Welcome to Jan Neal Law Firm LLC, located at 207 N. 4th Street, Opelika, Alabama 36801 where you can find the latest news concerning Elder and Special Needs Law in Alabama. Contact Jan at 334-745-2779 or toll free 1-800-270-7635 or email her at firstname.lastname@example.org, email@example.com, firstname.lastname@example.org.
A new law has passed as part of the federal budget bill that makes major changes to retirement plans. The new law is designed to provide more incentives to save for retirement, but it may require workers to rethink some of their planning.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act changes the law surrounding retirement plans in several ways:
- Stretch IRAS. The biggest change eliminates “stretch” IRAs. Under current law, if you name anyone other than a spouse as the beneficiary of your IRA, the beneficiary can choose to take distributions over his or her lifetime and to pass what is left onto future generations (called the “stretch” option). The required minimum distributions are calculated based on the beneficiary’s life expectancy. This allows the money to grow tax-deferred over the course of the beneficiary’s life and to be passed on to his or her own beneficiaries. The SECURE Act requires beneficiaries of an IRA to withdraw all the money in the IRA within 10 years of the IRA holder’s death. In many cases, these withdrawals would take place during the beneficiary’s highest tax years, meaning that the elimination of the stretch IRA is effectively a tax increase on many Americans. This provision will apply to those who inherit IRAs starting on January 1, 2020.
- Required minimum distributions. Under prior law, you have to begin taking distributions from your IRAs beginning when you reach age 70 ½. Under the new law, individuals who are not 70 ½ at the end of 2019 can now wait until age 72 to begin taking distributions.
- Contributions. The new law allows workers to continue to contribute to an IRA after age 70 ½, which is the same as rules for 401(k)s and Roth IRAs.
- Employers. The tax credit businesses get for starting a retirement plan is increased and the new law makes it easier for small businesses to join multiple-employer plans.
- Annuities. The newly enacted legislation removes roadblocks that made employers wary of including annuities in 401(k) plans by eliminating some of the fiduciary requirements used to vet companies and products before they can be included in a plan.
- Withdrawals. The new law allows an early withdrawal of up to $5,000 from a retirement account without a penalty in the event of the birth of a child or an adoption. Currently, there is a 10 percent penalty for early withdrawals in most circumstances.
Given these changes, workers need to immediately reevaluate their estate plans. Some people have used stretch IRAs as an estate planning tool to pass assets to their children and grandchildren. One way of doing this has been to name a trust as the IRA’s beneficiary, and these trusts may have to be reformed to conform to the new rules. If a stretch IRA is part of your estate plan, it may be time to reconsider your existing plan.
Sometimes the only property in an estate that is not jointly titled is a vehicle. To solve the problem of getting the vehicle transferred and to keep from having to open a formal estate administration, if the vehicle is paid off, the next of kin may file an Affidavit for Assignment of Title for a Vehicle from a Deceased Owner Whose Estate Does Not Require Probate(Alabama Department of Revenue MVT 5-6).
Title can be transferred by filing the affidavit at the tag and title office of the local probate court. If the vehicle is not paid off it will likely need to be refinanced, and the lender needs to be put on notice of the death.
To assist caregivers who are making arrangements for long term care a booklet concerning Alabama Medicaid is being made available to provide clarity for some of the issues that may arise and to provide basic information about the application process. The booklet is made available here and will remain available in the Publications section of our website. It can be read online or downloaded and printed.
The Veterans Administration has a federal and state program addressing health care needs of veterans and provides an option for long-term care.
There are four VA nursing facilities in Alabama:
- Bill Nichols State Veterans Home in Alexander City;
- William F. Green State Veterans Home in Bay Minette;
- Floyd E. “Tut” Fann State Veterans Home in Huntsville; and
- Col. Robert L. Howard State Veterans Home in Pell City.
In the VA system State VA and Federal VA contribute toward the charged rate, leaving the veteran responsible for the remainder. Actually this VA system is a highly affordable nursing home care option after the state and federal government provide subsidies.
In 2019 the out of pocket cost for care in the VA facilities in Alexander City, Bay Minette and Huntsville is $355.02 per month, and the out of pocket cost for care in the Pell City facility is $732.
The average wait for a bed is four to five months for Alexander City; six months for Bay Minette; three to four months for Huntsville; and two to three years for Pell City.
In July 2019 The Alabama Department of Veterans Affairs announced plans to build an additional $60 million veteran’s home on 27 acres in one of nine Southeast Alabama Wiregrass counties. The new nursing facility will provide care for 150 – 175 elderly veterans and will be located in either Barbour, Butler, Coffee, Covington, Crenshaw, Dale, Geneva, Houston or Pike County.
The VA is required to provide nursing home care to any veteran who needs that level of care because of a service-connected disability, has a combined disability rating of 70 percent or more or has a disability rating of at least 60 percent and is deemed unemployable or has been rated permanently and totally disabled. Other veterans in need of nursing home care will be provided services if resources are available after the priority groups are served.
You don’t really have to spend down all your resources to qualify for nursing home Medicaid. There are multiple ways to preserve funds. One of those ways is through the use of what I call the Medicaid Spend Down Special Needs Trust.
Usually persons who need nursing home care end up needing Medicaid to pay for that care. Why? Because it is so expensive. Nursing home care can cost between $6000 and $8000 depending on the specific market area in Alabama. At $7000 per month, the average nursing home resident will spend $84,000 in a year. Under these circumstances, most persons will exhaust their resources at a rapid rate rendering them unable to pay for the care they need without the assistance of Medicaid.
There are some funds a married couple can preserve for the spouse who remains at home, but there is still an amount that has to be spent down if a couple has countable assets over $25,000. A single person has to spend all of his or her resources down to $2000 before he or she can qualify for Medicaid. Using up the assets a person saved over a lifetime is known as the dreaded Medicaid “spend down.”
But what many people do not know is that there is a way to qualify for Medicaid to pay for nursing home care in Alabama without the resident having to go through a complete “spend down.” That is through the use of a pooled Special Needs Trust.
There are many types of Special Needs Trusts (SNTs), including trusts for disabled younger persons, disabled children whose parents and grandparents want to provide for their future needs, persons on public benefits who recover money from personal injury lawsuits or who inherit money when a relative dies. Each type of SNT has highly specific requirements. But what they all have in common is the goal of protecting funds for a disabled person without those funds resulting in the loss of public benefits.
With the Medicaid Spend Down SNT, instead of spending down the money required to be spent by Medicaid on nursing home care before eligibility can be established, the money is paid into a SNT and can then be used to pay for special needs not otherwise paid for by Medicaid for the disabled person once he or she becomes eligible. Medicaid eligibility can be immediately established while these funds remain available to pay for special needs for the nursing home resident.
The drawback to this type of trust is the requirement that, on the death of the person for whom the trust was established, Medicaid must be reimbursed from funds remaining in the trust up to the amount Medicaid has paid for the nursing home resident’s care. Still, creating a pool of money to meet the special needs of the nursing home resident after being awarded Medicaid is far better than simply spending down those funds before qualifying for Medicaid and leaving the resident with no resources to pay for special needs. Since Medicaid allows a nursing home resident to keep only $30 of his or her income each month to pay for personal needs, you can see how that is not enough to have needs met without families pitching in to help pay for necessary items.
An example of what the SNT funds can pay for is a private room in a nursing home since Medicaid will only cover a semi-private room. Other special needs might be items and services that can improve the quality of life for the nursing home resident such as hair salon charges, manicures, telephone, newspaper subscriptions, audiobooks, movies, recreation, medical and dental expenses not otherwise covered, special equipment like wheelchairs or specially-equipped vans; therapy or rehabilitation services; training and education, travel, electronic equipment including computers and mobile devices.
With a little planning the quality of life for a nursing home resident can be improved, and the burden for a family’s out of pocket expenses decreased.
Do not be confused with an internet search. The rules are different from state to state. Most states allow a person 65 and older to create a pooled SNT but still penalize transfers into that trust. That is not the case in Alabama.
Contact us for more information about establishing a Medicaid Spend Down SNT.
Starting in January 2020, Medicare will reimburse home health agencies at a lower rate when they provide care for patients who have not been admitted to a hospital first. Does this sound familiar? It should because it is a continuation of the observation status problem faced by Medicare patients who are not formally admitted to hospitals for at least three nights. Those patients who only stay at the hospital on an observation status are not eligible for limited skilled care Medicare coverage in long-term care facilities following hospital discharge.
Now the problem extends to people trying to obtain home health care services paid by Medicare. The new rule will require reimbursement for home health care agencies at a significantly lower rate for patients who do no satisfy the hospitalization admission standard. CMS estimates that it will pay home health agencies approximately 19 percent more for a patient who hires the home health agency directly after leaving a hospital than a patient who was never in the hospital or was only an outpatient on observation status. That estimate may be low. The Center for Medicare Advocacy estimates a 25 percent lower payment for patients who do not satisfy the hospital admission requirement.
This lower reimbursement rate means that home health agencies may be reluctant to provide care for patients who were under observation status or who haven’t been in a hospital at all.
Hospitals are required to provide notice to patients if they are under observation for more than 24 hours.
For more information about the new rule from the Center for Medicare Advocacy, click here.
Some benefits paid by Medicaid, including expenses for long-term care after age 55, can be recouped from the recipient’s estate upon death. The federal government makes estate recovery mandatory, and each state has enacted its own rules to comply with that requirement. A new publication is available to help you understand how Alabama Medicaid Estate Recovery works and what property is at risk for being lost upon death and repayment to Medicaid. This document can be read online or downloaded and printed. It will remain available in the Publications at this web site.