1. Pre-Need Planning Opportunities
By: Shannon L. Hammond, Esq.
Hammond Law, LLC

2. Introduction How can you prepare for long-term care?
What types of documents will serve you best?
Is there specific language to include in estate planning?
Are there important changes to the spouse’s documents?
Why “gifting” is a dirty word in the world of Medicaid
Reasons not to give away assets until the need arises
What are the basic financial eligibility rules for Medicaid?
Are there different rules for a single vs. married applicant?
What asset protection strategies are available to each?

3. Setting the Stage Early planning opportunities after diagnosis
Dementia diagnosis does not automatically = incapacity
Creating infrastructure to allow family to implement more complex planning strategies as disease progresses
Families should keep all options on the table, even if the goal is to avoid long-term care placement or Medicaid
Consider long-term care funding options:
Private Pay
Long-term Care Insurance
Medicare
Medicaid

4. Estate Planning Documents for LTC
All well-rounded basic estate plans have:
Last Will and Testament
Financial Power of Attorney
Advance Medical Directive
Same documents for LTC planning, but consider specific language to allow Medicaid planning to be accomplished
Equally important are updates to the community spouse’s documents to protect spouse applying for Medicaid
Financial Power of Attorney is the most expensive document NOT to have

5. Estate Planning Documents for LTC
Financial Power of Attorney
Maryland Statutory Forms
Personal Financial (General)
Limited
Supplemental POA vs. Special Instructions
Supplemental includes additional powers not granted in the statutory form. Supplemental references statutory form but not vice versa.
Special Instructions includes all supplemental powers under one document.

6. Estate Planning Documents for LTC
Choice of Agents
Choose your agent carefully and give them full powers if possible. Don’t choose an agent with bad judgment and then limit authority.
Primary & Alternate vs. Joint & Several
Too many chefs in the kitchen?
Possibility of stalemate?

7. Estate Planning Documents for LTC
Springing vs. Immediate Power
Medicaid planning is time-sensitive
Failure to execute a plan on time can cost tens of thousands!
If concerned about immediate power, probably chose wrong agent!
Immediately effective doesn’t mean to be used immediately
Springing powers require certifications of disability
Effectiveness not clear to third parties without lengthy review

8. Estate Planning Documents for LTC
Special Instructions/Supplemental Powers
Disclaimers
Gifting
Annual exclusion limitations should not be binding—suggestive only
Ability for agent to make gifts to agent
Beneficiary Designations
If community spouse is unable to make changes, need to update beneficiaries so as not to jeopardize Medicaid benefits for spouse
Trusts

9. Why Not to Give Away Your Assets
Medicaid Penalty: 1 month for each $8,684 over 5 years
Risky to predict the future
Hope no need for Medicaid in next 5 years
No control over assets
“Son, can you write me a check to buy groceries this month?”
May impact reverse mortgages on home if transfer title
No guarantee kids will give it back when needed
Exposure!
Creditors, divorce, law suits, etc.

10. Why Not to Give Away Your Assets
Medicaid’s view on gifting: GUILTY until proven innocent!
Old view: Presumption against applicant; Burden on applicant
New view: Certain transfers not done for Medicaid eligibility

11. Why Not to Give Away Your Assets
Evidence that disposal was other than to qualify for MA:
Traumatic onset of disability (no expectation of MA)
Expenses related to traumatic onset of disability
Unexpected loss of income or resources
Unexpected loss of health insurance coverage
Natural disaster affecting applicant or family member
Serious financial hardship of family member (eviction, bankruptcy)
Contribution to household expenses (informal rental arrangement)
Charitable contributions up to $200 or more if consistent pattern
Previous oral agreements reduced to writing (i.e., reimbursement)
Traditional gifts up to $200 or more if consistent pattern
Payments to help family with educational or medical expenses
Payments to modify a house for accessibility for any period of time

12. Why Not to Give Away Your Assets
Other transfers are not presumed to be gifts and are exempted from treatment as a gift:
House to spouse
Any asset of any amount between spouses
Transfers to a blind or disabled child or trust FBO child
Transfers to a trust FBO blind or disabled individual
Transfers to a special needs trust FBO applicant
Transfer of house to adult child who has provided nursing home level of care for 24 consecutive months immediately prior to applying for Medicaid. Transfer must be approved first.

13. Medicaid Eligibility: Single vs. Married
No more than $2,500 in “countable resources”
Non-countable Resources are:
House
Car
Prepaid funeral
Burial Plots
Life Insurance with no cash value
Countable Resources are:
All cash, deposit accounts, retirement accounts, bonds, stocks, second properties, etc.

14. Medicaid Eligibility: Single vs. Married
½ of the couple’s combined countable resources:
Minimum Resource Allowance: $24,720
Maximum Resource Allowance: $119,220

15. Medicaid Eligibility: Single vs. Married
Example:
Snapshot Date Countable Resources: $200,000
Community Spouse Resource Allowance : $100,000
$200,000/2 = $100,000
$100,000 falls within minimum and maximum limits
NH spouse gets an additional $2,500 in assets
Need couple to spend $100,000 to establish financial eligibility
Snapshot Date Countable Resources: $300,000
Community Spouse Resource Allowance: $123,600
$300,000/2 = $150,000
$150,000 exceeds maximum, so capped at max $123,600
Need to spend $173,900 to establish financial eligibility

16. Asset Protection: Single vs. Married
“Gift and Return”
Intentionally incurring a penalty immediately prior to application
Gift of all resources over the applicable resource limit, after expenses
Donee makes partial return of gift to applicant and reports to DSS
DSS adjusts the penalty to reflect the “net gift” after the return
Applicant now has sufficient assets and income to pay privately
Calculated to run out of money immediately prior to expiration of penalty

17. Asset Protection: Single vs. Married
Special Needs Trusts
Self-settled special needs trusts
Individual – (d)(4)(A)
Pooled – (d)(4)(C)
Payback requirements
State first
Remainder beneficiaries second
Or to non-profit running the pooled-asset trust
Allows for immediate eligibility but with payback

18. Asset Protection: Single vs. Married
Medicaid-Compliant Annuity
Transfer of excess resources into community spouse’s name (allowed)
Community spouse purchases irrevocable, non-surrenderable annuity
Community spouse’s income not attributed to nursing home spouse
Community spouse recovers entire amount invested over annuity term
Single Premium Immediate Annuity
Single Premium – only one payment made, often month prior to eligibility
Immediate – annuity makes first payment to spouse same or next month
The catch?
Must name State of Maryland as primary death beneficiary

19. Asset Protection: Single vs. Married
The goal?
Choose a short-term annuity to increase the likelihood that the community spouse will survive the annuity term
Shortest term available in the insurance market is 2 years
But annuity must be actuarially sound (can’t be longer than life)
Why it works?
After initial eligibility date, Medicaid spouse and community spouse become separate financial entities for Medicaid purposes.
DSS will not reevaluate the resources of the community spouse after the initial eligibility date.
Community spouse can re-accumulate wealth from annuity without consequence to Medicaid spouse.
BUT, be sure to name beneficiary on annuity deposit account!

20. Conclusion
Most helpful pre-need planning tool is updated and thoughtful estate planning documents
Be sure to include supplemental powers
Consider how the documents will work on the “back end” and not just at the initial planning stages

21. Conclusion Don’t give away all your assets!
Be aware of Medicaid consequences of gifting
There are many planning opportunities available at the time the need for long-term care arises. Don’t sit back and wait to apply for Medicaid.
Experienced practitioners can help preserve assets