documents. You can click ‘Send a link to folder’, and send a personal message to other users.

Put in, say, a son’s e-mail address and send it directly to them. Then you’ll have a similar situation, where that son is going to get an e-mail saying they’ve been granted access to the eDocs Access folderat McIntyre Elder Law. They’re going to be able to click the link, put in a username or password, and see those documents in your McIntyre Elde Law Access folder.

That’s how it works, in a nutshell. We’re very proud of it. We think it’s just a phenomenal system.

Any time you or your wife set up any documents with us or we do any type of legal work together, you can access them through this system. And we maintain this free of charge, as an extra added value for the client, so they can have those important documents with them at all times.

 

The McIntyre Elder Law Mission

We’ll continue to try and bring you cutting edge tools, both technical and legal, to help you with protecting your property, assets and legacy, as well as providing you with flexibility and mobility. That’s our mission here at our McIntyre Elder Law.

If you have any questions about eDocs Access, e-mail me at Greg@TheMcIntyreLawFirm.com or call our office at 704-259-7040.

Thank you very much for visiting. I’ll see you soon.

Make it a great day,
Greg McIntyre
Elder Law Attorney
704-751-8031
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The Importance of Thinking Differently and Planning

in Articles, Newsletters by Greg McIntyre Comments are off

I wanted to talk to you today about the importance of thinking differently and planning.

I take my job very seriously, as I’m sure you take your family, hard earned money, property, and legacy seriously.

One of the things that I had to do to transition from a general practitioner to an elder law attorney was a lot of study, a lot of planning, a lot of thinking differently. We really have done that over the last couple of years; I’ve really done that over the last couple of years.

We were honored last night by the Cleveland County Chamber of Commerce with an Emerging 10 Award, which I’m extremely thrilled with. There were 9 other great businesses honored along with us, and we all got this glass award which I’ve been carrying around since last night.

IMG_1684

That helps me look at and realize all the hard work that I’ve put in, that we’ve put in over the last couple of years. We wouldn’t be able to offer the services and legal strategies tailored to the senior population that we do unless we had done a lot of planning ahead of time.

The Importance of Planning

A couple of years ago, I sat down and said, “Okay, we’ve been doing a lot of estate planning, we’ve been doing some elder law services, but you know, I really want to go all in. Deep end of the pool. Jump in with both feet.”

And we got after it. We aggressively started laying the foundation and planned to really work our knowledge in that area. We joined national elder law attorney groups and did what it takes to move us in that direction. There’s still tons of planning to do going forward, and I’ll do that continuously, whether it’s retooling plans, planning for the quarter, planning for the next year, and so on.

But sometimes we forget to plan for some of the biggest things that are coming down the road. That’s what I wanted to talk about.

What’s your plan? Maybe you’re still working every day, or perhaps you’re in your 60s, 70s, or 80s. You’ve worked your life, and you’re in retirement now.

Do you have enough money to make it through retirement? Maybe you do, but you want to make sure that you can pass on a legacy for your children. To make their lives a little easier and better, or to pass on some farm land or your home.

Do you want to help set up a college fund for your grandkids and make sure that’s protected and that the funds are only used to fund their higher education?

Those are all possibilities with planning. I always say, nothing gets done unless it gets scheduled. There’s another saying along with that, that there’s if there’s no intention, there’s no tension.

That intention is what gets you to do what you need to do. So if I wanted to plan something, what I need to do is identify the steps I need to take, and I need to put those steps on a calendar and make sure that they’re scheduled so that I devote my time to doing them.

The One Constant in Life

I’d like to ask a few questions, if that’s okay, and just walk you through what might be a good thought process for you to plan to save your hard earned money and property.

What’s the one constant in life? Well, the one constant in life is change.

As much as we plan or think we know what’s going to happen, we can guarantee that things are going to change. We can try to anticipate that change, but things are going to change regardless.

You know there’s a two-thirds chance that, if you’re over 65 right now, you’re going to need some type of long term care in your life, whether that’s at-home care, assisted living care, or nursing home care.

If and when your current health should change, you need to be prepared for how you’re going to pay for that. What are your options? What is your strategy to make sure that you can keep all the money you’ve worked for and use that?

Maybe you’re a married couple. If one party should have a health problem, what’s the strategy to make sure that all the assets for retirement, the income and property, isn’t spent down and sold or leans placed on it because of a healthcare problem of just one of the spouses.

These are things that we need to think about.

Think About Your Goals

The second thing is, what are your goals? Are they to keep your land and money during your lifetime? That’s a rhetorical question really, I know that’s you’re goal.

But is there an element there that you want to pass those assets down? Is there a farm you want to keep in the family that’s very important? Is there a vacation property that you want to make sure that the family’s still able to use, in your memory, after you’re gone?

What are you plans for that money and property after you’re gone? What are your goals there?

So the first thing is that we need to say change is constant and we need to plan. Then identify some goals out there to have healthcare options, protect money and property, pass it on, and then to carry that further. That would be to set up trusts or something of that nature to make sure the grandkids go to college, that you can help with that and that you’re remembered when those things take place.

Reap the Rewards

The last thing is, what’s your reward? What drives you?

Is it that you know that Johnny or Susie, your grandkids, are going to go to college? Is it that you have peace of mind, sleep better, and have less stress because you know you have that binder on a shelf or in a safe place that has all your important legal documents there?

That your entire plan is going to grow with you. That you’ve already done everything under the law to take care of that. You can put that behind you, or at least have peace of mind that you know those things are taken care of. The property’s protected, you have healthcare options. You have a plan in place.

Setting the Plan in Motion

Finally, how are you going to get that plan in place? Well, obviously, I know a little bit about that. Call your elder law attorney, call our office and we’ll set you up for an appointment, and we’ll sit down and talk about it.

We’ll go through these steps. I firmly believe in being extremely regimented with my client interactions and our planning sessions. We’re going to look at what your assets are, if you have your foundational documents in place.

Do you even have the basics? Do you have the power of attorney? General durable power of attorney, healthcare power of attorney, wills.

What does your asset picture look like? Go online, fill out our estate planning workbook. I’d be glad to take a look at it. We can meet and talk about it.

Do you need to go online and do some research? Go to McElderLaw.com, and I have tons of video blogs like this one, podcasts, blog pieces, and newsletters. Our newsletter, the Elder Law Report, gives you constantly updated information on any changes in helping protect your hard earned assets and legacy.

That’s just a great way to get something delivered directly to your inbox, once a month or so.

Come to one of our seminars. We give seminars on different topics all of the time. You can check the seminar schedule on our website.

Like our Facebook page. We put out constant information daily, and sometimes multiple times a day, on what’s going on at our firm and in the elder law community.

To Sum It All Up

  • Know that change is constant
  • Identify your goals and rewards for planning
  • Figure out how to achieve those goals
  • Research by contacting your elder law attorney and financial planner.

 

THE ABLE ACT: A New Tool for the Special Needs Community

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Greg McIntyre
Elder Law Attorney
704-259-7040
greg@mcelderlaw.com

Late in 2014, the ABLE (“Achieving a Better Life Experience”) Act was signed into law.  The law is aimed at achieving a manner in which those with special needs can save money without losing needs based public benefits such as SSI or Medicaid . This is an important issue and, perhaps the greatest accomplishment of the Act is that it brings attention to this valuable community and addresses a serious struggle that they face.  The fact that the ABLE act had strong bi-partisan support is encouraging for the special needs community and those who serve it. 

While an ABLE account does not replace other tools, like special needs trusts, it is a tool that adds an option for us in serving our clients with special needs.  In this issue of the ElderCounselor, we will discuss the new law, when it applies, its limitations and its uses.  We are hopeful this will give you a general understanding of the Act.

 

The ABLE Act Defined

The ABLE Act is a federal law that allows states to establish a savings program for persons with disabilities.  The program is modeled after the 529 savings accounts.  ABLE accounts may be used to accumulate savings, with certain restrictions, for use by a beneficiary with a disability.

An ABLE account may be established by any contributor (a parent, friend, family member or the person with a disability) for the benefit of an eligible beneficiary of any age so long as that person can establish they met the criteria prior to age 26. An eligible beneficiary is an individual who meets the standard for disability prior to turning the age of 26.  A recipient of SSI or SSDI satisfies this requirement while those who do not receive such benefits must be certified under the act.

 

Financial Limitations on the ABLE Act

While the ABLE Act has made strides in bringing to light the issue of saving for those with disabilities, there are limits to the Act.  For example, the Act imposes a limit as to the amount of savings that can be held in an ABLE account.

The first such limitation deals with the annual contribution amount, which may not exceed the annual gift-tax exclusion amount (currently $14,000).  In addition, ABLE accounts may only accumulate aggregate contributions up to the state’s limit on qualified tuition programs (i.e. 529 accounts), which ranges between $300,000 and $400,000.  And, finally, SSI exempts only the first $100,000 of an able account.  Therefore, if an individual receives SSI, his or her ABLE account may not exceed $100,000 and he/she may have other assets up to only $2,000.  Otherwise, the individual will become ineligible to continue receiving SSI, but can remain eligible for Medicaid.

 

Medicaid Payback

It is important to note that the ABLE account is a “Medicaid Payback” account.  This means that the Act requires a provision in the account that upon the death of the beneficiary of the account, Medicaid payments made on behalf of the beneficiary subsequent to the establishment of the ABLE account must be reimbursed with any remaining funds.  As a professional serving those with special needs, attention to the client’s priorities should be weighed carefully when determining the amount of savings to place in an ABLE account given this payback provision.  When a beneficiary of an ABLE account is receiving Medicaid, it is important to consider how much should be placed in the ABLE account to limit what may be recovered by Medicaid at the end of the beneficiary’s life.

 

Tax Benefits

ABLE accounts have tax benefits similar to 529 accounts.  Qualified distributions from the account are not counted as taxable to either the contributor or the beneficiary.  Qualified distributions include expenses paid for the benefit of the beneficiary related to:  education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and any other expenses approved by the Secretary of Treasury.

In addition, earnings on the ABLE account are not taxable to the contributor or to the beneficiary.  Contributions, however, are made from post-tax income.

Finally, assets in an ABLE account may be rolled over to another ABLE account for the benefit of another qualified individual who is a brother, sister, stepbrother, or stepsister of the beneficiary.

 

Uses of the ABLE Act

A person receiving needs-based government benefits often has a dilemma when it comes to saving, whether for education or for unexpected events, all while maintaining public benefits such as SSI.  In order to receive SSI, a person with a disability must have assets under $2,000. The ABLE Act makes saving possible…up to a point.  Now the individual can remain on SSI and save a modest amount in an ABLE account (up to $14,000 per year).

Persons with disabilities who are employed may want to utilize an ABLE account to save a portion of their income while remaining qualified for SSI.  In addition, families may want to contribute to an ABLE account for their loved ones with disabilities in smaller increments.  These same families may also desire to use other tools available such as Special Needs Trusts, which may be more flexible.

On the other hand, the ABLE account will not be useful for people who have become disabled due to an accident and who are receiving a judgment or settlement for a significant amount.  And, it doesn’t work for a person with special needs in receiving a large inheritance.  There are several other instances where an ABLE account is not the answer.

 

Conclusion

Every tool has its use and the ABLE account is no exception.  Knowing when it is appropriate and knowing when another option might be more so is something we can assist with.  Please call us if you would like to learn more about this new law and how it might help you, a family member or one of your clients.  We are always happy to hear from you!

Understanding Social Security Survivor Benefits

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An earlier issue of The ElderCounselor addressed social security benefits generally and when to apply. In this issue, we will address the critical yet often-misunderstood topic of Social Security survivor benefits. This e-newsletter is based in part upon an article by Frank Rainaldi and William Rainaldi, first published in Trusts & Estates magazine and available on WealthManagement.com.

 Survivors Benefits

According to the Social Security Administration, a surviving spouse may be eligible to receive the deceased spouse’s full retirement benefits at full retirement age (“FRA”).  For survivor benefits only, FRA is 66 for anyone born before 1957, and it increases two months every year until it reaches 67 for those persons born in 1962 or later. (For a regular retirement or spousal benefit, FRA is 66 for anyone born before 1955 and it increases two months every year until it reaches 67 in 1960.)  (E.g., see http://www.ssa.gov/pubs/EN-05-10084.pdf.)

Simply stated, survivors benefits are determined by looking first at the age of the deceased spouse, and then at the age of the surviving spouse.  In other words, we look at the amount of the benefit available to or being paid to the deceased spouse.  Then, we use the age of the surviving spouse to determine if benefits are paid early or at FRA; if the surviving spouse’s benefits are paid before 65, we must apply an actuarial reduction to the deceased spouse’s benefits.

It is important to note a key difference between survivor benefits and spousal benefits.  Spousal retirement benefits provide a maximum 50% of the other spouse’s primary insurance amount (PIA). Alternatively, survivors’ benefits are a maximum 100% of the deceased spouse’s retirement benefit.

Also, note the difference between the PIA and retirement benefit, which is critical when considering deferred retirement credits (DRCs).  DRCs can increase benefits by 8% per year when the worker elects to start collecting after FRA, up to a maximum increase of 32% for deferral to age 70. Note, however, that DRCs apply only for survivor benefits; DRCs do not increase the PIA and thus they aren’t applicable to spousal benefits. Therefore, if one spouse has the higher personal benefit and waits until age 70 to begin collecting, the full benefit with DRCs would be payable to the surviving spouse.

 The Most Common Scenario – Both Spouses Reach FRA

The most common scenario is when death occurs after both spouses have reached their respective FRA.  In this case, the survivor benefit is simply the higher of the two benefits.  If one spouse is collecting $2,500 and the other is collecting $2,000, the surviving spouse’s benefit would be $2,500.  It actually does not matter which spouse dies, the survivor benefit is still $2,500.

For example, assume Mr. A has a personal benefit of $2,000, the amount he would receive at age 66.  If he elects to defer until age 69 he would get a 24% increase in his personal benefit to $2,480.

Now let’s say Mrs. A. never worked outside the home.  When Mr. A. is age 66, the spousal benefit would be 50 percent, or $1,000. Note, however, that the spousal benefit would still be $1,000 (not $1,240) when he is age 70 because the 24% increase does not apply to spousal benefits.  But DRCs do apply to survivor benefits.  So, when Mr. A. dies, Mrs. A. would get the full $2,480 as a survivor benefit.

What if the first spouse dies prior to age 62?  The benefit will be the deceased worker’s recalculated PIA, which is based on a different set of assumptions.  It uses the worker’s earnings for a “substitute year” and a different set of required Social Security credits for the applicable age.  This special PIA calculation can only help; it can’t hurt.  It only applies if it provides a higher PIA then the regular PIA calculation.

What if death occurs after age 62 but prior to FRA after taking early retirement benefits?  The benefit will be the deceased worker’s reduced retirement benefit.  This is one good reason not to retire early.  Note that there is a minimum benefit of 82.5% of the deceased worker’s PIA, not including any actuarial reduction in benefits.

 Surviving Spouse Collects Early

If the surviving spouse elects to collect before her own FRA, as with other Social Security retirement benefits there is an actuarial reduction.  For a personal, spousal or divorced spouse’s benefit, one can start as early as age 62.  However, a surviving spouse can start collecting as early as age 60.  If the survivor benefit is at FRA or later, there is no actuarial reduction.

It’s important to note that the surviving spouse has additional options.  Suppose the surviving spouse is age 60 and not collecting any benefits. When the other spouse dies, she has the option of receiving her actuarially reduced personal benefit, then later switching to a full-unreduced survivor benefit at FRA.  This could limit the downside of collecting early.

To determine the monthly reduction amount, simply take 28.5% divided by the number of months between age 60 and the survivor FRA determined above.   The “Widow Limit” caps the survivor’s benefit at the larger of the benefit the deceased would have received if he or she were still alive, or 82.5% of the deceased PIA. This Widow Limit only comes into play if the deceased claimed benefits prior to his or her FRA. The following, from SocialSecurityTiming.com, graphically explains these options.

Examples

Suppose the surviving spouse started collecting a reduced personal benefit at 62, and her spouse dies when she is 64.  At that point, she has the option of continuing to collect her personal benefit for two more years and then switching to a full, unreduced survivor benefit at age 66.

Of course, the survivor cannot collect both benefits at the same time; the survivor must choose one or the other.  Only one switch is allowed.  If the surviving spouse is already collecting a personal benefit, she could not go from a personal benefit to a survivor benefit and then back to the personal benefit.

Understanding survivor benefits is especially important when there is a significant age difference between the two spouses.  When one spouse may outlive the other by a considerable margin, survivor benefits are a much more important than “file and suspend” or “spousal only.”  In that case, it is often a good idea to make sure that the spouse with the higher personal benefit defer until age 70, if possible.

Divorce

A former spouse who is age 60 or older (50-59 if disabled) can get benefits if the marriage lasted at least 10 years.  However, there is no age or length of marriage requirement if the former spouse is caring for her or his natural or adopted child who is younger than 16 or who is disabled and entitled to benefits based upon your work.  Benefits paid to a former spouse who meets age or disability requirement does not affect the benefits for other survivors based upon the worker’s record. However, the benefits paid to a former spouse who is caring for a minor or disabled child do affect other survivor benefits.

Remarriage

Generally, the survivor cannot get survivor’s benefits if he or she remarries before age 60. But remarriage after age 60 (or age 50 with a disability) will not prevent the survivor from getting benefit payments based on the former spouse’s benefits. And at age 62 or older, the survivor may get benefits based on the new spouse’s work, if those benefits would be higher.

Conclusion

Social Security survivor benefits offer a surviving spouse the opportunity to significantly increase her or his benefits based upon the benefits payable to the deceased spouse. Therefore, it’s important that seniors and their loved ones understand how to maximize those benefits. Accessing survivor benefits and understanding what is available is an important piece in helping seniors with their overall planning goals.  Please contact our office if you have any questions or if we can be of assistance to someone you know.

 

 

Special Needs Trusts: The Current Law and Pending Legislation

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Introduction

Individuals with special needs often face “quality of life” challenges compared to those without special needs.  Many times individuals with special needs require added expenses to meet those needs.  The added financial burden often leads individuals with special needs to depend on public benefits to help them meet those costs.   Unfortunately, public benefits often fail to meet all of the needs of a disabled individual.  However, the supplemental needs of those individuals (meaning needs not covered by public benefits) can be met by using funds held in a Special Needs Trust (SNT).

 

Understanding Special Needs Trusts

A Special Needs Trust is a trust that is established for an individual with special needs who is or may become dependent on public benefits.  The trust is specifically identified to meet certain supplemental needs and to enhance the quality of life for the beneficiary, the special needs person.  Most importantly, the SNT is created so as to not disqualify the beneficiary for the public benefits being received.  The trust, then, is a pool of money available for the benefit of the beneficiary in order to provide him or her with goods or services that public benefits do not provide.  For example, SNT funds may be used for in-home care services that would otherwise not be affordable to the beneficiary.  Should a person with special needs receive these funds outright and outside a properly created SNT, the individual may become ineligible for the public benefits and reinstatement of the benefits can be a difficult process.

There are two types of SNTs:  A third-party SNT and a first-party SNT.  A third-party SNT is one in which a loved one has assets that he or she would like to use to benefit the individual with special needs.  Whereas, a self-settled SNT is one in which the assets belongs to the individual with special needs. 

A self-settled SNT is often used in the case of a litigation settlement.  One example involves an individual who was in a car accident and sued the “at fault” driver successfully.  By the time the lawsuit settlement was reached, the individual had been declared disabled.  Instead of the settlement funds being given outright to the person who is now disabled, the funds could be placed into a self-settled SNT for the benefit of that individual.  This allows the person with the disability to continue to receive benefits and have the settlement money available to him or her for supplemental purposes, increasing his or her quality of life.

Self-settled SNTs have been recognized by federal law since 1993 under 42 USC §1396p(d)(4)(A).   A self-settled SNT contains a mandatory payback provision, meaning that upon the death of the beneficiary, the State will be paid back from the remaining trust assets up to the amount of public benefits expended on behalf of the beneficiary during his or her lifetime. 

Within a self-settled trust an individual trustee or corporate trustee is appointed to manage the funds in the trust.   Choosing the correct trustee is an important decision as the trustee will be responsible for managing and investing trust assets, and is responsible for following the guidelines regarding proper distributions from the trust.  Failing to do so could result in a loss of benefits for the trust beneficiary. 

 

Problem with the Current Law

The law, as currently written, states that a first-party trust may only be established by the individual’s parent, grandparent or a court of competent jurisdiction.  It appears that the option for a competent individual to establish his or her own trust under 42 USC § 1396p (d)(4)(A) was a simple mistake by the writers of the law.  However, this minor mistake causes major financial losses to disabled individuals.  It requires those disabled individuals who have no parent or grandparent alive to establish the trust, to expend money on an attorney and court costs in order to ask for a court order establishing the trust.  The money to accomplish this is often such an impediment for these individuals, that they do not pursue it and end up either kicked off the public benefits or forgoing the supplemental monies they would otherwise have access to.

 

Pending Legislation

Currently there are two identical bills sitting in the House of Representatives and in the Senate which would create the option for competent individual who is disabled to establish his or her own trust under 42 USC § 1396p(d)(4)(A).  In May 2013, H.R. 2123 was introduced in the House and the next day it was referred to the House subcommittee on Health, where is currently sits.  A few months later in November 2013, S. 1672 was introduced in the Senate, was read twice and referred to the Committee on Finance.  The title of the identical bills is the “Special Needs Trust Fairness Act of 2013” and is described as “a bill to amend title XIX of the Social Security Act to empower individuals with disabilities to establish their own supplemental needs trusts.” 

As advocates for individuals with special needs, it is important that we support this bill so that our clients have more choices for themselves with regards to establishing special needs trusts.  If you feel so inclined, please contact your Congressional representative and ask for the passage of these bills.  Encouragement from us of the importance of this bill to our clients is imperative to get the bill recognized and enacted.  Otherwise, it may get lost in the shuffle and our clients’ needs may not be adequately addressed.

 

Conclusion

A Special Needs Planning attorney is an essential advocate when preparing SNTs for individuals with special needs.  The attorney will be able to identify the type of SNT that would be helpful in the particular situation and will know how to properly construct it so as to prevent the person with special needs from being kicked off his or her benefits.  There are many roadblocks that can arise in the planning process and it is imperative that you have an attorney familiar with the many federal and state laws and regulations concerning public benefits and SNTs.

If you have a client with special needs who would benefit from the establishment of an SNT, please contact us.  We are committed to and passionate about assisting those with special needs and look forward to helping in any way we can.

Helping Families Deal With the Financial and Emotional Costs of Dementia

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As Elder Law attorneys we are specially situated to help find solutions to many of the problems this condition brings with it.  While we can’t stop dementia, we can help protect those in its clutches while the medical world continues to seek prevention, treatment and reversal of the condition.

 

Losing Brain FunctionDementia Defined

The Alzheimer’s Association defines dementia as, “a general term for a decline in mental ability severe enough to interfere with daily life. Memory loss is an example. Alzheimer’s is the most common type of dementia.”

Dementia is not actually a specified disease.  It describes, instead, a general decline in memory or other thinking skills and is identified through a variety of symptoms.  Alzheimer’s disease accounts for 60 to 80 percent of dementia cases.  In order to be characterized as dementia, at least two of the following mental functions must be significantly impaired:  visual perception; reasoning and judgment; memory; communication and language; or ability to focus and pay attention.  Dementia is not a normal part of aging as the terms “senility” or “senile dementia” infer.  If a loved one is having trouble with any two or more of these mental functions, it’s a good idea to get it checked by a doctor.  Dementia is progressive and typically takes over the mental functions over time.  In this way, it provides the individual and the family with time to plan for its disastrous affects.[1]

 

Cost to the Individual

The cost to the individual with dementia is difficult to quantify.  Because dementia is a progressive condition and one where aging is the greatest risk factor, it is logical that at the beginning and younger stages of dementia, the cost to the individual is minimal.  As dementia progresses, so does the need for assistance with daily activities.  This assistance often comes in the form of meal preparation, help with grooming and hygiene, transportation assistance, as well as help with many other daily activities.  Dementia patients can become so mentally challenged that they may place themselves in dangerous situations, such as roaming neighborhoods and getting lost.  While the individual affected by dementia may need only a few hours of help per week at the beginning of symptoms showing, soon they may need around the clock supervision, not only for assistance with daily activities, but to protect them from themselves.  The individual’s costs will include medical expenses as well as paying a caretaker.

Caretaking for one with dementia varies depending on the quantity of care required.  An in-home caretaker may charge up to $21 per hour or higher.  Adult day care can run as high as $18,200 per year or more.  When an individual can no longer live alone but is not quite ready for a nursing home, Assisted Living facilities are available but may cost as much as $42,600 per year or more.  When around the clock care is needed, a nursing home can cost an individual up to $90,520 per year, or higher.  To view costs in other states and national average costs of long term care, see the MetLife Survey of Long Term Care Costs, https://www.metlife.com/mmi/research/2012-market-survey-long-term-care-costs.html#keyfindings.

 

Cost to the FamilyFamily

Where the individual with dementia is fortunate enough to have family nearby, the family will often step up to assist the ill loved one with their daily activities.  Again, the process can be gradual and before the helpful family member realizes it, they may find themselves missing work and, finally, quitting their job altogether in order to give proper care to the dementia patient.  Obviously, the cost to the family includes the loss of income from this family member’s job.

The less recognizable cost to the family, however, is the emotional strain that is placed on the family member caretaker.  In order to save the family money, many family members will work nearly twenty-four hours, seven days per week.  The ramifications are physical, mental and emotional health problems to the caretaker.  The medical costs and possible future psychological costs to the caretaker, then, must be considered.

It is important that family members take a step back from the situation and assess this cost.  Providing a caretaker with time off every day, week and year is a must to ensure the caretaker’s health.  The caretaker must have appropriate support in order to keep caring for the loved one.

 

Cost to the Nation

As a nation we have begun to recognize the devastation that dementia has caused and will continue to cause.  Organizations such as the Alzheimer’s Association have been effective in lobbying for monies to be put towards the research of dementia treatment, prevention and reversal.  The cost of dementia to our nation has been a great motivator for politicians to fund such research.

A study conducted by RAND Corporation in 2013, estimated the national cost of dementia to be between $159 billion to $215 billion (including an estimate for the monetary value of informal care provided).[2]  The majority of the costs associated with dementia are for institutional and home-based long-term care and not medical services.

Medicare and Medicaid pay for some of this cost, which amounts to a taxpayer burden.  According to the Alzheimer’s Association March 2013 Fact Sheet, in 2013 it is estimated that Medicare and Medicaid paid approximately $142 billion in caring for those with Alzheimer’s or other type of dementia.[3]

It is clearly in the best interest of the nation’s economy to continue research on prevention, treatment and reversal of dementia.

 

Conclusion

The costs of dementia can be devastating to the affected individual, their family and the nation.  While scientists continue to search for solutions to the debilitating condition, the families affected with it must face its challenges.  It is recommended that those families seek emotional support by way of a therapist or support group.  In addition, seeking out an Elder Law attorney can benefit the affected individual and family members in several ways.  Elder law attorneys can guide families to important resources available for the financial and other challenges they will face.  Elder law attorneys can also ensure that the family’s assets are being used in the most efficient manner considering other available resources and the family’s individual goals.

Getting an Elder Law attorney involved in planning for the challenges ahead is one of the MOST important steps a family facing the impact of dementia will take.  If you or someone you know is affected by dementia, we can help and we welcome the opportunity to do so.

 

[1] http://www.alz.org/what-is-dementia.asp

Elder Law Guy Newsletter – A Review of Important Elder Law

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Elder Law Guy Newsletter – A Review of Important Elder Law Stories From 2013Sent Thursday, February 6, 2014View as plaintext

Elder Counselor Newsletter Header

 

Volume 5, Issue 1

A Review of Important Elder Law Stories From 2013

As Happy New Year! 2013 was an important year for news that affected our senior, Veteran and disabled populations. Many stories affecting these groups made national headlines. This edition of the ElderCounselorTM will review some of the top stories that made headlines in 2013 and why they may continue to do so in 2014.

 

The DOMA Decision

One of the US Supreme Court’s highlighted decisions of the year was US v. Windsor[1].  This case stemmed from a widow from a same-sex marriage who was denied tax relief under the “Defense of Marriage Act (DOMA).”  The Supreme Court determined DOMA to be unconstitutional, ruling in favor of Edith Windsor and striking down the part of the law defining marriage as a union between a man and a woman.  The Court noted that the law deprived same sex couples of both rights and responsibilities.

 

The well-publicized ruling of this case impacted many federal laws which fell under the Act’s definition of marriage. The affected federal laws include benefits such as Medicaid, Social Security, housing, food, stamps, tax laws, federal employee benefits and Veteran’s benefits. The changes to these laws have already started to impact seniors throughout the country who are in same-sex marriages. Whether there is a change to the individual in a same sex marriage will depend on a few factors. One factor is based on the benefit in question and whether the state in which the individual resides recognizes same-sex marriage. Another factor is whether the couple was validly married in a state that recognized same-sex marriage at the time they got married.

 

For example, Medicaid will likely not recognize a marriage unless it is being administered in a state that recognizes an otherwise valid same-sex marriage. However, some states do provide hardship protections to a partner of a person in long term care. And, in some states that recognize civil unions or registered domestic partnerships, Medicaid may treat the couple as married. Each state continues to have authority as to whether or not to recognize marriage for same sex couples.

 

But, where the state recognizes a same-sex marriage, the impact in terms of Medicaid is great. In regards to Medicaid financial eligibility, the change means an increased allowance of assets from that of a single person (approximately $2,000) to those of a married couple (up to $117,920). The sword cuts both ways, though, as Medicaid will consider assets of both parties to the marriage and not just the applicant. Legal counsel can help assess the strategies available to potential Medicaid applicants and their spouses.

 

Affordable Care Act

We have all been inundated by information regarding the Affordable Care Act (ACA). Regardless of your feelings on the new law, your senior clients will likely be affected by its implementation.

 

More impactful to the senior population than the individual mandate, are the changes to Medicare, the prohibition against pre-existing conditions clauses, nursing home care changes, changes to community-based long term services and supports, and the funding of the ACA.

 

ACA and Medicare

The changes in Medicare include prescription drug coverage that will eventually reach 25% across the board for all prescription drugs. The increase in coverage will be felt by those who spend more than $2800 per year on prescription drugs. Where there was no coverage by Medicare when the prescription drug expense of an individual was between $2800 and $4550, there will eventually be coverage of 25% for all such expenses for those receiving Medicare.

 

Another Medicare change under the ACA is increased coverage of preventive care. These now-covered services include annual wellness visits, flu shots, tobacco use cessation counseling, cancer screenings, diabetes screenings and screenings for other chronic diseases.

 

Finally, the ACA’s changes to Medicare include a cut to Medicare Advantage Plans. The ACA restricts the options that can be provided by these plans. This may result in fewer choices to seniors and it makes uncertain the future of Medicare Advantage Plans..

 

ACA and the Prohibition Against Pre-Existing Conditions Clauses

The ACA’s prohibition against pre-existing conditions clauses received a great deal of attention in the news. This part of the law prohibits insurance companies from considering health when one applies for health care coverage. It also prohibits insurance companies from charging varying amounts to individuals based on heath, sex, age or other factors. The elderly will benefit from this portion of the law as the risk of insuring them will now be evenly distributed among the entire population, old and young alike.

 

ACA and Nursing Homes

Another major change affecting seniors under the ACA concerns nursing homes. The ACA requires the Center for Medicare and Medicaid Services to provide a consumer-friendly website, posting comprehensive information regarding nursing homes. This website is to provide data regarding the nursing home’s inspections, complaints and number of violations received. It will also identify the owner of the home and show expense reports comparing resident care costs versus administrative costs. In addition, the ACA will make it easier to file complaints against a nursing home.

 

In the event a nursing home decides to close its doors, the ACA has built in protections for residents of the home. The ACA mandates notice far enough in advance that all its residents can relocate. Further, it requires that the home ensure all residents have successfully relocated prior to closing.

 

There are other parts of the ACA that will potentially benefit those in need of nursing homes as well, including additional federal funding (at the option of the state) to help with background checks of staff.

 

ACA and Long Term Care Services and Supports

The ACA provides several options to states to expand home and community-based care under Medicaid. These options will fall largely to the states to exercise and implement.

 

Funding the ACA

The portions of funding the ACA that will be felt by our senior clientele include: the cuts to Medicare Advantage Plans[2]; a surcharge tax of 3.8% to unearned income[3]; an increase in the floor for medical expense deductions from 7.5% to 10% of AGI; and a .9% Medicare payroll tax on high income earners.[4]

 

Proposed VA Pension Changes

There have been two bills introduced this past year that would make changes to Veterans pension benefits. The house introduced H.R. 2189 and the Senate introduced S. 944. Both bills propose essentially the same changes. The bills, if passed, will affect wartime Veterans and surviving spouses of wartime Veterans who apply for pension benefits in a number of ways.

 

First, the proposed law would impose a penalty against the claimant who disposes of property for less than fair market value if that transfer reduces the amount of the claimant’s estate. There is currently no penalty if a pension applicant gives away assets and then applies for benefits.

 

Second, the bill imposes a 36-month look-back period for transfers made prior to the submission of an application. Under this portion of the law, the VA will review the applicant’s gifts and other transactions over the past 36 months to ensure no penalties described in the prior paragraph should apply.

 

Finally, the bill describes transfers to a trust, annuity or other financial instrument or investment as a transfer of an asset. There are exceptions, but the goal appears to be to discourage some Veterans pension planning strategies that currently exist and, according to bill proponents, are being misused.

 

There are other aspects of the proposed law that would further affect Veterans, and their spouses, applying for these benefits. However, the bottom line for our senior clientele is that new planning strategies may be required to assist them in obtaining these benefits. We will keep you posted on the progress of these bills. For more information about Veterans pension benefits, please contact our office.

 

Conclusion

Several big changes occurred in 2013 that will impact our senior clientele in the coming months and years. While some of the changes will have a positive impact on the senior and Veteran population, others will not. We can help guide your clients to needed legal resources and information. If you have a client, or know of someone who could benefit from our services, please contact us to see how we might be able to help.

 

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.

 

 

 

 

 

[1] US v. Windsor, 570 U.S. 12 (2013)

 

 

[2] The cuts to Medicare Advantage Plans are to be $145 billion over a ten (10) year period.

 

 

[3] This surcharge will be applied to unearned or investment income of singles with an annual income of over $200,000 and of couples with an annual income of over $250,000.

 

 

 

 

 

 

[4] High income earners are defined as taxpayers with over $200,000 in earned income for a single taxpayer and over $250,000 for families.

 

 

 

Greg McIntyre, Elder Law Attorney
Regards,
Greg McIntyre
Elder Law Attorney
McIntyre Elder Law
“We help seniors maintain their lifestyle and preserve their legacies.”


www.mcelderlaw.com
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Elder Counselor Newsletter – The Affordable Care Act: How It Impacts Our Senior Population

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Elder Counselor Newsletter – The Affordable Care Act: How It Impacts Our Senior PopulationSent Monday, December 2, 2013View as plaintext

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The Affordable Care Act:  How It Impacts Our Senior Population

Since its passage in 2010, the Affordable Care Act has been the subject of many heated debates and a cause for some confusion among most of the population.  In order to assist you in serving your senior clientele, this issue of the ElderCounselor TM will attempt to shed some light on how the law affects the elderly.  No doubt, there will continue to be debates over healthcare reform.  Regardless, the law of the land is the ACA.  Its far-reaching changes have already begun and will continue in the years to come.  Here is how it impacts seniors.

 

Individual Mandate

Most of us have heard that under the ACA there is an individual mandate to obtain healthcare insurance. In the event that one fails to do so, a penalty will be imposed at $95 per adult ($47.50 per child) or 1% of the family income, whichever is greater, in 2014.  The penalty rises each year and in 2016 will reach $695 per adult ($347.50 per child) or 2.5% of the family income, whichever is greater.  However, for our senior clientele, this is not as big a threat since those over 65 are eligible for Medicare coverage. As long as they enroll in the coverage available, seniors 65 and over will not face the penalty.

 

Medicare Changes

Although there will be payment cuts to Medicare, there are key benefits that are absolutely protected under the ACA. Medicare Part A (hospitals, hospice care and some home health services) and Medicare Part B (medical insurance) are protected and may not be cut. The changes under the ACA, according to the National Council on Aging, give seniors even more Medicare benefits.[1]

 

Changes to Prescription Drug Coverage

The new healthcare law decreases the expenditure on prescription drugs for Medicare recipients. Prior to the law being enacted, Medicare recipients were subject to what has become commonly known as the “Donut Hole.” Simply put, the Medicare law previously required recipients to reach a $310 deductible prior to Medicare kicking in to assist. At that point, enrollees starting paying 25% of the drug cost until they reached a total expenditure of $2800. The drug expense from $2800 to $4550 was then paid 100% by the enrollee. Once drug expenses reached $4550 Medicare would kick in again and the enrollee would pay only a small percentage of the prescription at that point. The Affordable Care Act has enacted a provision that requires Medicare to pick up more of the tab and will close the “donut hole” by the year 2020. Eventually, Medicare recipients will pay 25% of all prescription drugs across the board. This is good news for seniors since the number of prescription drugs taken typically increases with age.

 

Preventive Care Expanded

Another benefit to seniors under the Affordable Care Act is an increase in preventive care coverage. The ACA requires that Medicare cover preventive care procedures and screenings in an effort to reduce possible necessary future treatment. Prior to the ACA, Medicare did not cover preventive services.  Such services include flu shots, tobacco use cessation counseling, cancer screenings, diabetes screenings and screenings for other chronic diseases. In addition, seniors are allowed an annual wellness visit. Previously, these services, whether recommended or not, were paid out of the patient’s own pocket. No doubt the senior population sees this change as a benefit.

 

Changes to Medicare Advantage Plans

When a senior enrolls in Medicare, he or she may choose the traditional Medicare coverage plan or may seek what is called a Medicare Advantage Plan. The Medicare Advantage Plans have their own terms of coverage. They usually cover services not traditionally covered by Medicare such as dental or vision, but may, at the same time, require co-pays or cost-sharing fees for services covered at no out-of-pocket expense under traditional Medicare.

 

The ACA prohibits Medicare Advantage Plans from charging higher cost-sharing fees for seniors receiving chemotherapy and dialysis. In addition, it limits the amount of expenditures of other than medical services for enrollees. In other words, the Medicare Advantage Plans are now limited as to the amount they may spend on administrative, marketing and other non-medical expenses. While certain additional covered services under these plans may be eliminated, certain required benefits are prohibited from being cut. Presently, 1 in 4 seniors is enrolled in a Medicare Advantage Plan.

 

The new healthcare law reduces payments to Medicare Advantage Plans by $145 billion over 10 years. Because of these cuts to the Medicare Advantage Plans, the future as to these plans is uncertain. As to whether this is a benefit to the senior depends on your point of view. At any rate, it changes the options currently available to seniors under Medicare Advantage Plans.

 

Non-Medicare Changes

In addition to Medicare changes that certainly affect seniors, there are other changes written into the law that should be noted as well. Most of these would be considered beneficial to seniors.

 

No pre-existing and conditions clauses

All health insurance carriers are prohibited from including pre-existing conditions clauses in their plans. This means that health cannot be a factor as when applying for health care coverage. Furthermore, insurance companies are prohibited from charging individuals varying amounts for coverage based on their health, sex, age or other commonly-considered factors. This appears to be good news for the ill, females and the elderly, which are the groups of people who traditionally have paid more for their coverage. Now the cost will be evenly distributed to all.

 

In addition to those factors that may not be taken into consideration upon applying for coverage, there is also the protection of consumers once they are enrolled in the plan. The healthcare law says that once enrolled in a plan, the insurance company may not dis-enroll a person for becoming ill.

 

Grants as Incentives to Hospitals

The ACA incentivizes hospitals to take extra care of seniors by providing grants to them for working with seniors who are at high risk for frequent hospital readmissions.

 

The Elder Justice Act

The Elder Justice Act is aimed at protecting seniors from crimes and abuse including physical and mental abuse and financial exploitation. This was enacted under the ACA.

 

Nursing Home Care Changes

There are several provisions under the ACA that concern nursing homes. For example, the ACA requires the Center for Medicare and Medicaid Services to provide a comprehensive website where consumers may find information regarding local nursing homes, including inspection and complaint reports.[2] From this, the consumer may find the number of violations and complaints a specific nursing home has received. In addition, the consumer will be able to find information about the nursing home such as the owner of the nursing home, how much the nursing home spends on resident care compared to administrative costs, the number of hours of nursing care received by residents and staff turnover rates.

 

In addition to being able to evaluate a nursing home more completely prior to choosing one, the law has made changes meant to make it easier to file complaints about the quality of care within the nursing home. It also prohibits retaliation for filing such a complaint. [3]

 

Further, in the event a nursing home decides to close its doors, the ACA imposes new, expanded notice requirements for its residences. Not only must the nursing home provide notice of a closure far enough in advance for its residence to relocate, but it must ensure that all residents have been successfully relocated prior to actual closure. [4]

 

Finally, the ACA provides all states with the option to enroll in federal grants to pay for criminal background checks on more staff working at the nursing home. This will ensure that not only are nurses and certified nursing assistants background checked, but that any staff coming into contact with patients may be subject to such a safety procedure as well. Again, this is an optional program left to the discrepancy of each state.

 

Community Based Long Term Services and Supports

The ACA aims to strengthen the emphasis on home and community-based care by giving states several options to expand such programs for Medicaid enrollees.

 

There are three voluntary provisions for the expansion of home and community-based services (HCBS) under Medicaid. First, a state may choose to offer a community first choice option to provide attendant care services and supports. Second, a state may amend its state plan to provide an optional HCBS benefit. And, finally, states may rebalance spending on long term services and supports to increase the proportion that is community-based. The first and third provisions offer states enhanced federal matching rates as an incentive. Although the new provisions are valuable, the law does not set minimum standards for access to HCBS, and the new financial incentives are limited especially for the many states facing serious budget problems. Wide variations in access to HCBS can be expected to continue, while HCBS will continue to compete for funding with mandated institutional services. [5]

 

How is the ACA Funded by Seniors

The benefits received under the ACA must be funded. Although too lengthy to detail in this writing, we will outline how our seniors will bear part of the burden of funding the law.

 

As already mentioned, there will be some cuts to the Medicare Advantage Plans that will support the funding of the ACA. This is in the form of $145 billion over a ten (10) year period. Those seniors enrolled in such plans will no doubt undergo adjustments as the changes are implemented.

 

In addition, the ACA will be funded with a surcharge tax of 3.8% to unearned or investment income of singles with an annual income over $200,000 and couples with an annual income over $250,000. Therefore, seniors who fall within this income bracket will be subject to the tax.

 

Another impact on seniors is the increase in the floor for medical expense deductions from 7.5% to 10% of Adjusted Gross Income. This change will impact taxes paid for 2013.

 

Finally, working seniors may be subject to the additional 0.9% Medicare payroll tax on high income earners (defined as taxpayers with over $200,000 in earned income, $250,000 for families). This additional tax applies to the excess over the stated limits. This change takes place in 2013.

 

Conclusion

Clearly there are many changes made by the Affordable Care Act that will affect seniors and their loved ones. It is important to have a general understanding of what seniors are facing in terms of their health care coverage. With seniors facing so many changes during a susceptible time in their lives, it is crucial that they be directed to resources that can assist them to make educated decisions about their health, their finances and their care options. Our firm is dedicated to helping seniors and their loved ones work through these issues and implement sound legal planning to address them. If we can help in any way, please don’t hesitate to contact our office.

 

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.

 

 

[1] http://www.ncoa.org/assets/files/pdf/130812-FAQs.pdf

 

 

 

[2]http://www.canhr.org/newsroom/newdev_archive/2013/ACA%20Nursing%20Home%20Report.pdf

 

 

[3] Id.

 

 

[4] http://www.healthindustrywashingtonwatch.com/2013/03/articles/regulatory-developments/hhs-developments/other-cms-developments/cms-finalizes-aca-nursing-facility-closure-notification-rules/

 

 

[5] http://www.ncbi.nlm.nih.gov/pubmed/22497357

 

 

 

Greg McIntyre, Elder Law Attorney
Regards,
Greg McIntyre
Elder Law Attorney
McIntyre Elder Law
“We help seniors maintain their lifestyle and preserve their legacies.”


www.mcelderlaw.com
Phone: 704-259-7040
Fax: 866-908-1278
PO Box 165
Shelby, NC 28151-0165
Get Our Mobile App
Listen to Elder Law Radio
Follow:Follow Me On FacebookFollow Me On Twitter
Share: Facebook Twitter Google+ LinkedIn StumbleUpon

 

 

 

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