Aaron Charles Gregg

Is It Necessary to have a Medical Power of Attorney?

“Selecting medical powers of attorney is an important step that aging parents should take to ensure they get the care they wan,t if they are unable to advocate for themselves.”

There’s no way around it, this is a difficult conversation to have with aging parents or loved ones. Who will take care of parents when they cannot take care of themselves? Do they have their estate plan in order? According to this article from Health, an important detail is often overlooked: “A Health Care Power of Attorney Is Essential for Aging Parents—Here’s Why.”

Referred to as a health care proxy or a medical power of attorney, a health care POA allows a person to choose someone to make medical decisions on their behalf, if they are unable to do so. This is a different document than a living will, which serves to let a person outline their wishes if they can’t communicate for end-of-life care.

Naming a medical proxy in advance lets the person conduct their wishes, with full and complete knowledge of what those wishes are.

A health care POA is also not the same as a last will and testament, which goes into effect after a person dies. There is nothing in a health care POA concerning wealth distribution. The will and trusts address those matters.

Giving a trusted person the legal power to make medical decisions is a big step, but one that provides a sense of control and peace of mind. There should be a first choice and an alternate, in case the first person, usually a spouse, is unable or unwilling to serve.

Without a medical POA, the family may need to go to court to get legal permission to make decisions. It’s the last thing anyone wants to do when their loved one is in a critical medical situation. Imagine having to leave the hospital to go to court, when the minutes are ticking away and your parent is in the midst of medical crisis.

If someone fails to name a medical proxy and becomes incapacitated, the hospital itself will most often step in to make treatment decisions or rely on the rules of the state to pick a family member to make decisions. The person named by the hospital might not be the person the family wants, but it will have no choice.

Like having an estate plan in place, having a medical proxy in place eliminates a lot of unnecessary stress. Most parents name the adult children they feel will make decisions in their best interest. The responsible, dependable child, regardless of their age relative their siblings, is often named. If siblings don’t get along and have a history of fighting, it may be best to name a cousin or trusted family friend.

An experienced estate planning attorney will make sure the health care proxy documents comply with the laws in the person’s state of residence. Every state has its own forms, and its own laws.

A discussion needs to take place between the person and the people they name in the health care proxy. Make sure the proxy is willing to take on the role and understands the person’s wishes.  The form should also be submitted to a health care facility or doctor’s office, so it is on file if it is needed. Unexpected events occur every day—being prepared makes it easier for loved ones.

Reference: Health (Dec. 1, 2021) “A Health Care Power of Attorney Is Essential for Aging Parents—Here’s Why”

Court Victory for Adults Caring for Parents at Home

“Advocates are celebrating an important victory for individuals who provide care for their parents at home. The new decision will likely lead to a substantial expansion in the number of homes transferred to those caregivers.”

A New Jersey Appellate Division recently reaffirmed the state’s regulation that allows older adults to transfer their homes to adult caregiver children without Medicaid penalty, reports an article titled “Major Victory for Adults Who Provide Home Care for Parents” from The National Law Review. The regulation permits the home to be transferred with no Medicaid penalty, when the adult child has provided care to the parent for a period of two years. This allows the parents to remain at home under the care of their children, delaying the need to enter a long-term care facility.

New Jersey Medicaid has tried to narrow this rule for many years, claiming that the regulation only applies to caregivers who did not work outside of the home. This decision, along with other cases, recognizes that caregivers qualify if they meet the requirements of the regulation, regardless of whether they work outside of the home.

The court held that the language of the regulations requires only that:

• The adult child must live with the parent for two years, prior to the parent moving into a nursing facility.
• The child provided special care that allowed the parent to live at home when the parent would otherwise need to move out of their own home and into a nursing care facility.
• The care provided by the adult child was more than personal support activities and was essential for the health and safety of the parent.

In the past, qualifying to transfer a home to an adult caregiver child was met by a huge obstacle: the caregiver was required to either provide all care to the parents or pay for any care from their own pockets. This argument has now been firmly rejected in the decision A.M. v. Monmouth County Board of Social Services.

The court held that there was nothing in the regulation requiring the child to be the only provider of care, and the question of who paid for additional care was completely irrelevant legally.

It is now clear that as long as the child personally provides essential care without which the parent would need to live in a nursing facility, then the fact that additional caregivers may be needed does not preclude the ability to transfer the home to the adult child.

The decision is a huge shift, and one that elder law estate planning attorneys have fought over for years, as there have been increasingly stricter interpretation of the rule by New Jersey Medicaid.

While Medicaid is a federal program, each state has the legal right to set its own eligibility requirements. This New Jersey Appellate Court decision is expected to have an influence over other states’ decisions in similar circumstances. Since every state is different, adult children should speak with an elder law estate planning attorney about how the law of their parent’s state of residence would apply if they were facing this situation.

Reference: The National Law Review (March 22, 2021) “Major Victory for Adults Who Provide Home Care for Parents”

How to Avoid Medicaid Estate Recovery

“If you’re helping an aging parent navigate Medicaid because they don’t have long-term care insurance or you think you’ll need it yourself someday, it’s important to understand how the program works.”

Medicaid is a government program that helps seniors and others pay for long term care. However, it’s not always free, explains the article “What Is Medicaid Estate Recovery?” from AOL.com. The Medicaid Estate Recovery Program (MERP) is used by states to recover costs from estates with funds. The goal of Medicaid estate recovery is to make the program affordable for the government, but it can have a severe impact on the beneficiaries of Medicaid recipients. An estate planning elder law attorney should be contacted, if you believe you or a loved one may need Medicaid.

Seniors are eligible for Medicare when they turn 65. This program pays for many healthcare expenses, but not for long-term care in a nursing home. Medicaid is used when someone does not have long term care insurance or enough money to pay for long-term care out of pocket. Medicaid can also be used for long-term or nursing home care, if steps have been taken to protect assets. This usually includes strategies, like trusts and Medicaid Asset Protection Trusts (MAPT).

A federal law passed in 1993 (the Omnibus Budget Reconciliation Act) requires states to attempt to seek reimbursement from a Medicaid beneficiary’s estate after they have died. Some of the costs that the state will try to recover include:

• Nursing home costs
• Home and community-based services
• Medical services received through a hospital where the recipient is a long-term care patient
• Prescription drug services for long-term care recipient

The recovery program lets Medicaid pursue any eligible assets owned by the estate. While this depends upon where you live, any assets that are part of the probate estate could be attached, including:

• Bank accounts
• Your home or other real estate
• Vehicles or other real property

In addition, some states allow Medicaid to recover assets that are not subject to probate, including jointly held accounts, Payable-On-Death (POD) bank accounts, real estate owned in joint tenancy with right of survivorship, living trusts and any other assets that the Medicaid recipient had a legal interest in.

An estate planning elder care attorney in your state will know what types of assets your state tends to pursue and will help you understand what can and cannot be used for Medicaid benefit recovery.

Note that while Medicaid cannot take the primary residence while the recipient is still living, they can place a lien on the home. If the recipient passes away and a beneficiary inherits the home, they will not be able to sell the property until the lien has been satisfied.

For beneficiaries, Medicaid recovery means a smaller inheritance. However, that’s not the only thing to be mindful of. There are laws known as “filial responsibility laws” that allow healthcare providers to sue the children of long-term care recipients to recover nursing care costs. This is not commonly done as of this writing, but the costs of COVID may change this in the near future.

Strategic planning can help you or loved ones avoid the financial impact of Medicaid estate recovery. If you are eligible and can afford to buy a long-term care policy, that may help to cover most of the cost of care. Another option is to remove as many assets from the probate process as possible. An estate planning attorney will be able to help you create a plan to protect your assets.

Reference: AOL.com (February 5, 2021) “What Is Medicaid Estate Recovery?”

The High Cost of Medicare Mistakes

“She recently enrolled in traditional (Parts A, B, and D) Medicare and was hit with huge Part B and Part D monthly premiums. She had no idea why it was so high. After many letters, calls, and meetings with Social Security, she still had no idea.”

A 68-year-old woman knew that she had to sign up at age 65 for Medicare Part A for hospital care and Part B for outpatient care, since she did not have employer provided health insurance from an employer with 20 or more employees. She knew also that if she did not have health insurance from an employer and didn’t sign up immediately, she’d face a penalty with higher Part B and Part D premiums for the rest of her life when eventually she did sign up, reports Forbes in the article “Beware Medicare’s Part B Premium Penalty And Surcharge Traps.”

Here’s where it got sticky: she thought that Medicare provided an eight-month special enrollment period after one job ended to apply penalty free. She is employed on a sporadic basis, so she thought she had a window of time. Between the ages of 65 and 68, she had several jobs with large employers, and was never out of work for more than eight months.

She was out of work for 25 months total between ages 65 and 68, when she was not enrolled in Medicare. She thought that since she was never out of work for more than eight months, she didn’t have to sign up until she officially stopped working and would then enroll penalty free in traditional Medicare Parts A, B, and D.

She had read information on the Medicare website and her interpretation of the information was wrong. It was a costly mistake.

In determining whether you need to permanently pay a Medicare Part B penalty, Medicare counts up all the months between age 65 and the month you first enroll in Part B, even if you have a job with a large employer with no gaps in employment for more than eight months.

She got hit with a 20% lifetime Medicare Part B premium penalty. For every 12 months that you’re not covered by Medicare B after reaching 65 and before you enroll, the penalty is an additional 10%. And making things worse, she was hit with a Medicare Part B penalty based on the cumulative (not consecutive, which is an important difference) 25 months that she went without credible prescription drug coverage.

This is the sort of problem that does not self-resolve or get better over time. In this case, another mistake in timing is going to hurt her. She sold some assets and realized a capital gain in 2018, which increased her Modified Adjusted Gross Income (MAGI). In 2020, she’s going to have to pay the Income Related Monthly Adjustment Amount (IRMAA). If your MAGI, two years before the current year, is less than $87,000, you are exempt from IRMAA in the current year. Her cost: $1,735.20 more this year. Had she instead realized those capital gains over the course of several years, her 2018 MAGI might not have crossed the $87,000 threshold. Most people are not aware of the IRMAA and take capital gains in larger amounts than they need.

This is a harsh lesson to learn, at a time in life when there’s not a lot of flexibility or time to catch up. Talking with an estate planning lawyer about Medicare and about tax planning, as well as having an estate plan created, would have spared this woman, and countless others, from the harsh consequences of her mistakes.

Reference: Forbes (Jan. 29, 2020) “Beware Medicare’s Part B Premium Penalty And Surcharge Traps”

Will Medicaid be Able to Claim my Life Insurance Policy Cash if Surrendered?

“New Jersey uses an expanded definition of estate recovery, which includes any property that belonged to the deceased person at the moment prior to his or her death.”
If a person receives Medicaid benefits after taking the cash surrender from their whole life policy for funeral expenses but that policy stays in effect through continued payments by the beneficiary, who gets the remainder of the policy? Medicaid or the beneficiary? What if the Medicaid beneficiary only lived for a few more months after that?
nj.com’s recent article on the subject asks “Can Medicaid take this life insurance policy?” The article says that the rules concerning Medicaid can be very complicated.
In this situation, it looks like the beneficiary, not Medicaid , would receive the money from the life insurance policy.
Under Federal and state laws, Medicaid is required to recover funds from the estates of certain deceased Medicaid recipients for all payments made by Medicaid for services received on or after age 55.
States are able to apply a narrow probate definition of “estate” in their Medicaid recovery program. They can also define “estate” more broadly to include probate, as well as non-probate assets.
Remember that probate assets are those that pass under a will, and non-probate assets are accounts like joint checking accounts, pensions and other assets that are designated to go to a beneficiary directly and not the estate.
This also includes property, such as the deceased person’s home or share of that residence, other bank or investment accounts (whether solely or jointly held), as well as trusts, annuities, stocks, bonds and any other real or personal property.
Proceeds from whole life insurance policies are subject to estate recovery, if they’re not liquidated prior to death as required. The proceeds from any life insurance policy are subject to Medicaid recovery, when the proceeds are paid to the estate.
In the example here, if the policy was liquidated, there should be no estate recovery against the policy, because there was a designated beneficiary other than the estate.
Your estate planning attorney can help you with the specific Medicaid and probate laws in your state.
Reference: nj.com (October 29, 2019) “Can Medicaid take this life insurance policy?”

The Sumner Redstone Saga Inspires HBO Series

“Many of us have read the titillating and tragic story of Sumner Redstone, the former executive chairman of Viacom, and the litigious financial power struggle that has embroiled his family.”

HBO says that the Sumner Redstone saga was a key influence on its series Succession. That show involves money, a media mogul, a conniving lover and children trying to get control of the family fortune.

Forbes’s recent article, “What 'Succession' And Sumner Redstone Can Teach Us About Planning Ahead For Senior Care,” says that many of us won’t need to concern ourselves with a multi-billion-dollar empire, so our family struggles may look fairly mundane in comparison. However, disagreements over money can and frequently do keep families from making the right decisions about elder care.

A family’s financial resources—or lack thereof—may determine the options available and the type of long-term care a senior will ultimately receive. The big surprise for many retirees is that Medicare doesn’t usually pay for long-term care services. This means that nursing home expenses, which run more than $80,000 a year on average, must be paid in some other way. With most people preferring to age in place, in-home care may be the best option.

The tough news for many who aren’t rich enough to afford the skyrocketing cost of long-term care, is that they don’t qualify for Medicaid either. If you’re one of the “in-betweeners,” you’ll need to be resourceful and there’s a lot to learn.

Baby Boomers are turning 65 at a rate of 10,000 people a day, so it might be time to plan for what comes next. Roughly 70% of Americans over age 65 will need some form of long-term care during their lifetime. If you don’t make plans, you and your family will have to prepare on the fly, when a crisis happens. Let’s discuss some of the things you’ll want to learn about:

Medicare vs. Medicaid. You’re not the only one to get these two programs mixed up. Medicare is a federally-funded insurance program for people aged 65 and over (as well as for those under 65 with certain disabilities, regardless of income). Medicaid is funded jointly by states and the federal government. It is also the largest funding source for long-term care in nursing homes. Medicaid is for people with low incomes, who typically don’t have more than $2,000 in assets. There are specific eligibility rules for each state, so plan ahead with an elder law attorney.

Long-Term Care Insurance. Long-term care insurance is a type of private insurance that gives you limited coverage (often after an initial waiting period) for long-term care. The cost varies, based on the type of plan, the senior’s age, and his or her health status.

Veteran’s Benefits. The Department of Veteran’s Affairs has long-term care benefits for eligible veterans, who’re either homebound or need assistance with their activities of daily living. Although there’s a lot of bureaucratic red tape to apply for veteran’s benefits, it can really be worth it.

Take the time now to get a feel for what’s covered by insurance, how much money—if any—your parents have saved and if they have long-term care insurance or veteran’s benefits.

Reference: Forbes (September 27, 2018) “What 'Succession' And Sumner Redstone Can Teach Us About Planning Ahead For Senior Care”

Planning for the Death of a Spouse

“Of all the risks couples face in retirement, the death of a spouse is a certainty.”

According to a Merrill Lynch and Age Wave study on widowhood, people aren’t really planning for this certainty. USA Today’s recent article, “Before the death of a spouse, here's how to prepare a financial plan for living alone,” reported that 53% of widows say they and their spouse didn’t have a plan for what would happen, if one of them passed away, and 76% of married retirees say they wouldn’t be financially prepared for retirement, if their spouse died. After the death of a spouse, half of all widows experience a household income decline of 50% or more.

Here’s what couples should do to better prepare for the loss of a spouse.

There are about 20 million widows in the U.S., and 1.4 million new widows annually, according to the study. Nevertheless, most married couples don’t like discussing or planning for death. Nonetheless, it’s best to address this difficult subject head-on, because of the potentially dire consequences.

If you need assistance, speak with a qualified elder law attorney. A new widow also should put together a comprehensive financial evaluation and plan with an analysis of potential cash flow issues that emerge after the death of a spouse.

An experienced and knowledgeable elder law attorney can conduct a thorough inventory of the available financial resources and help integrate Social Security, Medicare, Medicaid, veteran’s benefits, and other programs to maximize the benefits you will receive. An experienced estate planning attorney can also then determine, if any asset protection/wealth preservation strategies are necessary to qualify for and preserve government benefits. For instance, an income-only trust to make sure an individual qualifies for Medicaid may be needed to qualify for Medicaid.

Ask yourself if you have enough life insurance because it’s important to get the necessary amount of insurance, in case of an unexpected or premature death. Calculate how much to purchase using any number of methods—human life, financial needs, and capital retention.

A widow needs planning, not products. This is where estate planning attorneys and elder law attorneys can maintain the focus on planning and help protect widows financially.

The key to planning properly for the death of a spouse, is to determine exactly what the available financial resources are and figure out the financial needs.

The next step is to plan on the best way to maximize those resources, while getting additional funds through government benefit programs.

Reference: USA Today (September 26, 2018) “Before the death of a spouse, here's how to prepare a financial plan for living alone”

Don’t Let These Mistakes Crack Your Retirement Nest Egg

“According to a Gallup poll, 51% of non-retired Americans don’t think they will have enough money to live comfortably in retirement.”

While half of those Americans who aren’t retired believe they don’t have enough money to retire, 78% of those in retirement say they have enough money to live comfortably.

However, a Fox Business article, “10 mistakes that can sabotage your retirement savings,” advises that wherever you are on the retirement curve—whether you’re just starting to save for retirement or are already retired—there are mistakes that can poke a big hole in your retirement nest egg. Let’s take a look the list:

1. Failing to consider the effect of taxes on retirement income. You need to calculate how taxes could affect your savings. Some retirement savings plans are taxed, when they’re withdrawn. A big mistake many retirees make is believing that Social Security isn’t taxed, but 85% of Social Security can be taxed.
2. Failing to consider the effect of health care costs in retirement. This can be expensive and includes things like deductibles and out of pocket payments—not just the costs for a health care plan.
3. Failing to consider the effect of potential long-term care costs in retirement. It’s easy to forget to consider the day-to-day costs of long-term care, like assisted living, nursing homes, and in-home care. Medicare will pay for certain care for 30 days, but after that it has to come from your own savings.
4. Failing to have enough liquidity and an emergency fund. You need to have money invested appropriately for retirement, so it can be accessed when you need cash.
5. Having too much money tied up in your home. This isn’t a liquid investment, and if you have too much of your net worth tied up in your home, you may experience a lack of liquidity when you need it.
6. Starting your retirement with significant levels of debt. Pay off or reduce your debt before retirement. Otherwise, your debt can debilitate your finances.
7. Failing to plan for Social Security. There are a lot of strategies for using Social Security to maximize the amount of money you’ll receive. You can begin receiving Social Security payments at age 62. However, if you wait, you’ll see more money.
8. Spending too much early in your retirement. Trips are nice, but your money has to last as long as you do! People who spend too much during the early part of their retirement years, can find themselves in a financial pinch later on.
9. Failing to assess your risk. You need to have risk-appropriate investments in retirement. Consider your risk tolerance, since being too risk averse could eat into the value of a savings plan.
10. Thinking you can do it yourself without a professional. Work with a qualified estate planning attorney to have an estate plan in place.

Reference: Fox Business (August 3, 2018) “10 mistakes that can sabotage your retirement savings”

What Will Care Cost For My Parent?

“If your elderly mom or dad has a problem and suddenly cannot live on his or her own, it can be a terrible shock to everyone in the family. It can also cause big financial problems.”

Hiring a caretaker in your home for a day may cost about $200 a day. At an assisted living facility, at a very low-level tier of care, the price is somewhere between $5,500 and $6,500 per month. For skilled nursing, it’s $8,500 or more, based on the amount of care you receive.

New Jersey 101.5’s recent article, “Mom or Dad Goes to a Nursing Home: Will You Go Broke?” explains that New Jersey is one of the more expensive areas for long-term care. As a result, when looking at paying for that care and trying to protect assets, it’s important to work with an attorney who specializes in elder law. That person can draft the legal documents and also handle counseling issues on housing, placement and level of care.

Many folks think they’ll have to spend their parents’ entire savings or assets before becoming eligible for some type of government assistance. However, there are four ways to pay for elder care: your own money, long-term care insurance, Medicaid or the VA. You should ask an experienced elder law attorney to try and protect as much of their individual assets as possible. The sooner you begin the planning process, the more options you’ll have as far as the type of care and how long you’re able to pay for it.

An elder law attorney will discuss ways to protect the assets of someone going into long-term care. Strategies usually focus on leveraging the Medicaid and VA regulations.

An elderly person who requires 24/7 care, can exhaust all of his or her financial resources.  However, Medicaid can help. This program lets the person stay with their care, when they’ve spent everything down.

In some situations, an elderly parent requires a significant amount of care, and his or her assets must be used to pay for assisted living or a nursing home. That can make things tense. The children may be anticipating inheritances to help with their own retirements, and they could be resentful when that money's being spent on mom’s care.

However, most families are focused on the welfare of the elderly parent or relative. Those who are facing a crisis with an aging parent, should know they can ask for help. Speak with an elder law attorney and explore all of your options.

Reference: New Jersey 101.5 (August 20, 2018) “Mom or Dad Goes to a Nursing Home: Will You Go Broke?”

How Do Annuities Work with Medicaid Eligibility?

“Financial advisors often recommend annuities for retirement income—for example, to solve for "longevity risk."  However, if clients or their spouses seek to qualify for Medicaid, they'd better be careful. Certain types of annuities can harm Medicaid eligibility, while others can actually be helpful.”

Financial Advisor’s recent article, “Annuities Can Help or Harm Medicaid Eligibility,” explains that Medicaid rules include both asset limitations and income limitations. Annuities can be exceptionally beneficial for a retirement income plan, such as for an older individual facing long-term care costs.  However, the annuity will be viewed as a resource available for payment, which will make the applicant ineligible for Medicaid.

An annuity can help with Medicaid eligibility by transforming otherwise countable assets, like savings accounts, into a non-countable income stream, which will shield the assets for heirs, while spending down what counts against you in Medicaid eligibility. A good type of annuity for this is the Single Premium Immediate Annuity (SPIA). It’s the simplest, most transparent type of fixed annuity. It has a lump-sum premium payment at the start and a predetermined, contracted payback schedule. In contrast, variable annuities invest in a range of securities that don't have guaranteed returns.

However, the use of annuities in Medicaid planning is complex. Years ago, these annuities were treated more favorably. In 2006, federal law was amended to limit the ability to benefit from these annuities. The Deficit Reduction Act (DRA) of 2005 introduced new rules to limit the transfer of assets for purposes of gaining Medicaid eligibility. Nevertheless, there are still some uses for SPIAs in Medicaid planning.

Generally, to assist with Medicaid eligibility, a SPIA must be non-cancelable, non-assignable and actuarially sound. Therefore, it must be irrevocable, and the funds stay in the annuity, except for contracted monthly payments. Second, the annuitant must receive back at least as much as was paid into the annuity during his or her actuarial life expectancy. If there’s a guaranteed minimum number of payments, it can’t exceed that actuarial life expectancy. Finally, the DRA says that annuities must name the state as beneficiary for at least the value of the Medicaid assistance received (there may be an exception for a disabled child).

Therefore, you can convert an asset into an income stream, but you can't change it back. The income rules must also be analyzed, to see if the additional income will be a problem. If the annuity can be converted to a lump sum or sold for a lump sum, Medicaid still treats it as an asset. This is the reason why most annuities don’t work for Medicaid purposes.

 It is important to note that because of income limits for some programs and income contribution rules for other programs, conversion of an asset to a stream of income isn’t always in the best interests of a person seeking Medicaid long-term-care benefits. Talk to an elder law attorney first.

Reference: Financial Advisor (May 11, 2018) “Annuities Can Help or Harm Medicaid Eligibility”