Crisis planning upon institutionalization

When a loved one is institutionalized, your financial situation may be impacted. Here are some tips to help you transition:

1. Engage competent counsel. It is very important to ensure that the lawyer you have selected is knowledgeable in elder law. This sub-specialty of estate planning allows lawyers who are specially trained to assist with tax, estate planning, and asset protection planning for the benefit of a client.
2. Review tax issues. Any time there is a gift, transfer, or any transaction involving real estate, stocks, bonds, and often CD’s or bank accounts, income tax, estate tax, and gift tax consequences must be reviewed. Whether assets pass during lifetime or at death make a significant difference in whether there will be a capital gain or no gain. Similar rules apply relative to real estate, especially whether a person obtains their exemption from tax upon the sale of the principal residence. Tax rules change frequently, and therefore, it is important to be sure that the advisor and accountant are involved in the planning process.
3. Purchase a pre-paid funeral plan. In most states, including Massachusetts, it is permissible to pre-pay a funeral or establish an irrevocable trust for one’s burial expenses. At the current time, any reasonable expenditure as a pre-paid expense is allowable if part of a irrevocable contract. Most funeral homes are aware of the rules of Medicaid eligibility, and if married, the husband and wife are both permitted to pre-pay their funerals without any look-back period.
4. Open burial account. In addition to pre-paying a funeral, any person who is applying for Medicaid is also permitted to have a $1,500 burial account. This account must be listed as a burial account, and no funds may be added in the future or withdrawn except for interest, which may accrue on this account during its lifetime. Again, there is no disqualification period for setting up an irrevocable burial account even when a person is already institutionalized.
5. Purchase a new vehicle if allowable. A reasonable amount may be spent on a car if the person who is institutionalized has a spouse living in the community who is not institutionalized. Transportation is not a necessity, but the regulations permit a car to be purchased. That is not to say that a “luxury car” should be purchased upon a spouse entering a nursing home, but rather, a reasonable sum may be expended.
6. Purchase new home and make home improvements. In the event that a person is renting and has sufficient assets to purchase a house or condominium, this may be an acceptable transaction so long as there is a community spouse who is living at home. However, if a person is institutionalized and is single, without any reasonable likelihood of returning to the community, then clearly, a purchase is not allowable. There are special rules regarding purchases of real estate with one or more names, as well as mortgages and reverse mortgages, all of which are techniques that require special attention. In addition, home improvements and renovations are allowable so long as there is a community spouse living in the premises.
7. Purchase personal items or household goods. Certain items of tangible personal property are allowable to be purchased. These would include new furnishings, carpeting, a new television, clothing, and other goods that are allowable under the regulations. Again, the rules regarding these items vary from state to state and are also changed within a state frequently, so attention must be paid to the regulations regarding asset purchases.
8. Pay debts if legitimately eligible to be repaid. The payment of debts is also allowable, including paying on a mortgage. Other debts, such as outstanding medical bills, credit card bills, etc. are allowable, but the bills may be carefully scrutinized to ensure that the goods charged are for the institutionalized person and/or their spouse.
9. Take a vacation if possible. If able to, the expenditure of money on one’s self is allowable, including the taking of a vacation. However, paying for a vacation for an entire family would be frowned upon. But, as opposed to having funds spent on long-term care, a person may expend funds on himself, such as taking that long deserved and anticipated vacation.
10. Review all proposed expenditures with an elder law attorney before making any payments, decisions, or gifts. Before taking any action in all of the above options, it is vitally important to check with a qualified attorney, preferably an elder law attorney, who will be able to look at each particular situation individually to determine the best course of action. There are no two situations that allow any “boilerplate” technique to be taken, but rather, similar to medical care, each person is looked at individually, and a plan is prepared for their specific situation regarding family, assets, and proposed care.

By: Hyman G. Darling, Esq.

Comments

[lotro gold]

I tried to think so, but I found it was not as the same in the actual process. As you mentioned, I still have doubts, but really thank you for sharing!