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East Hanover New Jersey Elder Law Blog

How can a qualified income trust be used in Medicaid planning?

To be eligible for Medicaid benefits in New Jersey (referred to as Long Term Services and Supports), a person's income and resources cannot exceed a certain dollar amount annually. However, does this mean that a person must be impoverished before they can begin receiving LTSS? Not necessarily.

If a person's gross monthly income exceeds the maximum limit allowed, then it may be possible to funnel the extra income into a qualified income trust, thus allowing them to apply for LTSS. A QIT is a trust that utilizes a dedicated bank account in which any excess income over the monetary limit is deposited. The funds in a person's QIT account will not be included as income for the purposes of Medicaid eligibility. Social Security benefits and pension income can be placed in a QIT. A person can choose all or some income to be placed in their QIT, but at least all of one source of income (such as a pension) must be placed in the QIT.

Long-term care needs should not deplete your hard-earned assets

While sometimes people in New Jersey make plans for a potential stay in a nursing home well before they need such care, many times a person's admission to a long-term care facility occurs due to a sudden illness or disability. When this happens, the person's family may fear that all their loved one's assets will be handed over to the facility to pay for their care.

This fear is not unfounded. Medicare may pay for rehabilitation and therapy, but, once that care ends, a nursing home resident will be considered a custodial patient and Medicare will no longer cover the cost of their nursing home stay. A 24/7 nursing home stay can cost upwards of $144,000 a year, meaning that a person's lifetime wealth can be utterly extinguished in a matter of years. Medicaid may be an option for paying for a stay in a long-term care facility, but a person must reduce their financial resources to a mere $2,000 before they are eligible for Medicaid benefits.

Misunderstanding the Medicaid program in New Jersey

As medical advancements extend lives, it can be both a blessing and a concern. More families are dealing with care decisions for elders. The sad day may come when one partner can no longer care for the other due to advanced Alzheimer's or dementia.

The accelerating price increases of senior care centers add another layer of stress to adult children trying to navigate complicated programs. They may even receive incorrect information several times from wrong departments while attempting to get help. Younger caregivers are seldom prepared to run the Medicaid obstacle course.

How can Medicaid planning address 'estate recovery'?

Under federal and New Jersey law, once a Medicaid beneficiary dies, the government recovers funds from the deceased's estate for any services the deceased received after age 55 that were paid for using Medicaid benefits. This is known as "estate recovery."

For estate recovery purposes, a person's estate can include assets, such as their house, bank accounts, trusts, stocks and any other pieces of real or personal property. If the asset is to pass on to the deceased's survivors, it is still part of the deceased's estate.

Guardianship of an estate is not necessary in every situation

Parents of adult children with a disability or adult children of an elderly parent may be concerned that their loved one is unable to handle their personal and financial affairs on their own. If a person is incapacitated, guardianship may be sought if no other alternative exists. New Jersey law recognizes two types of guardianship: guardian of the person and guardian of the estate. While the guardian of the person is responsible for care planning for the incapacitated person, the guardian of the estate is responsible for their financial affairs. Since guardianship in New Jersey is viewed as a last resort, it is important to understand when guardianship is not needed.

Today, we will focus on guardianship of the estate. If an incapacitated person has an estate, then it is possible that a guardian will need to be appointed. An estate can include income from earnings, pensions, investments and stocks and bonds, as well as other valuable assets. Managing these assets is a significant responsibility.

Don't wait until it's too late to address elder law issues

As a person ages, their mental and physical health eventually begin to wear down. Activities that may have been easy when a person is in their 50s or 60s may become more difficult once they reach their 80s or 90s. Therefore, it is important that people in New Jersey plan for their old age, so that their final wishes are met should they be unable to express these wishes on their own due to mental or physical incapacity.

First, a person will want to consider how they will pay for health care and daily self-care expenses, such as in-home health care or a stay in a nursing home. Some people may find long-term care insurance useful, but this option is best implemented well before they need it. In addition, it can help to visit assisted living communities and nursing homes while you are still mentally sound, so you can choose the facility that best meets your needs if that is the direction you choose to take. Finally, another way to finance end-of-life care is through the execution of a special needs trust, which can help ensure a person remains eligible for government benefits such as Medicaid, without having to become impoverished.

Did your loved one have legal capacity to execute a care plan?

Estate planning is important for anyone in New Jersey of any age. However, for those who have Alzheimer's disease or dementia, it is important to begin estate planning as soon as possible, so they can advocate for themselves before their disease makes it impossible to make decisions.

To execute most estate planning documents, a person must have the legal capacity to do so. This means they must be able to understand what assets they own, who they are selecting as heirs or decision-makers, and what the consequences of executing these documents are. If a person has these abilities, then they probably have the legal capacity to make decisions regarding their estate plan.

Planning to preserve a home's value

Asset preservation strategies and estate plans make seem similar on a superficial level. They are both things people do to preserve wealth from risk while maintaining control over assets.

However, there is a fundamental difference between the two, and the legal benefits of various strategies fit better with either one or the other in many cases. Here is one common example of a topic where careful attention to prioritizing between the two topics would be necessary.

How can New Jersey residents plan for end-of-life care?

Many people in New Jersey have opinions about what type of end-of-life care they'd like to receive. It is not always a pleasant topic to contemplate but it is one a person may feel strongly about. They can take steps to ensure their wishes are followed with regards to medical care if they are near death. This can be accomplished through the execution of a living will and an advanced medical directive.

A living will is a legal document wherein a person dictates what end-of-life medical care they wish to receive. This document will become effective once a person is near death and can no longer express what their preferences are, for example, if they are in a coma. Some people may want every effort made to extend their life, while others may wish to simply receive palliative care if they are suffering from a terminal illness. Living wills can be of benefit by allowing you to make these preferences known before you find yourself in a life-threatening situation.

Special needs trusts can be an important part of an estate plan

When a person in New Jersey has a disabled loved one, they want to ensure that their loved one's medical care needs are met. Sometimes, a disabled individual qualifies for government benefits, but these benefits may not be enough to cover all aspects of their care. Fortunately, there are other ways to set money aside for the care of a disabled loved one.

Special needs trusts are estate planning vehicles that allow a person to set funds aside for the benefit of a disabled loved one, without having their eligibility for means-tested government benefits compromised. For example, to qualify for Medicaid and Supplemental Security Income, a person must have less than $2,000 in assets, and have an income below a certain threshold. Special needs trusts can provide disabled individuals with funding for the care they need, while still receiving these benefits and without having to become impoverished.

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