Medicaid LTC Penalty Divisor for 2016 Announced

The Medicaid program is the most significant source of government payment toward the cost of long-term care. It is critical to meeting the care needs of many of Pennsylvania’s frail elderly. But you may be ineligible for those benefits if you or your spouse has disposed of assets for less than fair market value during the prior five year "look-back"period. 

Imposition of a transfer penalty can result in a denial of benefits for individuals who desperately need and would otherwise qualify for Medicaid help in paying for long-term services and supports. And, since Pennsylvania has a filial responsibility law, a denial can effectively make an individual’s children liable for the costs of the needed care. See: Children can be liable for a parent’s long term care costs in Pennsylvania.

The penalty applies to transfers made by the individual applying for Medicaid long-term care benefits, or their spouse, or someone else acting on their behalf. 

Unless the transfer is for some reason exempt, if an asset was transferred for less than fair consideration within the look-back period, then a period of ineligibility is imposed based on the uncompensated value of that transfer.

New Penalty Divisor for 2016

The length of the penalty period is calculated by taking the uncompensated value of the transfer and dividing it by the average private patient cost of nursing facility care in Pennsylvania at the time of application for benefits. The average cost to a private patient of nursing facility care is often referred to as the “private pay rate” or the “penalty divisor.”

The penalty divisor is revised each year as nursing facility care costs increase. Effective January 1, 2016, the penalty divisor will be set at $302.42 per day and $9,198.61 per month. ($302.42 x 365 / 12 = $9,198.61). These 2016 divisor amounts represent an increase of approximately 3% from the 2015 figures of $293.15 and $8,916.65.

Uncompensated transfers made during the look-back period will be calculated at one day of ineligibility for every $302.42 transferred away. In Pennsylvania, transfers penalties will be imposed when the value of transfers made in a month exceeds $500.   

The rules are complicated. Seniors considering making gifts or other transfers of assets may want to consult with an experienced elder law attorney before completing the transaction.

Further Reading:

Understanding Medicaid's Five Year Look-Back Period

If You Need Long-Term Care You Need to Understand Medicaid
 

The Man Who Mistook His Will for His Estate Plan

Oliver Sacks died a few months ago. Dr. Sacks was a neurologist and author who turned clinical case histories into best sellers. People are perhaps most familiar with his book Awakenings which was made into an Oscar nominated movie starring Robin Williams and Robert DeNiro.

For Christmas I received a copy of Dr. Sack’s final book, Gratitude, a series of essays he wrote while facing cancer and his own mortality.  I look forward to reading it as I start the New Year.

I was first drawn to Dr. Sacks by the title of one of his books, The Man who Mistook his Wife for a Hat. The title essay refers to a man with visual agnosia, a visual cortex based impairment in recognizing objects despite normal eyesight. Hopefully, not many of us will suffer from visual agnosia and make that kind of mistake. 

As an estate planning lawyer, the title of that Sack's book always makes me think of a legal planning mistake that many people make. This common error is thinking that having a Will prepared is all the estate planning they need. In other words, mistaking their Will for their estate plan.

Estate planning is planning for the disposition of your property upon your death. It involves putting the right legal tools in place so that after your death the right people receive the right inheritance, in the right amounts, at the right times, with a minimum of family discord and stress.    

It is a mistake to think that your estate planning is complete because you have a Will. Because your Will may actually have very little impact on who gets what after you are gone. 

For many of us, most of our assets will pass to our heirs based upon how those assets are owned and how beneficiary forms have been set up. No matter what your Will says, your retirement accounts, annuities, life insurance policies, and possibly some of your mutual funds and bank accounts will pass according to their beneficiary designations, not your Will. Assets that are owned jointly with another person may pass by right of survivorship. Your Will may be irrelevant.

To create an estate plan that meets your goals, you need to make certain that your assets are properly titled and your beneficiary designations are correct. Your lawyer can help with this. Then you need to have your lawyer draft a Will that fits in with the rest of your plan. 

Your estate plan is like a jigsaw puzzle.  Everything needs to fit together if your plan is to meet your goals. If any parts of the puzzle are missing, your family will end up with an ugly picture.

Don’t risk being remembered by your loved-ones as the "Man who Mistook his Will for an Estate Plan."  Your elder law and estate planning lawyer can help you put together a comprehensive estate plan that will implement your true intentions and fully protect your family after you are gone.  

For more on Oliver Sacks, here is a link to Charley Rose interviews: http://tinyurl.com/zhxybly. And here is a link to interviews with Dr. Sacks on NPR’s Fresh Air program: http://tinyurl.com/go2nz5d. 

Court Orders Child to Support Parent Needing Care

Under Pennsylvania’s support laws children have the responsibility to care for and maintain or financially assist parents who become unable to pay for their care.  See, 23 Pa. C.S.A. §§ 4601-4606, “Support of the Indigent”. This is commonly referred to as the “filial support law.” Nursing homes and other care providers have long been successful in using this law to collect from children for the unpaid costs of the services provided to their parents.

The filial support law can also be used by a child (acting on behalf of the parent) to seek contributions from siblings toward the parent’s cost of care being provided in the child’s home. A recent case, Eori v. Eori, illustrates this fratricidal application. Here is an article on the Eori case written by attorney Matt Parker of Marshall, Parker and Weber.  

A Pennsylvania appellate court ruled in the case of Eori v. Eori that you can be ordered to help pay for your parent’s caregivers if your parent does not have enough money to pay them. The court also ruled that your obligation to pay for your parent’s care does not turn on whether you had a good or bad relationship with your parent. And your obligation to your parent comes before your obligation to pay for your step-child’s college education.

Pennsylvania’s filial support law allows an indigent parent (someone who cannot pay their bills) to sue a child to help pay for the parent’s support. Mrs. Eori is a 90 year old woman who requires 24 hour care to live at home. Her modest Social Security was insufficient to pay for the care. In this case, Mrs. Eori’s agent sued two of her children on her behalf to force them to help pay for her caregivers.

Her son, Russell Eori (n/k/a Joshua Ryan), claimed he did not have a good relationship with his mother and had other financial obligations, including paying for his step-child’s college education. The Superior Court of Pennsylvania affirmed the trial court’s decision, ordering Mr. Ryan to pay for some of his mother’s care. The Court found that the existence of a bad relationship with the parent was not a defense to a filial support claim. The financial obligations to support a step-child, such as college expenses, were found to be insufficient evidence of the inability to contribute towards the cost of the parent’s care. Mr. Ryan was ordered to pay $400 per month towards his mother’s care.

While many families have strong bonds and care for their aging parents, other families have been fractured and have no interest in helping to care for each other. In Pennsylvania, that lack of a relationship has no bearing on your financial obligation to help a parent under the filial support law (unless the parent had abandoned the child).

It is surprising that the cost of keeping an elderly parent at home by paying private caregivers, takes precedent over the obligation to educate a step-child. The Court focuses on the lack of a blood relation to discredit the college expenses as a legitimate expense. Given the holding in this case, it won’t matter if this is a “Brady Bunch” family and Mike Brady is paying for Marsha Brady’s Penn State tuition. His estranged mother’s 24 hour privately paid care would take precedent.

It is unclear why the family did not agree to institutional placement for Mrs. Eori. If Mrs. Eori suffered from dementia and needed 24 hour supervised care, nursing facility care would have been a legitimate option for care. Mrs. Eori’s care would then have been paid for by the Medicaid program. Institutional care would have avoided the need to sue family members to pay for 24 hour private care that most families cannot afford.

Jeff’s comment: It seems to me that Eori is mainly a case of the primary caregiver child trying to get more contribution from his siblings. When frail older adults remain in community settings an inordinate portion of the caregiving burden often falls on just one child. Since there is a growing emphasis on keeping care dependent seniors in the community, I expect we will be seeing a lot more litigation like that in Eori.    

Further Reading

Professor Katherine Pearson’s discussion of the Eori case: Filial Friday: Court Finds Less Than "Ideal" Childhood Not Enough to Release Duty to Support Indigent Parent

Marshall Elder and Estate Planning Blog: PA Ruling: Son must pay mother’s nursing home bill

ABLE Account Residency Requirement Eliminated

Congress has eased the rules for ABLE accounts. The just enacted Omnibus Budget and Tax legislation eliminates the state residency requirement.  

Under ABLE some individuals with disabilities are allowed to retain much higher amounts of savings without losing their Social Security and Medicaid benefits. (See my previous article on ABLE accounts here). But the prior law specified that the beneficiary of an ABLE account was required to reside in a state that had specifically authorized ABLE.

The Protecting American’s from Tax Hikes (PATH) Act of 2015 includes a section (Section 303) that eliminates the residency requirement for qualified ABLE programs. The provision allows ABLE accounts (tax-preferred savings accounts for disabled individuals), which currently may be located only in the State of residence of the beneficiary, to be established in any State. This will allow individuals setting up ABLE accounts to choose the State program that best fits their needs, such as with regard to investment options, fees, and account limits. The provision is effective for tax years beginning after December 31, 2014.

The new provision reads as follows:

303. Elimination of residency requirement for qualified ABLE programs

(a) In general

Section 529A(b)(1) is amended by striking subparagraph (C), by inserting and at the end of subparagraph (B), and by redesignating subparagraph (D) as subparagraph (C).

(b) Conforming amendments

(1) The second sentence of section 529A(d)(3) is amended by striking and State of residence.

(2) Section 529A(e) is amended by striking paragraph (7).

(c) Technical amendments

(1) Section 529A(d)(4) is amended by striking section 4 and inserting section 103.

(2) Section 529A(c)(1)(C)(i) is amended by striking family member and inserting member of the family.

(d) Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

The PATH Act, including Section 303, is incorporated as Division Q of the Consolidated Appropriations Act, 2016, the year-end tax and spending legislation that was signed into law by President Obama on December 18^th.  

This legislative change follows a regulatory easing of ABLE account restrictions announced by the IRS in November. In its guidance the IRS backed off a requirement mandating the submission of medical documentation of disability to open an ABLE account. The IRS also made changes intended to make it easier for states to administer the accounts. 

The elimination of the residency requirement raises a number of questions and may delay the process of states moving forward with ABLE account implementation.