Medicaid Planning: The Ins & Outs of MMMNA – Part Two

April 2, 2014

by David Zumpano with No Comment Asset Protection Legal Technical Medicaid

This post is part two of our series on determining MMMNA in your Medicaid planning. If you didn't see the first post, you can find that here.

Our last post delved into how you determine the minimum monthly maintenance needs allowance, or MMMNA, which is the minimum income allowance for the community (or well) spouse in a Medicaid claim. If you read that post, you should be able to figure out the MMMNA for a few basic cases. So let's go through what the minimum and maximum would be, and what the MMMNA would be, in each of four scenarios.

Starting with scenario one and scenario two, the fact pattern is this:

The husband has $3,000 a month of income.
The wife has $1,000 a month of income.
The MMMNA minimum is $1,939; the maximum is $2,931.

In scenario one, the husband is in a nursing home, so we know that the wife is the community spouse, and she has $1,000 in income. Plus, we are in a max state, which means that the community spouse is entitled to the maximum income – $2,931.

What does that mean? That means of the total income of $4,000 between the husband and wife, $1,069 will be contributed toward the cost of care each month. So essentially the husband goes into the nursing home, the wife gets her $1,000 of income– or she gets to keep her $1,000, plus she gets to keep $1,931 of the husband’s monthly income. The balance of $1,069 ($4000 – $1000 – $1931)would go toward the cost of his care. (We are setting aside the discussion of his personal needs allowance, but whatever it is in this state, the amount contributed to the cost of care would be reduced by the personal needs allowance.)

What if the wife went into a nursing home? What’s the MMMNA in that case? It’s still $2,931, but now the husband is the community spouse, so he would be able to keep $2,931 and he would have to contribute 25% of the amount over $2,931. So his $3,000 minus $2,931 comes out to $69, and 25% of that would be $17.25. But remember, New York is the only state that currently requires spousal contribution for incomes above the MMMNA. In all the other states the husband as community spouse would get to keep his total $3,000 in monthly income, and the cost of care would be $1,000, the wife’s income, less whatever the personal needs allowance is for the state.

Why? Because every other state allows the community spouse to keep whichever is greater, the MMMNA or the community spouse’s actual income. As discussed in the previous post, we make that distinction because the federal Medicaid law does not require it; the law does not even allow it. The states allow it. Remember, the federal government sets the laws on Medicaid, and the states can be less restrictive, but they cannot be more restrictive. So in most states if the husband, who is the community spouse in this scenario, has $3,000 a month of income, they will allow him to keep 100% of his income. That’s why we have shown it here as $3,000, and all you would lose is the institutionalized spouse’s income of $1,000.

So how would this be different in a range state? With the husband going into the nursing home, the wife is now the community spouse, so the range state would essentially say, she can keep the bottom of the range. She has $1,000 of income, but the MMMNA says the minimum is $1,939, so she gets to keep her income, plus $939 of his income. So in that scenario she would get $1,939, and the remaining $2,061 of his income would be contributed toward the cost of his care (again less the personal needs allowance amount, which he would get to keep).

So that's the difference between a range state versus a max state. Now again, this is because the husband went in the nursing home and he is the higher income earner. In the range state, because the wife is the lower income earner, it would be the same scenario. The husband would be the community spouse. In the range state, again the top of the range is $2,931. But again, most states don’t have any chargeback. So the answer for a range state in this particular fact pattern would be the same as for a max state.

Don't feel alone if you find this confusing. Our intent was not to confuse you, but to show you that there is a science to Medicaid and how this works. Stick with us in our upcoming MMMNA posts and we'll continue to bring clarity to this fairly complex issue.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

Medicaid Planning: The Ins & Outs of MMMNA – Part One

March 26, 2014

by David Zumpano with 2 Comments Asset Protection Medicaid

Part of planning for a married Medicaid applicant is figuring the minimum monthly maintenance needs allowance, which is the minimum income allowance for the community (or well) spouse. Medicaid law says that the income of the Medicaid applicant in excess of the limits must be used toward the cost of care. But if the applicant has a spouse, Medicaid, through the concept of the minimum monthly maintenance needs allowance (“MMMNA”), allows the community spouse to keep some or all of their income.

Medicaid considers the gross income of the community spouse. If the community spouse’s income is in excess of the MMMNA, then under the federal rules, 25% of the community spouse’s income must be used for cost of care. While New York is currently the only state that enforces that provision, we must be aware of the federal rules because it is probably only a matter of time before other states are assessing the 25%.

Now if the community spouse’s income is less than the MMMNA, then income from the applicant will be diverted to the community spouse to try to get the community spouse’s income up to the MMMNA. If the community spouse’s income is still below the MMMNA, then assets needed to generate sufficient interest to fill the income up to the MMMNA are exempt. This is what we call the assets to income rule.

But there's a little more to it than that. The federal law says there’s a minimum and there’s a maximum MMMNA. The states are allowed to set the MMMNA for the community spouse. But the federal government says the states can’t set a MMMNA below $1938.75 (we will call it $1,939 to keep the math easy) or above $2,931. So your state’s MMMNA will be somewhere between those two numbers.

States vary in how they set the MMMNA. About half of the states are what we call “max states.” They set the MMMNA at the maximum end of the range and say that the community spouse can keep up to $2,931 in gross monthly income. Other states are “range states.” That is the MMMNA can fall somewhere between both the maximum and minimum range the feds allow for the MMMNA. In a range state, if the community spouse's income is less than $1,939, then the community spouse can take the institutionalized spouse’s income up to that minimum. And what happens if the community spouse’s income was more than the minimum but less than the maximum? Then the income of the community spouse would be the MMMNA.

Let’s consider the following examples to show you what I mean.

I had a community spouse who had $1,000 of income. The applicant, the husband, was the predominant income earner, and the community spouse had $1,000 of income. In a max state, the law says the community spouse could keep the first $2,931, regardless of whom it came from. So if the wife had $1,000 of income, she would be able to keep the first $1,931 of the income of the husband, who’s in the nursing home. And if the husband didn’t have $1,931, then the assets to income rule would come into play. That means the law would say that, if the total income between the institutionalized spouse and the community spouse does not equal the MMMNA, then the community spouse can exempt additional assets needed to generate the income to get the community spouse up to the MMMNA. So again, if this is a max state, the threshold is $2,931. If the community spouse had $1,000 and the husband had $3,000 of income, the community spouse would be able to keep $1,931 of the applicant’s income.

In a range state, the community spouse is allowed to keep the minimum, but if the income is below $1,939, then the community spouse gets to take income from the institutionalized spouse to get to the $1,939 limit. For instance, if a community spouse’s income was $1,000, she could take $939 from the husband’s income. If she had income of $2,500, then her MMMNA would be $2,500 because her income is below the maximum and above the minimum MMMNA. And if a community spouse earns more than the maximum MMMNA, then 25% of that amount in excess would have to be contributed toward the cost of care. Those are the federal rules. But remember, as of now only New York applies the 25% rule. Most states allow the community spouse to keep any income in excess of the MMMNA.

We will continue to delve into MMMNA in future posts on this blog, to help you understand the nuances and work through the complexities of this issue.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

The Estate Plan Audit

March 19, 2014

by David Zumpano with One Comment Estate Planning Drafting Software Legal Technical

At Lawyers With Purpose, we put a tremendous amount of time and expertise into developing tools for estate planning attorneys to help them day in and day out, in their practice and with their clients. One tool for example is the "Estate Plan Audit."

The Estate Plan Audit is a checklist of 15 questions to tap into the client’s needs. The goal of the Audit is to find out where they are currently, and where they want to be. And we can do that by asking them just 15 very important questions that address what their estate planning goals are. Then ask them to rate them each, on a scale of 1 to 10, one being not very important and ten being very important. What they’re really doing is showing us what's important in their world.

When you use the Estate Plan Audit, the best part about it is, that it becomes a non-sales process. This completely focuses on the client, without the attorney pushing any particular agenda. We’re not pushing any particular trust or plan on the client. They’re really looking at where they are now, what their needs are and what they might want.

If your an LWP members you can review our 2012 Enhancement Retreat, where members Jeff Bellomo and Susan Hunter discuss in much greater detail the Estate Plan Audit, how to connect it to the workshop and the stories told in The 7 Threats Workshop. All you've got to do is log into the members website and hover over the “LWP Process” tab, choose the “LWP Program Modules Folder,“ then scroll all the way down to a folder titled "2012 Annual Enhancement Retreat." You’re looking for the November 14, 2012, Day 1, Video 4. Start listening right about the 27 minute mark!

We hope you put the Estate Plan Audit to good use. It's a great tool for distilling all of the pieces of an estate plan into what really matters to the client, in a way that won't feel like a sales job. If you aren't a Lawyers With Purpose member, contact Molly Hall at mhall@lawyerswithpurpose.com for more information.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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Medicaid: Understanding The Six Activities of Daily Living Standards (ADL’s)

February 26, 2014

by David Zumpano with 2 Comments Uncategorized

Many times in complicated Medicaid planning cases, the attorney is trying to work out the funding plan before figuring out what rules apply. Before you go any further, you've got to determine whether the client is eligible, and what the qualification standards are.

Everyone focuses on the assets and income test, but that's not the only test. Number one is, does the client meet the needs test? By that we mean the “Activities of Daily Living,” or ADL's. They are necessary in determining eligibility for Medicaid.

The six ADL standards for Medicaid clients are whether they can:

Bathe themselves.
Dress themselves.
Transfer from a bed or chair, which usually means from a sitting position to a standing position.
Walk.
Feed themselves.
Toilet themselves.

If your client is unable to do one of those six things, the client would be considered in need of adult care, which is the lowest level of care. If the client is missing two of the six, that would earn a rating of assisted living. If the client needs help in three or more of those areas, that would be considered chronic care need or nursing home need, which in most states is the threshold that qualifies the client for Medicaid.

There is a major exception to the ADL standards, however: severe dementia. Usually severe dementia will inhibit the client's ability to do one or two of the six ADLs, but not always. If you can bathe and dress yourself – and you can do all six of these things, but you don't know why you’re doing it or how to do it or when to do it, then you will be considered to have severe dementia, which is an automatic qualifier for chronic care or nursing home care.

One other note: Traditionally, Medicaid only covers the chronic care level. Some states, including New York, will cover assisted living, but those rules are dependent on your state. Most states do not cover assisted living. So knowing your state's standard is essential to serve your Medicaid clients.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder of MPS, Founder and Senior Partner of Estate Planning Law Center

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Medicaid Planning: Who Should Consider It, Part 2

February 18, 2014

by David Zumpano with No Comment Medicaid

As you saw in my prior post titled “Medicaid Planning: Who Should Consider It,” it can be a shock to clients when they realize how much it can cost to provide for their care. So what did this piece inspire you to think?

The purpose of the analysis in the previous post was to identify whether people have properly planned for the long-term care they may incur. Our job as counselors is to advise people on the impact of their decisions. Fact by fact case analysis.

The conclusion was that, if you have anything short of $3.5 million, you aren't going to be able to pay for that care; the payment is going to come out of your assets. Most people want to protect their assets, and they hire us to help them with that. So the question is, are you having this conversation with people? Finding our what they want? If not, you need to.

Medicaid has a set of rules that determines whether someone qualifies. It’s the client's choice, not ours to decide for them. Our job to advise them and let them decide. We help them identify the long-term impact their decisions would have, and whether they will be able to protect their legacy.

Long-term care insurance is another option, and it can be a great solution. But it doesn't mean you have to give up on qualifying for Medicaid – find the “and” by figuring out how the client can qualify for both. If you've helped your client meet the legal guidelines for that, you've done something that will make a lasting impact.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder of MPS, Founder and Senior Partner of Estate Planning Law Center

Medicaid Planning: Who Should Consider It.

February 11, 2014

by David Zumpano with One Comment Medicaid

The first question you'll run into in Medicaid planning is, who needs it? Attorneys will bump up against a variety of scenarios, from those clearly in need to others who are convinced they're "all set." So which ones truly need your help?

The safe answer is, more people need this than you might think. Let's run through a typical case, and you'll see what we mean.

Most of our Medicaid clients here have income of around $2,500 and live on $2,000, so we'll use those numbers for our typical case. The difference between those two means there's $500 in disposable income every month.

Now let's see how far that gets us. In this area, typical long-term care costs are about $6,000. Subtract the $500 in disposable income from that and you've got a shortfall of $5,500 per month in paying for the client's care. That's $66,000 per year, and that will have to come from the client's principal.

So the next question is, how much investment do we need to cover that shortfall? To figure that out, choose an expected rate of return. Let's say 5%; if we went any lower, you might freak out. You'll see why in a minute.

The $66,000 divided by your .05 rate of return tells you how much money you would need in investable assets to generate the funds to cover the shortfall. In this case, that amount would be $1.32 million. If you can only manage a 3% return instead of 5%, which is more likely, then you would need $2.2 million in investable assets. So, as you can see, someone who thinks he is set because he has $1 million is in for a shock, because he's not even close to covering his costs of care.

For the attorney, this is a powerful way to explain who should be scheduling a Medicaid conversation with you. Because a client who does not have the total net worth to pay his own way has to understand that it’s going to be eating up his principal, and it becomes a planning issue for you as the attorney to be able to solve. And that’s really a powerful tool to help you identify whom in your community this would apply to.

A word of warning: You're probably better off presenting the above math to a referral source, not directly to a client. If you drop this on your clients, our experience is that it can seem too technical, and you really want to keep it simple for them. Do the math for your client, then just ask the big question: "Did you know that you don't have sufficient assets to pay your way if needed?"

Factoring in the numbers that are relevant to your region and your practice. If in you area, for instance, the cost of nursing homes is more like $9,000 per month, the client would need $3.4 million sitting in a brokerage account generating 3% to cover that. So being a multimillionaire might be just enough.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder of MPS, Founder and Senior Partner of Estate Planning Law Center.

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Obama Care & Estate Recovery – The Impact on Medicaid – Lawyers With Purpose

February 3, 2014

by David Zumpano with 2 Comments Asset Protection Medicaid

The Omnibus Budget Reconciliation Act of 1993 required all states to implement an "estate recovery program" to recover assets from the estates of any individuals who received Medicaid benefits during life. The default language of the federal statute provides the state can recover from the "probate estate" of the Medicaid recipient, but allows the states to expand the definition to include all assets owned by the recipient including joint accounts, lifetime interests, beneficiary designated accounts, and even trusts.

So what does this have to do with the Affordable Care Act, commonly known as, “Obama Care”? There is a new twist coming to light regarding States’ rights to recovery for Medicaid benefits paid. What does the Affordable Care Act have to do with Medicaid benefits? While it does not, in any way, provide care for nursing homes, it does provide that Medicaid can be a provider of health insurance and can be available on the exchange for affordable healthcare. It seems pretty ordinary, except the Affordable Care Act has a provision that ensures estate recovery from the estates of those receiving Medicaid benefits for healthcare.

What does this all mean? Well, for the first time, estate recovery will apply to those individuals who receive Medicaid as a health insurance benefit rather than just as a nursing home benefit. This could impact many seniors who currently rely on Medicaid (in addition to Medicare) to help pay for their medical expenses and healthcare costs. It is unclear whether the enforcement procedures or the state's ability to recover on healthcare-related Medicaid costs will be enforced and, if so, how it will be managed.

It is essential we understand the estate recovery laws and how they impact Medicaid recipients. More importantly, it’s imperative to ensure your healthcare needs will be met now and in the future. The best way to ensure the total protection of your assets and your values now and after you pass, is to plan ahead. Those that have failed to plan are typically the most adversely affected by the rules. I encourage you to make sure you address these new rules when doing your planning.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder of MPS, Founder and Senior Partner of Estate Planning Law Center.

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Do You Know Lorraine?

January 23, 2014

by David Zumpano with No Comment Uncategorized

Recently, while reading the obituaries, I saw that Jeff, my neighbor’s father, died at the age of 78. While viewed as somewhat ordinary, it immediately made me flash back to my childhood and growing up in a neighborhood of over 25 kids, ten of which were myself and my siblings and seven were Jeff and his wife, Lorraine’s, all the same age as one of us.

We grew up in the 70s playing kick the can, red rover, red light/green light and many other outdoor games to keep ourselves busy (there were no video games in those days). With Jeff dying, it symbolized the end of an era we see as the “good old days” where you can relate back to where you came from and appreciate the simple things. I made it a point to visit Lorraine and her children, several of whom I was still casually in touch with, to express my condolences.

Unfortunately for Lorraine, she not only had to deal with the loss of her husband of 55 years, but also had to deal with the tremendous unknown of having to maintain her life without him. You see, Jeff did everything; he paid the bills, managed the finances, and handled all the financial responsibilities of the household, while Lorraine managed the family. Lorraine did not even know how much money they made each month. She was unsure of what bills had to be paid and she was scared to figure it all out now, without her most important ally with her. As an estate-planning attorney, the family naturally started to ask me questions, which began with, what we in the business often refer to as, “the morbid scavenger hunt” – that is, the hunt for information after someone has passed to try and figure out what was being done. They were unaware of insurance policies, financial accounts, bank accounts and, in fact, Lorraine did not even have power of attorney for Jeff in his final phase of life.

This very stressful time leading up to Jeff’s death and after his passing was exacerbated by the unknown and the additional fear created by it. Do you know someone like Lorraine? The truth is estate planning is ensuring you have a plan in place to handle the legal and financial matters while you are alive and healthy, after you become disabled, and after you pass. Ultimately, a properly drawn estate plan will also provide for a smooth transition after the second passing and, most importantly, avoid the family fights.

Lucky for Lorraine, I am an estate-planning attorney and do this every day of my life. And because I have a strong affinity to her, I was willing to sit in her kitchen and go through information with her and her children to try to assemble the past, resolving all the unknowns. We began calls to the insurance companies and some miscellaneous names she had given me all to try to discover all the pieces and parts that made up her financial life. The good news is we are making headway; but it didn’t have to be this stressful.

I feel for Lorraine and I encourage those of you who are not actively involved in your estate to begin the journey of knowledge now to alleviate the unnecessary pain created by the unknown after the pain of losing your loved one.

David J. Zumpano, Esq., CPA, Co-founder Lawyers With Purpose, Founder of MPS, Founder and Senior Partner of EState Planning Law Center.

Medicaid Terms of Art Glossary

January 22, 2014

by David Zumpano with No Comment Asset Protection Medicaid

Dave Zumpano used the below Terms of Art Glossary for the Your Legal Hour series on Medicaid Planning: Who Should Consider It. We've put them in a user friendly format for you to print and use as needed!

CS: Community Spouse: The Spouse of an institutionalized individual and does not reside in an institution.

IS: Institutionalized Spouse: The spouse that resides in an institution and is receiving chronic care (not custodial).

MA: Medicaid Applicant: Individual applying for Medicaid.

MR: Medicaid Recipient: Individual qualified for and who is receiving Medicaid benefits.

INDIVIDUAL RESOURCE ALLOWANCE: The amount of resources (assets) the Medicaid Applicant can retain and still be eligible for Medicaid benefits.

CSRA: Community Spouse Resource Allowance: Minimum and Maximum amount of resources (assets) the community spouse is entitled to retain and have the institutionalized spouse be eligible for Medicaid benefits.

MMMNA: Minimum Monthly Maintenance Needs Allowance: (“Triple M N A”): The minimum amount of income per month a “community spouse” is entitled to retain prior to being required to contribute toward the “institutional spouse’s” cost of care.

SNAP SHOT DATE: The date used to calculate the CSRA. The first day the Medicaid applicant is admitted to a health care facility for at least 30 continuous days and then applies for Medicaid benefits.

LOOK-BACK DATE: The first day of the month in which a MA resides in a health-care facility and applies for Medicaid benefits. (Can apply for benefits retroactively 3 months.)

LOOK-BACK PERIOD: The period of time Medicaid will look at all financial records of a MA. The Look Back Period begins on the Look Back Date.

SPEND DOWN: The method or process of transferring (or spending) MA’s income or assets to get applicant and/or community spouse to Medicaid qualifying levels.

COMPENSATED TRANSFER: A transfer or spending of MA or CS’s income or assets and MA or CS receives something of equal value in return.

UNCOMPENSATED TRANSFER: A transfer or spending of MA or CS income or assets and MA receives no value, or less than the value transferred in return.

MONTHLY DIVISOR: The average cost of one month of private pay nursing home costs in your region. (Must be revised annually by the state)

PENALTY PERIOD: The number of months an MA is ineligible for Medicaid Benefits because of an uncompensated transfer.