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Attorney Mark D. Munson, CELA* Shepherd Elder Law Group, LLC
August 9, 2018
PROTECT YOUR ASSETS: Long-Term Care and
Medicaid Planning
Hutchinson | Overland Park
www.ShepherdElderLaw.com
* Distinguished as a Certified Elder Law Attorney by the National Elder
Law Foundation, as accredited by the American Bar Association.
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Asset Protection Planning
Tax Planning
Insurance Planning
Limited Liability Entities
Risk Management Planning
Medicaid Eligibility Planning
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Medicaid Eligibility
Planning
What is Medicaid Eligibility?
What is Medicaid Eligibility Planning?
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Medicaid Eligibility
SINGLE PERSON
Eligibility Criteria
• U.S. Citizen
• Elderly (age 65 or older), blind, or disabled
• $2,000 or less in assets
• Income less than the cost of care
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SINGLE PERSON
Asset Exemptions • Home up to $572,000 (if intent is to return)
• Automobile
• Personal property
Medicaid Eligibility
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SINGLE PERSON
Asset Exemptions (continued)
• Pre-paid funeral arrangements ($1,500 burial
fund; $4,500 irrevocable trust account; up to
$7,000 of irrevocable funeral plans and burial
insurance for funeral services (with unlimited
value for caskets, vaults, spaces, etc.)
• Life insurance with no potential cash surrender
value (i.e., term, group, Veterans, etc.) and life
insurance up to $1,500 face value
Medicaid Eligibility
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SINGLE PERSON
Income Exemption
NONE
This means all income must go
toward long-term care
(except $62 monthly for personal needs allowance).
Medicaid Eligibility
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Medicaid Eligibility
MARRIED COUPLE
Eligibility Criteria
• For the spouse in need of long-term care, the asset
allowance and exemptions are the same as a single
person.
• The “Community Spouse” is allowed to keep
additional assets and may be entitled to income
from the spouse who needs long-term care.
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COMMUNITY SPOUSE
Asset Exemptions
• Home (unlimited value)
• Automobile (unlimited value)
• Retirement accounts belonging to the CS
(i.e., IRAs, 401(k)s, etc.) (KS only)
Medicaid Eligibility
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• In addition to the asset exemptions, the
“Community Spouse” is allowed to keep $0
to $123,600 in non-exempt marital assets,
depending on the amount of the couple’s
non-exempt marital assets.
COMMUNITY SPOUSE
Resource (or Asset) Allowance
Medicaid Eligibility
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If a couple’s
combined non-exempt
assets are:
Community Spouse
may keep:
$0 - $24,720 ALL
$24,721 - $49,440 $24,720
$49,440 - $247,200 HALF of the combined assets
Over $247,200 $123,600
COMMUNITY SPOUSE
Resource Allowance
Medicaid Eligibility
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What are Examples of
Non-Exempt Marital Assets?
Checking Accounts
Savings Accounts
Certificates of Deposit
Stocks
Bonds
Mutual Funds
U.S. Savings Bonds
Non-Homestead Real
Estate
Mineral, gas, and oil
interests
Life Insurance with Cash Value
Non-Qualified Annuities
Nursing Home Spouse’s
Retirement Benefits (IRAs,
401(k)s, etc.)
Non-Retirement Investment Accts
Inheritances
Gifts from Family and Relatives
Cash on hand
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The remaining balance of $100,000 must be spent
down before medical assistance will begin paying for
spouse’s long-term care costs.
COMMUNITY SPOUSE
Potential Problem
Non-Exempt Marital Assets = $200,000
Community Spouse Resource Allowance = ($100,000)
Remaining Balance = $100,000
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• The Community Spouse is entitled to have up
to $2,030.00 of monthly income. To get to this
level, income of the “nursing home spouse”
can be given to the Community Spouse.
COMMUNITY SPOUSE
Income Allowance
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EXAMPLE
John and Jane Doe are married. John is in the nursing home
and has a monthly income of $1,000. Jane is still at home and
has a monthly income of $800. Jane can have John’s entire
monthly income of $1,000 given to her because $1,800
(John’s monthly income of $1,000 plus Jane’s monthly
income of $800) is less than $2,030.00.
COMMUNITY SPOUSE
Income Allowance
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EXAMPLE (continued)
If John’s monthly income was $2,000 per month, only
$1,230 could be given to Jane, and John would have to
pay $708 toward his care at the nursing home. John is
allowed to keep $62 per month as his personal needs
allowance.
COMMUNITY SPOUSE
Income Allowance
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Medicaid Eligibility
Any Questions?
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Medicaid Eligibility
PLANNING
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Planning for Incapacity
Durable Power of Attorney
• For property and financial decisions
Power of Attorney for Health Care
• For health and medical decisions
• HIPAA
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Power to create trusts and make gifts
Power to fund trusts and transfer assets
Power to deal with retirement benefits -
401(k)s, IRAs, etc.
Powers to be Included in your
Durable Power of Attorney
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Need to make sure that medical assistance
eligibility planning can be accomplished if
you are incapacitated.
Powers to be Included in your
Durable Power of Attorney
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The number one goal and objective in any asset
protection planning engagement involving Medicaid
should be to protect the assets of the original
owner(s) so that assets are available if needed and
protected if not needed.
Number One Asset Protection
Planning Goal and Objective
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How Do I Protect My Assets?
The key to asset protection planning is
getting assets out of your name so that you
no longer have legal ownership over those
assets so that they are not available to you.
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How Do I Protect My Assets?
If your assets are available to you, they
must be used on your care, including long-
term care costs.
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The only way to get assets out of your
name is to give them away by making
gifts. A gift is a transfer of assets where
you do not receive anything in return.
How Do I Get Assets
Out of My Name?
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Considerations When
Gifting Assets
Five–year look-back period.
Determination of penalty period. (Calculated by dividing the value of gifts within the
last five years by the average daily private pay
nursing home cost in Kansas, which is currently
$197.88) ($160.73 in Missouri)
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Considerations When
Gifting Assets
Delayed penalty period start date
(The need for asset protection after a gift has been
made is now far more important than ever before.)
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Delayed Penalty Period
Start Date
In the event a gift or gifts is/are made within
the five-year look-back period, the penalty
period for the gift(s) will not start until all four
of the following conditions are met and
satisfied:
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Delayed Penalty Period
Start Date
The Medicaid applicant is in the nursing home;
An application for Medicaid is filed;
The Medicaid applicant’s income is less than the cost
of care; and
The Medicaid applicant’s non-exempt assets/resources
are less than $2,000.
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EXAMPLE
Four years ago, Jane Doe gave away (gifted)
$60,000 to her children. Jane has a 303 day
penalty period ($60,000 / 197.88 = 303) and is
now in a Kansas nursing home. She has applied
for medical assistance, her income is less than the
cost of care, and she has $20,000 in
assets/resources remaining.
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EXAMPLE (continued)
Jane’s 303 day penalty period will not start until
the $20,000 she has in assets is spent down to
$2,000 or less.
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In order to get Jane through the 303 day penalty
period, it is likely that the beneficiary or
beneficiaries of Jane’s $60,000 gift will have to
give that money back to Jane so she can pay for
her nursing home care.
EXAMPLE (continued)
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Two realistic choices:
1. Your children.
2. Your asset protection trust.
Who Should Receive My Gifts?
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Risks of Gifting Assets
to Children
Five years is a long time
Irrevocable
No direct access to principal
or income
No legal ownership
No legal control
Death
Financial and creditor
problems
Job loss
Incapacity/Guardianship
Divorce
Nursing home
Health
Human vices
Accidents and lawsuits
Judgments and liens
Loss of tax benefit
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What is a Trust?
A trust is a legal arrangement created by a person
(known as the Settlor(s) or Grantor(s))
where assets and property are held and managed by a person
(known as the Trustee)
for the benefit of one or more people
(known as the Beneficiary or Beneficiaries).
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What is a Revocable Trust?
A revocable trust is a trust that you can revoke
(undo, change, amend, or terminate) at anytime.
Revocable trusts do not provide any asset
protection to the Settlor(s).
A Settlor is the person who sets up or establishes the trust
and contributes assets to it.
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What Does it Mean if a
Trust is Irrevocable?
If a trust is irrevocable, the trust cannot be
terminated unilaterally by the Settlor(s).
In order for an irrevocable trust to be
terminated, all of the trust parties
(Settlor(s), Trustee(s), and Beneficiary or Beneficiaries)
must agree and consent.
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What Does it Mean if a
Trust is Irrevocable?
This is the precise reason why
irrevocable trusts can provide asset protection.
Neither the nursing home nor the State of Kansas
can force you to revoke or terminate your trust
(because you do not have the
legal power to do so by yourself).
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What Does it NOT Mean
if a Trust is Irrevocable?
If a trust is irrevocable, it does not mean:
1. That you cannot have control over trust assets
(YOU CAN – indirectly);
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What Does it NOT Mean
if a Trust is Irrevocable?
If a trust is irrevocable, it does not mean:
2. That the trust cannot be amended to deal with
unforeseen situations that actually occur in
the future (IT CAN BE AMENDED OR
MODIFIED IN THE FUTURE);
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What Does it NOT Mean
if a Trust is Irrevocable?
If a trust is irrevocable, it does not mean:
3. That you cannot change who will inherit
from the trust upon your passing (YOU CAN
RETAIN CONTROL TO DETERMINE WHO
SHOULD INHERIT FROM YOUR TRUST
UPON YOUR PASSING);
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What Does it NOT Mean
if a Trust is Irrevocable?
If a trust is irrevocable, it does not mean:
4. That you cannot have the same tax
benefits when compared to outright
ownership (YOU CAN HAVE THE SAME
TAX BENEFITS AS OUTRIGHT
OWNERSHIP).
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• Control
• Management
• Creditor protection
• Flexibility for future planning
• Preservation of tax benefits
• Access to income (if desired)
Advantages of Gifting Assets to
an Asset Protection Trust
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Trust Parties
Settlor: The person who creates the trust; YOU
Trustee: - The person who administers the trust and
manages the trust assets; YOU DECIDE
Beneficiary - the person who receives distributions
from the trust; YOUR CHILDREN
Asset Protection Trust
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You
Your Asset
Protection Trust
Trustee = You
Decide Assets
Asset Protection Trust
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Trust Distributions
Income: To YOUR CHILDREN
Principal: To YOUR CHILDREN
Nothing to you. You are not a beneficiary of
the trust at all. You are not a beneficiary as to
income. You are not a beneficiary as to
principal. You are never a beneficiary under any
circumstance.
Asset Protection Trust
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You
Your Asset
Protection Trust
Trustee = You
Decide
Your
Child
Your
Child
Assets
Beneficiaries
Income and
Principal
Income and
Principal
Asset Protection Trust
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You
Your Asset
Protection Trust
Trustee = You
Decide
Your
Child
Your
Child
Assets
Beneficiaries
Income and
Principal
Income and
Principal
Gifts from
your children
back to you
Asset Protection Trust
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All assets, except for qualified retirement
accounts, such as IRAs, 401(k)s, 403(b)s
Real estate, bank accounts, certificates of
deposit, stocks, bonds, mutual funds, life
insurance, non-qualified annuities, etc.
What Assets can be Transferred to
an Irrevocable Income-Only Trust
or an Asset Protection Trust??
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Personal Care Contracts
Promissory Notes
Annuities
Life Estates with Real Estate
Limited Liability Companies (LLCs)
Special Needs Trusts
Other Planning Options
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Planning now is always better than later.
• Potential to protect more assets
• Lower legal fees
General Observations
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Assets can still be protected at the last
minute.
• Can usually save around one-half if single.
• Can usually save more than one-half if
married.
General Observations
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Identify assets that you want to protect and
that you do not want to use in order to pay
long-term care expenses and then get those
assets out of your name.
General Observations
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Everyone has an estate plan.
Your estate plan is either planned by you or has already
been planned for you by the government.
If your estate plan is planned for you by the government,
it will very likely involve probate, unnecessary expenses,
extra taxes, time and confusion for family members,
along with unnecessary spend down
and loss of family assets.
Final Thought
(and a Call to Action)
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A “government planned” estate plan will provide no extra
benefits or protections for you and your family.
A government-planned estate plan may
be accurately summarized as follows:
“Heads, the government wins;
tails, you and your family lose.”
Final Thought
(and a Call to Action)
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When it comes to estate planning,
failing to plan is planning to fail.
Final Thought
(and a Call to Action)
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Any Final Questions?
Final Thoughts
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www.shepherdelderlaw.com
Shepherd Elder Law Group, LLC – Hutchinson
1 North Main, Suite 410
Hutchinson, KS 67501
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©2018 Shepherd Elder Law Group, LLC, Accurate
reproduction with acknowledgment granted. All rights reserved.
This document provides information of a general nature
regarding legislative or other legal developments. None of the
information contained herein is intended as legal advice or
opinion relative to specific matters, facts, situations, or issues,
and additional facts and information or future developments may
affect the subjects addressed.