Louisiana Medicaid Planning

Personal Care Agreement Can Protect Assets From Nursing Home Spend Down

The Louisiana Medicaid Eligibility Manual allows certain family members to enter into a written Personal Care Agreement which, essentially, allows money to be shifted to children/caregivers without the parent triggering a five year ineligibility period for Louisiana Long Term Care Medicaid.

When a parent has funds in their name and they transfer those funds to their children, it will typically trigger a five year ineligibility period for Louisiana Long Term Care Medicaid in the event the parent needs care in a nursing home.

However, in the right circumstances, if a child is actually providing care and assistance services to the parent, the parent can compensate the child without triggering the time-penalty Medicaid penalties, SO LONG AS ALL OF THE CORRECT DOCUMENTATION IS IN PLACE PRIOR THE SERVICES BEING PROVIDED.

There are at least seven mandatory conditions that must be met, but the one that families sometimes struggle with is that, "The agreement must be in writing, and properly executed prior
to the service or assistance being provided. The agreement
cannot be applied retroactively to pay for services or assistance that was provided prior to the agreement."

The concept is, if there is the right written contract in place, an individual (a parent, for example) can pay another person (a child, for example) to provide personal care services.

Note that one of many important provisions of the Louisiana Medicaid Eligibility Manual regarding these Personal Care Agreements provides that, "A Personal Care Agreement that fails to contain any of the mandatory provisions is considered to be invalid. Payments that are not considered to be compensation in accordance with a valid written agreement are transfers without compensation."

Bottom line - this can help certain families protect assets while keeping a parent or grandparent out of the nursing home.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Louisiana Estate Planning Attorney
Phone: (225) 329-2450

The Right Kind of Louisiana Trust Protects Estate From Nursing Home Costs

Been working with a Louisiana couple who's main concern was losing assets to nursing home expenses in the future. They had a revocable living trust set up years ago by a non-lawyer group. They were hoping that their existing trust would protect those assets from their future nursing home expenses.

Several of their family members had lost everything due to extended nursing home stays. This couple owned a home, rental property, as well as stock and mutual funds.

We quickly realized that their revocable living trust gave them no protection from nursing home costs in the future. So, part of their new estate legal program for these Louisiana residents includes establishing the right kind of trust that allows them to remain in control of their estate, yet have it structured in a way that their two biggest threats to estate depletion (nursing home costs and probate) are no longer a concern.

If you'd like to start a conversation about how you can protect your home and life savings from government interference, give our office a call from anywhere at 866-491-3884

What Are Options That People Consider When Attempting To Protect Their Estate From Nursing Home Poverty?

I've talked to many Louisiana families about things that they had done in an effort to protect their money from all being sucked up by the nursing home costs which can exceed $100,000 annually. Lots of mistakes being made here by people who don't truly understand the intricacies of the Louisiana Long Term Care Medicaid law and regulations. While you won't get all the answers in this post, you'll learn what some of the common mistakes are. So...here are options that just don't work.

Do Nothing

Probably the worst thing that you can do if you want to protect your estate from being eaten up to nursing home costs is to ignore the problem.

Example. Nelda had her home worth $150,000 (no mortgage). She also owned accounts totaling $450,000 in value. Nelda procrastinated taking action to protect her estate from skilled care cost. A stroke caused Nelda to have to reside in a nursing facility. Nelda was forced to spend all of her $450,000 (until there was less than $2,000 remaining) before qualifying for Medicaid. When Nelda died, Medicaid pursued its Estate Recovery rights, forcing Nelda’s home to be paid to reimburse Medicaid for what it had spent on her nursing home care.

The people who protect their estate from nursing home costs typically are those who are proactively seek out the right information, at the right time, and work with the right people, and get it right the first time. Others risk losing everything they own.

Give It Away

Some people choose to give their assets away so that the assets will not be in their name when they get sick and apply for Medicaid.

People generally utilize one of two different gifting strategies when they attempt to help their financial situation by giving their assets away:

1.      Give $14,000 Away. Gift and estate tax laws provide that you can donate $14,000 to as many people as you want to without gift and estate tax consequences. Many people mistakenly interpret this as an income tax rule. Many mistakenly believe that either the donor or the recipient must pay income tax on gifts that exceed $14,000. Example: Dad gives Daughter $114,000. No one owes any income tax, but since the gift exceeded $14,000 (by $100,000) Dad has used up $100,000 of his $5.450,000 estate tax exemption. No one owes tax, but when Dad dies, he can “only” leave $5,350,000 free of the 40% estate tax. The problem, however, with making $14,000 annual gifts, from a Medicaid Planning standpoint, is that assets are not protected until five years after they are given away. So, giving it away in $14,000 increments does little good.

2.      Give Everything Away. Some people think that they will beat the government by putting all of their assets in their kids’ names. But his could be really dumb move for tax purposes. Example: Mom and Dad own a home that they bought 35 years ago for $30,000. Today, the home is worth $240,000. If Mom and Dad donate the home to the kids during Mom and Dad’s lifetime, then the kids will get Mom and Dad’s $30,000 “carry-over” capital gains tax basis. When the kids later sell the home, there could be an extra $60,000 or so of capital gains tax due. Plus, when Mom and Dad donate their home to their kids, Mom and Dad will lose their property tax homestead exemption. In addition, many parents that I talk to don’t like to give up the control over their assets that they give up when they put everything in their children’s names. Serious problems could result if the children die, go bankrupt, have IRS issues, get divorced, have spouses with bad spending habits, or if they can’t pay their debts. Don’t turn over everything you own to your kids.

Rely on Medicare To Pay Nursing Home Costs

While Medicare will pay for some of the nursing home costs for the first 100 days of rehabilitation if you had a prior hospital stay of at least three days, you must pay 100% of the remaining costs of the skilled nursing facility (unless you qualify for Medicaid).

Have a Last Will and Testament and Power of Attorney

If you think that somehow your last will and testament will help you avoid losing your home and life savings to nursing home poverty, then think again. A last will and testament (“Last Will”) names your executor who will administer the court proceeding when you die, and your Last Will tells a judge who to make sure remaining assets get disbursed to at the end of the court proceeding (“Probate”). But a Last Will does nothing to protect your estate from long term care costs.

Example. Mom had a Last Will prepared naming her daughter, Sue, as the executor. In her Last Will, Mom left her estate to her two children, Sue and Richard. Mom felt like she did all she needed to do to “protect her estate for her children.” Eight years after writing her Will, Mom went into a nursing home. Mom was forced to spend her entire life savings on her nursing home care. When Mom died, Sue, as the executor of Mom’s probate, was forced to sell Mom’s home on behalf of the estate and give all of the proceeds of the sale to Medicaid – leaving the children with nothing.

A common Last Will technique can get you in bigger trouble. Many married couples write Last Wills. Often, the Wills are structured so that the first spouse to die leaves all of his or her assets to the surviving spouse. Then, because all of the assets were lumped into the surviving spouse’s estate, the surviving spouse must deplete the entire family estate before getting any help from Medicaid. So, the “I Love You” Will leaving everything to your spouse can be a disaster.

Put Your Money In a Safe Deposit Box – Or In A Hole You Dig In The Back Yard

One of the questions on a Medicaid application asks where you have a safe deposit box and what is in the box. Documents of Proof that Medicaid says it may need from you includes, “A list of what is inside any safe-deposit box.  This must be a written statement by a bank employee or a sworn statement from someone who looked inside.”

Failing to disclose the necessary information on a Medicaid application is Medicaid Fraud. It’s easier to plan ahead, get the right information to enable you to protect your estate, and then take that action.

Some people mistakenly believe that if they “put their child’s name on their bank account,” then the bank account somehow is no longer a Countable Resource for Medicaid eligibility purposes. Wrong.

Brother Watches Sister Lose $500,000 to Nursing Home Expenses

I was working with a gentleman recently who came to my office to see me. He had been taking care of his elderly sister's money for the past several years after his sister became ill and needed skilled care.

Over the past several years, the brother had spent more than $500,000 of his sister's life savings on her nursing home expenses. The sister, who started with a life savings of almost three-quarters of a million dollars, was not down to about $200,000. And, the brother told me that the nursing home cost was increasing by about 10% from the previous year.  Years ago. the sister established an estate planning program for other family members. But now that most of the funds had been depleted, the estate planning program won't have much impact on her surviving family members.

We discussed a few options that exist to try to salvage some of her sister's funds: do nothing and she will spend it all; do some transfers and hope that in five years there are still some assets that have been preserved, and a few other legal strategies. But quite frankly, much more would be protected if the estate protection program would have been enacted years ago.

The silver lining behind all of this is that the brother and his wife now have started to create a program to protect the value of their home and their savings for themselves and their children.

Use Trust To Keep Property In The Family For Children and Grandchildren

I met with recently with a woman who owned quite a bit of acreage near Jennings, Louisiana. It was important to her that the property stay in the family for at least the next couple of generations. She was in her early 80's, and she did not want one of the seven children to be able to sell of the property after she died. She stated that the children and grandchildren all enjoyed hunting, fishing, and spending time on the property.

She discussed whether it would be appropriate to get the property surveyed so that the big piece of property could be divided up into seven smaller tracts - one for each child. But she and some of her children were concerned that the family could never agree on which child should get which tract - but they felt that given some time, the kids could come to an agreement regarding who would get each tract.

On top of that, the woman was concerned that if she went into the nursing home, she would be forced to sell the property and use all of the money on her nursing home expenses. She realized that if she gave the property outright to her kids, that the kids would get a "carry-over basis" in the property causing there to be considerable taxes to be paid when the property would be disposed of in the future.

The woman ultimately came to the conclusion that it would be best for her to put that property in a trust now. The trust would be initially for her seven children, and it would continue to exist after the woman died. By setting up the right kind of trust, the woman will not be forced to sell the property if she goes in a nursing home in the future. Also, by setting up the right kind of trust, the family will enjoy the benefits of a step-up in basis when the woman dies.

The woman has one child in particular that the woman know will carry out the woman's intentions after the woman dies. This child, a son, will be named the Successor Trustee of the trust to handle matters after the woman dies. The child will have the ability to keep the property in tact, preventing a child from demanding their share, or the son could allocate tracts to each of the seven children in the event they all come to an agreement regarding who should get which tract.

Many parents and grandparents own land and they wish to keep the land in the family for use and enjoyment by children, grandchildren, or others. Louisiana and federal law limit your ability to do certain things. Anything you establish may have to comply the right way with property law, trust law, tax law, Long Term Care Medicaid law, and inheritance law. Make sure you work with the right person - and get it done right the first time - so that you keep the property in the family the right way for enjoyment by your descendants and other loved ones.