Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

Fredrick Niemann, New Jersey Long Term Care Insurance Attorney

“According to some sources, 60% of us will need long term care sometime during our lives. It is important for all of us to prepare for that day when we will need to help loved ones with elder care or we will need elder care for ourselves.”

“It is simply a fact of life to prepare financially for unexpected disasters by covering our homes, automobiles and health with insurance policies and to provide funding for our retirement. But no other life event can be as devastating to our lifestyle, finances and security as needing long term care. It drastically alters or completely eliminates the three principal retirement dreams of elderly Americans, which are:

1. Remaining independent in the home without intervention from others
2. Maintaining good health and receiving adequate health care
3. Having enough money for everyday needs and not outliving assets and income

Yet, it is our experience that the majority of the American public does not plan for the devastating crisis of needing elder care. This lack of planning also has an adverse effect on the older person’s family, with sacrifices made in time, money, family lifestyles and even affecting the family’s or caregiver’s medical and emotional health.

Because of changing demographics and potential changes in government funding, the current generation — more-than-ever — needs to plan for long term care.

If you have spent time helping a parent or loved one cope with a disability resulting from aging, you know the frustration of balancing what you feel they need to do and what they want to do. Communication is strained at times, because after all, you are the child and they the parent, yet physically and mentally the rolls have changed.

When you make directives, assignments and arrangements in advance of needing elder care, then everyone involved can follow the prearranged care plan.

As an example, Jefferson Simpson wrote in his care plan that if dementia or Alzheimer’s inhibited his mental abilities to communicate or recognize his surroundings, he wished to be in a respectable facility and only asked that he be visited and brought chocolates. To his children this request seemed silly at the time, but when his mental capacities did diminish, the instructions were there. No one had to wonder if they should try to take care of Father Jefferson at home and how they would do it. Without quilt or question they placed him in a respectable facility that took care of his needs. All they had to do was make loving visits, and of course they brought chocolates.

In order for Jefferson’s simple request to happen, he had made financial, legal and personal long term care plans years before.

What do you want your children or friends to do on your behalf?

When it comes time for them to help, what if you can’t say what you want because of a physical or mental disability? This is where a written long term care plan comes into effect.
 
Do you have a financial plan or long term care insurance? Retirement savings can disappear quickly when used for care services.
 
Where is your paperwork; insurance policies, living will, medical directives, Armed Services discharge or disability papers? Is there someone designated to know the location?
 
What are the legal documents that are needed for power of attorney, estate planning and disbursement of assets? When do they have to be completed?
 
What types of care services and facilities are available and what are the costs?
 
What will government programs pay for and how do you qualify?
 
There is a lot you can do now to put together a plan for your own long term care. You may have limited resources in the future or health problems that will inhibit your ability to take care of things you could do now. For example.
 
James and Cindy want to be able to stay in their home as they age. In order to do this, when they were in their 40’s they took out a long term care insurance policy that will pay for home care if it is needed. The policy will also pay for nursing home costs as a care option. With taking the policy at a younger age and in good health the monthly payments are low. Extra funds can now be put away for retirement without worries of having to deplete savings for care costs.
 
Or consider Sarah’s following experience:
 
After taking care of her own parents for many years, Sarah realized the importance of making, in advance, a plan and preparations for herself. She saw all of her parents’ assets dissipated in order for her father to qualify for Medicaid nursing home coverage. She didn’t want the same thing to happen to her. She took the time to create her own plan on paper– expressing her wishes for her own care. A trip to her attorney provided all the legal documents and estate planning she wanted to be in place to insure care for her and an inheritance for her children.
 
There is much to learn about long term care and there are a lot of new services and programs available to draw from.
 
The National Care Planning Council has gathered together an overall review of government and private long term care services both on the Council website, www.longtermcarelink.net and in their book The 4 Steps of Long Term Care Planning.

The 4 Steps of Long Term Care Planning provides comprehensive information about long term care planning. The design also allows you to record personal information, family agreements and directions on 20 planning sheets at the back of the book. Using this book as a single-source repository for information and directions makes it much easier for you or your care coordinator to carry out your wishes when the need for care occurs.

For further information and advice in any elder law matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., an Elder Law Attorney

Have you been wondering if the proposed Obama-Biden “plan to lower healthcare costs and ensure affordable, accessible, health coverage for all” would provide long-term skilled nursing home care for frail seniors?  The short answer is…no!

The key features of the plan focus on providing access to healthcare to “over 45 million Americans—including over 8 million children” who lack health insurance.  The Obama-Biden Plan has five main strategies:

1. Invest in electronic health information technology system
2. Improve access to prevention and proven disease management programs
3. Ensure that health providers deliver quality care
4. Lower drug and insurance costs
5. Reduce insurance costs for catastrophic illness coverage

Here is the principal goal as highlighted on the Obama website:  “Barack Obama and Joe Biden will guarantee affordable, accessible healthcare coverage for all Americans.”  Despite the presence of the seemingly straightforward words “healthcare coverage” and “all” in the sentence above, it’s critical to understand the definition of those words.  When it comes to healthcare and politics, even simple words may not have a common-sense meaning.  “Healthcare coverage” means “payment for acute healthcare costs.”  Acute care is the type of care given to recover from short-term diseases and accidents.

In the United States, public healthcare payers, such as Medicare and Tri-Care (for retired military) and the private healthcare insurers, reimburse healthcare providers only for acute care and acute illness rehabilitation.  These payers specifically exclude long-term care in a skilled care nursing home.  Care in a skilled care nursing home is defined as chronic care.  Neither Medicare nor private health insurance pay for chronic care in assisted living facilities or nursing homes.  Unfortunately, the bottom line for America’s frail seniors with a long-term illness is that the word “all” (as defined in the Obama-Biden Healthcare Plan) does not include them.

Sadly, this means that under our current healthcare program and the Obama proposals, the majority of America’s seniors have no alternative but to pay their own nursing home bills.  If you have Alzheimer’s, Parkinson’s, or another long-term illness—you are still on your own.  Even if Obama-care is enacted, you will be required to pay your own tab for long-term healthcare until you are impoverished enough to qualify for Medicaid.

But there are ways to prevent the impoverishment required to qualify for Medicaid, if you plan far enough ahead. 

For further information and advice in any elder law matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., a NJ Estate Planning Attorney

We all know we are supposed to do estate planning, but not all of us get around to it.  So what happens if you don’t have a will when you die in New Jersey? Your estate will be distributed according to New Jersey state laws, which may or may not be the way you want it to be distributed.

Dying without a will is called dying “intestate”. New Jersey has laws that determine what will happen to your estate if you don’t have a will. If you are married, New Jersey law will award a portion of your estate to your spouse, with the rest divided among your children.  If you don’t have children, then your estate will be divided among other living relatives such as your parents or siblings. If you are single, New Jersey provides that your estate will go to your children or to other living relatives if you don’t have children. If you have absolutely no living relatives, then your estate will go to the state.  This is called escheating to the state of New Jersey.

Note that any jointly held assets, such as bank accounts or real estate, will go directly to the co-owner. In addition any life insurance policies or retirement accounts will go directly to the beneficiary designated on the account. And if you have a trust, any assets in the trust will go to the beneficiary designated in the trust.

One purpose of a will is to name a guardian for your young children; if you do not have a will, the court will determine who will act as guardian of your children. The court will also appoint the person who will administer your estate. In addition, if you are unmarried but have an unregistered partner, your partner will not inherit anything from your estate without a will naming him or her as a beneficiary.

The best way to ensure your estate is distributed the way you want it is to plan your estate with a will and/or a trust attorney.

For further information and advice on NJ estate planning laws, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., a Medicaid Planning Attorney

As we discussed last week, Joe wants to transfer his home to Jim, who lives there with his wife and children.  But let’s change the facts a bit.  Joe is not healthy but has the early stages of dementia and needs some in home assistance.  It is possible that within 5 years he will need nursing home care, so we are concerned about the 5 year Medicaid lookback.  What options do Joe and Jim have?

One possibility is for Jim to buy the home at a price that he can afford but that may be below fair market value.  If, for example, he purchases the home for $200,000 and it is worth $450,000, then $250,000 is considered a gift subject to the Medicaid transfer penalty.  Jim can spend down the $200,000 for his care but if he runs out of money then Jim may need to cover the cost of care until the 5 year time frame expires.

Now that Joe lives in Jim’s home, they could enter into an agreement for Joe to pay rent.  If Jim or his wife is providing care that Joe otherwise would need to hire an aide to do, then Joe could pay Jim to do it.  This is what is called a personal services contract.  Food, utilities, and other goods and services that Jim may be providing, can and should be paid for by Joe.  Perhaps the home needs to be modified to allow Joe to live there.  Jim could spend money to make those improvements when they become necessary, borrowing against the home. 

Some or all of these strategies may be ways for Jim to, in essence, pay Joe for some of the remaining uncompensated value of Joe’s home, over time, in a way that may be more affordable for Jim.  However, each of these financial arrangements must be in writing.  There are details that must be followed.  That’s because Medicaid presumes that any transfers of money or services is a gift, subject to a transfer penalty, unless it is in writing and at fair value.

A word of caution.  The Medicaid rules are complicated.  What will work in one state may not work in another.  What may suitable for one family may be entirely the wrong solution for another.  If you try to do it yourself and get it wrong, you may find yourself with a lengthy period of Medicaid ineligibility and no money to pay for care.  You need a knowledgeable and trusted elder law advisor to guide you through the maze of laws and regulations that leave hidden traps for the unwary.

For further information and advice in a New Jersey Medicaid or an estate planning matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., a Medicaid Attorney

So, in last week’s blog I presented a common scenario, Mom and Dad both needing long term care and nothing but a house left in their names.  The children are paying for their care.  We get Dad on Medicaid first. 

Now we work on getting Mom into a nursing home and then apply for Medicaid for her.  The home will have to be sold (unless there is a family member living there but we’ll address that exception in another issue)  but it won’t hold up Mom’s Medicaid, which is important, since it not so easy these days to sell in a what is a down market.  Once the home is sold Mom will lose her eligibility for Medicaid and will need to private pay from the proceeds of the sale.  She also could keep her Medicaid eligibility and pay the proceeds to the State to reimburse it for benefits paid up till that point.  Which option is better depends on how much is realized from the sale and how much is owed to the State.  But, keep in mind that the State pays the nursing home at a lower rate than you or I would pay (approximately 50% less).

And, what about the money that the children paid out of their own pocket for Mom and Dad’s care?  They can be reimbursed from the proceeds once they sell the house.  However, everything must be documented because Medicaid presumes that transfers between family members are gifts, not loans.  If it is a loan then there must be a written agreement.  The best practice is for there to be a recorded mortgage.  At the closing the mortgage is paid off and a discharge is recorded by the Buyer’s attorney.  The children are reimbursed directly and there is a record as far as Medicaid is concerned.

In the end, the parents are paying for their care from their own assets, the children are paid back (money which they will need for their own retirement and long term care needs) and depending on how much long term care is needed and what the home sells for, there may even be some amount left to transfer to the next generation in the form of an inheritance, after the State is reimbursed for benefits they paid out on Mom and Dad’s behalf.

For further information and advice in any Medicaid matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., NJ Medicaid Attorney

Here’s a story I was told by a colleague.  Mary was 85 years old and had been cared for by her granddaughter, Jane for several years.  As Mary’s health deteriorated mentally and physically, Jane devoted more of her time to caring for Mary, putting her own life on hold in some respects.  Mary’s family agreed that Jane would look after Mary.  Eventually, however, Jane could no longer care for Mary.  Mary was admitted to a hospital and then a nursing facility.  Because she had no assets, Jane needed to make application for Medicaid benefits and that’s when the problems began.

When Jane met with a Medicaid caseworker, she was asked about Mary’s finances.  Jane explained that in 2004, Mary sold her house for $125,000.  Jane moved Mary to an over 55 community where Jane lived nearby.  Jane quit her job to look after Mary and had power of attorney for Mary.  Their finances were commingled, however, and Jane, not understanding the Medicaid rules, did not keep records of how money was spent.  Recognizing that caring for Mary was a full time job, Mary’s assets and income supported both Mary and Jane.  Mary also gave Jane gifts of several thousand dollars on a few different occasions as a symbol of her love and appreciation of Jane.

The Medicaid caseworker incorrectly told Jane that Mary was not eligible for Medicaid, that all the money from the sale of the house would be treated as a gift subject to a Medicaid penalty.  She also suggested that Jane might be held responsible for “taking” Mary’s money.  Jane was panic stricken.  She didn’t know enough to assert her rights and give Medicaid the proper information.  As bad as things were, Mary and Jane had one thing going for them, timing.  Because the home sale and spend down of the proceeds all occurred before February 8, 2006, the transfer of Mary’s assets were subject to penalties that began to run when the transfers were made.  In their case, those penalties had already expired by the time the client applied for Medicaid.  Had those transfers occurred under the new law, no Medicaid would have been available to Mary for 12 months or more, leaving Jane with no way to pay for her care and the nursing home with a resident unable to pay their bill.

The next case that comes to us with these set of facts will likely fall under the new rules and would not end as favorably.  So what can you do?  Consult with an elder law attorney and understand the rules well before Medicaid is even a possibility on the horizon.  Once properly educated, you can take the steps to avoid the mess Mary and Jane faced or fix the mistakes.  If you wait until it’s time to file for Medicaid, it could very well be too late.

For further information and advice in any elder law matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., an Estate Planning Attorney

Home ownership has long been a large part of the American dream.  Through the course of the 20th century, the percentage of Americans owning their homes rose considerably.   In many of these homes three generations lived under one roof.  Today, there still are many 3 generations homes.  The reasons for it are the same.  The grandparents often help care for their grandchildren while the parents are working.  Sometimes the grandparents need assistance and can’t live alone any longer. 

There is, however, a big difference between the households of the 20th century and those of the 21st century, which generation owns the home.  The parent homeowner of the 20th century now is the grandparent homeowner of the 21st century. 
 
So now that homeowner, we’ll call him Joe, is in his 70’s.  His son Jim and Jim’s wife and kids live with Joe.  They are concerned that as Joe ages and needs long term care they may lose the house.  Jim wants to buy a house but can’t afford it, even in today’s depressed real estate market.  So they come upon a solution.  Joe will transfer his house to Jim or perhaps sell to Jim at a reduced price, maybe enough to pay off Joe’s mortgage.  Jim will have a home of his own to raise his family and Joe will have the support of family should he need it.  A win – win scenario for everyone.  Right?

Well, not so fast.  If Jim doesn’t pay fair market value for the home then the uncompensated amount is treated as a transfer for less than fair value should Joe need Medicaid benefits in the next five years to pay for long term care. 
 
What to do?  Joe and Jim must understand that if Joe needs care there must be a plan in place to cover the cost of that care.  That plan could involve VA benefits if Joe is a veteran.  It could also include using Joe’s funds to pay for his care and long term care insurance benefits.  But, if these sources of payment still leave a gap then Jim will need to borrow against the home to pay for Joe’s care, which may mean putting off tapping into the equity to pay for renovations or other expenses. 

Provided these contingencies are covered, however, the home transfer can work well.  What happens, however, if Joe is not healthy when contemplating a transfer, but instead has dementia and already needs some care.  In that case, the home transfer is a little more complicated but I’ll address that in the next week’s post.

For further information and advice in a New Jersey Medicaid or an estate planning matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., a Medicaid Attorney

Mom and Dad are still living in their home which they own.  They both need round the clock nursing home level care and have home health aides living with them.  This has been going on for a number of years and they have spent down much of their assets on care and maintaining the home.  Now the children are spending their own money with no end in sight.  They want to sell the home but in today’s economy and real estate market that isn’t as easy as it once was.  Their current predicament is taxing on the family, both financially and emotionally.  Last week I talked about a reverse mortgage as a possible solution.  Is there any other way out?

Actually, there is.  There is a way to move both parents into a nursing home, get them on Medicaid and reimburse the children for monies they paid for their parents’ care.  Medicaid rules are very complex and the timing of each step in the process is critical but it can be done.  Here’s how it works.

The first step is to get one of the parents into a nursing home.  Let’s say it is Dad.  If he is in the hospital already (often the case when we get the call) then he should be transferred from there to the nursing home.  We then apply for Medicaid.  The house is an exempt asset (ie., not a countable asset for Medicaid eligibility purposes) since Mom is still living there.  Once we get Dad approved for Medicaid there is what is called a “division of assets”.  Whatever is Mom’s is now hers, to be spent on her care but not on Dad’s.  This is the key.  In next week’s blog I’ll discuss the next step, getting Mom on Medicaid.

For further information and advice in any Medicaid matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., an Elder Law Attorney

The Internal Revenue Service (IRS) has issued guidance to financial institutions clarifying the new law that allows seniors to avoid making required withdrawals from depleted retirement accounts in 2009.

Taxpayers over 70 ½ years old generally must begin withdrawing a certain percentage of the balance of retirement accounts like IRAs and 401(k)s each year or pay, in addition to income tax, a 50 percent excise tax on the amount that should have been withdrawn but was not. While tax payers who turned 70 ½ in 2008, can delay the 2008 distribution until April 1, 2009, the guidance makes clear that those seniors must still take their withdrawals because the new law only suspends required withdrawals for the 2009 tax year.

Some beneficiaries must deplete an IRA by the fifth anniversary of the IRA owner’s death. The guidance explains that if a beneficiary must take required minimum distributions under the five-year rule and the fifth year is 2009, the beneficiary has an extra year (until 2010) to liquidate the account.

Finally, according the guidance, the IRA trustee is not required to give the IRA owner a notice detailing the required withdrawal for 2009. Instead, the trustee may, if it wishes, send a statement that the required distribution is zero or a statement showing what the required distribution would have been and an explanation of the waiver.

For further information and advice in any elder law matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., an Asset Protection Attorney

If you are looking for a steady stream of income in retirement, an immediate fixed annuity may be the answer. An immediate fixed annuity isn’t flashy and doesn’t promise big gains, but with the stock market so uncertain, sometimes steady is better.

When you purchase an immediate fixed annuity you give a lump sum to an insurance company. The insurance company then pays you a set amount each month for the rest of your life. There are several different types of annuities, but the immediate fixed annuity has two key elements. The annuity is immediate — meaning the insurance company starts making payments right away. This is in contrast to a deferred annuity, which begins making payments at a later date. In addition, the annuity is fixed. Unlike a variable annuity, which can fluctuate with the stock market, the amount you get with a fixed annuity stays the same each month. It is sort of like having your own personal pension plan.

The benefit of an immediate fixed annuity is a steady stream of income for life. This can be helpful if payments from Social Security and your pension or 401(k) don’t cover your needs. Immediate annuities can also be used to make up missed income if you retire early.

Immediate annuities are also useful for Medicaid planning. Purchasing an immediate annuity is a way for people with assets in excess of Medicaid’s limits to turn the assets into an income stream while avoiding a penalty for transferring the assets.

Immediate fixed annuities do have some downsides and are not for everyone. First, you must have accumulated some savings to use for the annuity premium payment. Another issue is that payments are not adjusted for inflation, so over time the money you receive is not worth as much. In addition, the money in the annuity is not liquid, so if you need a large sum of money for a medical or other emergency, it will not be available. Because of the lack of liquidity, experts advise putting not more than 20 to 30 percent of your assets into a fixed annuity.

If you are planning on purchasing an immediate fixed annuity, be wary of sales agents who try to convince you to purchase a variable annuity. Many companies have come under scrutiny for unscrupulous sales tactics with regard to annuities. In addition, because the payments are meant to last a lifetime, you want to be sure the insurance company you pick will still be around. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moodys, Standard & Poor’s, or Weiss.

For further information and advice, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.