If you apply for long-term care assistance through Medicaid and your application is denied, the situation may seem hopeless. The good news is that you can appeal the decision.

Medicaid is a program for low-income individuals, so it has strict income and asset eligibility requirements. Qualifying for Medicaid requires navigating the complicated application process, which has many potential stumbling blocks. However, a Medicaid denial does not mean you will not eventually qualify for benefits.

The Medicaid agency may deny a Medicaid application for a number of reasons, including the following:

• Missing documentation. You need to show proof that you are eligible for benefits, which usually means providing Social Security statements, bank records, property deeds, retirement accounts, and insurance records, among other things.
• Excess assets. In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in “countable” assets (in most states).
• Transferred assets. If you transferred assets for less than market value within five years before applying for benefits, you may be subject to a penalty period before you become eligible for benefits.

The Medicaid agency is required to issue the denial notice with 45 days of the application (or 90 days if you filed for benefits on the basis of a disability). When you get a denial notice, read it carefully. The notice will explain why the application was denied and specify how to file an appeal.

Before filing a formal appeal, you can try informally asking the agency to reverse the decision. If you made a mistake on the application, this is the easiest and quickest way to proceed. If the caseworker made a mistake, it may be more complicated and require escalation to a supervisor or a formal appeal.

Appealing a Decision
The denial notice will tell how long you have to file an appeal—the deadline may be as short as 30 days or as long as 90 days after the denial notice. It is important to file the appeal before the deadline. Whether the denial notice requires it or not, you should submit your request for an appeal in writing, so that there is a record of it.

Once your appeal is submitted, the Medicaid agency will set a hearing date. Applicants must attend the hearing or their cases will be dismissed. You have a right to have witnesses testify at the hearing and to question the Medicaid agency’s witnesses. It is a good idea to have an attorney to help you through the appeal process. An attorney can make sure you have all the correct documentation and information to present at the hearing.

If you win the appeal, your benefits will be retroactive to the date of your eligibility—usually the date of your application. If you lose the appeal, the notice will explain how to appeal the decision. The next step in the appeal process usually involves submitting written arguments. If the next appeal is unsuccessful, then you will have to appeal to court. It is crucial to have the assistance of an attorney for this.

Reapplying for Benefits
If your application was denied correctly due to excess assets or income, there are steps you can take to spend down your assets or put your income in a trust. Contact an attorney to find out what actions you can take to qualify for benefits. Once you do this, you can then reapply for benefits. Note that when you reapply for benefits, your eligibility date will change to the date of the new application.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

Running a small business can keep you busy, but it should not keep you from creating an estate plan. Not having a plan in place can cause problems for your business and your family after you are gone.

While an estate plan is important for everyone, it is especially important for small business owners. Planning allows you to dictate what will happen with your business after you die or are no longer able to manage it. It can help you avoid excess taxes and debts and facilitate your business’s continued success.

Before sitting down to start the estate planning process, you should think about your goals for the business. What do you want to have happen if you die or become incapacitated? Should the business continue with current partners or be sold to new owners? Should your family take over? Should the business be shut down? Consider your family dynamics when thinking about these questions. Once you have come up with your goals, you can create a plan to meet them.

The basic building blocks of any estate plan include a will, power of attorney, and medical directives. The will allows you to direct who will receive your property at your death while the power of attorney and medical directives dictate who can act in your place for financial and health care purposes.

Following are some additional things a small business owner should consider as part of an estate plan:

• Tax Planning. If your business is not a separate entity, you may want to consider ways to minimize estate taxes. The current estate tax exemption ($12.06 million in 2022) is so high that most estates do not pay any estate tax. However, a small business could put an estate over the limit. Also, the fact that the estate tax exemption is set to be cut in half in 2026 and that states have their own estate taxes means that tax planning is important. You may want to put your business assets into a trust or a separate business entity like a limited liability company to lower your estate tax burden.
• Trust. A trust can be useful not only to reduce estate taxes, but also to ensure the continued running of your business if you die or become incapacitated. Because a trust passes outside of probate, the assets in the trust can be transferred immediately to the person you want to run the business without waiting for the whole estate to go through probate. In addition, if you become incapacitated, the trustee can continue to run your business without court involvement.
• Buy-Sell Agreement. If you own your business with others, a buy-sell agreement can be very useful. Buy-sell agreements are used if one of the owners dies, leaves the company, or becomes incapacitated. It specifies who can buy an owner’s share of the business, under what conditions, and for what price.
• Life Insurance. When you own a business, life insurance takes on new importance. A life insurance policy can ensure that your family continues to receive an income in the event of your death. It can also provide funds to keep the business running and be used to fund a buy-sell agreement.

Your estate planning attorney can help you come up with a plan to meet the needs of your business.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

Leaving a nursing home to return home is a goal for many residents and their families, but it requires careful consideration. While returning home is a good move for some, it won’t work for everyone.

A nursing home stay does not have to be permanent. Many residents enter a facility temporarily to recover from an illness or accident and are able to easily transition back to living at home. For residents who continue to need care but would rather be at home, moving out of a nursing home is more complicated.

Before considering moving out of a nursing home, here are some questions to bear in mind:

• Can you receive the care you need at home? Some patients require help with eating, dressing, and going to the bathroom. You need to consider whether you can adequately get that care at home.
• Who will be providing the care? The care can come from family members or hiring in-home health care. If family members aren’t available, is there money to hire help? All 50 states have Medicaid programs that offer at least some home care. You will need to check with your state to see if you qualify.
• Will you be able to take the medications you need at home?
• How is your physical and emotional stamina? Moving back home requires determination and an ability to manage problems, since not everything will be taken care of as in a facility.
• Is the house set up to safely accommodate you? Are there a lot of stairs? Does the bathroom have rails? If the patient has dementia, there may be other considerations to take into account.
• Is there transportation available to get to doctor’s or other appointments?

If you determine that moving back home is the best option, then you can begin to craft a plan based on where you will live and who will provide care. Contact your local Area Agency on Aging to get help finding and coordinating services.

There is a federal program called Money Follows the Person that is designed to make it easier for nursing home residents who qualify for Medicaid to move out. Currently, 34 states and the District of Columbia participate in the program, which provides personal and financial support to help eligible nursing home residents live on their own or in group settings.

For tips on transitioning from a nursing home to the community, click here.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

A Roth IRA does not have to be used as just a retirement plan; it can also be a way to transfer assets tax-free to the next generation.

Unlike a traditional IRA, contributions to a Roth IRA are taxed, which means that the distributions are tax-free. Also, unlike a traditional IRA, you are also not required to take any distributions on a Roth IRA, regardless of your age. If you don’t need the money for retirement, you can leave all of it in the IRA to grow tax-free and eventually pass on to your heirs.

If your spouse is the beneficiary on your Roth IRA, your spouse can become the owner of the account. Your spouse can either put the IRA in his or her name or roll it over into a new IRA, and the IRS will treat the IRA as if your spouse had always owned it. Just like you, your spouse does not need to take any distributions from the IRA if they are not needed.

The rules for a child or grandchild (or other non-spouse) who inherits an IRA are different than those for a spouse. They must withdraw all of the assets in the inherited account within 10 years. There are no required distributions during those 10 years, but it must all be distributed by the 10th year.

Certain non-spouse beneficiaries are treated like spouses, which means they can treat the IRA as their own:

• Disabled or chronically ill individuals
• Individuals who are not more than 10 years younger than the account owner
• Minor children. Once the child reaches the age of majority, he or she has 10 years to withdraw the money from the account.

The benefit of a Roth IRA for your heirs is that the assets will be distributed tax-free. As long as you opened and began making contributions to the Roth IRA more than five years before you died, the distributions will not be taxed when the beneficiary takes distributions.

Another consideration is that money you leave your heirs in a Roth IRA does not go through the probate process. This can make it easier for your beneficiaries to access the funds quickly. But make sure that you name a beneficiary on your account. If no beneficiary is named, the account will go to your estate and will then have to go through probate. Also, be sure to regularly check that your beneficiary designations are up to date.

Leaving your heirs a tax-free Roth IRA may not always be the best plan. In figuring out the best type of IRA to leave to your beneficiaries, you need to consider whether your beneficiary’s tax rate will be higher or lower than your tax rate when you fund the IRA. In general, if your beneficiary’s tax rate is higher than your tax rate, then you should leave your beneficiary a Roth IRA. Because the funds in a Roth IRA are taxed before they are put into the IRA, it makes sense to fund it when your tax rate is lower. On the other hand, if your beneficiary’s tax rate is lower than your tax rate, a traditional IRA might make more sense. That way, you won’t pay the taxes at your higher rate; instead, your beneficiary will pay at their lower tax rate.

To determine if a Roth IRA should be a part of your estate plan, consult with your attorney.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

As a trust beneficiary, you may feel that you are at the mercy of the trustee, but depending on the type of trust, beneficiaries may have rights to ensure the trust is properly managed.

A trust is a legal arrangement through which one person, called a “settlor” or “grantor,” gives assets to another person (or an institution, such as a bank or law firm), called a “trustee.” The trustee holds legal title to the assets for another person, called a “beneficiary.” The rights of a trust beneficiary depend on the type of trust and the type of beneficiary.

If the trust is a revocable trust—meaning the person who set up the trust can change it or revoke it at any time–the trust beneficiaries other than the settlor have very few rights. Because the settlor can change the trust at any time, he or she can also change the beneficiaries at any time. Often a trust is revocable until the settlor dies and then it becomes irrevocable. An irrevocable trust is a trust that cannot be changed except in rare cases by court order.

Beneficiaries of an irrevocable trust have rights to information about the trust and to make sure the trustee is acting properly. The scope of those rights depends on the type of beneficiary. Current beneficiaries are beneficiaries who are currently entitled to income from the trust. Remainder or contingent beneficiaries have an interest in the trust after the current beneficiaries’ interest is over. For example, a wife may set up a trust that leaves income to her husband for life (the current beneficiary) and then the remainder of the property to her children (the remainder beneficiaries).

State law and the terms of the trust determine exactly what rights a beneficiary has, but following are five common rights given to beneficiaries of irrevocable trusts:

• Payment. Current beneficiaries have the right to distributions as set forth in the trust document.
• Right to information. Current and remainder beneficiaries have the right to be provided enough information about the trust and its administration to know how to enforce their rights.
• Right to an accounting. Current beneficiaries are entitled to an accounting. An accounting is a detailed report of all income, expenses, and distributions from the trust. Usually, trustees are required to provide an accounting annually, but that may vary, depending on the terms of the trust. Beneficiaries may also be able to waive the accounting.
• Remove the trustee. Current and remainder beneficiaries have the right to petition the court for the removal of the trustee if they believe the trustee isn’t acting in their best interest. Trustees have an obligation to balance the needs of the current beneficiary with the needs of the remainder beneficiaries, which can be difficult to manage.
• End the trust. In some circumstances, if all the current and remainder beneficiaries agree, they can petition the court to end the trust. State laws vary on when this is allowed. Usually, the purpose of the trust must have been fulfilled or be impossible.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

Navigating the Medicaid application process can be complicated, especially if you are applying for long-term care benefits. Hiring an attorney to help you through the process can be extremely helpful.

Whether you should prepare and file a Medicaid application by yourself or should hire help depends on answers to the following questions:

• How old is the applicant?
• How complicated is the applicant’s financial situation?
• Is the individual applying for community or nursing home benefits?
• How much time do you have available?
• How organized are you?

Medicaid is the health care program for individuals who do not have another form of insurance or whose insurance does not cover what they need, such as long-term care. Many people rely on Medicaid for assistance in paying for care at home or in nursing homes.

For people under age 65 and not in need of long-term care, eligibility is based largely on income and the application process is not very complicated. Most people can apply on their own without assistance.

Matters get a bit more complicated for applicants age 65 and above and especially for those of any age who need nursing home or other long-term care coverage. In these cases, availing yourself of the services of an attorney is practically essential.

Medicaid applicants over age 65 are limited to $2,000 in countable assets (in most states). It’s possible to transfer assets over this amount in order to become eligible, but seniors need to be careful in doing so because they may need the funds in the future and if they move to a nursing home, the transfer could make them ineligible for benefits for five years. Professional advice is also crucial because there is a confusing array of different Medicaid programs that may be of assistance in providing home care, each with its own rules.

All of that said, the application process itself is not as complicated for community benefits (care that takes place outside of an institutional setting, such as in the beneficiary’s home). In short, those over 65 may need to consult with an elder law attorney for planning purposes, but they or their families may be able to prepare and submit the Medicaid application themselves.

But submitting an application for nursing home benefits without an attorney’s help is not a good idea. This is because Medicaid officials subject such applications to enhanced scrutiny, requiring up to five years of financial records and documentation of every fact. Any unexplained expense may be treated as a disqualifying transfer of assets, and many planning steps — such as trusts, transfers to family members, and family care agreements — are viewed as suspect unless properly explained. Finally, the process generally takes several months as Medicaid keeps asking questions and demanding further documentation for the answers provided.

Many elder law attorneys offer assistance with Medicaid applications as part of their services. This has several advantages, including expert advice on how best to qualify for benefits as early as possible, experience in dealing with the more difficult eligibility questions that often arise, and a high level of service through a long, grueling process. The one drawback of using an attorney rather than a lay service is that the fee is typically substantially higher. However, given the high cost of nursing homes, if the law firm’s assistance can accelerate eligibility by even one month that will generally cover the fee. In addition, the payments to the attorney are generally with funds that would otherwise be paid to the nursing home — in other words, the funds will have to be spent in any event, whether for nursing home or for legal fees.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

When a married couple applies for Medicaid, the Medicaid agency must analyze the couple’s income and assets as of a particular date to determine eligibility. The date that the agency chooses for this analysis is called the “snapshot” date and it can have a major impact on a couple’s financial future.

In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in “countable” assets (the figure may be somewhat higher in some states). Medicaid law also provides special protections for the spouses of Medicaid applicants to make sure they  have the minimum support needed to continue living in the community while their husband or wife is receiving long-term care benefits.

In general, the community spouse may keep one-half of the couple’s total “countable” assets up to a maximum of $137,400 (in 2022). This is the community spouse resource allowance (CSRA), the most that a state may allow a community spouse to retain without a hearing or a court order. The least that a state may allow a community spouse to retain is $27,480 (in 2022). Some states are more generous to the community spouse. In these states, the community spouse may keep up to $137,400 (in 2022), regardless of whether or not this represents half the couple’s assets.

Medicaid agencies must pick a date to use to analyze the applicant’s assets. The date that the agency chooses can affect how much money the applicant must spend down before qualifying for benefits and how much a spouse is able to keep. It is called the “snapshot” date because Medicaid is taking a picture of the applicant’s assets as of this date.

The snapshot date is usually the date of “institutionalization,” the day on which the Medicaid applicant enters either a hospital or a long-term care facility in which he or she then stays for at least 30 consecutive days. States use as the snapshot date either the first day of the month the applicant entered the facility or the actual date of entry. If the applicant enters a hospital or nursing home, stays for 30 days, goes home, and then reenters a hospital or nursing home, the snapshot date is the date the applicant entered the hospital or nursing home for the first stay.

Not all Medicaid long-term care applicants are in an institution. If the applicant is applying for Medicaid home care through a waiver program, the snapshot date is usually either the date of the application or the date the applicant is determined to need a nursing home level of care.

On the snapshot date, the Medicaid agency counts up all of an applicant’s and his or her spouse’s assets, excluding the couple’s house. Then depending on the state’s CSRA, the agency determines how much the community spouse can keep. If any assets above $2,000 remain, then that money must be spent down before the applicant will qualify for benefits.

Example: If a couple has $100,000 in countable assets on the snapshot date and the state allows the spouse to keep half the couple’s assets up to the maximum CSRA, the Medicaid applicant will be eligible for Medicaid once the couple’s assets have been reduced to a combined figure of $52,000 — $2,000 for the applicant and $50,000 for the community spouse. If the state allows the spouse to keep the entire amount of the maximum CSRA, then the community spouse could keep the entire amount and the applicant would not be required to spend down assets.

Proper planning can help a couple determine when the best time to apply for benefits based on the snapshot date and maximize the assets the couple can keep.  Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

The Biden administration has announced far-reaching nursing home reforms, targeting staffing and accountability at facilities with deficient care. Advocates are calling the proposals, which include the first-ever federal minimum staffing levels, the most significant reforms in decades.

Nursing homes have been plagued by chronic understaffing and high turnover rates for years, a problem only exacerbated by the COVID-19 pandemic. Studies have revealed that nursing home staffing levels are often inadequate and inaccurately reported and recent research found that increasing staffing by just 20 minutes a day led to fewer COVID cases and deaths. Meanwhile, there is evidence that most nursing homes have inadequate infection control measures in place.

Currently there are no minimum staffing levels for nurse’s aides, who provide most of the day-to-day care. Instead, nursing homes are required “to provide sufficient staff and services to attain or maintain the highest possible level of physical, mental, and psychosocial well-being of each resident.”

Recognizing these issues, President Biden announced new measures aimed at improving the safety and quality of care in nursing homes. The Biden administration’s proposals include taking the following actions:

• The Centers for Medicare and Medicaid Services (CMS), which regulates nursing homes, will study the level and type of staffing needed to ensure safe and quality care and propose minimum staffing levels within a year.
• CMS will explore ways to phase out multi-occupancy rooms and promote single-occupancy rooms.
• The administration will call on Congress to provide $500 million for health and safety inspections, a 25 percent increase.
• CMS will increase enforcement actions against poor-performing facilities. After reversing a Trump era change that imposed a one-time fine for nursing home deficiencies, CMS will explore making per-day penalties the default penalty.
• In an effort to increase transparency of nursing home ownership, CMS will create a database to track nursing home owners and operators across states. In addition, the government will investigate the role private equity firms play in buying and selling nursing homes.

The Consumer Voice,  an advocacy group for long-term care issues, calls the proposals the “most significant reforms in nursing homes in decades.” Terry Fulmer,  president of the nonprofit John A. Hartford Foundation, which works to improve long-term care, calls the plan “a major step forward for quality and safety in our nation’s nursing homes.”

CMS had previously announced that it will add data on staff turnover rates and weekend staffing levels to its Care Compare website, giving consumers another tool when choosing a nursing home.

To read the announcement from the administration, click here.

For more information about the reforms from Kaiser Health News, click here.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

Naming a trust as a beneficiary of your retirement plan can be a good idea in some circumstances, but it can be dangerous if you are worried about creditors coming after your estate.

There are a lot of good reasons to name a trust as beneficiary of a retirement plan, whether it is a 401(k), a 403(b), or an IRA. If the IRA beneficiaries are young, disabled, or for other reasons shouldn’t be managing the asset themselves, the trust provides that management. People in a second marriage or relationship may want their spouse or partner to benefit from the funds, but not be able to deplete them entirely, and trusts provide protection from the beneficiary’s creditors. However, the trust may not protect your retirement funds from your own creditors.

Creditor Protection for Retirement Plans
IRAs enjoy substantial creditor protection during your life. If you get sued, your IRA will be subject to claim, but you can protect it by declaring bankruptcy. Under the federal bankruptcy code, the first $1,362,800 of retirement assets are protected from having to be paid to creditors. Most cases settle, so you can generally get this protection without having to go through the bankruptcy process, but it’s there if necessary.

But Only During Life
However, that protection ends at death. It does not apply to inherited IRAs, those you leave to others or that you have inherited from others. Inherited IRAs are subject to creditor claims. However, your heirs are not liable for your debts. So, if your retirement plans pass directly to them, the plan assets will be protected from your debts.

By way of example, let’s assume an individual dies owing $400,000 to various creditors, with a total estate of $500,000 divided between a house with a market value of $250,000, savings of $100,000, and retirement plans holding $150,000. If the retirement plans are paid directly to this individual’s heirs, they will not be subject to the person’s debts. The rest of the assets will have to go to pay off debts, leaving nothing in the estate for the heirs, but also leaving the creditors short $50,000.

Revocable Trusts Subject to Claim
But what if the IRAs were payable to the individual’s revocable trust? Then they very well may be subject to claim. If there are not enough funds in the decedent’s probate estate to pay his or her debts, states often allow the creditors to go after a revocable trust. In at least one case in Kansas, which like 34 other states and the District of Columbia has adopted the Uniform Trust Code, the court ruled that this right of creditors to go after the decedent’s revocable trust applied to an IRA payable to the trust. There’s no reason to think that other courts would not come to a similar conclusion.

Conclusion
So, if your debts exceed your non-retirement plan assets, don’t make your retirement plan payable to your revocable trust. Either make it payable directly to beneficiaries or, if a trust is necessary, to an irrevocable trust. If your assets far exceed your debts, or possible lawsuit claims against you or your estate, then don’t worry about any of the above.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

Not everyone wants to take the required minimum distributions from their retirement accounts right away. If you don’t want your distribution, one option is to donate it to charity and get a tax deduction.

You are required to begin taking distributions from your tax-deferred IRA when you reach age 72 (70 ½ if you turned 70 ½ in 2019 or before) even if you don’t need the money. The distributions are added to your income and taxed at your highest marginal rate, perhaps even at a higher rate than your other income if you’re right at the threshold between two rates. You’re more likely to have to pay a higher rate on this income if you are still working.

If you don’t want the distribution, you may want to consider donating the distribution directly to charity through a qualified charitable donation. By donating your required minimum distribution, the distribution won’t be included in your gross income, which means lower taxes overall.

A qualified charitable donation can also be a good way to get a tax deduction since after the 2017 tax law doubled the standard deduction, it makes sense for many fewer people to itemize. If your charitable contributions along with any other itemized deductions are less than $12,950 a year (in 2022), you will no longer get a deduction for your contributions to charity (which can be a disincentive to donate to charity). However, substituting a qualified charitable donation for your RMD is a way to make a donation and receive a tax benefit from it.

In order for the donation to count as a required minimum distribution, the donation must be made directly from the IRA to the charity. Funds distributed directly to you do not count. The charity must be approved by the IRS, and different IRAs have different rules about how to make the distributions. If you make a qualified charitable donation, you cannot also itemize the deduction. The maximum amount you can donate is $100,000. If you donate less than your required minimum distribution, you will need to take the remainder as a distribution.

For more information from the IRS about distributions, click here.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.