Helping qualify clients for benefits is a sometimes tricky and often a frustrating area of practice. Good lawyers are left feeling befuddled by the maze of laws, regulations, guidelines and rules that govern benefits for their clients in need. They have every right to feel lost. The rules are complicated and filled with hidden traps that can adversely affect vulnerable clients.
For example, the Social Security Administration says that trusts that can collapse when they become too small to be cost effective are countable assets that disqualify individuals who must have less than $2,000 to receive Social Security Income and Medicaid. Prenuptial agreements mean nothing to TennCare caseworkers who require couples to spend down their life savings in order to qualify one of them for nursing home benefits. Also, giving the house to the kids will make your client run afoul of the five-year look back period for Medicaid/ TennCare and the imminent 10-year look back period of the Veterans Administration (VA).
Over the years, I have seen people create absolute messes when they thought that they could outsmart the system. The problem with trying to outsmart the system is that it comes with a significant downside: a penalty period. Currently, every dollar improperly transferred away from the applicant or spouse within five years of the application for benefits creates a penalty period. The length of the penalty period is all of the money improperly transferred during the last five years divided by $5,472.00, the average state reimbursement to nursing homes for long-term care. The penalty period begins when the applicant is otherwise qualified; meaning they are down to less than $2,000 in countable assets and in the nursing home receiving care. At that point, the person who needs help has usually spent all their money and the adult children are worried about how they are going to be able to afford an attorney, much less the more than $7,000 in nursing home monthly costs. The way to avoid those emergencies is planning.
In the case of TennCare and VA benefits, the sooner the planning, the better. When the mental capacity of the client is gone, so is their chance of making arrangements outside of court proceedings. Assets transferred to a trust four years and eight months ago incur the same penalty period TennCare requires from an asset transfer made four months before an application for benefits.
With good planning, a couple may well be able to afford for one to live in a facility while the other spouse remains home and can still afford groceries. With more planning, a court will not have to appoint someone to make life and death medical decisions for a person they never met before they were in the hospital. Clients can even use their power of attorney to appoint the person they want to be their conservator should they ever need one.
Be careful when you do decide to practice elder law. Be sure you are willing to wrap your head around the 25 pages of Rule 1240-03-03, 25 pages of 42 U.S.C. §1396p, and the Program Operations Manual System of the Social Security Administration. Knowledge of these important documents will allow you to work out strategies for families who need help qualifying for benefits while simultaneously making sure there are enough resources to keep their at-home spouse safe.
Benefit law and regulation are only a part of providing for clients in need of benefits. A working knowledge of the tax implications of trusts as well as how trusts report income paid out to beneficiaries is crucial. It is also important to make sure that there is somebody who knows how to run any trusts involved in planning. The best drafted trust in the world is useless if it is not run according to its internal rules.
You will also need to become familiar with annuities. Annuities have been a major vehicle for converting assets, which prevent people from obtaining benefits into assets that allow people to receive benefits from both TennCare and the VA. The system has, however, been abused, rules have changed and older couples have purchased what they thought was security in an annuity, only to find that the annuity not only disqualifies them, they cannot obtain their money back intact.
I like my practice. I am able to help families in need. We navigate through tough problems together and make sure loved ones have the care they need. That’s a good thing. You might enjoy it as well. Karl Warden