Attorney Joe Pippen Interviews Attorney John Frazier on 12 20 20
Radio Interview Transcript of Most Commonly Used Medicaid Planning Strategies
Attorney Joe Pippen: We have attorney John Frazier on the line. John is our Medicaid planning and VA planning attorney, and he usually has a Medicaid or VA planning tip of the week. So good morning, John.
Attorney John Frazier: Hey Joe, how are you doing today?
Attorney Joe Pippen: I am doing good, very good.
Attorney John Frazier: Well today, I was going to talk about what are the most commonly used Medicaid planning strategies, and I think it depends on the fact pattern. The first thing I think that it depends on is whether the client is in a nursing facility or an assisted living facility. And the reason why that’s so important is that there is an extensive waiting list for assisted living Medicaid, which means that the first thing that the person has to do is to be placed on that Medicaid waiting list, and then try to get to the top of that waiting list. So the restructuring of the assets is not really the top priority, getting a high score on the waiting list is the top priority with respect to assisted living Medicaid.
I think the next thing depends on whether the person is married or unmarried because we have a completely different strategy that we use depending on that fact pattern. If the person is unmarried, I would say that one of the most commonly used Medicaid Planning strategies that we use probably in at least 95% of our cases is something called a personal services contract. So what we’re talking about is taking the countable assets in excess of $2,000 and restructuring, protecting those monies, to bring the Medicaid applicant to less than $2,000. In addition, a personal services contract involves paying a lump sum of money to one or more family members involved in the care of the person. Therefore, I would say that that is probably the most popular strategy.
However, the other thing is that we typically are going to use a combination of strategies in all of our cases, at least for an unmarried person. Therefore, there is a whole wide range of other strategies that we would use. Moreover, we need to keep in mind that the payment under the personal services contract is taxable income, so the person who receives the money must report that on their income taxes. Therefore, that’s a very important consideration.
Another I think of the most commonly used Medicaid Planning strategies is the purchase of exempt assets. When you have an unmarried person, there’s a whole wide array of assets, which are treated as non-countable. Any items that you would have inside your house, furniture, clothing, TV, appliances, so those are all things that can be purchased. Computers, laptops, electronics, TVs, so those are all very common things to do.
I think something else that most of my clients typically will do, most of my clients are over the age of 65, and so many clients in that age range, they’ve already thought about a funeral service or cremation contract, so if the person has not done that we will typically incorporate that into our planning.
I think another thing that many people will want to consider, the Florida homestead is exempt up to $595,000 so we can make repairs to the property. Therefore, any repairs that we make on the property are a proper way, and a good way to restructure the assets.
I think if we are talking about a married couple, if both spouses are applying for Medicaid, then those same strategies that I just mentioned will also be used for that type of fact pattern. A more typical scenario though is we have one spouse in the nursing facility, one spouse in the community, and I think there is no question that the most common strategy that we use for a fact pattern like that is called spousal refusal. Spousal refusal is when we take the countable assets, move those countable assets into the name of the spouse in the community, and then the state of Florida will disregard those countable assets if we employ the spousal refusal strategy. In addition, even if the spouse in the community has hundreds of thousands of dollars, maybe even over a million, $2 million, $3 million, we can still get the Medicaid applicant on Medicaid. I’ve done many, many cases involving the spousal refusal strategy. I would say that those are our most commonly used strategies in the Medicaid planning context.
Attorney Joe Pippen: John, let’s talk about prepaid funeral costs. Is there a limit to what you can spend?
Attorney John Frazier: No, there is no limit on that. So I actually had one client spent $25,000 on that. I would say my typical client spends between probably a thousand to maybe up to about $8,000, somewhere in between that range, maybe more typically three, four or $5,000, but anywhere I think between $1,000 and $8,000, and what the state of Florida says is that if you make that contract irrevocable, which means that you can’t cash it in and get the money back on that, then the state of Florida says that that entire cost is a non-countable assets. I advise people I would say… Like I was saying earlier, probably 75% of my clients have already started that process because most of my clients are retirees and they think about that, and the other 25% are pretty much going to do that as part of this planning if they have not set that up already. So very, very common strategy.
Attorney Joe Pippen: Is there a difference in how much you can spend versus if you do it while you are say competent and not in a nursing home, as opposed to once you are placed in a nursing home by your power of attorney?
Attorney John Frazier: Well, I would say certainly, when we are purchasing these contracts, most of my clients are actually already in the nursing facility, so right on the eve of a Medicaid application. We could spend $10,000 on the funeral service contract, make it irrevocable, the state of Florida has absolutely no problem whatsoever with that, and we do it all the time. It is a very good way to shelter money and it eliminates the need to have to worry about that in the future. It is all taken care of now, so it is all paid for. I think it’s a really good strategy.
Attorney Joe Pippen: Can a prepaid funeral planning plan include transportation costs for family members living in different parts of the United States to attend the funeral?
Attorney John Frazier: I have not actually researched that issue before. I know that it does include transportation of the remains anywhere in the United States. I have never researched whether that could include plane tickets and things like that, but certainly flowers and all of those things that would be in a standard contract. I would actually have to look at what the standard contract would say to see if that’s even included as an option. I’ve never actually researched that issue before this, so I’ll take a look at that.
Attorney Joe Pippen: All right, well I tend to think of questions that I don’t know the answer to myself.
Attorney John Frazier: Yeah, that’s a good one.
Attorney Joe Pippen: I should probably think way ahead of time, but I’m more of a spontaneous person, as you know, on my feet with questions. So the other question would be that I just thought of would be what about the big reception after the funeral? Could that be prepaid for somehow?
Attorney John Frazier: That’s also an interesting question. I would have to, again, take a look at the contracts because that’s not something that I think that my clients have really pursued or asked me about, but that’s also a very interesting question. I think it would depend probably on what is in the standard contract, and I will look into that. Therefore, that’s a very interesting thought.
Attorney Joe Pippen: All right. Well as you know because you attended my mother’s funeral yesterday, I’ve got funerals on my mind here, and it was part of the point. My mother was not in a nursing home and she never went on Medicaid, but I was thinking as we’re talking, I’m thinking about, well, what should I be able to tell clients on this prepaid funeral planning and how much can they spend, because I think those are maybe good possible new planning strategies for us to suggest to clients to do things like that possibly.
Attorney John Frazier: Yeah, it’s definitely worth thinking about. And the service yesterday was wonderful and a great tribute to your mother. So, it was excellent.
Attorney Joe Pippen: Well, thank you very much. All right. Any other tips, John? We have about three minutes that you can free to tell our clients out there. Let me say that John has done just, I don’t know, hundreds and hundreds and thousands of Medicaid and VA cases. It’s very common for people to come in, are estate planning clients, to be concerned about these issues. In addition, a lot of the times the question comes up how much pre-planning do you do? Your parent is in the nursing home or should be in the nursing home, and sometimes they’re in denial, and sometimes it’s hard to get them to do what’s right for themselves to get into the nursing home. How much pre-planning should a son or daughter out there who’s concerned about their parent, how much pre-planning would you suggest they get involved in and they can do like now to just to get ready?
Attorney John Frazier: Well, the first thing that I always tell people is to have a properly drafted power of attorney because as we’ve discussed many times before, probably 20% of the people who are looking to hire us for Medicaid planning either don’t have a power of attorney or they have one that doesn’t comply with Florida law. Therefore, that is the number one most important thing is to have a properly drafted power of attorney.
Attorney Joe Pippen: Let me interrupt you for a second because we only have two minutes and my producer got a question from a caller he wants to ask you here before we wind up.
Attorney John Frazier: Sure.
Attorney Joe Pippen: All right Reggie, go ahead.
Reggie: Yeah. The question that I got from the caller was what age does eldercare start, 55 or 65?
Attorney John Frazier: Well, I think honestly and unfortunately, I’ve had clients who had to be admitted to a nursing facility in their 30s, and those cases have involved head injuries. I had a couple of police officers who were injured in motorcycle accidents and had very serious collisions that impacted their heads, unable to recover from that. I’ve had early-onset Alzheimer’s cases, people actually in their 40s getting those diagnoses. Therefore, we do have some clients well under the age of 65 who need to do this, but my typical client is 65 or older. Although I wouldn’t say that there’s a strict cutoff, I would say my typical client is 65 or older. Moreover, the Florida Medicaid programs are designed for that, but there are definitely exceptions.
So if a person is disabled under social security and they’re 35 years old they’re actually medically qualified for Medicaid in a nursing facility, even if they’re in their thirties or even younger. There are some unfortunate circumstances here in Pinellas County where we even have children in nursing facilities. Some local facilities actually have wings for minor children depending on their developmental disabilities. I don’t think that there’s a strict cutoff on that, on the age limit.
Attorney Joe Pippen: All right, John. So give us your contact information so clients can contact you if they have further questions and do want to do some planning for Medicaid.
Attorney John Frazier: The office number is (727) 586-3306 extension 104. My cellphone is (727) 748-5374. And my email is firstname.lastname@example.org.
Attorney Joe Pippen: OK John, I hope you have a great Sunday.
Attorney John Frazier: Okay, you too. Thank you very much.
Attorney Joe Pippen: You are very welcome.
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