Posted on

What is an Irrevocable Funeral Trust?

One tool for those looking to spend down their assets in order to apply for Medicaid benefits is the Irrevocable Funeral Trust (“IFT”). Through an IFT, a person can set aside funds to pay for his or her funeral and burial expenses. Importantly, funds in an IFT are not considered to be part of a person’s estate for purposes of Medicaid qualification. A recent article discusses the basics of the IFT.

Importantly, an IFT should not be used by just anyone. High net-worth individuals who will not require Medicaid assistance, for example, would not use an IFT because they likely have sufficient funds or insurance policies that will cover medical expenses.

However, those who are worried about how to pay for their long-term care costs and do not have money earmarked for their funeral should consider an IFT. A person taking out an IFT will be required to pay completely in advance, and will not be permitted to take out an IFT for an amount that exceeds 125 percent of the average funeral cost.

Importantly, no medical underwriting is necessary for an IFT. Beyond the one-time payment to the insurance company, the insured party faces no expense from the trust.

Posted on

Dealing with Early-Stage Alzheimer’s

Currently, the sixth leading cause of death in the United States is Alzheimer’s disease. Between 2000 and 2010, the number of deaths caused by Alzheimer’s disease increased by 68 percent. By 2050, the number of Americans with Alzheimer’s disease is set to increase to 13.8 million. As a recent article explains, Alzheimer’s could quite possibly become an epidemic, if it is not one already.

English: PET scan of a human brain with Alzhei...
English: PET scan of a human brain with Alzheimer’s disease (Photo credit: Wikipedia)

If a loved one in your family begins to display the signs of Alzheimer’s disease, the first thing a family should do (beyond medical attention) is be sure that the family member has executed a will, durable financial power of attorney, and health care power of attorney. These documents allow the person to direct how his or her assets will be distributed upon his or her death, and also to direct who should make medical and financial decisions for him or her when he or she is no longer capable.

Importantly, a person diagnosed with early-stage Alzheimer’s may still be able to sign these legal documents. When a loved one is suffering from short-term memory or vocabulary loss, but still has a grasp on reality, he or she can often show the necessary mental capacity to create legal documents.  Although it is best if these documents are created prior to the early-stage dementia, if that is not possible, have a geriatric psychologist evaluate the person immediately prior to signing.

Enhanced by Zemanta
Posted on

‘Spending Down’ for Medicaid Coverage: A Cautionary Tale

Medicaid is a need-based public benefit program that assists citizens in paying for medical care. Therefore, a person can only receive benefits if he or she meets certain income criteria. In order to meet the criteria, many people attempt to spend down their assets. However, if not done properly, a ‘Medicaid spend-down’ could have disastrous consequences. A recent article tells the story of Eugene Shipman, who ran into trouble after attempting to spend down his assets to qualify for Medicaid.

Centers for Medicare and Medicaid Services (Me...
Centers for Medicare and Medicaid Services (Medicaid administrator) logo (Photo credit: Wikipedia)

Shipman and his wife, Arline, began the spend down process in April of 2008, so that Arline would qualify for Medicaid coverage for her anticipated and impending care needs. As part of this spend-down, Eugene disinherited her in his will executed in March of 2009. Following the drafting of the will, Arline’s son, David – who exercised her power of attorney – disclaimed any inheritance from Eugene on her behalf.

Then, in 2010, Eugene unexpectedly passed away. Arline’s attorney scrambled to file a petition to claim an elective share of Eugene’s estate on her behalf. When the trial court denied the petition, Medicaid got involved and asked the court to reconsider. Luckily, the appellate court revoked the disclaimer and granting Arline the elective share.

Had the court determined that the disclaimer should not be revoked, not only would she have lost her Medicaid eligibility, but she would have also missed out on half of Eugene’s estate. The story of Eugene and Arline should remind individuals that they must seek competent counsel and take caution when involved in a Medicaid spend down.

Enhanced by Zemanta
Posted on

ALERT: New Rules for Reverse Mortgages

As the costs of long-term care continue to rise, more and more elderly Americans are turning to reverse mortgages in order to fund these costs. A reverse mortgage allows a homeowner aged 62 or older to convert his or her home equity into cash while also remaining in the home. The homeowner can choose to accept this cash through a line of credit, monthly payment, or lump sum. As a recent article explains, the rules surrounding reverse mortgages are about to change.

Logo of the Federal Housing Administration.
Logo of the Federal Housing Administration. (Photo credit: Wikipedia)

The Federal Housing Administration (“FHA”), which insures and regulates reverse mortgages, recently announced that it will modify the reverse mortgage program in order to reduce the incidence of default. Two major changes include lower caps on borrowing limits and new rules that will make it even harder to obtain a reverse mortgage.

The FHA plans to change the borrowing limits in order to reduce the cap on the amount that a borrower can receive in the first year of a reverse mortgage. After the new rules are implemented, a borrower will only be able to take up to 60 percent of the appraisal value of the home. This amount is reduced from the previous cap of 75 percent.

The FHA will also implement various rules that will make it harder to obtain a reverse mortgage. These rules will also likely reduce the size of the loan that borrowers will be able to receive. The new rules are scheduled to take effect on October 1.

Enhanced by Zemanta
Posted on

Consider a Care Contract When Caring for Your Parents

Many adult children are living with and caring for their elderly parents. As a recent article explains, it would be beneficial for both parties to create a care contract for these services. Through a care contract, the parties can agree that the caregiver will assume responsibility for, and accept a specified payment from the loved one.

A care contract is especially important if the person receiving the care anticipates eventually requiring a nursing home stay. When a person applies for Medicaid coverage, representatives for Medicaid will consider all of the money that he or she has available to pay for his or her care. A person will not be provided with coverage unless he or she has depleted all of his or her financial resources. If that person has a care contract in place, all the money that he or she spent on care will count towards his or her “Medicaid spend down.”

Without a care contract in place, Medicaid representatives may consider the money given to the caregiver to be a “gift” or “transfer of assets.” If this happens, the money will be factored back into a person’s assets and he or she could be denied coverage.

It is also important to have a care contract from a caregiver’s perspective. Without a care contract, other heirs may think that the caregiver offered his or her services for free and may attempt to reduce the caregiver’s inheritance accordingly.