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4 Myths Regarding Medicaid Long-Term Care Coverage
Patricia Bloom-McDonald • Mar 04, 2019

For individuals who are of low income and assets, Medicaid can be an important tool that assists in paying for healthcare and long-term care expenses, such as nursing home or at-home care. However, program rules and eligibility regarding Medicaid, as well as what Medicaid will and will not pay for, can be confusing. Here are four common myths regarding Medicaid long-term care coverage – if you have more questions, reach out to experienced elder planning lawyer Patricia Bloom-McDonald, Attorney at Law.

  1. Will Medicare Cover My Long-Term Care Needs

Many people mistakenly assume that Medicare will cover their long-term care needs and expenses, and therefore believe that they will not need Medicaid services. However, this is not the case; as explained by the U.S. Department of Health and Human Services – Administration on Aging, Medicare will not pay for some long-term care services, including custodial care in a nursing home. Only Medi caid offers this coverage type.

  1. Medicaid and Long-Term Care Coverage is NOT Only for the Elderly

While it’s true that the majority of people who require long-term care coverage, including nursing home assistance, are elderly, Medicaid is not just for elderly persons, nor are the long-term coverage benefits offered by Medicaid. In Massachusetts, Medicaid coverage (also referred to as MassHealth coverage) is for those who are U.S. citizens, who are residents of the Commonwealth of Massachusetts, who are in need of healthcare coverage, and who are classified as low-income. Income limits for Medicaid coverage can be found online.

  1. Can I Just Transfer My Assets in Order to Qualify for Medicaid

Medicaid and the long-term care coverage that it provides can be extremely valuable, but because Medicaid eligibility is limited to those who are low income, many people will not qualify at their current income and asset level. As such, some people might try to transfer assets to their children in order to meet the income/asset eligibility requirements. However, federal law prohibits doing this within five years of applying for Medicaid coverage. Which means that if you think that you’ll need coverage in the next four to five years or less, it’s too late to transfer your assets. This is one of the reasons that long-term care planning with a qualified lawyer is so important. (There are some exceptions to the five-year transfer rule – talk to a lawyer to learn more.)

  1. With Medicaid, I Can Choose Any Nursing Home that I Want

Unfortunately, under Medicaid coverage, you may be limited in your choice of nursing home and other long-term care coverage services. Not all facilities accept Medicaid benefits, which means that you may be more limited in your options than you would be if you were to pay out-of-pocket. You may also be unable to secure a private room through Medicaid coverage.

Meet with a Long-Term Care Planning Lawyer Today

Thinking about the future and the need for long-term care can be uncomfortable; no one likes to think about their own disability or mortality. However, taking steps to plan for the future now can provide comfort and peace of mind. Patricia Bloom-McDonald, Attorney at Law, has more than 20 years worth of experience representing clients in their long-term care planning needs, and helping clients to navigate long-term care benefits. Please reach her today for a consultation by phone or online.

Using a Credit Card When You Have a Special Needs Trust

25 May, 2023
A special needs trust (SNT) allows you to meet your needs while receiving government benefits, such as Medicaid/MassHealth and Supplemental Security Income (SSI). When you have a special needs trust, you can use it to pay for goods and services government benefits do not cover, such as therapy, education,and housing. Since receiving income directly from your trust would jeopardize your eligibility for benefits, your trustee cannot give you cash from your SNT. When you use a credit card for permitted transactions, and your trustee pays off the balance with funds from your trust, these payments to a credit card company are not considered income. An SSI or Medicaid/MassHealth recipient who is capable of managing their own affairs can therefore use a credit card to make small purchases, and the trustee of the special needs trust need not micromanage every transaction. In the past, beneficiaries of SNTs sent their bills to their trustees for payment. Today, an individual with an SNT who qualifies for a personal credit card may find that using a credit card is more convenient. Credit cards have several benefits. Using a credit card to manage payments from your special needs trust allows you to maintain independence, gain access to some of the advantages of a credit card, and easily keep records while preserving your eligibility for Medicaid/MassHealth and SSI. Although credit cards can help people manage their special needs trusts, there are also several important restrictions and considerations to keep in mind. Consult with a special needs planner to ensure all transactions are acceptable under the trust's rules and comply with government regulations. The Benefits of Using Credit Cards When You Have a Special Needs Trust If you have a special needs trust, using a credit card has many benefits, including: Independence : Allowing you to maintain your independence. You can use your card to make qualifying purchases yourself. Your trustee does not have to make the transactions for you. Access to the Typical Advantages of a Credit Card : Using it responsibly can help you establish or build credit history, which may be important for your future financial needs. Record-Keeping : Credit cards provide easy record-keeping and a convenient way to monitor transactions from your special needs trust, which can also help special needs trustees fulfill their duty to maintain records. When you use your card, your trustee can observe your purchases and ensure that all expenses are allowable under the trust’s rules. Your statements can help your trustee keep track of funds leaving the trust. Benefits Eligibility : While adhering to Medicaid/MassHealth and SSI’s income and asset limits, you can access funds from your SNT. Credit cards can help prevent your trustee from accidentally providing you with cash payments that could affect your eligibility for government benefits. Considerations When Using a Credit Card for Your Special Needs Trust While you can use a credit card to access funds from your special needs trust for certain transactions , restrictions apply. If your trustee sees a charge on your card that could affect your benefits eligibility , they can flag it for review. You cannot use your credit card to pay for food and shelter, which SSI would cover. When administering your funds, your trustee must ensure that any expenditures are for your sole benefit if you have a first-party special needs trust. While using a credit card is appropriate, you should not use a debit card. Debit cards are considered cash income. Best Practices When using a credit card for a special needs trust fund, remember several best practices. Choose a card with low fees and interest rates. Set a clear budget and monitor transactions regularly. Keep thorough records and receipts of expenses. Consult with your special needs planning attorney. A special needs planning attorney can help you navigate the rules that apply to your trust and understand how to use a credit card to preserve your Medicaid/MassHealth and SSI eligibility. 

How an ILIT can help offset estate taxes

12 May, 2023
With the Federal estate tax exemption possibly about to be lowered, it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust allows you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax which is currently $1 million in the Commonwealth of Massachusetts. Senate Democrats have proposed lowering the current estate tax exemption from $11.7 million for individuals and $23.4 million for couples to $3.5 million for individuals and $7 million for couples. While it is unclear if this proposal will pass, it is likely that some change to the estate tax is coming. Even if Congress does not take any action, the current rate will sunset in 2026 and essentially be cut in half, to about $6 million per individual. In the Commonwealth of Massachusetts, the current estate tax exemption is $1 million for individuals and is taxed at dollar $1.00. A proposal to raise it to $3 Million and the tax to start at $3 Million (not at $1.00) has been submitted in the legislature but has not yet been voted on or enacted. One way to make up for any estate tax your estate may have to pay is by setting up an irrevocable life insurance trust [ILIT]and funding it with a policy that has a death benefit that would pay your heirs some or all of the amount your estate will be taxed. If you purchased such a life insurance policy directly, it could end up being taxed as part of your estate. But if a trust owned the policy, it could pass outside your estate. While a life insurance trust can be highly beneficial, it is also complicated to set up and maintain properly. The following are some of the requirements: Trustee . If you are setting up the trust, you cannot also serve as a trustee. If you are the trustee, you have control of the trust, which could lead to the trust being included in your estate. You will need to name another trusted person or financial institution to act as trustee. Policy ownership . The trust must own the life insurance policy. If you transfer an existing policy to the trust and die within three years, the policy will still be considered a part of your estate. To avoid this risk, the trust can purchase a policy directly rather than receive an existing policy. Premiums . You need to transfer funds to the trust to pay the policy premiums, which creates an issue with gift taxes. A transfer to a trust is usually not subject to the $15,000 yearly gift tax exclusion. For a gift to qualify for the exclusion, the recipient must have a "present interest" in the money. Because a promise to give someone money later does not count as a present interest, most gifts to trusts aren't excluded from the gift tax. To avoid this, you can use something called a “Crummey” power which gives beneficiaries the right to withdraw the funds transferred to the trust for up to 30 days. As part of the process, the trustee needs to send them a letter, known as a Crummey letter, letting them know about the trust funding and their right to withdraw the funds. After the 30 days have passed, the trustee can use the funds to pay the annual insurance premium. You run the risk of the beneficiaries withdrawing the funds, but if they know that by allowing the money to stay in the trust they will receive more money later, it shouldn’t be a problem. Beneficiaries . The beneficiary of the life insurance policy is usually the trust. Once the funds are deposited in the trust, the trustee can distribute the assets to the beneficiaries in the way specified by the trust. For example, if your beneficiaries are minors, you can wait to have the trustee distribute the assets. Keeping the assets in the trust will also protect them from your beneficiaries’ creditors. The downside of an irrevocable life insurance trust is that you do not have the ability to change it once it is set up, although the policy would effectively be canceled if you stopped paying the premiums. If you are considering this type of trust, discuss it with your attorney.
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