Jan Neal Law Firm, LLC

Alabama Estate, Elder and Special Needs Law


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Medicaid Personal Liability

When Nursing Home Medicaid eligibility has been established there is an amount of income that the nursing home resident must pay directly to the nursing home.  After that amount is paid Medicaid picks up the difference in that personal liability and the nursing home Medicaid rate for room and board.    

Before paying the personal liability Medicaid will allow the resident to keep:

  • The personal needs allowance of $30 per month;
  • The spousal minimum monthly maintenance needs allowance (enough money to bring the income of the spouse at home up to $2178);
  • Family maintenance needs allowance (a similar allowance for minor or dependent adult child, a dependent parent or a dependent sibling of either spouse);
  • Costs of necessary medical or remedial care not covered by a third party (e.g. Medicare Part B premium).

These allowances are made to the extent the resident’s income can cover them.  It is entirely possible for the patient to exhaust his or her income before paying any personal liability at all to the nursing home.

It is important to remember that during the time a Medicaid application is pending the resident should pay the estimated personal liability or risk receiving a bill for this amount from the nursing home.  After eligibility is established Medicaid will publish the exact personal liability to use.

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Social Security Retroactive Lump Sum Benefits

If you need a lump sum of cash on hand when you retire, Social Security offers a lump sum payment option that’s worth six months of benefits for those who have waited beyond full retirement age to draw benefits (for those born between 1943 and 1954 full retirement age is 66). Known as retroactive benefits, the maximum that Social Security offers is six months’ worth of back payments in a lump sum.

This may be a good deal depending on your needs and goals, but it does come at a cost. By taking the lump sum, your retirement date and the amount of your monthly benefit are rolled back six months. So it is important to understand the details before requesting the payment.

When you delay taking retirement beyond your full retirement age, you amass “delayed retirement credits” that increase your benefits by 8 percent for every year that you wait, over and above annual inflation adjustments. By taking the retroactive lump sum payment, you lose the delayed credits that you had accumulated over the previous six months, so your monthly benefit will be lower than if you did not take the lump sum. 

Whether you should take the lump sum payment depends on a number of factors, including your life expectancy, your spouse’s needs, and what you will do with the money. Taking the lump sum payment makes more sense if your life expectancy is shorter. In this case, the immediate cash infusion may be more beneficial than bigger monthly payments, especially if you need cash for caregiver expenses. However, if you are married and are the higher earner, you will want to consider your spouse’s needs. If you die, your spouse will receive spousal benefits equal to the monthly amount of your benefits. The higher your benefit, the more your spouse will receive, and that is important when the spouse goes from a two earner household to a one earner. 

You also need to consider what you will do with the lump-sum payment. If you are paying off high-interest debt or investing in something with a good rate of return, the lump sum might be better than having the higher monthly payment. 

For more information about the retroactive benefit see the Online Social Security Handbook found at https://www.ssa.gov/OP_Home/handbook/handbook.15/handbook-1513.html.


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Selling Life Estate Property

A life estate deed can be a great tool for passing property after death.  A couple might give the property to their children and reserve a life estate for themselves until the last of the two dies.  The couple retains their homestead exemption status for life, and at death the property will automatically belong to the children without the need to probate anyone’s will.  Also the child will have a stepped up tax basis in the property which is the fair market value on the date of death of the last life tenant.  An additional benefit is the fact that Medicaid will not count the life estate as a resource if the life estate deed was executed five years prior to Medicaid application, and the property would not be subject to Medicaid Estate Recovery since it will never be probate property.  That all sounds like a win, win situation, right?

It is, except for one thing.  If the couple decides to sell the property they will need the children to sign off on the sale because the children are now joint owners with the parents.  The parents own use of the property NOW, and the children, as remaindermen, own the FUTURE use of the property.

Often a life estate deed is given with the goal of keeping property in the family, but that is not always the case.  Sometimes the life tenants want to sell the property to obtain funds for any number of purposes. With this in mind, before signing a life estate deed it is important to make sure the remaindermen would be willing to relinquish their interest and sign off on any sale of the property.    


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The Importance of a Will in Second Marriages

If a person dies without a will, or if the will is not probated within five years of death, then property in his or her probate estate will be distributed by rules determined by the legislature, known as the law of intestacy. 

The law of intestacy in Alabama requires that the estate of a person having children by a previous marriage be divided one-half to the current spouse and one-half to the child or children by a previous marriage.  This can create some totally unforeseen consequences for a couple in a second marriage with children by that marriage.  The children of that union will take nothing under the law of intestacy while a child from a previous marriage will take one-half.

It is important to evaluate your individual situation to determine what is at risk if you die without a will and how you can structure your assets to assure your property passes in the manner you prefer.      


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Legal Brief: Alabama Small Estate Summary Distribution

This is a short presentation on The Alabama Small Estate Summary Distribution available for estates that include no real property and assets not exceeding $30,245 (in 2020).


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Greater Transparency to be Required of Nursing Homes

The Center for Medicare and Medicaid Services (CMS) has issued its Interim Final Rule Updating Requirements for Notification of Confirmed and Suspected COVID-19 Cases Among Residents and Staff in Nursing Homes. This is good news for people who are concerned about their relatives living in long-term care.

CMS will require nursing homes to report COVID-19 facility data to the Centers for Disease Control and Prevention (CDC) and to report to residents, their representatives, and families of residents in facilities. Failure to report in accordance with 42 CFR §483.80(g) can result in an enforcement action.

There have been some problems for Alabama residents trying to obtain information about infection rates in individual facilities despite the fact that it is reported that residents and staff members of long-term care facilities now account for about 13 percent of the cases in Alabama, and 100 deaths in long-term cre facilities account for more than a third of the state’s total deaths as of May 1. Since relatives have been unable to visit since March, a great deal of anxiety about the care of residents has increased.

In Alabama up until now staff are required to tell families if someone living or working at the facility has tested positive for coronavirus, but those facilities do not have to say how many cases have been reported. Greater transparency will benefit family members seeking to protect their institutionalized loved ones.


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Stimulus Payments for Seniors Update

Late yesterday, after much congressional protest, the administration reversed course and announced that tax filing will not be required for Social Security recipients to receive their stimulus payments. 

It is not clear if this course reversal applies to those on Veteran’s Benefits and SSI, but it would be surprising if it did not. We will keep you posted.


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Save Your Money with a Medicaid Spend Down Special Needs Trust

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.

      


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New Medicare Rule May Have Negative Impact on Home Health Care Services

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


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Medicaid Estate Recovery: What Medicaid Can Recoup From Your Estate

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.