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ELDER LAW TERMS
5-Year Look-Back – MDHHS may look at gifts made during the 5-years preceding the application for Medicaid long-term care benefits. Many clients improperly transfer assets during the look-back period to try to qualify for Medicaid benefits; usually an elder law attorney will need to reverse the transfer.
Annuity (See, “Medicaid compliant below”) – An investment that turns an asset into an income stream. The conversion of an asset to an income stream can often allow clients with excess assets to qualify for Medicaid. These are most often used in combination with half-loaf gifting (see below).
Community Spouse – The spouse of a nursing home resident who is still living in the community and not receiving MI Choice Waiver benefits. The community spouse can be in an assisted living facility, but not a long-term care facility.
Community Spouse Income Allowance – The amount of the nursing home spouse’s income the community spouse may keep. Any of the nursing home spouse’s income over the CSIA must be paid to the nursing home as a patient-pay amount.
Community Spouse Resource Allowance – The amount of countable assets a community spouse gets to keep while still qualifying the nursing home spouse for Medicaid long-term care benefits.
Divestment – A divestment is giving away an asset for less than fair market value during the 5-year look-back period. A divestment can be a complete gift, or it can be selling an asset at a discount. All divestments made during the look-back period are added together to calculate the divestment penalty.
Divestment Penalty – The number of months and days that a nursing home resident is otherwise eligible for Medicaid, but during which the MDHHS will not pay for long-term care expenses. The penalty is designed to force families to pay for the nursing home from assets that were given away during the look-back period.
Elder Law Attorney – An attorney whose experience and training makes him adept at counseling clients on government benefits and other issues affecting our seniors. Elder law attorneys often focus on protecting assets from spend-downs when a client is seeking Medicaid or Veterans benefits. However, a good elder law attorney does so much more. Elder law attorneys help client’s find the appropriate level or care and the best facility or service to provide that level of care. Elder law attorneys amend or redraft estate plans to focus more closely on the issues facing our senior clients elder law attorneys make referrals to professionals that can help the client in other fields like physical therapy, home improvements, insurance reviews, and counseling and assessment.
Estate Recovery – Michigan attempts to obtain reimbursement for Medicaid long-term care dollars from a deceased persons estate. Michigan does not have an aggressive estate recovery program; essentially the minimum mandated by federal law. Estate recovery is generally avoided with a ladybird deed.
Fair Market Value - The amount of money the owner would receive in the local area for his asset (or his interest in an asset) if the asset (or his interest in the asset) was sold on short notice, possibly without the opportunity to realize the full potential of the investment. That is, what the owner would receive and a buyer be willing to pay on the open market and in an arm length transaction.
Half-Loaf Planning – Also known as reverse half-loaf planning. A Medicaid applicant gifts half of their assets to a child and places the other half in a Medicaid compliant annuity or promissory note. The gift triggers a divestment penalty; the Medicaid compliant annuity or promissory note increases the applicant’s income high enough to pay the nursing home during the penalty period. The percentage saved varies from client to client, but average out to around 50% of a client’s assets.
Homestead - The residence that a person owns (or is buying) where they usually live. The homestead includes all adjoining property, any other buildings on the property, but does not include other residences on the property.
Initial Asset Assessment - A determination of the total amount of countable assets owned by a client and/or his spouse as of the day of the first continuous period of care that began on or after 9-30-89.
Ladybird Deed – A ladybird deed transfers your property to your heirs upon your death with no probate, no trust administration, and no estate recovery. When you create a ladybird deed, you transfer your property to your heirs, but you reserve an enhanced life estate. The enhanced life estate affords you complete control of the property. You can sell, gift, convey, mortgage, etc.
Medicaid Compliant Annuity or Promissory Note – A Medicaid compliant annuity or promissory note is an investment that complies with Medicaid’s strict requirements. The investment must pay out in equal monthly payments that end prior to the applicant’s life expectancy; balloon payments are generally not allowed. There are also requirements that can mandate that the State of Michigan be a beneficiary on the investment.
MDHHS – Michigan Department of Health and Human Services, which administers Michigan’s Medicaid long-term care programs.
Personal Care Contract – A contract used to pay caregivers (usually a family member) for providing care to a client that would otherwise need to enter a nursing home. Michigan is extremely strict with these agreements and there are many examples of families being punished by inadvertent mistakes. The most important requirements are that it must: (1) be in writing; (2) be prescribed by a doctor; (3) pay a commercially reasonable rate and (4) require the client to pay employment taxes to the IRS.
Pre-Eligibility Medical Expense – Also known as an offset. Unpaid medical expenses incurred in the three months prior to application for Medicaid. The offset is only allowed if used to pay the provider(s) for the medical expense and will be terminated if the recipient fails to pay the provider.
Presumed Asset Eligibility Period – This is a one-year period that begins upon a Medicaid application being approved. During the period a community spouse must remove the nursing home spouse’s name from all assets. After the period expires, a Medicaid recipient can only have $2,000 of countable assets in his name. Also, after the period ends, a community spouse can own any amount of countable assets without the nursing home spouse losing Medicaid; we have had two community spouses win the lottery after the Medicaid application; those lottery winnings were protected.
Promissory Note (See, “Medicaid compliant” above) – These investments are best used to protect excess countable assets for a community spouse. The client gives his children all the excess assets and receives a promissory note in return. The promissory note converts an asset into income and allows for the nursing home spouse to obtain Medicaid eligibility.
Resource - Resource means all the client’s and the spouse’s assets and income. That is, all cash and any other personal property, as well as any real property, that an individual (or the spouse): owns, has the right or power to convert to cash, and is not legally restricted from using for the individual’s support and maintenance. An asset does not stop being a resource just because it has no current market value.
Revocable Burial Space Contract – These contracts normally protect about 90% of a Medicaid applicant’s countable assets. A Medicaid applicant purchases burial space items (caskets, mausoleums, etc.) for his children or other immediate family. The burial space item is immediately available for delivery, which must be arranged by the child. Alternatively, the child can forgo delivery and receive a refund of 90% of the purchase price.
Shelter Expense - The amount of money that must be paid for the home for rent or for a mortgage or land contract or for condominium or cooperative housing fees, property taxes, home insurance and special assessments.
SSI-Related Medicaid - Those Medicaid categories in which eligibility depends on a person being aged (65 or older), blind, disabled or entitled to Medicare, or formerly blind or disabled.
Trusts - Any arrangement in which a grantor transfers property to a trustee with the intention that it be held, managed, or administered by the trustee for the benefit of the grantor or certain designated persons. The trust must be valid under state law and manifested by a valid trust instrument or agreement. This includes any legal instrument or devise that is similar to a trust.
VA – Department of Veterans Affairs.
Verification Checklist - A MDHHS form telling clients what is needed to determine or redetermine eligibility.
Waiver – Home and Community based waiver. The benefits are administered through the MIChoice Waiver program which is usually run by the Area Agency on Aging.