Top Ten Things
a Planner Should Know
About Elder Law
TABLE OF CONTENTS
I. Introduction
II. ISSUE # 1: Government Benefits Programs
A. Means-Tested Programs
1. Supplemental Security Income (“SSI”)
2. Medicaid
3. General Eligibility Requirements for SSI and Medicaid
B. Non-Means-Tested Programs
1. Social Security Disability Insurance (“SSDI”)
2. Medicare
III. ISSUE # 2: Use of a Qualified Income Trust
IV. ISSUE # 3: Transfers
A. General Transfer Rules
B. Exclusion Gifting
C. Disclaimers
D. Exceptions to the Transfer of Assets Penalty
E. Two-Year Caretaker Rule
F. Gifting Provisions in Powers of Attorney
V. ISSUE # 4: Special Needs Trusts
A. Self-Settled Special Needs Trusts
1. (d)(4)(A) Special Needs Trust
2. (d)(4)(C) Pooled Special Needs Trust
B. Third-Party Settled Special Needs Trusts
C. Differences between Self-Settled and Third-Party Special Needs Trusts
D. Common Mistakes When Drafting and Administering Special Needs Trusts
1. Inclusion of a Medicaid Pay-Back Provision in a Third-Party Special Needs Trust
2. Drafting a Strict Special Needs Trust
3. Creating a Self-Settled Special Needs Trust for an Individual Over the Age of 65
VI. ISSUE # 5: Ethical Considerations in Medicaid Planning
A. Failure to Consider Medicaid Planning
B. Failure to Create a Special Needs Trust
C. Beneficiary Designations
VII. ISSUE # 6: Spousal Impoverishment Rules
A. Eligibility for Spousal Impoverishment Rules
1. Institutionalization
2. Limitations on Income
3. Limitations on Resources
B. The Spousal Protected Resource Amount
1. When the SPRA is Calculated
2. How the SPRA is Calculated
3. How the SPRA Can Be Increased
4. The Right to Increase the Minimum Monthly Maintenance Needs Allowance
5. Post Eligibility Treatment of the Community Spouse’s Resources
C. Annuities
D. Avoidance of Spousal Impoverishment Rules for Spouses With $0 Income
VIII. ISSUE # 7: Medicaid Estate Recovery Program (“MERP”)
A. Applicability of Estate Recovery
B. Claim Procedure
C. Exemptions from Claims
IX. ISSUE # 8: Veterans’ Benefits
A. Disability Compensation
1. Service-Connected Disability Compensation
2. Low-Income Disability Payments
3. Special Monthly Payments
B. VA Health Care System
C. Other VA Benefits
1. Survivor’s Benefits
2. Burial Benefits
3. Texas Veterans’ Homes
X. ISSUE # 9: Long-Term Care Insurance
XI.ISSUE # 10: Exploitation, Abuse and Neglect
A. General Reporting Requirement
B. Criminal Statutes
C. The Rights of the Elderly Statute
D. Other Legal Interventions
XII. Conclusion
I. Introduction
The practice of elder law is unique among legal specializations in that the field is defined not by a discipline of law, but rather by the class of individuals serving as clients. An elder law attorney focuses his or her practice on the needs of the elderly and individuals with special needs.
The genesis of elder law occurred in the mid-1960s when then-President Lyndon Baines Johnson signed into law two massive federal acts known as Medicare and Medicaid. These two acts served as the pinnacle of Johnson’s “Great Society” and marked the beginning of both lawmakers and society in general as perceiving seniors and individuals with disabilities as a special class of people possessing unique needs.
Since elder law is defined more by a population, an elder law attorney may need to address issues spanning many areas of law. Issues commonly encountered by an elder law attorney include estate planning, guardianship, probate, long-term care issues, housing, Medicare, Medicaid, private pensions, Social Security, disability, poverty issues, mental health, exploitation, abuse and neglect. Additionally, an elder law attorney may participate in both business and real estate transactions on behalf of his or her client, as well as advise on family law matters.
Many elder law attorneys disagree as to what constitutes an elder law practice. Some elder law attorneys practice solely in the area of estate planning, including Medicaid planning. Others focus on guardianship and advocacy issues. A practice in elder law can be tailored to fit the needs and interests of the attorney, as well as the area in which he or she services.
The purpose of this paper is to outline the top ten things the non-elder law practitioner should know about elder law. However, since the practice of elder law is extremely broad and encompasses so many different issues related to the client, this list only scratches the surface of elder law.
II. ISSUE # 1: Government Benefits Programs
One of the main concerns of the typical elder law client is access to various government benefits programs. These programs can be divided into two categories: 1) means-tested programs and 2) non-means-tested programs. A means-tested program considers the income and resources of the applicant in determining whether or nor he or she qualifies for the program. Examples of means-tested programs are Supplemental Security Income (“SSI”) and Medicaid. Non-means-tested programs are not based on financial restrictions, and eligibility is determined based on other criteria. Examples of non-means-tested programs are Social Security Disability Insurance (“SSDI”) and Medicare.
Attorneys not familiar with government benefits programs often use Medicaid and Medicare and SSI and SSDI interchangeably. However, each program has different eligibility requirements and failure to understand the nature of the benefit received by the client or a potential beneficiary of an estate plan being prepared by the attorney, can cause the loss of the public benefit. As the government benefit generally provides the recipient’s only access to health insurance, the result can be catastrophic.
A. Means-Tested Programs
As stated above, means-tested programs determine eligibility for the program based on income and resource limitations. The most common means-tested programs are SSI and Medicaid. Each of these programs, along with the eligibility requirements, are discussed below.
1. Supplemental Security Income (“SSI”)
Supplemental Security Income (“SSI”) is a monthly cash income assistance program intended to help pay for the costs of a person’s food and shelter.[1] As such, the benefits are designed to augment the income or assistance otherwise available to the aged (age 65 or over), blind or disabled (as determined by the Social Security Administration), including children, who meet the income and resource restrictions of the program. The full amount of the monthly SSI benefit is $721 (in 2014). However, this amount can be reduced by the receipt of income by the SSI recipient.
The definition of “income” for SSI and effects of the receipt of income to an SSI recipient are important when preparing estate planning documents for a beneficiary with disabilities. “Income” for SSI purposes is generally anything the SSI recipient receives in cash, including wages earned, or property readily converted to cash, or in-kind support and maintenance that can be used to meet the SSI recipient’s needs for food and shelter.[2] This definition includes certain distributions from trusts and gifts. The receipt of income causes a dollar for dollar reduction in the SSI benefit.
In Texas, once an individual qualifies for SSI benefits, he or she is automatically eligible for Medicaid benefits. The Medicaid benefit is often more beneficial than any cash payment received from SSI since the Medicaid program provides comprehensive health insurance coverage. If a SSI recipient receives $1 of the benefit, then he or she qualifies for Medicaid.
2. Medicaid
Medicaid is the term used to refer to government health insurance programs that provide medical care and services to indigent (poverty level) individuals pursuant to Title XIX of the Social Security Act.[3] In order to be eligible to receive Medicaid benefits, an individual must meet certain income and resource restrictions. The Medicaid program is a state run program funded with federal dollars. Therefore, the rules related to Medicaid eligibility are based on federal law and are similar to the requirements for SSI eligibility. In Texas, the Medicaid program is administered by the Texas Health and Human Services Commission (“HHSC”). While each state has some latitude to establish its own rules and regulations for Medicaid programs, such regulations cannot be more restrictive than the federal laws and guidelines.
Below are some of the programs available in Texas under the state’s Medicaid program:
- Institutionalized programs: provides nursing home institutionalized care for the elderly and disabled;
- Personal Attendant Services: included Community Attendant Services (“CAS”), the Primary Home Care Program, and the Family Care Program. These programs provide attendant care to assist with the activities of daily living, as well as provide light housekeeping and meal preparation;
- Emergency Medicaid for Aliens: allows for the treatment of undocumented aliens for the duration of his or her emergency condition;
- Medicaid Waiver Programs: these programs offer full Medicaid coverage and in-home services as a more cost-effective alternative to institutionalized care. Waiver programs include Community-Based Alternatives (“CBA”), Community Living Assistance and Support Services (“CLASS”), Medically Dependent Children’s Program (“MDCP”), Deaf, Blind, Multiple Disability Waiver (“DBMD”), Home and Community-Based Services (“HCS”), Texas Home Living Waiver (“Tx/HmL”), Star + Plus Waiver, and Integrated Care Management programs;
- Deemed SSI programs: Medicaid that is mandated under federal law to provide continuing coverage for those individuals who lose SSI as a result of a cost-of-living increase for another Social Security program. These programs include the Disabled Adult Child (“DAC”) benefit; and
- Community Medicaid: program that provides comprehensive medical assistance that can pay for doctor’s visits, hospital stays, prescription drugs and adaptive aids for people not living in nursing homes.
Medicaid is the benefit most commonly affected by traditional estate planning techniques. Often, the Medicaid program is the only source of health insurance available to a beneficiary with disabilities, and the loss of such benefits can result in the loss of medical care for the beneficiary.
3. General Eligibility Requirements for SSI and Medicaid
Most clients contact an elder law attorney for assistance in qualifying for long-term care institutionalized Medicaid benefits. In order to be eligible for long-term care Medicaid benefits, an individual must meet certain requirements in the following categories: 1) nationality and residence, 2) age, blindness or disability, 3) medical necessity and 4) income and resource requirements. This section will provide a general overview of the eligibility requirements for SSI and Medicaid and is not intended to provide an exhaustive discussion regarding Medicaid eligibility rules and exceptions.
CAUTION: Please be advised that this section cites the Texas rules for Medicaid eligibility. These rules generally track the SSI eligibility rules (found in Social Security Administration Program Operation Manual System (POMS), SI, available on-line at However, there are differences. Therefore, you should consult the SSI POMS section before undertaking any action regarding to qualification of SSI benefits.
a) Nationality and Residence Requirements
In order to be eligible for Medicaid benefits, an individual must either be a citizen of the United States or a lawfully admitted alien who is a permanent resident or permanently living in the United States under color of law.[4] Additionally, a lawfully admitted alien who entered the United States after August 22, 1996, is ineligible for Medicaid benefits until the alien has lived in the United States for five years, unless the alien falls under one of the exceptions for a refugee or asylee.[5] Illegal or undocumented aliens do not satisfy the nationality requirement.[6]
An individual must also be a resident of the state of Texas. Travel outside the state of Texas does not terminate residence, however, the individual must have an interest to return to Texas.[7]
b) Age, Blindness and Disability
An individual must either be aged (65 or older), blind or disabled (under the Social Security definition).[8]
c) Medical Necessity
In order to be eligible for long-term care Medicaid, an individual must meet a medical necessity requirement. Medical necessity is defined under Texas law as:
The determination that a recipient requires the services of licensed nurses in an institutional setting to carry out the physician’s planned regimen for total care. A recipient’s need for custodial care in a 24-hour institutional setting does not constitute medical need…[9]
The initial assessment for medical necessity is done upon entry to the nursing home or program, and a follow-up is done annually in most cases.
Essentially, a medical necessity requirement requires a medical disorder or disease necessitating regular medical attention by a registered or licensed vocational nurse. It is important to note that the inability to perform activities of daily living (i.e. bathing, grooming, eating, etc…) is not in itself sufficient to meet the medical necessity requirement.[10]
d) Income Limitations
The income cap for a single individual applying for Medicaid is $2,163 per month (in 2014). The same limitation applies to a married individual applying for Medicaid, with one spouse ineligible. For a married couple, both of whom are applying for Medicaid, the income cap is $4,326 (in 2014). However, if the income exceeds the applicable cap, then the individual or couple may establish a Qualified Income Trust (or Miller Trust) to achieve income eligibility.[11] These income limitations increase each January 1st.
The income limitation only applies to countable income. Income is defined as the receipt of any property or service an individual can apply, either directly or by sale or conversion, to meet basic needs for food or shelter. Countable income is the amount of the individual’s income after exemptions and exclusions. Exempt income includes the value of medical services provided either for free or that are paid by a third-party, payments to providers of social services by a government program, and interest earned on excluded burial funds. Excluded income is income which includes interest and dividend income earned on countable assets, as well as irregular and infrequent income. An important distinction between exempt and excluded income is that while both are not included in the initial Medicaid eligibility determination, excluded income is considered when calculating the amount of the individual’s co-payment to the nursing facility, while exempt income is disregarded.
Importantly, the Medicaid waiver programs do not count in-kind support and maintenance as income. This is contrary to how SSI eligibility rules treat in-kind support and maintenance, which is counted in the determination of SSI eligibility.
e) Resource Limitations
“Resources are cash, other liquid assets, or any real or personal property or other non-liquid assets owned by a client, his spouse or parent, that could be converted to cash.”[12] In 2014, the resource limit for a single individual applying for Medicaid is $2,000 of countable resources. The limit is $3,000 for a married couple both of whom are applying for Medicaid.[13]
For a married couple, one of whom is applying for Medicaid, the resource limitations are more difficult to calculate. The limit is one-half of the couple’s combined resources, subject to a “Spousal Protected Resource Amount” (“SPRA”) of a minimum of $23,448 and a maximum of $117,240 (in 2014). This amount may be increased by expanding the SPRA under the spousal impoverishment rules found in MEPD Chapter J and discussed in Section VII of this paper.
B. Non-Means-Tested Programs
Social Security retirement and disability benefits and Medicare are federal programs administered by the Social Security Administration (“SSA”). Social Security Disability Insurance (“SSDI”) and Medicare are not means-tested programs meaning that entitlement to the programs are not contingent upon an individual’s financial situation.
1. Social Security Disability Insurance (“SSDI”)
Social Security Disability Insurance (“SSDI”) is a non-means-tested cash assistance benefit provided through SSA to individuals who are disabled and who have made sufficient contributions to Social Security through the payment of employment taxes. SSDI eligibility is not based on income and/or resource restrictions. A person can qualify for SSDI if he or she has paid into the Social Security program for at least 10 years and for at least 20 of the 40 preceding work quarters. A person can be eligible with less work history if the person is disabled and under the age of 31, or if he or she is disabled due to blindness.[14]
In order to receive SSDI benefits, an individual must be disabled. An adult is considered disabled for SSDI purposes if he or she “is unable to engage in any substantial gainful activity because a medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of at least twelve months.”[15]
The amount of SSDI benefit varies depending on the work history of the recipient. The amount is also calculated to take into consideration the age and total contributions of the recipient. More importantly, once an individual has received SSDI payments for 24 months, he or she becomes eligible for Medicare benefits.
2. Medicare
Medicare is a federal health insurance program available to individuals who:
- Meet either the disability or age (65 or older) requirements of the programs;
- Have paid money into the program through retirement tax payments; and/or
- Have become eligible to receive SSDI or Railroad Retirement Disability benefits; or
- Who have end-stage renal disease.
Coverage through the Medicare program is automatic when payments have been contributed to the program from the qualifying person’s own income or that of his or her spouse or parent, as is the case with dependent children or survivor coverage. Medicare coverage can also be available to individuals over the age of 65, but have not paid money into the system, so long as that individual enrolls in the Medicare program and pays all required premiums. In 2014, the Medicare Part A premium was $426.00 per month. Most people are not required to pay the Part A premium. The Medicare Part B premium in 2014, for most Medicare recipients, is $104.90 per month. This amount is usually deducted from the recipient’s Social Security benefit.
III. ISSUE # 2: Use of a Qualified Income Trust
One of the biggest errors made by attorneys not specializing in elder law is the failure to establish a Qualified Income Trust (“QIT”) for their clients. Many practitioners either do not establish a QIT, also known as a Miller Trust, or do not understand the complex Medicaid eligibility rules regarding income. Moreover, many clients who attempt to apply for Medicaid on their own lose out on months of Medicaid eligibility by not utilizing a QIT.[16]