Articles of Importance

TRUSTS AND MEDICAID PLANNING

Many families wonder if putting money or other assets into a trust can protect the family assets from Medicaid claims when a family member becomes ill and needs nursing home care. More

ADVANCE PLANNING FOR HEALTH CARE DECISIONS

For most people, maintaining control over healthcare decisions even when they are physically or mentally unable to do so is very important. Proper Estate Planning can provide…. More

IDENTITY THEFT IT CAN HAPPEN TO YOU TOO

In our ever changing world, identity theft is fast becoming all too common. Last year over 3 million US citizens experienced identity theft and spent an average of 60 hours trying to resolve….More

LET’S CLEAR THE CONFUSION ON MEDICARE DISCOUNT PRESCRIPTION CARDS

The recent Medicare Modernization Act of 2003 provides a two phase prescription benefit to seniors. … More

PAYING YOUR MONTHLY BILLS

WHEN YOUR SPOUSE IS IN A NURSING HOME

When a spouse’s health indicates the possibility of nursing home care, you need to think about a number of issues including: how long you can care for the spouse at home, how to protect family finances, and how to qualify for Medicaid payments if the nursing home stay is required. More

PREPARING FOR A NURSING HOME STAY.

Baby boomers are reaching middle age and are facing concerns of elder care for parents and, in the not-so-distant future, for themselves. More

LONG TERM CARE INSURANCE – SOMETHING WORTH CONSIDERING.

The purpose of insurance is to provide protection from probable events in life that would, without coverage, subject you to significant financial loss. Long Term Care Insurance certainly falls into this category. It is an essential component to consider in every financial plan; its impact should not be overlooked. …More

TRUSTS AND MEDICAID PLANNING

Many families wonder if putting money or other assets into a trust can protect the family assets from Medicaid claims when a family member becomes ill and needs nursing home care. For many years some trusts were used effectively to shelter assets from being used for nursing home care; but a major change in the laws in 1993 has made it much more difficult to use trusts for Medicaid planning.

Many transfers of assets either into or out of a trust will be considered a transfer of an asset for less than fair market value (a gift transfer), triggering a disqualification of a person from Medicaid coverage for months or even years.

Medicaid trust rules are very complex but here are a couple examples to think about.

John sets up an irrevocable trust and contributes $300,000 to the trust. During John’s life he may use the income from the trust but cannot remove any of the principal. When John dies, the principal goes to his children. Because John cannot have any of the $300,000 paid to him, this transfer to the trust is considered a gift transfer for Medicaid purposes. As a result, there is a 60 month look back period that Medicaid will use to determine John’s eligibility for Medicaid coverage for nursing home care. If John applies for Medicaid anytime during the 60 months from the date he contributed the $300,000 to the trust, Medicaid will consider the entire $300,000 to be John’s for determining whether or not he is eligible for Medicaid. This is true even though John cannot remove the principal from the trust. In this example, if John were to apply for Medicaid within the 60 month period, he would be ineligible for Medicaid for several years. If John applied for Medicaid 61 months later, the $300,000 would not be counted as John’s asset for Medicaid eligibility.

If, on the other hand, John creates a revocable trust and puts $300,000 into the revocable trust, Medicaid does not consider the $300,000 contribution to the revocable trust to be a disqualifying transfer. John has control over the assets in the revocable trust which are available to him and remain countable assets for Medicaid purposes. Therefore, if John applies for Medicaid, all of the assets in the revocable trust would be available to be used by John for nursing home care prior to his qualification for Medicaid to pay for the nursing home care. If John transferred assets out of the revocable trust, let’s say $100,000 to John’s son, John, Jr., the transfer is a gift transfer with a 60 month look back period. So, the transfer from the revocable trust to John, Jr. would be a disqualifying transfer if John applied for Medicaid within 60 months of the transfer. If John withdraws the $100,000 from his revocable trust and then personally gives the $100,000 to John Jr., there would be a gift transfer subject to a 36 month look back period rather than a 60 month period.

As you can see by these examples, use of trusts can have a major impact on Medicaid planning. Seeking competent advice and planning are the keys to preparing for any nursing home stay. It is important to remember that the Medicaid rules relating to trusts are complex and subject to change. These examples of John creating either a revocable or irrevocable trust only touch on the complicated issues of trusts and Medicaid coverage. We will be happy to receive questions from you concerning these matters and other issues regarding estate planning and Medicaid planning. Remember, you should always seek competent legal and financial advice on any of these issues.

David G. LeFrancois is an Attorney licensed in New Hampshire and Massachusetts with over 27 years experience. He represents clients in Estate and Medicaid planning with offices at 6 Lane Road, East Derry, New Hampshire, 03041. Telephone: (603) 432-9539. E-mail: dglefranc@aol.com.

David H. McLaughlin is a Certified Financial Planner™ and President of Nutfield Financial Services, Ltd., a Registered Investment Advisor with the New Hampshire and Massachusetts Securities Divisions, and provides financial services to individuals and small businesses in New Hampshire and Massachusetts with offices at 6 Parker Way – PO Box 297, Auburn, New Hampshire, 03032. Telephone: (603) 644-4855. www.Nutfieldfinancial.com E-mail: David@NutfieldFinancial.com .

CFP® & Certified Financial Planner™ are marks owned by the Certified Financial Planner Board of Standards, Inc.

ADVANCE PLANNING FOR HEALTH CARE DECISIONS

For most people, maintaining control over healthcare decisions even when they are physically or mentally unable to do so is very important. Proper Estate Planning can provide this capability through the preparation of a living will and a health proxy.

A living will documents your direction of care in areas such as resuscitation, life support, artificial nourishment, pain management and medication. This direction is implemented on your behalf if and when you become physically or mentally incapacitated. A health proxy also known as a durable power of attorney for health care appoints a person to act on your behalf as your proxy or agent, to make medical decisions on your behalf in the event you are incapacitated. These two documents work together to provide active decision making capability on health care issues on your behalf within your per-established guidelines.

Living wills and health proxies although available in all 50 states are not universal each state may have unique requirements. Having these documents prepared by a local attorney will ensure that these documents conform to your state’s laws. This is especially important if you reside in more than one state during the year. For example a winter home in Florida and a summer home in New Hampshire.

Once prepared you should discuss these documents with and provide copies to your primary care physician, your health proxy and your family. This will reduce the chances of misunderstanding and conflicts among family members. You should also keep your original documents in a safe but accessible location for your health proxy or physician. One logical location is with your attorney.

According to the National Council on Aging, although the majority of American adults recognize the importance of this capability, only 20 to 30 percent of American adults actually have them. Too many people assume that these documents are only for senior citizens, but this is a misconception. Many younger people are involved in accidents that place them in situations where these documents would be greatly supportive.

Preparation of a living will and a health proxy are basic components of a comprehensive estate plan. Estate plans should be addressed periodically to ensure that they are kept up to date reflecting current law and your current wishes.

We will be happy to receive questions from you regarding this week’s topic or other matters that affect your financial and estate planning through this column. And remember, this column is only a summary of complicated issues. You should always seek competent legal and financial advice on all of these matters.

CFP® & Certified Financial Planner™ are marks owned by the Certified Financial Planner Board of Standards, Inc.

IDENTITY THEFT IT CAN HAPPEN TO YOU TOO

In our ever changing world, identity theft is fast becoming all too common. Last year over 3 million US citizens experienced identity theft and spent an average of 60 hours trying to resolve the issues it creates. Any time people gain access to your information identity theft can occur. Your personal information becomes vulnerable any time it is made available to others such as: a credit or loan application; a debit or credit card transaction either in a store or online; theft of your mail; or simply disposing of personal information in the trash.

If you find that you are a victim of identity theft you should take immediate action. The quicker you react the better your chances to minimize the impact. Here are a few immediate steps you will need to make:

Contact the fraud department at any one of the three credit bureaus and file a fraud report. The bureau you report to will immediately notify the other two bureaus. Your credit profile will be flagged so that no new accounts or changes to existing accounts can be implemented without your notification and approval. In addition each bureau will forward a copy of your credit report for your review and correction.

Experian 888-397-3742 or www.experion.com

Equifax 800-525-6285 or www.equifax.com

TransUnion 800-680-7289 or www.transunion.com

Go to your local police station and file an identity theft / fraud report. You will need to retain the case number so that you can provide that information to the various creditors involved.

Contact the Federal Trade Commission (FTC) 877-438-4338 or www.ftc.gov/ftc/consumer.htm and file a complaint report. The FTC maintains a database on fraud / identity theft and makes this data available to law enforcement agencies and creditors. In addition the FTC has online resources to assist you in dealing with identity theft.

Contact the Social Security Administration 800-269-0271 or www.ssa.gov and request a report on your social security number to make sure it is not being used by someone else for employment or to avoid paying taxes.

Contact each of the creditors that have a fraudulent account or have fraudulent activity on your valid accounts. You will need to ask for the Fraud department. Explain the situation to them; they will immediately freeze the account in question. They may also require you to sign an identity theft affidavit.

Contact all of your other creditors and notify them of the situation. This will allow them to work with you to take extra precautions, such as, changing PIN numbers and passwords, and making sure address changes are not made without your notification and approval.

With persistent effort you will eventually contain the problem and one by one resolve the issues. Although this can happen to anyone there are actions you can take to reduce your risk:

Shred all trash that contains personal information before you dispose of it.

Retrieve your mail promptly from your mailbox or use a post office box, never use your mail box for outgoing mail.

If you are going on a vacation or a business trip contact the Postal Service 800-275-8777 and request a vacation hold on your mail.

Never carry your social security card, keep it in a safe place.

Only provide your social security number when it is absolutely necessary. Request another identifier where possible.

Check your credit report at least once a year, check all entries and cancel any accounts that are inactive.

Never use your mother’s maiden name or any other easily obtainable identifier as a password.

When it comes to identity theft an ounce of prevention can be worth a pound of cure.

We wish you a happy and healthy new year filled with prosperity (and planning) and will be happy to respond to your questions concerning these matters through this column. And remember, always seek competent legal and financial advice on all of these issues.

CFP® & Certified Financial Planner™ are marks owned by the Certified Financial Planner Board of Standards, Inc.

LET’S CLEAR THE CONFUSION ON MEDICARE DISCOUNT PRESCRIPTION CARDS

The recent Medicare Modernization Act of 2003 provides a two phase prescription benefit to seniors. The first phase, which became effective in May of 2004, provides seniors with the option of obtaining a prescription discount card and, depending on their income, a credit of $600.00 per year. The second phase, which will not become effective until January of 2006, replaces the discount cards with a more formal prescription drug plan.

The design of the benefits is complicated and has generated a lot of confusion. In addition, companies have been flooding seniors with advertisements seeking to convince them to use their prescription discount card. There are also a number of private prescription discount cards that are also competing but are unrelated to this benefit, which further adds to the confusion.

Let’s try to simplify this as best we can. First let’s defer on the benefits that will become effective in January of 2006 we will review those at a later date. Let’s focus on the prescription discount card program that is currently available. Prescription discount cards (cards) are available to all seniors who are not already covered by Medicaid, TRICARE for Life (Military Health Insurance), FEHBP (Federal employee & retiree heath insurance) or an employer sponsored plan. If you have a State sponsored plan or a Medigap plan you are still eligible and you may be able to use them in combination. The cards require an annual enrollment fee but they provide a 10 – 25% savings on prescription drugs. If you have two or more prescriptions per month there is a $30 annual enrollment fee. If you only have one prescription per month the annual enrollment fee is $19. You can only have one card active at any one time. You can change cards but you will have to pay another annual enrollment fee and wait 30 days to have it activated. So it is important to carefully select the card that meets your needs, which we will go over shortly.

There are added benefits for low income seniors. Single seniors with income no more than $12,569, or married with no more than $16,862, can qualify for a credit of up to $600 per year. This credit can be used to pay for your prescriptions and the annual enrollment fee. Income includes all taxable income plus retirement benefits paid by social security, railroad retirement, the Federal Government including VA payments and disability payments.

The cards are issued by private companies and to be eligible they must have the “Medicare Approved” symbol on the card. You need to carefully compare each company’s offerings because not all cards provide the same benefits. Each company decides which prescriptions will be discounted and the amount of the discount for each drug. To assist you in comparing these cards you can call Medicare at 800-633-4227 or you can go to www.medicare.gov and scroll down to Search tools ( on the left side ) and then select ‘Prescription Drug and Other Assistance Programs”. The website requires you to enter your zip code and medications and then provides you with a list of companies’ offering cards in your area. It will also calculate how much each of your prescriptions will be under each plan. This will allow you to compare the costs under each plan to find the one that is most beneficial to your specific needs. Once you select a plan, it will display the exact locations of the drug stores that you can go to. This site greatly simplifies the process of choosing a company.

Once you have selected a company, you need to contact them to request an enrollment form. When your enrollment form is processed and approved you will receive your card along with additional information to assist you in using the card such as pharmacy locations, covered drugs, complaint procedures, etc. It normally takes up to 30 days to process your enrollment request.

If you have any questions on this week’s topic or if you have general questions on Estate, Medicaid or Financial Planning issues please email us and we will reply and or use your question in a future article.

CFP® & Certified Financial Planner™ are marks owned by the Certified Financial Planner Board of Standards, Inc.

PAYING YOUR MONTHLY BILLS

WHEN YOUR SPOUSE IS IN A NURSING HOME

When a spouse’s health indicates the possibility of nursing home care, you need to think about a number of issues including: how long you can care for the spouse at home, how to protect family finances, and how to qualify for Medicaid payments if the nursing home stay is required.

Every January, the Medicaid rules change the amount of assets and income the at home spouse can keep when the ill spouse has to go to a nursing home.

For example, Medicaid rules allow the at home spouse to keep a portion of the couple’s assets (called the “resource allowance”). As of January 1, 2005, the at home spouse can keep $19,020 worth of assets or up to one half of all of the couple’s assets (up to a maximum of $95,100), whichever is greater. The at home spouse may also be able to keep additional assets if the assets are not considered “countable assets” under the Medicaid rules. All of the couple’s other assets would have to be spent before the ill spouse would qualify for Medicaid payments for the nursing home care.

In addition to keeping a portion of the couple’s assets, the at home spouse may be entitled to keep a certain portion of the nursing home spouse’s income (such as social security or pension payments), which is called the “spousal income allowance”. The at home spouse is currently entitled to a minimum of $1,562 per month of income. If the at home spouse’s shelter costs (rent, mortgage, property taxes, insurance, and utilities) are substantial, the at home spouse may be entitled to a higher allowance up to a maximum of $2,378 as of January 1, 2005. The at home spouse could possibly request a higher amount through a Medicaid Fair Hearing procedure or a court order.

Needless to say, the rules on what assets and income may be available to an at home spouse when an ill spouse has to go into a nursing home are complicated. If a loved one is facing a possible nursing home stay, you should seek competent advice from financial and legal advisors.

CFP® & Certified Financial Planner™ are marks owned by the Certified Financial Planner Board of Standards, Inc.

PREPARING FOR A NURSING HOME STAY

Baby boomers are reaching middle age and are facing concerns of elder care for parents and, in the not-so-distant future, for themselves. When a parent or spouse’s failing health no longer makes at-home care possible, it is vital not only to find the appropriate nursing home for the ill person, but also to (1) protect the heath and financial security of the at-home spouse, if there is one, and (2) obtain Medicaid coverage to pay for the high cost of nursing home care.

When a person enters a nursing home, the nursing home is paid for by (1) private pay (the person pays for the entire cost of the nursing home which could be $4,000 - $7,000 per month); (2) long term care insurance if a policy has been purchased; or (3) Medicaid if the person qualifies financially.

MEDICARE is a “medical needs” program which is not financially need based but provides only up to 100 days of nursing home care.

MEDICAID is a “custodial care” (i.e. nursing home) program which is a financial need based program. If a person qualifies based on his or her finances, Medicaid provides nursing home care as long as the person needs it.

Who Qualifies for Medicaid? The rules to qualify for Medicaid are very complicated and differ for single and married persons.

If single, you only qualify for Medicaid if you have no more than $2,500.00 worth of “countable assets” (one motor vehicle, furniture, clothing and personal effects are not countable, but most “liquid assets” such as cash, bank accounts, CD’s, stocks, bonds, and IRA’s are countable). Usually, the ill person’s home also must be sold and proceeds used before a single person qualifies for Medicaid.

If married and one spouse enters a nursing home, the at-home spouse can keep the home residence and countable assets of approximately $84,000.00. All other countable assets must be “spent-down” before the ill person qualifies for Medicaid coverage.

There are additional rules that can disqualify a person facing a nursing home stay from Medicaid coverage if he or she gives away assets to children or others within 3 years of applying for Medicaid coverage (or 5 years in the case of trusts).

What can you do? Even though Medicaid is need-based, a family can restructure the family assets to qualify for Medicaid while preserving at least some assets for the at-home spouse and other family members.

Seeking competent advice and planning are the keys to preparing for a nursing home stay. Planning can take place before a parent or spouse enters a nursing home and after he or she enters a nursing home but before a Medicaid application is filed. It is important to remember Medicaid rules are complex and subject to change. This brief summary only touches on the complicated issues of Medicaid coverage. Future articles will look at more details of Medicaid and other estate planning issues facing elders today. We will be happy to receive questions from you concerning these matters. And, remember, you should always seek competent legal and financial advice on any of these issues.

CFP® & Certified Financial Planner™ are marks owned by the Certified Financial Planner Board of Standards, Inc.

LONG TERM CARE INSURANCE – SOMETHING WORTH CONSIDERING.

Long Term Care Insurance pays for custodial care for people who can no longer perform basic activities of daily living such as eating, bathing, dressing, etc. Payments for this type of care are not provided by health insurance. Medicare insurance sometimes pays for custodial care for a very limited time. Medicaid is the welfare program that provides coverage for long term care in a nursing home; but only if you meet strict financial guidelines. Typically, the cost of this type of care is very expensive and most people are not insured. As a result, many families face the unpleasant need to spend most of their life savings on nursing home and medical costs before becoming eligible for Medicaid. Worse still, Medicaid only provides payments for services in a nursing home. At home care is not an option. In this area, however, a little planning can go a long way.

No one likes to think about buying Long Term Care Insurance. After all, the thought of growing old and failing is not a topic most people want to dwell on. But for many of us, someday it will be a reality. There have been a number of changes over the past fifty years prompting the need for Long Term Care planning. For one, family structure is much different today than it was fifty years ago. The family structure displayed in so many 1950 and 1960 television programs is no longer a reality. Today, families with two working spouses can no longer care for their parents for extended periods of time. Great strides in medical care have extended our lifespan but have also exposed us to periods of chronic illnesses brought on by longer life. These major changes have given rise to the need for Long Term Care Insurance.

Long Term Care Insurance is still relatively new compared to other forms of insurance. As a result, underwriting rules are in flux and the claims experiences point to possible higher rates. This trend will probably continue as the baby boom generation starts to increase the demand for long term care. To protect against rate increases, look for long term care insurance companies that offer fully paid plans with rate guarantees. Another issue to consider is the ability of your insurance company to be there in the future. Many companies have consolidated or altogether left the Long Term Care Insurance market. This trend may also continue; but that does not mean a policy purchased today is always in major jeopardy. Insurance is highly regulated by individual states. New Hampshire has safeguards in place to provide for limited policyholder protection. One way to reduce your risk is to make sure that the company you place your policy with has a solid rating and history. Choosing the right Long Term Care policy is complicated and has significant impact to Estate Planning, Medicaid Planning, Retirement Planning and Tax Planning. Care should be taken to be sure your agent or planner is capable of fully understanding your specific circumstances, needs and goals.

The purpose of insurance is to provide protection from probable events in life that would, without coverage, subject you to significant financial loss. Long Term Care Insurance certainly falls into this category. It is an essential component to consider in every financial plan; its impact should not be overlooked.

This brief overview on Long Term Care only touches on its many complicated issues. We will be happy to receive questions from you concerning long term care insurance and other estate and financial matters. And, remember, you should always seek competent legal and financial advice on any of these issues.

CFP® & Certified Financial Planner™ are marks owned by the Certified Financial Planner Board of Standards, Inc.