I meet with close to 500 families a year. Each family has a unique situation but more times the questions and concerns are the same. So, since you’re here with me now and have navigated towards this page I have given you a comprehensive list of questions with answers to help you with your Medicaid education. Remember, you can always come in and see me for more answers to your particular questions.
If a person is going to transfer assets, do they need to do it more than five (5) years prior to entering a nursing home?
No, not always. The five (5) years is simply a look back. If transfers occurred more than the five (5) years look back, there is no penalty. If transfers occurred during the five (5) year look back, there is a penalty. In most instances, the penalty is significantly shorter than five (5) years.
Is it too late to do Medicaid Planning if someone is close to being admitted or is already in a nursing home?
No. Medicaid Planning can be done even after someone has already entered a nursing home.
Under Medicaid is it alright to transfer $15,000 to each family member every year? My accountant says the IRS allows it.
No, it’s not okay. The $15,000+ per year gifting limit is part of the federal gift tax law, not the Medicaid law. Medicaid does not permit gifts and/or any transfers within the 5-year look-back period without them being subject to a penalty. On the other hand, if a gift(s) exceeds $15,000 per person, per year, this does not generally trigger any payment whatsoever of gift tax.
It simply means that a gift tax return may have to be filed. Today, a person can gift $5,400,000+ (indexed for inflation) during his or her lifetime or on death in addition to the $15,000 per person per year without paying any Federal estate or gift tax.
I knew I needed an attorney, but could I afford one? Would he or she be experienced and someone I could trust and talk to openly and in confidence?
I was referred to Fredrick P. Niemann. I was warmly greeted and my appointment promptly kept. I was given all the time I needed to ask questions and talk about my needs and concerns. I was quoted a fee that was appropriate and reasonable for my matter. My attorney gave me answers and advice. He was a counselor at law and in life. Calling Mr. Niemann was the right decision.
—Nick Alfano, Morganville, NJ
I didn’t know who to turn to for legal advice. There are so many lawyers, but who was the right one for me? I wanted someone who would listen to me and someone I could afford. I knew I couldn’t afford to be without an attorney and then I remembered an old cliché… ”you get what you pay for”. But there can be a difference between high price and high value. With Fred, I got a terrific attorney who really worked with me. He was with me every step of the way. His fees were fair and our interpersonal relationship great. I would recommend Fred Niemann to anyone who wants a caring attorney.
—Josephine Pysniak, Woodbridge, NJ
Does the person receiving the gift for Medicaid Planning purposes have to pay income taxes on the gift?
No. A gift is not taxable income. The person receiving the gift does not declare the gift on their 1040 tax return. However, if the person receiving the gift invests the gift, they must report the investment income from the gift on their 1040.
Are there any income tax issues to be considered in Medicaid Planning?
Yes. If a person withdraws money from an IRA, it is taxable income. If a person liquidates certain Bonds, it is taxable income. If a person liquidates H Bonds, which have been converted from E or EE Bonds, it generates taxable income. If a person withdraws money from an annuity, a portion of the withdrawal is taxable income. If a person assigns an annuity, it triggers immediate income tax on the deferred income. These are a few of the many examples of events that trigger income tax. Carryover basis, step up in basis and tax on the sale of a home are some of the others. Good Medicaid Planning incorporates good tax planning.
Can trusts be used for Medicaid asset transfer purposes?
Yes. The Federal Government has approved the use of certain types of trusts for Medicaid Planning purposes.
Is it true that a home is not counted for Medicaid eligibility purposes?
In some cases, a home is not counted as an asset for Medicaid eligibility purposes. However, for a single person, it is not exempt. The home must always be considered in Medicaid Planning. Even if it is not counted as an asset for Medicaid eligibility purposes, New Jersey will file a lien on the home upon the Medicaid applicant’s death, under certain circumstances.
Is there a way I can transfer my home to my children but ensure that I can live there for the rest of my life?
Yes. There is a technique known as a life estate or use and occupancy agreement. Under a life estate, or a right or use and occupancy, the parent transfers a remainder interest in the home to the children but reserves the right to live there for the rest of the parent’s life. The children cannot sell the home out from under the parent or mortgage it without the parent’s consent.
Is an annuity a good Medicaid Planning technique?
Under current New Jersey law, purchasing a qualifying Medicaid annuity may be treated as an exempt transfer of assets if properly structured. Using an annuity may but may not be a good Medicaid Planning technique.
Is it important to have my legal documents reviewed as part of Medicaid Asset Protection Planning?
Yes. It is always important to review Wills, Living Wills and Powers of Attorney. These documents are usually not designed for situations in which a family member will be applying for Medicaid. For example, if there is a husband and wife and the husband is entering the nursing home, the wife’s Will usually leaves her assets to the husband. This needs to be changed. It’s potentially fatal!
Where are Medicaid Applications Filed?
In New Jersey, Medicaid Applications are filed at the County Board of Social Services. Some counties maintain outreach offices at satellite locations, otherwise, the application must be filed at the central county office.
What type of documents are required in connection with an application?
Required documentation begins with a birth certificate for the applicant, a marriage certificate if the applicant is or has been married and a death certificate of the spouse or divorce decree if the marriage has been dissolved by death or divorce. In addition, five years of complete financial records may be required as well as all the documents itemized on the application form. Many other documents are required as part of the review process and are identified in the application.
How does Medicaid know that the information I am providing is complete?
Medicaid has a computer match with the IRS. Medicaid will receive information concerning 1099’s, K-1’s, and 1040 tax returns sent by all financial institutions.
How long does it take to process a Medicaid Application?
The length of time necessary to process a Medicaid Application varies from county to county and is dependent on the nature of the financial data being submitted. In some counties, an application can be approved within 45 – 60 days. In other counties, it takes 6 months or more to a year. In special situations, the application has to be approved in Trenton and this can take 18 months or longer.
Who pays the nursing home while the Medicaid Application is pending?
At the time of approval of the Medicaid Application, Medicaid will inform the applicant of his/her applicant’s monthly share of long-term care costs. The applicant must pay this share to the facility while the application is pending. When the application is approved, Medicaid will pay the nursing home the balance due and owing retroactively to the date of eligibility.
Where are Medicaid Applications Filed?
In New Jersey, Medicaid Applications are filed in each of the 21 County Board of Social Services. The counties maintain outreach offices in certain locations, otherwise, the application must be filed at the county office.
Can Medicaid applications be filed by mail?
In some counties yes, but in most counties, no. In-person appointments are required, scheduled in advance, or “wait in line” basis. Call your local County Board of Social Services for its application intake process.
What documents are required to be filed in connection with an application?
Required documentation begins with a birth certificate for the Medicaid Applicant. A marriage certificate is required if the applicant is or has been married. A death certificate or divorce decree should be provided if the marriage has been dissolved by death or divorce. In addition, five years of complete and detailed financial records are required. All counties have a Medicaid checklist of required document submissions. You can generally call and ask for one, but don’t be surprised if it never comes in the mail.
What do I do if I am unable to locate a birth certificate, marriage certificate, death certificate or divorce decree?
This can be a real problem. Medicaid is a bureaucracy; it’s government processing of paperwork. Often times, these items can be obtained from the Registrar of Vital Statistics or from court records. If it is absolutely impossible to obtain these records, other forms of evidence may be accepted. If you’re hitting a roadblock, then consult with an experienced NJ Medicaid application attorney or if in doubt about the completeness of your documentation to reduce the chances of denial.
Must applicants prove that it is medically necessary that he/she be receiving the long-term care being provided?
Yes. A PAS must be ordered by the facility or by the family if care is being provided at home. Once received, Medicaid sends a nurse to examine the applicant to determine whether or not the care is medically necessary. New Jersey has an unwritten rule that the examination will take place within 30 days from the date the PAS is ordered. Medical eligibility is determined by a document called a “pre-admission survey”.
Must I pay the nursing home while the Medicaid application?
Yes, but only pay a portion of the bill. Always keep health insurance premiums current. At the time of approval of the Medicaid Application, Medicaid will inform the applicant of the applicant’s future monthly share of costs. The applicant should generally pay this share to the facility while the application is pending. When the application is approved, Medicaid will pay the nursing home retroactively to the date of eligibility.
Is the Medicaid Application process time-consuming in New Jersey?
You bet it is! Medicaid demands proof of every financial transaction going back five full calendar years prior to the application. Complete and detailed records should be obtained and furnished to the County Board of Social Services. This makes the processing simpler. If records are incomplete or if a Medicaid application package is disorganized, the County Agency will insist on additional information. They will cause the application to be delayed indefinitely. A Medicaid Application takes approximately 40+ dedicated and undisturbed hours to assemble and organize. A person unfamiliar with the process will spend many times that amount of time, often in excess of 100 hours.
Is the cost of paying a professional such as a law firm to prepare and file a Medicaid Application in New Jersey a legitimate spend down for Medicaid eligibility purposes?
Yes. The cost of professional assistance (including an attorney) and law firm in preparing and filing a Medicaid Application is part of the spend-down process. The legal fee paid to our office, for example, is credited toward the applicant’s eligibility. Since a person can retain only $2,000/$4,000 in resources to become Medicaid eligible, it seldom makes sense for the family to assume the responsibility for filing the application. The money will only go to the nursing home or other parties who could be paid once eligibility is established.
What do you mean when you say, “the applicant must spend down”?
To qualify for Medicaid, an applicant’s non-exempt resources must be spent down to the calculated amount, and never greater than $2,000. However, with proper planning, there are often ways to preserve some or all of these resources for the benefit of the family.
Similarly, for married couples, the rules are even more complex. The community spouse, (i.e. the at-home spouse) may generally keep roughly one-half of the couple’s assets up to a maximum of about $120,000. Depending upon their resources, the couple may have a substantial amount of money that needs to be spent before the nursing home spouse qualifies for Medicaid.
A person pursuing Medicaid eligibility may want to purchase a new car, pre-pay nursing home expenses, clothing, wheelchair, make home improvements, purchase household goods, consolidate debt repayment or even purchase a vacation for a spouse living at home. There are many things that can be spent down to achieve eligibility that benefit the applicant or the family if you know what to do.
A pre-paid funeral plan is often another good item to purchase during the spend-down process. However, the rules regarding funerals differ so you should only deal with a funeral home knowledgeable in this type of planning.
These are, of course, not the only appropriate items for a spend-down. There are other expenses, which would also qualify. The main thing to keep in mind is that whatever goods or services are purchased must be done at fair market value. In other words, giving the money away or paying outrageous amounts for less than the real value of the services can cause Medicaid disqualification.
Also, don’t let anyone tell you that anything spent must be done solely for the benefit of the nursing home spouse. On the contrary, virtually anything that benefits the community spouse will also benefit the nursing home spouse and therefore may be an appropriate spend down item.
Finally, keep in mind that while some of the spend-down strategies will not work as well for a single person when qualifying for Medicaid, still there are other strategies that can work very well when you are dealing with a single person. Consult an experienced Medicaid planning attorney for guidance.
Can I give my assets away in order to qualify for Medicaid?
Generally, no. We frequently counsel clients who are under the impression that they are allowed to give away $14,000 as a gift based upon the federal gift tax rules. Federal gift and estate tax rules allow gifting of up to $14,000 per person per year without any gift tax consequence. However, those gifts will result in a period of ineligibility for someone applying for Medicaid benefits. That does not mean gifting can’t be done. You just need to learn the rules.
Can I gift certain amounts of money to my family and still be eligible for Medicaid?
There are ways to do some gifting; however, this must be done in strict conformance with Medicaid rules and regulations. So, the answer is “yes” and “no”. Sorry.
Since my children’s names are on my bank accounts, will those assets still count against me for Medicaid purposes?
Simply placing a child’s name on a bank account and creating a joint account does not transfer the account to your child. This is true even if the child’s name has been on those accounts for several years. The state says when you add your child’s name to an account, you are doing so for “convenience purposes.” Generally, the entire amount will be counted for Medicaid purposes unless it can be proven the monies in those accounts were contributed by the child. This rule applies to savings and checking accounts, credit union and share draft accounts, certificates of deposit, and other similar financial accounts.
All of my assets are in a Revocable Living Trust. Are these assets exempt from Medicaid?
Medicaid considers all assets in a revocable trust to be countable for Medicaid. Therefore, they are not protected and will need to be spent down. Only a qualifying Irrevocable Trust can work.
Will I lose my home if I need long-term care?
Oftentimes, people are concerned that they will have to forfeit their home to qualify for Medicaid benefits. When an individual is applying for Medicaid benefits, the home can be a non-countable resource. However, there is a federal law requiring each state to have a plan in place to recover the costs Medicaid pays for long-term care. This is called Estate Recovery. In other words, after an individual who has received Medicaid benefits passes away, it is the State’s responsibility to recover the value of Medicaid payments from the recipient’s estate, including a home.
New Jersey’s Estate Recovery Acts attempts to recover the money paid for benefits through the estate of the individual who received the benefits. For a married couple, however, this typically does not occur until both spouses have passed away. Once that happens, (or upon the death of a single Medicaid recipient) the Estate Recovery Act will lay claim to the value of the house up to the cost of benefits provided by Medicaid. Of course, estate recovery planning should not be left until the individual passes away. It should be part of an overall plan prior to application.
My husband is 59 and has just been diagnosed with early-onset Alzheimer’s disease, can you explain some of the unique legal issues that will arise due to this?
In future years, more individuals will be accurately diagnosed at younger ages due to the increase in productive diagnostic procedures. Alzheimer’s disease is considered to be early onset if an individual is age 55 or younger when symptoms first appear. Early-onset individuals may not necessarily be in the early stage of Alzheimer’s when the diagnosis is made. Individuals with early-onset Alzheimer’s will experience similar symptoms as early-stage Alzheimer’s, but there are other issues that may also be present. These individuals may experience unique physical and cognitive issues due to their younger age (e.g. children still living at home, employment issues). It is critically important that if a loved one receives a diagnosis of early-onset anything (ALS, Parkinson’s, Dementia, etc.) that they see me immediately. Time is the enemy. The condition will never get better. Do not wait for a crisis to occur. You have time if you act immediately.
Answers to Additional Commonly Asked Questions About Medicaid and Other State Programs and Insurance
Some people who are enrolled in New Jersey Medicaid or NJ FamilyCare “Plan A” also have or are covered by private health or other insurance. If this describes your situation, it is important for you to understand how these different types of coverage work together, and what your legal obligations are to the Medicaid or NJ FamilyCare program.
This section of the page is intended to help explain your responsibilities to Medicaid or NJ FamilyCare if you have other insurance, and to answer questions about how to make the best use of all your coverage.
This section of the page also will answer questions about what you should do if you receive a legal settlement or insurance claim as the result of an accident or injury caused by someone else.
Please take a few minutes to read it carefully.
What is New Jersey Medicaid and what is NJ FamilyCare?
New Jersey Medicaid and NJ. FamilyCare are both health care programs paid for by federal and state funds. ‘A person’s eligibility for either of these- programs is based on income and other information. Both programs pay certain medical and health care costs.
Both programs are administered by the New Jersey Division of Medical Assistance and Health Services (DMAHS). Neither Medicaid nor NJ FamilyCare should be confused with Medicare, which is administered by the federal government only.
In this brochure, both Medicaid and those NJ FamilyCare services paid for by Medicaid are referred to as “Medicaid.”
What is private health insurance?
Private health insurance is any individual or group health insurance or health care plan that you pay for or that is provided through an employer, union, absent parent, or military or other organization. Like Medicaid, private health insurance pays all or part of the medical, vision, prescription, dental or other health care bills for you and/or your family.
Also, like Medicaid, private health insurance is often provided through an HMO.
Can I qualify for Medicaid if I have private health insurance?
Yes, you may qualify, regardless of other health insurance you may have.
In addition, if you do not have private health insurance but it is available to you, for example through an employer, Medicaid may require you to apply for it.
Why should l tell Medicaid if I have private health insurance?
Federal and state laws require you to report your private health insurance coverage to your eligibility caseworker. In most cases, federal and state law also requires you to use your private health insurance to pay for health care before using Medicaid.
What should I do to make sure that my private insurance and Medicaid work together?
Whenever you choose a health care provider, you should make sure that he or she accepts both your private health insurance and Medicaid. When you visit your health care provider, you should provide both your Medicaid identification card and your private health insurance information.
If the service you receive is covered by both your private health insurance and by Medicaid, Medicaid may pay a portion of the bill that is not paid by your private health insurance company. Generally, your .health care provider must bill your private insurance company first. The provider may only bill Medicaid for any amount that is not paid by your private health insurance, and if Medicaid does pay anything, it will only pay up to a certain amount.
It is important to remember that if you receive services from a health care provider who does not accept Medicaid, Medicaid will not cover any portion of your bill.
What if I have co-pays or deductibles with my private health insurance?
If the co-payments or deductibles under your private health insurance plan are for services that are covered by Medicaid, the Medicaid program may pay some or all of them. Your health care provider must bill your private health insurance company first for the services he has provided. Then, Medicaid can be billed for the co-payment and/or deductible. Again, if Medicaid then pays anything, it will only pay up to a certain amount.
Will Medicaid ever pay the premiums for my private health insurance?
Premiums for a private health insurance plan are your responsibility. Sometimes: however, Medicaid may decide that it is cost-effective to pay your premiums. An example might be if you have a medical condition that requires costly care that is covered by your private health insurance.
If you are eligible for, or are currently enrolled in, a job-related health plan, then you may be eligible for the Premium Support Program (PSP). If you or a member of your family have costly medical expenses and have access either to a job-related or individual insurance plan, then you may be eligible for the Payment of Premium (POP) program. If you are interested in learning more about either PSP or POP, contact the DMAHS Hotline at 1-800-356-1561.
What if my private health insurance changes? Can I still qualify for Medicaid?
You must report any changes in your health insurance coverage to your eligibility caseworker. This includes any changes in insurance companies or changes in what your insurance covers.
This requirement also applies to any health insurance carried by someone other than yourself who provides health insurance coverage for you and/or your family.
What if I am no longer covered by private health insurance?
If your private coverage stops, give your eligibility caseworker proof of termination. Proof may be:
- A letter from your health plan showing the date the coverage ended.
- A letter from your employer showing the date coverage was terminated.
- A signed affidavit.
What if I am injured by someone else and I receive a financial settlement? Will Medicaid take the money?
Generally, yes. If you are injured and there is a possibility that you may receive a financial settlement or a payment from someone else’s insurance company as a result, you are responsible for providing this information to your eligibility caseworker. If you receive Medicaid through an HMO, you also are responsible for providing this information to the HMO.
If you receive a financial settlement or insurance payment as a result of an injury or accident, you are required to use this money to repay Medicaid for any related services that it has already covered. As a result of this settlement, you might also lose your Medicaid eligibility.
If you fail to repay Medicaid, or if you do not cooperate in establishing another person’s or company’s liability for your expenses, you can lose your Medicaid coverage and face both criminal and civil penalties.
What if my attorney or other legal representative plans to take legal action on my behalf, or actually gets a settlement or judgment for me?
You or your attorney or other legal representative are required by law to notify DMAHS’s Bureau of Administrative Action and Recoveries (BAAR) in writing if a lawsuit or Worker’s Compensation claim is filed on your behalf, and also when a settlement or recovery is received on your behalf. Both written notices must be sent to the Bureau of Administrative Action and Recoveries, P.O. Box 712, Unit 6, Trenton, NJ 08625.
You and your attorney or other legal representative are also responsible for making sure that any money received as the result of a legal action or Worker’s Compensation claim is first used to immediately repay DMAHS for any Medicaid or NJ FamilyCare payments made in relation to the incidents that led to the legal action or claim. The remainder of the settlement can be paid to you only after these expenses have been reimbursed. Also, all settlements must be reported to the agency that /determined your eligibility.
What if my attorney advises me to put my settlement into a Special Needs Trust?
If you receive a settlement of any kind, you must first use it to repay Medicaid for any bills it has paid for health care services related to your injury. Any money that remains can only be placed in a Special Needs Trust if you have the approval of the County Board of Social Services or of the Social Security Office, depending on which agency determines your eligibility for Medicaid.
If you have additional questions about New Jersey Medicaid, I’m here for you and your family. You can reach me toll-free (855) 376-5291 or via email him at email@example.com.
If you call that number and have any questions about your health insurance, ask to speak with someone in the Bureau of Third Party Liability. If you have any questions about your insurance that covers accidents and injuries; auto, homeowners or workers compensation claims or lawsuits that you have filed; or Special Needs Trusts, ask for the Bureau of Administrative Action and Recoveries.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Medicaid Attorney