Hospice, Medicaid and NJ Estate Planning (FAQ)

Frequently Asked Questions (FAQ) About NJ Medicaid and Hospice

As complicated as Medicaid is, there are certain questions which come up over and over again. While no book, article or website will be a substitute for the advice of an experienced attorney who counsels Hospice patients, let’s at least review some of the questions that seem to frequently come up.

Question: Is a married couple always required to spend down one half of their assets before qualifying for Medicaid?

Answer: Not always. In fact, oftentimes, couples have over $100,000 and qualify for Medicaid benefits without spending down. Although there are income and asset criteria a couple must meet before one of them qualifies for benefits, federal and state laws were written to protect individuals from becoming impoverished if their spouse needs care. Medicaid planning is like tax planning in that the laws provide certain “safe harbors” that, with expert advice from a knowledgeable professional, can save Medicaid applicants and their families thousands of dollars. An experienced elder law attorney can help you determine if there are ways to protect additional assets in your particular situation.

Question: Will I lose my home?

Answer: The answer is sometimes yes and sometimes no. Many people who apply for Medicaid ask this question. For many people, the home constitutes much or most of their life savings. Often, it’s the only asset that a person has to pass on to his or her children.

Under the Medicaid regulations, the home can be exempt. There are exceptions and limits of value under the new Medicaid law when calculating eligibility for Medicaid. (There may be certain issues regarding an “intent to return home” which make the home unavailable for only a certain period of time.)

In 1993, Congress passed a law which requires New Jersey to try to recover the value of Medicaid payments made to recipients. This process is called “estate recovery”.

Estate recovery does not take place until the recipient of the benefits dies. In the case of a married couple, it occurs after the death of both spouses under current law. At that point, the law requires New Jersey to attempt to recover the benefits paid from the recipient’s (or spouse’s) estate. In recent years, as NJ’s budget has gotten tighter, the state has become more aggressive about their estate recovery programs. For instance, New Jersey passed a law that will place a lien on a Medicaid recipient’s home under certain conditions. There also may be more frequent changes in the coming months. For that reason, you will need assistance from someone knowledgeable about the rules and regulations to determine whether or not there will be estate recovery, and whether it can be avoided in any particular situation.

Question: Is it true that under current Medicaid laws, a parent cannot make gifts to their children once they are contemplating Medicaid or have even entered a nursing home?

Answer: No. In fact, a proper gifting program can be a great Medicaid planning technique. At the time an applicant applies for Medicaid, the state will “look back” five years to see if any gifts have been made. Any financial gifts or transfers for less than fair market value during the five year look back may cause a delay in an applicant’s eligibility. Also, just because the state may ask about gifts made during the prior five years, does not mean that all of those gifts will be considered. You do need to be aware of a new law which became effective February 8th, 2006. Under the terms of that new law, the gifting rules have become far more complicated. There may be some special opportunities for asset transfers for hospice patients. My office can help determine if hospice planning could be a benefit in your situation.

Question: I’ve heard that $13,000 is the most an individual can give away if they are going to apply for Medicaid.

Answer: No, the $13,000 figure is a gift tax figure, and not relevant to Medicaid. The maximum monetary figure Medicaid applicants need to concern themselves with is the “penalty divisor”. The penalty divisor is the state-assessed average cost for nursing home care by which the state assesses Medicaid penalties. The penalty divisor for New Jersey is currently $7,282.00. Therefore, a gift will cause a penalty of one month for each $7,282.00 given away in New Jersey.

Question: If my house is considered “exempt” under current Medicaid laws, can I give it away without incurring penalties?

Answer: No. Any assets which are given away are considered transfers for less than fair market value. If an applicant gives the house away, NJ will assess a penalty based on the fair market value of the house at the time it was transferred.

Suffice it to say that the Medicaid laws are complicated. There are a number of steps which smart families can take to preserve their assets and to qualify for benefits. These can range from gifting strategies to personal care contracts to annuities to increasing the amount of money which the at home spouse is allowed to protect. It’s important to keep in mind that these laws are constantly changing, and that the advice which was given to a friend or neighbor last year may no longer be relevant, or even appropriate. It’s also important to understand, however, that with expert advice you may be able to protect yourself and your loved ones while qualifying for all the benefits the law allows.

If you would like to speak to a NJ hospice attorney who is experienced in NJ Medicaid, contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com to schedule a consultation about your particular needs. He welcomes your calls and inquiries and you’ll find him very approachable and easy to talk to.

 

Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Hospice Care Attorney

Fredrick P. Niemann, Esq. NJ Hospice Care Attorney

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