LTC Bullet: Freddy Krueger and Medicaid Planning
Wednesday, October 28, 2009
Providence, Rhode Island--
LTC Comment: Halloween movies may frighten, but this guy
and his bag of tricks are lethal to Medicaid, LTC insurance and
unsuspecting clients. Be very scared, after the ***news.*** [omitted]
LTC BULLET: FREDDY KRUEGER AND MEDICAID PLANNING
LTC Comment: Judging by the number of our readers who sent me Roccy DeFrancesco's Medicaid planning flyer, you might like to know about it too. So, you can read it below shorn of links to his dubious hustles and tie downs. But read this first.
Medicaid planning has been around for as long as the federal and state governments have tried to prevent affluent people from ripping off welfare-financed long-term care. But every time public officials close a loophole, the elder lawyers open new ones for their well-heeled clients. Sometimes Medicaid planners re-open old loopholes that responsible officials thought they'd closed. That's what DeFrancesco thinks he's done with "Medicaid annuities."
News flash. There is nearly always a way to qualify for Medicaid after the insurable event has occurred without spending down much money for care. Whether you work the legalized swindle as an annuity, a trust, a reverse half-a-loaf, a life care contract, a purchase of exempt assets, an early divestiture, or whatever . . . it's easy to do. Plenty of attorneys of dubious repute will be happy to take big fees for getting you an early inheritance by putting you or your parents in a nursing home on welfare.
I've spent the past 25 years of my professional career helping to close loopholes like those. We've been successful getting federal legislation passed in 1988, 1993, 1997 and 2005 to do just that. But bottom line, if you want to game the system and you're willing to accept the consequences, it's still easy to do.
So, what really matters are the consequences. Medicaid is a means-tested public assistance program. It is welfare. It was intended as a safety net for the poor, but has become instead the dominant payer for long-term care in the United States for all economic classes. Because Medicaid tries to do too much for too many, it has a dismal reputation for problems of access, quality, reimbursement, discrimination, institutional bias, loss of independence and welfare stigma. Worst of all, Medicaid cannot continue to do even what itís done in the past, however inadequate, for long-term care. In the future, access to quality LTC, especially in settings other than nursing homes, will require the ability to pay privately.
So bottom line: there's always been a way to get the government to pay for LTC if you're willing to accept dubious access to care of questionable quality. That's still true, but not for much longer. So beware of promotions like the one that follows and think seriously about planning responsibly for long-term care by saving, investing, or insuring privately.
Following is the Medicaid planning flyer several Center members sent my way. Wouldn't it be nice if some of you could attend this fellow's program, ask the tough questions and enlighten him and his other attendees about the real facts of life concerning Medicaid planning? But if you do, please be courteous and professional as it reflects poorly on our more responsible position to behave otherwise. If you really want to find this character and his Medicaid planning class, try his website here.
If you are prone to high blood pressure, please take your medicine before reading what follows:
Medicaid Planning Using Annuities is Viable Again-
Educational Webinar on Nov. 4th at 3:00 pm est. (click here to sign up)
I used to really like "Medicaid Planning" back in the day (prior to 2006). While Medicaid planning is not terribly helpful to "affluent" clients, I had a module in my CWPP course nonetheless.
Why? Because Medicaid planning for someone who needs it is one of the most motivating subjects an advisor can use to facilitate planning with a client and just by good happenstance, the main tool to help clients is a Medicaid compliant annuity.
What is "Medicaid Planning"
It's planning that is typically done for clients who are about ready to enter* a nursing home (one or both spouses) and they have to deal with the realities of how to pay for that care. *Crisis planning can also be done after someone enters a nursing home.
What's the big deal? Most clients and their advisors do not understand that in order to receive federal funds to help pay for nursing home care, there are strict limitations on how many assets can be owned and how much income can be made. If you have too many assets, you have to "spend them down" in order to receive aid. If you make too much income, you simply will not qualify for aid.
In most states singles can't own more than $2,000 in countable assets. (FYI, there is a short list of exempted assets and wouldn't you know it, IRA and qualified plan money are NOT on the list). Married couples can't own more than $109,560 in countable assets in most states. FYI, "Medicaid Planning" doesn't usually take place until after the first spouse has died.
When it comes to disqualification because of income, in most states if you earn more than $2,022 a month, you will NOT qualify for financial assistance.
The old days
In the old days (pre-2006), Medicaid planning with annuities was very useful. How? You would have clients reposition assets into what are known as "Medicaid Annuities." By doing so, you would turn a countable asset into a non-countable asset. Additionally, the income from the annuity could be positioned so that it would not hurt the financial aid available for the nursing home-bound spouse.
Additionally, when the client died, the value of the annuity would pass to the heirs without setoff (meaning the government didn't seize the annuity to pay itself back for the aid it gave someone while living).
The death of Medicaid planning
In 2006 the Deficit Reduction Act passed and this was bad news for Medicaid planning. Many states interpreted the law to say that a Medicaid annuity paying to the non-nursing home-bound spouse would count against the spouse going into the nursing home and who was applying for financial aid. The Act setup a situation where the non-nursing home-bound spouse also had to impoverish him/herself in order for the nursing home-bound spouse to receive federal aid. Also, the government had to be the primary beneficiary of the annuity.
This just killed the use of Medicaid annuity planning because both spouses had to be impoverished in order for one of the spouses to receive non-countable income from a Medicaid annuity.
Medicaid annuity planning is back!
Because the Deficit Reduction Act was not the clearest piece of legislation, there has been some ongoing litigation to help interpret it. A few months ago a state court of appeals (2nd highest in the state) ruled and interpreted how Medicaid annuities should be treated under the Deficit Reduction Act.
The court stated that certain type of payments made to the non-nursing home-bound spouse (like those coming from a Medicaid compliant annuity) will NOT count against the spouse who is nursing home bound.
That's good for the society at large because the non-nursing home-bound spouse can maintain a standard of living while he/she still lives in the marital residence. That's also good for financial planners/insurance advisors who miss the days of pouring hundreds of thousands of dollars into Medicaid compliant annuities.
Next week's newsletter
In next week's newsletter I will explain to you what a Medicaid compliant annuity is and how you can educate yourself not only on Medicaid annuities but also Medicaid planning in general.
Medicaid Marketing Platform (a pilot program)
I was contacted recently by a CWPP advisor who informed me that he, along with one of the top Medicaid planning attorneys in the country, have been working on a turnkey marketing platform that financial planners/insurance advisors can use to generate significant new client flow (and in turn hundreds of thousands of dollars of new Medicaid annuity business).
The marketing platform will be seminar based where seniors come to learn about the problems with Medicaid planning and the solutions available to them.
Soon there will be an announcement of a two-day Medicaid planning educational boot camp for those interested in the marketing program. To learn about this boot camp, please click here. Only a small number of advisors will be allowed into the pilot program (20 or less) that will start in December of this year and will last for three months. After the pilot program has produced the needed results, the platform will be opened up nationwide to all advisors who have an interest.
Sign me up!
If you would like to learn how to significantly grow your business by becoming a Medicaid planner and more about this turnkey marketing platform, please click here to fill out a form. At the bottom of the form, you will be asked if you have an interest in being considered for the Pilot program.
Medicaid Annuity Planning Webinar
November 4th at 3:00 pm est.
To attend a webinar so you can learn more about Medicaid planning and planning using Medicaid compliant annuities (as well as more about the turnkey marketing platform), please click here.
Webinar on SPWL Policies
Click here to sign up for more information on SPWL policies and/or to sign up for the FREE webinar.
Roccy DeFrancesco, J.D., CWPPT, CAPPT, or MMBT