Medicaid Redeterminations Revisited – Part 2
In my blog post last week, I wrote about changes in Medicaid’s redetermination process, especially in the last 6 to 7 years. More recently, in the last 6 to 7 months, Medicaid has changed the redetermination application itself. Before the change, the “redet” application was 7 pages. Now it is more than double that, at 15 pages. More important, however, is what is being asked on this new application. Many of the questions being asked are identical to the original application. In other words, to many it looks like the redet app is an entirely new application process with a new 5 year look back - except that it’s not supposed to be that way. There are two primary reasons for the redetermination application process. One is to be certain that the Medicaid recipient still meets the resource eligibility standard of having no more than $2000 of assets. What would have changed in a year, you may ask? A Medicaid recipient may have received an inheritance from a family member, a settlement of a lawsuit or may now be divorced. That’s why on the old redetermination application there was a question asking about changes in the past year. On the new application, however, that question has been removed. The second purpose for the redetermination is
Medicaid Redeterminations Revisited – Part 1
There are many misconceptions about Medicaid and the application process. One of them is that after Medicaid is approved, ”we are home free”, so to speak, meaning no more worries about the eligibility requirements. Unfortunately, not true. As I often tell new clients and their families, we first must focus on meeting all of Medicaid’s financial and medical eligibility requirements before applying for benefits. Once Medicaid is approved, “I will then tell you how not to lose Medicaid benefits”. That’s because Medicaid conducts an annual redetermination process. Over the years, this process has changed. Back when I filed my first Medicaid applications in the 1990’s, redeterminations were sporadic. They were not conducted annually and some counties (Medicaid applications are filed with the board of social services of the county where the applicant resides) never seemed to conduct them at all. That changed maybe 6 or 7 years ago. Now all the counties routinely send annual notices and redetermination applications. While the redetermination process is much easier than the application process, problems do exist, some of which I have written about in the past. For example, despite my office having filed the original application, I tell families that when it comes to getting the redetermination notice, it may be sent to us,
A Capital Gains Tax Mistake (Part 3)
In my blog post last week, I was explaining the large and unexpected capital gains tax a client faced. I explained that capital gains is paid on an asset that has appreciated when it is sold. In my client’s case, he had sold real estate that his mother had given him after his father died. When he filed his income tax return for the year he sold it, his CPA told him he had a large six figure tax to pay. The amount surprised him but that’s because no one explained to him (or his mom) before the transfer how capital gains tax works. Had they gotten that advice, they could have avoided or minimized the tax. What they missed was something called a stepped up basis. As I wrote last week, normally the capital gains is taxed on the difference between the sale price and the basis, which is the purchase price. (In the case of real estate, capital improvements made during the course of ownership can raise that basis.) Had the property been inherited by my client, rather than gifted by his mother during her lifetime, he would have received a stepped up basis to the value of the property when his mother died. This “reset” basis could
A Capital Gains Tax Mistake (Part 2)
In my blog post last week I told you about a call I received from a client facing an unexpectedly large income tax bill. The increased tax resulted from real estate that he inherited from his parents - or so he thought. An inheritance is what one receives from someone as a result of their death. In actuality, the real estate he received was not an inheritance but rather a gift given to him by his mother after his father died. At first glance, this may seem to be only a matter of semantics. The client received the property from his parents. What does it matter whether it was an inheritance or a gift made by the donor while she was alive? Because how the transfer occurred impacts capital gains tax in a big way. Capital gains tax is paid when a particular asset is sold by the owner for an amount that is more than what he purchased the it for. Most common assets that can result in capital gains are stocks, bonds, mutual funds and real estate. As these assets increase in value, there is resulting capital gains - the difference between the current value and what it was purchased for, what is referred to as the asset’s
A Capital Gains Tax Mistake – Part 1
A client called recently after receiving his income tax return from his accountant. Much to his surprise, he was facing a significant 6 figure income tax bill. So why was he calling us? We don’t prepare and file income tax returns. The reason had to do with the sale of real estate that he inherited from his mother - or so he thought. Allow me to explain. I asked him how he came to acquire the real estate. He said that he had received a part of it when his father died and the rest when his mother died. A few follow up questions, however, led me to believe that his recollection might not be entirely correct. I told him I would look up the county clerk’s records to locate the deed so we could be sure. Turns out he was only partly right. What I was able to confirm was that Mom and Dad owned the property together as husband and wife. When Dad died Mom became 100% owner. That part he had correct. Mom, however, did not transfer 1/2 to him at that time. Instead, she transferred the whole 100% to him while she was alive. I then asked him how much his parents had purchased the property for and how much he sold
Significant Change to New Jersey Guardianship Law
As part of the long term care planning guidance we provide to clients, we often file guardianship applications on behalf of families. A typical scenario is one in which an elderly parent needs assistance but did not execute a power of attorney or health care directive designating a family member to provide that assistance. At the time they come to us, it may be too late. If the parent no longer has the required mental capacity to execute legal documents a guardianship action must be filed. There is, however, another type of scenario in which we also file guardianship applications - younger individuals with special needs who cannot make decisions of their own. In many of these instances, parents of minor children reach out as their children approach age 18., sometimes when those children are still only 16. We must then explain to families that this is a bit too early. While parents have the right to make decisions for their children until they reach the age of majority, which is age 18, the law did not permit a judgment of incapacity and appointment of a guardian until the person has reached that age. This creates a potential dilemma for parents - the gap in time between the