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Elder LawWhat are the
Illinois Medicaid Rules? The issue of what it takes to qualify for Illinois Medicaid payments is a very confusing one to clients. Below are some of the "basics" in this area. Please do not act based on this information. You should discuss your situation with an attorney. There is no substitute for informed advice. Illinois Medicaid is administered by the Department of Human Services http://www.dhs.state.il.us/ (formerly the Illinois Department of Public Aid.) The Medicaid program is called “Aid to Aged, Blind and Disabled (AABD)” The program is “needs” based. There are limits on the amount of “income” and “assets” that a person can have and still qualify for Medicaid. Maried
Couple
Income
you can keep $2267.00 Per Month to at home spouse $30.00 per month to spouse in nursing home
Assets
you can keep -House -Personal property and furniture -A car -Prepaid funeral and cemetery site -$1500 cash value of life insurance -$90,660 (Community Spouse Resource Allowance) assets that the community spouse (the spouse not in a nursing home) can keep Single
People
Assets
you can keep -House (if you have an intent to return) -Personal property and furniture -Car -Prepaid funeral and cemetery site -$1500 cash value of life insurance -$2000 in other assets
Income you can keep $30/month There are many exceptions to the above rules. There are also many planning opportunities. In all cases, the welfare and comfort of the person needing nursing care is the most important factor. One of the most confusing areas for clients is the law regarding asset transfers. In order to prevent people from “dumping” assets to relatives and then applying for Medicaid, the department will examine your financial records going back 36 months from the date of the Medicaid application. Please call to set up a consultation. There is a charge of about $150.00 for the consultation. ELDER LAW INFORMATION FORM. In order to properly advise you and have, please complete the Elder Care Information Form. Click here to download. In preparing wills and trusts for clients for the last 16 years, I found that clients were very confused at how their living trust impacted the issue of their needing nursing care later in life. Many thought that the living trust protected their assets for their heirs and that the trust made it easier for them to qualify for Medicaid if they needed it. (It doesn’t help at all.) Questions on this issue come up almost every day from clients. It was clear that clients needed help in the area of elder law. What is elder law? The National Academy of Elder Law Attorneys (of which I am a member) defines elder law as counseling and representing older persons and their representatives about the legal aspects of health and long-term care planning and public benefits. Some of these include:
Medicaid Planning with the Irrevocable 5-year Look Back Trust
1.
What type of client would be interested in this type of Medicaid
planning? Actually, any client that is concerned about having medical costs financially devastate their family, and the assets the clients have accumulated over the years. 2.
How does an Irrevocable Five Year Look Back Trust work? First, let’s look at some of the Medicaid rules that come into play here. Since we are using an irrevocable trust, to protect the clients, which we will discuss later, we need to discuss the “5 year look back” rules under Medicaid. Let’s assume that clients realize they are going to need long term care in 6 months. It would be nice if they could simply give all of their property to their children and then apply for Medicaid. 3.
I don’t know many parents that would simply want to give property to
their children, do you? No, but let’s discuss that later, I need to point something out first. To prevent applicants for Medicaid from simply giving everything away and then applying, Congress instituted the, in the case of many trusts, “look back” rule. The look back rule is a procedure whereby an applicant for Medicaid is asked if they have made any gifts, in trust in this circumstance, within the last 5 years. If so, there is a period of ineligibility imposed on the applicant. 4.
What is a period of ineligibility? The government figures that if you could give your property away and then apply for benefits, the taxpayer’s would be subsidizing the applicant’s family. In 1993, a new rule came in that provides if an applicant has made gifts, in Trust, within 5 years of applying for Medicaid, the value of the gifts will determine a period for which the applicant will be ineligible. This period of ineligibility is based on: (i) the value of the gift, and (ii) the average monthly cost of long term care in the applicant’s area. As an example, assume that the average monthly cost for one person is $3,500 per month. If an applicant gave away $300,000, the government will divide the $300,000 by the $3,500 per month average cost, and the resulting figure, 86, is the number of months of ineligibility caused by the gift. That totals 7 years of ineligibility for Medicaid benefits. 5.
What is the meaning of “5 Year Look Back Trust” then? Perfect question. If the applicant had made the gift more than 5 years, even one month, before applying, there is no gift within the 5 year look back period, and the applicant will be covered. That brings us to the format of the Irrevocable 5 Year Look Back Trust. 6.
How is it set up? Frankly it is not that complicated, if done correctly. The following are the steps: · The trust is created: The attorney drafts a properly designed irrevocable trust; · Parents contribute their property: The parents contribute their property to the trust and receive back income interests for their joint lives. At the death of the survivor, the trust property passes to their children or other heirs; ·
Wait 5 Years: Neither
parent applies for Medicaid benefits until 5 years have elapsed.
Because there will have been no gifts within 5 years of applying, there
is no ineligibility and the property in the trust is protected for the children
or other heirs. ·
Who is the trustee of the trust:
Good question, generally, someone the parents trust to make sure that
the assets are invested to provide the parents with income for their lives. · What happens to the income when the parents apply, after 5 years: The income will be spent on medical care until the death of the survivor, but the corpus of the trust is safe. 7.
That sounds like a good planning technique, is it really that simple? Yes, you will find that most of the sound planning techniques have as few moving parts as possible. The Irrevocable 5 Year Look Back Trust is a planning tool that some parents might consider as a method to maintain their income for life, yet protect their children in the event that long term care becomes necessary copyright Thomas F. Sammons 2003 |