Category: Medicaid Pennsylvania

Understanding Life Insurance Policies And How They Relate To Medicaid

Post author By sps
Post date December 3, 2014

Understanding Life Insurance Policies And How They Relate To Medicaid

When an individual is applying for Medicaid and has assets that exceed Medicaid’s resource limit, a Medicaid spend-down is necessary. Assets in excess of the allowable amount must be spent down in order to achieve financial eligibility. Some kinds of life insurance policies are included in the spend-down with a few exceptions. Below is a breakdown of what needs to be liquidated in order to be eligible for Medicaid.

There are two popular types of life insurance policies that have different effects on the Medicaid application process.

Term Life Insurance Policies:

Term Life Insurance Policies have premiums that increase as the individual’s age increases. These policies only carry a death benefit. They are also referred to as protection policies; their purpose is to assist the beneficiaries in the event of the policy holder’s sudden death. Since there is no current cash value in term policies they are not considered an asset according to NJ Medicaid guidelines. These policies may remain active and will not impede one’s Medicaid eligibility. Once an individual is on Medicaid he/she will have minimal assets and may not have the money to cover the monthly premiums. Some beneficiaries choose to cover the monthly premiums so that they can ultimately benefit from the death benefit once the Medicaid recipient passes.

Whole Life Insurance Policies:

Whole Life insurance policies generally have fixed premiums, death benefit and cash value reserves. These policies may be liquidated at any time. Being that they carry a current cash value, they are not exempt from the Medicaid spend-down and must be liquidated in order to meet Medicaid’s financial eligibility requirements. There is one exception to the rule! If the Whole Life Policy has a face value of less than $1,500.00, regardless of the cash surrender value, it is exempt from the Medicaid spend down and may remain open and active. “Face Value” is the original death benefit amount on the day the policy was purchased, prior to the policy holder making monthly premiums. While the policy is active it will accumulate cash value from the premiums as well as dividends from reinvestment money. The cash value may exceed the original death benefit (or Face Value). Once the policyholder passes, the beneficiaries will then be able to claim the total death benefit from the policy.

Medicaid Connecticut Medicaid New Jersey Medicaid New York Medicaid Pennsylvania

Medicaid Spend Down and Special Needs Trust

Post author By sps
Post date September 16, 2014

In order for an individual to be eligible for Medicaid, there are financial standards that need to be met. Many Medicaid applicants will have to spend some of their assets in order to meet Medicaid’s financial threshold. There are a few excludable resources that are exempt from the Medicaid Spend down. These assets can be kept by the Medicaid applicant and will not impede Medicaid eligibility. An individual’s personal possessions, a prepaid irrevocable funeral trust and a special needs trust for a disabled child, are just a few excludable resources when applying for Medicaid.

Today we will discuss utilizing a special needs trust with the excess “spend-down” money. When a Medicaid applicant has a disabled child a special needs trust allows the transference of assets from a parent to the child without jeopardizing the child’s government benefits.

Special needs trusts are also referred to as “supplemental care trust” these trusts supplement the disabled child’s supplemental security insurance (SSI) and Medicaid benefits. The money in a special need trust may only be used for specific items or services. The trust is meant to supplement, and not pay for basics such as food and shelter. Some things that may be purchased through a special needs trust include:

Home modifications to assist the disabled,
Medical treatments and equipment not already covered by government assistance programs.
Education and recreation equipment
Computers
Musical instruments
Sports equipment
Travel expenses
Prepaid funeral

When a parent creates a special needs trust for a disabled child, He/ She chooses a trustee. A trustee is an individual or institution who manages the assets in the trust. The trustee’s responsibility is to follow the terms and guidelines outlined in the trust as well as transferring the funds from the trust to the beneficiary or disabled child. A trustee can be a family member, attorney, bank or anyone that one chooses to assign as a trustee.

The trust is an excludable resource for government benefits for both the parent applying for adult Medicaid and the disabled child receiving SSI and Medicaid benefits. The trust restricts the beneficiary (or Disabled child) and parent access to the assets in the trust. Only the trustee would have accessibility to the funds and therefore it’s considered an unattainable asset for both the parent and disabled child. It is for this reason that it will not impede Medicaid eligibility for either.

One should consult with a competent elder care attorney for advise on if and when such planning strategies are advisable.

Gifting Medicaid Connecticut Medicaid New Jersey Medicaid Pennsylvania

Medicaid Planning – “Failing to plan is planning to fail”

Post author By sps
Post date September 3, 2014

If a hiker was setting out to cross Arizona’s Sonoran Desert, he would begin by planning weeks or even months in advance. He would be certain to pack all necessities such as water, clothing, a trail map, sun hats and anything that may be needed along the way. He will take the time to educate himself on the plants, snakes and scorpions that are found in the Sonoran desert.

As an avid hiker, I often reference hiking metaphorically as an analogy easily understood. I find that it helps folks mentally prepare for the Medicaid application mindset. When asked by prospective applicants “at what point should I start thinking about Medicaid for myself or my loved one?” I reference the Sonoran desert. Certainly, the time to think about the process is well in advance. Otherwise, if you wait too long, you are like the poor desert hiker who hasn’t prepared. Certainly, this is not an enviable position to be in. Alan Lakein once said ” Failing to plan is planning to fail.”

In order to help folks prepare for the Medicaid journey I would like shed light on some guideline that can positively impact prospective Medicaid applicants.

Medicaid guidelines dictate that an applicant may not gift money within the five years prior to Medicaid eligibility, generally referred to as the five year ”look-back” period. However, many mix up the Gift Tax Exclusion Act with the Medicaid gifting laws and believe that gifting $13,000 annually is permitted for Medicaid purposes. For the IRS it is permitted, but for Medicaid purposes it is not. Should Medicaid identify any transfers or gifts in the applicants reviewed financial history, Medicaid will impose a penalty. A penalty period is a defined period of time in which Medicaid will not pay for care. The penalty period is calculated based upon the amount of funds that were gifted or transferred divided by the penalty divisor. The divisor is a figure derived from the average cost of care at a nursing home.

Most of us generally don’t know whether we will be needing Medicaid for ourselves or our loved ones over the next five years. Therefore, planning in advance is crucial in order to preserves ones assets. There are numerous asset preservation opportunities that Medicaid guidelines afford applicants. There are spousal rules that protect the community spouse. There are rules that protect disabled children. There are possible methods of preserving the home in certain instances. There are options that require forethought and planning in order to successfully achieve the desired goals.

When I am given the opportunity to speak to the senior population, the above is something that I always stress to prospective applicants. Understanding the rules and the possible scenarios that may arise ranks as the most critical aspects of a successful Medicaid outcome. Prospective applicants need to be ahead of their needs or risk finding themselves In the Sonoran desert without their sunscreen.