Medicaid Estate Recovery – The Facts (Part 2) #MedicaidEstateRecovery
Last week I was telling you about a common topic of confusion when it comes to Medicaid – the potential for estate recovery – that process by which the State attempts to recoup money from the estates of Medicaid recipients to offset the amount of Medicaid benefits it paid out. The son our client called with concern over the possible lien on the home that his mom owns and lives in now that his dad has died. I told him not to worry. That’s because the State will not place a lien on the home so long as the deceased Medicaid recipient left a surviving spouse, child under age 21 or a child who is blind or permanently and totally disabled. The State will wait until none of these exceptions exist before pursuing estate recovery. New Jersey will also not seek estate recovery if the property in the estate is the sole source of income for one or more of the survivors and pursuing recovery would likely result in any of those survivors becoming eligible for public assistance or Medicaid benefits themselves. Finally, if a family member (other than the spouse) has been continuously living in the home prior
Medicaid Estate Recovery – The Facts (Part 1) #MedicaidEstateRecovery
I got a call the other day from the son of a client. We had obtained Medicaid for his father, preserving the home and just under $120,000 under Medicaid’s Community Spouse Resource Allowance (CSRA) for his mother. He called to tell us that Dad just died but he also needed me to ease his concerns after he spoke with the attorney who had prepared his Dad’s will. The attorney told him to expect an estate recovery letter from Medicaid and to be prepared that there is the potential for a lien to be placed on the home. It prompted him to call me for clarification. In my 20+ years concentrating my practice in the area of elder law, there has always been much misunderstanding and misinformation about Medicaid. The estate recovery lien is towards the top of that list. Let’s first be clear on what estate recovery is. Under federal and New Jersey law, New Jersey’s Division of Medical Assistance and Health Services (DMAHS) is required to recover funds from the estates of certain deceased medical assistance clients for payments provided on their behalf through the Medicaid program. The State does this to attempt to recoup moneys paid out
When Protecting Assets Beware of Capital Gains Tax (Part 3)
The last two weeks I have been explaining the danger of ignoring a potential capital gains tax while focusing on the avoidance of estate tax and asset protection from the cost of long term care. Mom wants to protect her $600,000 home from being lost to the cost of long term care. If, however, she transfers the home outright to her children, when they sell it they’ll have to pay a pretty hefty capital gains tax because they get her carryover basis, what she paid for the home 50 years ago (see last week’s post about a “carry over” basis). If she holds onto the home and the children inherit it and sell it after she passes away they’ll save the tax because of a “step upped” basis, but that’s only if she doesn’t get sick, need a lot of care and have sell the home to pay for that care. Is there another way to accomplish Mom’s goal? The answer is “yes”. By transferring the home to a special type of trust she can preserve the step up in basis and prevent the State from forcing her to sell the home and spend down all the proceeds for
When Protecting Assets Beware of Capital Gains Tax (Part 2)
Last week I told you that when protecting assets from the cost of long term care or from an estate tax when you pass away, there is another tax – capital gains tax – to be aware of and I explained how the tax is calculated. This week let’s look at a few more terms that will help you understand the capital gains tax problem. There is something called the personal residence exclusion. You may exclude up to $250,000 of gain on the sale of your personal residence from tax and if married up to $500,000 of gain. To qualify, you (or your spouse) must have lived in and owned the house for at least two of the five years prior to the sale. Those years do not need to be consecutive. Another term you need to understand is a carry over basis. If you give property to someone else, such as stock or real estate, that person receives it with your basis. If A bought shares of a stock for $1 per share and gifts it to B, and B sells it for $10, B’s gain is $9 because he keeps A’s basis. It “carries over” to him.
When Protecting Assets Beware of Capital Gains
When we get calls with questions about how to protect assets from being spent towards long term care #longtermcareplan or how to protect an estate by minimizing or eliminating an estate tax the focus is limited to the value of the asset. In the case of asset protection a typical fear is that Mom does not want the State or the nursing home to take her home, which let’s say she could sell for $600,000. When considering estate tax, she might be thinking about transferring her home to reduce the size of her estate by that same $600,000 and thus reduce the estate tax. However, so many times when I mention that capital gains tax has to be considered I encounter some puzzling looks. That’s because many people forget about – or don’t really understand the impact of – this tax. It is like a silent assassin lurking in the shadows. Before I explain how so, let’s review what it is. Capital gain #CapitalGains is the difference between the “basis” in property and its selling price. Capital gain applies to property that appreciates – increases in value – over the time that you owned it, such as real estate and
Origins of Memorial Day
At some point in time, Memorial Day has become a holiday that signifies the unofficial beginning of summer. Of course, it is a much more important day than that. It is a time to honor those who fought and died in the service of the United States of America. Originally called Decoration Day, Memorial Day was the result of a desire to honor the memory of Union soldiers who died in the Civil War. It was officially proclaimed on May 5, 1868 by General John Logan, the commander of the Grand Army of the Republic, an organization of Union veterans. Interestingly, May 30 was chosen because that date was not the anniversary of any particular Civil War battle. The purpose was to decorate the soldiers’ graves with flowers on that date. The South initially refused to acknowledge Memorial Day, instead honoring Confederate soldiers on separate days. That changed after World War I when the holiday was expanded to honor not just deceased Civil War veterans but any solider who died fighting in any war. The name was changed from Decoration Day to Memorial Day, but not officially so until 1967. A year later Memorial Day was moved to the