LEGAL ABILITY PLANNING
PRESENTED BY:
JANNA DUTTON, JD
ATTORNEY AND FOUNDER
DUTTON & CASEY, PC
ESTATE PLANNING – PROBATE – ELDER LAW
PHONE: 312-899-0950
PHONE: 847-261-4708
www.duttonelderlaw.com
Dutton & Casey, PC
Attorneys at Law
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Dutton & Casey, PC, Attorneys at law
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Issues Involved in Planning and Caring
▪
▪
▪
▪
Financial Decision-Making and Management
Health Care Decision-Making and Management
Care Planning
Long-Term Care Costs
Dutton & Casey, PC, Attorneys at law
Power of Attorney for Property
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The Power of Attorney for Property allows an individual, referred to as the
"principal" in the document, to designate another person, known as the "agent"
to act for the principal as described in the document for purposes of financial
and other property transactions. The agent stands in the shoes of the principal
and is then legally authorized to act.
A principal must have mental capacity to execute a power of attorney: ability to
comprehend the document and the effect of signing the document.
A. Advantages
1.
2.
3.
4.
Durable -effective beyond mental incapacity
Revocable if competent
Amendable
Low cost to set up
Dutton & Casey, PC, Attorneys at law
Power of Attorney for Property
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B. Disadvantages
1. Easily abused - no accountability
2. Difficult to remove a “bad” agent if principal incapacitated
3. Often difficult to use with out of state institutions
4. Allows principal to continue to contract despite incapacity,
potentially making bad decisions and jeopardizing assets
5. Agent has no duty to act
C. Special Powers which must be added
3.
4.
1. Gifting - for Medicaid planning or other purposes
2. Transferring assets to a Trust (for self or others)
3. Establishing OBRA Trusts
4. Representation in legal separations\domestic relations actions
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Power of Attorney for Property
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D. Duties of an Agent
1. Accounting - documentation of receipts, disbursements, significant
actions
2. Loyalty, acting for the welfare of the principal
3. No self-dealing, comingling of assets
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2. Living Trusts
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Allows for property to be owned in trust, with a designated trustee in control of
the assets, and requires that the trustee manage the property according to the terms
of the trust document.
A. Advantages
B.
1. Avoids probate at the death of the Grantor.
2. Provides for effective management of property during the incapacity of the
Grantor.
3. Allows the Grantor to remain in control; easy to change the trust document.
However, also may not prevent financial exploitation.
Dutton & Casey, PC, Attorneys at law
Living Trusts
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B. Disadvantages
1.
2.
3.
4.
1. More expensive to create (legal fees).
2. Assets must be transferred to trust - time consuming effort.
3. Assets must be held in trust - requires lifetime administration.
4. Trustee has authority only over Trust assets and is limited by the terms
of the trust document
C. Duties of Trustee
1. Prudently invest and administer trust assets.
2. Loyalty to trust beneficiaries; no self-dealing
3.Accounting to trust beneficiaries
4.Compliance with terms of trust document
Dutton & Casey, PC, Attorneys at law
Joint Tenancy
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A form of joint ownership whereby each owner owns one
hundred percent of the property; at the death of one of the joint
owners, the surviving owners own the entire property.
Advantages
1. No cost to set up.
2. Effective way to avoid probate.
3. Effective way to arrange estate so that others will be able to
manage during incapacity.
Dutton & Casey, PC, Attorneys at law
Joint Tenancy
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Disadvantages
1. Risky - joint tenancy has an ownership interest in the property and the
property is available to the creditors of the joint tenant, as well as may become
subject to the marital disputes, disabilities, and other problems of the joint tenant.
2. Does not allow for contingent beneficiaries if the joint tenancy predeceases.
3. Surviving joint tenant is entitled to the entire property at death of a joint
tenant - where there are several persons who are the beneficiaries of the owner’s
estate, difficult to name all as joint tenants, and more risky.
4. For Medicaid purposes, Medicaid applicant presumed to be 100% owner of a
all personal joint property
Dutton & Casey, PC, Attorneys at law
Convenience Accounts
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As of January 1, 2010, Illinois law allows bank account holders to name another
person on their account for the sake of convenience. Previously, your sole option in
naming another person on your account was as joint tenants with rights of
survivorship, meaning the joint tenant is entitled to inherit the account upon your
death. It also meant that you were making an inter vivos gift, or in other words,
giving the joint tenant the right to legally take all of your money for himself.
Furthermore, it meant that you could not remove the joint tenant without his
consent– even if this person was withdrawing money from the account for himself
without your permission. The new law allows you to name a person on your account
without making an inter vivos gift and without entitling that person to inherit your
account upon your death. Most importantly, the new law allows you to remove the
person from your account at any time without his permission.
Note: Your joint accounts will not be converted automatically to convenience
accounts under this law and you still have the option of holding joint accounts. In
order for this new law to apply, you will need to go to your bank and open a new
convenience account.
Dutton & Casey, PC, Attorneys at law
3. Power of Attorney for Health Care
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The Power of Attorney for Health Care allows an individual, referred to as the "principal" in
the document, to designate another person, known as the "agent" to act for the principal as
described in the document to make health care decisions for the principal. The agent stands
in the shoes of the principal and is then legally authorized to act, including acting to
withhold or withdraw life support as well as make any other type of health care decisions.
The principal must have mental capacity to execute a power of attorney for
health care.
A.
Advantages
1.
2.
3.
B.
Decisions are legally enforceable
Amendable
Revocable regardless of mental status
Disadvantages
1.
2.
Revocable regardless of the mental condition of the principal.
If designate a person who is unaware of principal’s values, they may make a health
care decisionDutton
contrary
to principal’s
wishes.
& Casey,
PC, Attorneys
at law
Living Will
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A Living Will is a document that expresses your preferences to forgo life support in
the circumstances that it would only prolong the dying process. It does not
authorize another person to make a decision, but is a form of communication to a
health care provider.
A. Advantages
1.Allows a method of communicating values to health care providers that
death-delaying life support is not wanted.
B. Disadvantages
1.On a practical level, is not legally enforceable by person signing it.
2.May be ignored.
Dutton & Casey, PC, Attorneys at law
II. Planning for Long-Term Care Costs
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The cost of long term care-meaning either in-home care or nursing home
care for individuals requiring assistance with activities of daily living- is
largely an uninsured healthcare cost for most individuals. Planning for
possible exposure to these costs is necessary for effective retirement
planning.
A.
Medicare Coverage
1. Covers 100 days of skilled nursing care provided in a Medicare certified nursing facility
following a hospitalization per spell of illness. Medicare pays the full cost of the first 20 days. There is a
coinsurance payment of $144.50 per day for days 21 through 100 which most Medicare supplemental policies
cover.
2. Medicare provides home care to those individuals needing intermittent skilled care, usually post
hospitalization only, although long term part time skilled home care services are covered. Skilled care does
not include custodial care, which is the type of long term care most individuals impaired by dementia require
Dutton & Casey, PC, Attorneys at law
B. Long-Term Care Insurance
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Long Term Care Insurance is the only health insurance that
pays for custodial long term care, either at home, or in a
nursing home.
Dutton & Casey, PC, Attorneys at law
Medicaid
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




Federal – State Program
Federal Law and Monitoring
State Law – Regulations and Policy
State “Medicaid Agency” – Illinois Department of
Healthcare and Family Services
State Eligibility Determinations – Illinois Department
of Human Services
Dutton & Casey, PC, Attorneys at law
Illinois Medicaid Covered Long
Term Care
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



Nursing homes
Supportive living- “Waivered”
Community care program (over 60) – “Waivered”
In-home services (under 60) – “Waivered”
Dutton & Casey, PC, Attorneys at law
Medicaid Eligibility
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
Residency and Citizenship

Categorical eligibility

Need
Dutton & Casey, PC, Attorneys at law
Residency
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
Only residents of Illinois are eligible for Illinois
Medicaid.
 Voluntarily
living in Illinois
 No durational requirement
 Intention to remain in Illinois
 If
an individual maintains a home in another state, Illinois
residency may not be established.
Dutton & Casey, PC, Attorneys at law
Citizenship
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
Only U.S. Citizens or lawful aliens are eligible for
Medicaid.
 Lawfully
admitted for permanent residency; or
 Permanently residing in the United States under color of
law
 Documentation of U.S. Citizenship and identity is
required of all applicants except for Medicare, SSI,
and RSDI recipients.
Dutton & Casey, PC, Attorneys at law
Categorical Eligibility
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
Under current law, for an individual to be eligible
for Medicaid, must be categorically eligible:
 Aged,
blind or disabled;
 Child;
 Caretaker

of eligible child.
Additionally, the individual must meet strict financial
requirements.
Dutton & Casey, PC, Attorneys at law
Medicaid Eligibility Asset Limitations
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
Exempt assets:







$2000 asset disregard
Homestead Property if: intend to return; occupied by spouse;
siblings; minor or disabled child. Under new regulations equity
must be less than $525,000 (2012) or not exempt unless
occupied by spouse, minor or disabled child.
Personal Effects or Household Goods
Motor Vehicle necessary for medical transportation, modified for
handicap, transferred to community spouse, or worth less than
$4500
Life Insurance
Burial Funds
Burial Space andDutton
Merchandise
& Casey, PC, Attorneys at law
Exempt Homestead
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


Property in which a person has an ownership interest and
serves as the person’s place of residence (includes adjoining
land and buildings)
Exemption requires either intent to return or occupancy by
spouse, dependent children
Unless occupied by spouse or dependent child under 21, minor
child, equity limited to $525,000 as determined by appraisal
no more than 6 months old, assessor’s current estimate, or other
reliable or verifiable indication of fair market value.
Dutton & Casey, PC, Attorneys at law
Personal Property
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


Personal effects and household goods are exempt
to the extent they are exempt under federal law
Items acquired or held for their value or as an
investment are excluded
Examples of excluded items are: gems, jewelry not
worn or held for family significance, or collectibles
Dutton & Casey, PC, Attorneys at law
Burial Space Exemptions
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


For use by applicant, spouse or any immediate
family members
Includes gravesites, crypts, mausoleums, urns,
caskets, vaults, plots, niches, etc.
Also- headstones, markers, plaques, burial
containers and arrangements for opening and
closing gravesites
Dutton & Casey, PC, Attorneys at law
Joint Assets
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
Joint accounts and personal property
 Presumption


is 100% belongs to applicant
Joint real estate
Life estate
 Life
estate may be subject to lien
 Change: funds used to purchase life estate will be
considered to be non-allowable transfer of assets
unless the purchaser resides in the home for a period
of at least one year after date of purchase
Dutton & Casey, PC, Attorneys at law
Burial Funds
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


Up to $1,500 in a revocable burial fund contract;
Funds in an irrevocable prepaid burial contract up to $5,874,
including both goods and services but not including burial
spaces; or
A prepaid burial contract funded by an irrevocable
assignment of a person’s life insurance policy irrevocably
assigned to a trust which includes a statement that, upon the
death of the person, the State will receive all amounts
remaining in the trust.
Dutton & Casey, PC, Attorneys at law
Entrance Fees
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
A person’s entrance fee in a continuing care
community will be considered as part of a person’s
available assets if:
 Person
has ability to use resource for care
 Person is eligible for a refund of any remaining fee or
 Entrance fee does not confer ownership interest
Dutton & Casey, PC, Attorneys at law
Non-Homestead Real Estate
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
Considered available unless:
 Farmland
property;
 Small fractional interest;
 Listed for sale, will not be counted for six months as
long as good faith effort to sell continues; or
 Property was homestead property that is no longer
exempt and that is producing income in an amount
equal to six percent or greater of person’s equity.
Dutton & Casey, PC, Attorneys at law
Annuities
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



Ownership or purchase of any annuity must be
disclosed;
Revocable and assignable annuities are available;
Payments considered available income; and
Failure to name State as remainder beneficiary
after spouse, disabled or minor child will result in
denial of eligibility for long term care services.
Dutton & Casey, PC, Attorneys at law
Annuities
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
In addition to above, purchase of an annuity by an
institutionalized person will be considered a
penalized transfer unless:
 Purchased
with retirement funds; or
 Purchased from a commercial financial institution, is
actuarially sound based on the social security life
expectancy ; payout is equal to or less than life
expectancy, is irrevocable and nonassignable, and
benefits are paid in approximately equal periodic
payments.
Dutton & Casey, PC, Attorneys at law
Income Eligibility
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
To qualify for Medicaid coverage, the nursing home or
supportive living resident’s countable monthly income must
be less than the nursing home’s monthly private pay rate.



Different income rules apply to the Community Care Program
Income in the community spouse’s name is not considered
available to the nursing home spouse from the first full
month in which the nursing home spouse is institutionalized.
“Name on the instrument” rule
Dutton & Casey, PC, Attorneys at law
Allowable Deductions from Income of Nursing Home
Medicaid Recipient
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
Personal needs allowance ($30 for Nursing Home residents/$90 for Veterans)

Community Spouse Income Allowance

Family Maintenance Needs Allowance

Maintenance for Dependent Children under 21 not residing with community spouse

Amounts to cover Medicare and other health insurance premiums


Amounts to cover over the counter drugs or other medically necessary items ordered by a
physician but not paid for by Medicaid and amounts to cover incurred expenses for medical or
remedial care for the institutionalized spouse not paid for by Medicaid limited to those
incurred within the 6 months prior to the month of an application if a current liability.
Medical expenses incurred during a penalty period not allowable.
Amounts to maintain a home in the community if a person who has no spouse or dependent
children at home is admitted to a facility for what is expected to be six months or less,
provided that a physician has certified that the individual is expected to return home
within six months. Amount of the deduction is based upon the AABD MAG standard.
Dutton & Casey, PC, Attorneys at law
Community Spouse Maintenance
Needs Allowance
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



The community spouse is able to receive a contribution from the nursing home
spouse's income to bring his or her total monthly income up to the amount of a
predetermined monthly needs allowance, $2,739. There are provisions for annual
adjustments of this figure like the asset figure that is tied to the consumer price
index of the previous year.
Community spouse or nursing home spouse may request a fair hearing to establish a
greater amount of maintenance allowance. For instance, if regular heath care costs
exceeding $2,739 per month can be proven at a fair hearing to increase the needs
standard, the allowance from the nursing home spouse's income may be increased.
Under new regulations, the Community Spouse must prove exceptional circumstances
resulting in significant financial distress.
Additionally, if the community spouse has a court order for support or maintenance
which, in combination with the community spouse's income, exceeds the $2,739
standard, IDHS must abide by the court order.
Dutton & Casey, PC, Attorneys at law
Community Spouse Assets
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


Under new regulations, all assets of the
institutionalized spouse and community spouse count
as available in determining eligibility.
Community Spouse Asset Allowance – the standard
allowance is $109,560. All other nonexempt assets
considered available to pay for case.
Court Orders – the State must allow assets
awarded to the community spouse by court order
Dutton & Casey, PC, Attorneys at law
Community Spouse Asset Allowance
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Increased Asset Allowance by Appeal Hearing
 Based
upon community spouse’s separate income;
 Increase in Asset Allowance measured by the cost of an
actuarially sound single premium life annuity that, when
added to the combined income of the institutionalized
spouse and community spouse will be sufficient to raise the
CS’s total income, including the income of the nursing home
spouse, to the standard ($2739).
Dutton & Casey, PC, Attorneys at law
Community Spouse Rules
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

Under the new regulations, the nursing home
spouse’s application for Medicaid will not be
denied based upon the assets of the community
spouse if the nursing home spouse “assigns” to the
State his or her support rights; the nursing home
spouse is incapable of signing an Assignment; or
undue hardship will result.
The State may seek Responsible Relative income
payments from the spouse or take other legal
action.
Dutton & Casey, PC, Attorneys at law
Major Differences Between Old and New
Spousal Impoverishment Rules
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


CS assets count towards NH spouse Medicaid
eligibility: Prenuptial Agreements irrelevant - all
assets count
CS refusal - NH spouse may be determined eligible
provided he/she “Assigns” right to spousal support
to the State. State allowed to legally pursue CS for
support both for income contribution under current
rules and by other legal actions.
Income First Rule for increased asset allowance
Dutton & Casey, PC, Attorneys at law
Nonallowable Transfers
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
Non-allowable transfers are those made for less
than fair market value which are presumed to be
made for the purpose of qualifying for Medicaid
and do not fall within one of the exceptions.
Dutton & Casey, PC, Attorneys at law
Transfer of Assets Rules
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For applications filed on or after 1/1/2012, a 60month “look back”
 New rules applicable to all transfers occurring on or
after January 1, 2007, except hardship exceptions
apply
 Penalty period calculated for each month in which
nonallowable transfer occurred by dividing amount
transferred by average cost of nursing home care
 Penalty period measured in months and partial
months/days

Dutton & Casey, PC, Attorneys at law
Transfer of Assets Rules
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 Penalty
period starts the month that the applicant is
receiving a long term care level of care and is eligible
for Medicaid based upon an application but for the
application of the penalty period; multiple penalty
periods run consecutively. BUT SEE HARDSHIP
EXCEPTIONS
 No“partial” cures for transfers occurring after
November 1, 2008 – penalty reduced only if the entire
amount transferred is returned to applicant. Partial
cures allowed for transfers made prior to November 1,
2008.
Dutton & Casey, PC, Attorneys at law
Hardship Waivers of Penalties
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 For
Transfers occurring prior to November 1, 2011:

Hardship waiver of penalty period shall be granted if applicant
signs an attestation form stating that the penalized transfer was
made in reliance on the administrative rules in effect at the time
of the transfer and that, without a waiver, the applicant faces
deprivation of medical care, food, clothing, shelter, or other
necessities
Dutton & Casey, PC, Attorneys at law
Hardship Waivers of Penalties
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A
facility in which an institutionalized person is residing
may request a hardship waiver on behalf of that
person provided written consent has been obtained
from the person who is legally competent or from the
person’s personal representative, which may include the
person who signed the application for medical
assistance on behalf of the resident.
Dutton & Casey, PC, Attorneys at law
Notice of Hardship Waivers
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The Department shall issue a notice to any person who
is subject to a penalty period not less than 10 days
prior to imposition of the penalty. The notice shall
inform the person of the period of ineligibility for long
term care services and include a statement that the
person may request a hardship waiver by submitting
evidence. Upon review, the Department shall issue a
notice of decision on a request for a hardship waiver
that includes a statement that the person may appeal
the decision.
Dutton & Casey, PC, Attorneys at law
Allowable Transfer of Assets
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
Allowable Transfers of Assets




Transfers of exempt homestead property to: a spouse, minor child, disabled adult child, sibling
with an equity interest residing on the property, or child who lived with applicant and provided
care or support for years prior to nursing home admission
Transfers to or for the benefit of the Community Spouse
Transfers to a blind or disabled child of any age or to a trust created solely for the benefit of
the disabled child
Transfers by a disabled person under age 65 to an OBRA Pay Back Trust or OBRA Pooled
Trust Subaccount. Note: transfers by disabled persons over the age of 65 to an OBRA Pay
Back Trust or OBRA Pooled Trust Subaccount are penalized transfers.

Transfers where it is determined that a denial of eligibility would create an undue hardship

Transfers made exclusively for a reason other than to qualify for benefits

Transfers to a Community Spouse that were result of a court order

Transfers that are returned to the person prior to a determination of eligibility. If returned
after eligibility determination, must be returned in full.
Dutton & Casey, PC, Attorneys at law
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Allowable Transfers of Assets –
Proposed Rules

Changes to allowable transfers under new rules
 Transfers
of homestead to 2-year, live-in caregiver
child:
 Need
evidence (physician’s statement) to support that the
term would have otherwise required institutional level of
care ;
 Need evidence to show the child resided with the person;
 Need evidence to show the child provided care that
prevented institutionalization, such as affidavits.
Dutton & Casey, PC, Attorneys at law
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Medicaid Rules and Payments to
Caregivers




Personal Care Contracts must be established prior to the
receipt of services;
Services must be clearly identified and reimbursed consistent
with the prevailing cost in the service area;
Contemporaneous receipts, logs or other credible
documentation showing actual delivery of services;
Presumption that services provided by friends or family are
“gratis” unless there is contemporaneous written agreement.
Dutton & Casey, PC, Attorneys at law
Promissory Notes
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The purchase of a promissory note, loan or mortgage by an applicant is
considered a transfer of assets unless:
 A written instrument recording the transaction is executed, signed and
dated on the effective date of the transaction;
 Repayment term is actuarially sound;
 Instrument provides for payments to be made in equal installments with
no deferral or balloon payments;
 Instrument prohibits cancellation; and
 There is a verifiable record of consistent, timely payments of amounts
due under the Note. (Delinquency of 3 months or more results in the loan
being considered nonallowable.)
 Assignment of remainder to State up to amount Medicaid paid.
Dutton & Casey, PC, Attorneys at law
49
Hardship Waiver for transfers after
November 1, 2011
 The
Department shall waive a penalty period or
portion of a penalty period if it determines the penalty
causes undue hardship defined as:
 Deprivation
of medical care endangering person’s health or
life, food, clothing, shelter;
 Person requesting waiver has burden of proof of actual
hardship.
 Person must provide written evidence to substantiate the
circumstances of the transfer, attempts to recover the
uncompensated value of the transfer, reasons for the
transfer and the impact of the penalty period of ineligibility
Dutton & Casey, PC, Attorneys at law
50
Hardship Waivers for transfers
after 11/1/2011
 Person
must present credible and convincing evidence
that the person has, in good faith and to the best of
their ability, taken all equitable and legal means
available to recover an asset that has been
transferred. In cases involving alleged theft, fraud,
elder abuse or other misappropriation of assets,
evidence of referrals to law enforcement is required.
Dutton & Casey, PC, Attorneys at law
Miscellaneous Changes
51



Retroactive eligibility – must prove eligibility in
each of three months of retroactive eligibility.
Currently presumed except may use funds for legal
fees, prepaid burial.
Asset transfer rules will apply to persons living in
Community Integrated Living Arrangements.
Assets considered available when the person has
the lawful power to cause the resource to be
available (although not actually easily available,
i.e. requires lawsuit to be filed).
Dutton & Casey, PC, Attorneys at law
Medicaid Treatment of Trusts
52

Self Settled (or by spouse) Revocable Trusts - commonly known
as “Living Trusts”


Self Settled (or by spouse) Irrevocable Trusts


Whatever amounts that the trustee may use for the benefit of the
Medicaid applicant is presumed available; it can use any
principal, all available
Third -Party Trusts


Count as an asset
Do not count if “discretionary”; count if can be used for support,
health and maintenance
OBRA Payback Trusts

Do not count if Dutton
meet &all
requirements
Casey, PC, Attorneys at law
OBRA Individual Payback Trust
Requirements
53





Irrevocable
Established by parent, grandparent, court or guardian
Beneficiary disabled. Transfer allowable only if beneficiary
under age 65.
Any state which paid out Medicaid benefits on behalf of
beneficiary is paid back at the death of the beneficiary
before any other payment except taxes and reasonable
expenses of administration.
If proceeds of trust are from personal injury action, the
Department lien must be paid off before transferring the
proceeds to the trust.
Dutton & Casey, PC, Attorneys at law
OBRA Pooled Trust Subaccount
Requirements
54





Irrevocable
Established by parent, grandparent, court or guardian or the
beneficiary him or herself
Beneficiary disabled. Transfer allowable only if beneficiary
under age 65.
Payback to any State providing Medicaid unless retained by
the Trust
If States are paid back at the death of the beneficiary must
be before any other payment except taxes and reasonable
expenses of administration.
Dutton & Casey, PC, Attorneys at law
DUTTON & CASEY, P.C.
ESTATE PLANNING – PROBATE – ELDER LAW
Attorneys:
Janna Dutton, Kathryn C. Casey, Helen Mesoloras, and Hanny Pei
Client Care Coordinator:
Erin C. Vogt, LCSW, ACSW, CMC
Appointments Available In:
Arlington Heights, Chicago, Skokie, and Vernon Hills, Illinois
Phone:
Email:
312-899-0950 or 847-261-4706
contact@duttonelderlaw.com
www.duttonelderlaw.com