Elder Law, Medicaid, and VA

What is Elder Law?

Attorneys who focus their law practice on elder law know legal strategies that allow clients to protect their assets from long-term care expenses while gaining eligibility for the Veterans Affairs pension and/or Medicaid benefits.  Although a younger or middle-aged adult may require long-term care due to a serious stroke or accident, or early onset dementia, Parkinson’s disease or another disabling condition, since senior adults require such care more often the practice area has become known as “elder law.”  But one does not need to be elderly to benefit from the advice of an elder law attorney.  

How Can I Pay For Long Term Care?

There are four primary ways to pay for long term care:
  • Out of pocket (also known as “private pay”)
  • With the proceeds of long-term care insurance
  • Veteran Affairs (“VA”) pension benefits; and
  • Medicaid.
  With the cost of an Arkansas nursing home now averaging $7,000 a month for a semi-private room, and the cost of 24/7 home care averaging $17,000 a month, the vast majority of Arkansans cannot afford to privately pay for care for more than a brief period.  But less than 10% of Americans have long-term care insurance.  Therefore, most Arkansans in need of care beyond a brief period of rehabilitation must resort to Medicaid or the VA pension to help pay for that care.  Most often, this care entails assistance with activities of daily living (“ADLs”) – matters directly related to a person’s basic functioning as an adult such as eating, toileting, ambulation (getting out of bed to a chair, out of a chair to a toilet, etc.), incontinence issues, making adjustments to a prosthetic limb, matters of personal hygiene (bathing, dressing, shaving, combing hair and otherwise maintaining a neat appearance), or providing a protective environment for one with dementia.  

Distinction Between ADLs and IADLs

Many individuals reach a point in life during which they can remain at home and live independently if they can get assistance with certain incidental activities of daily living (IADLs).  Help with IADLs is generally known as “companion care” and includes tasks such as:
  • Housework
  • Managing money
  • Taking and managing medication
  • Meal preparation and clean-up
  • Grocery and clothes shopping
  • Use of the telephone and other communication devices
  • Pet care; and
  • Responding to emergency alerts
The cost of assistance with IADLs is typically not considered a medical expense.  By contrast, the cost of assistance with ADLs typically is.  This distinction is critical because the amount of your unreimbursed medical expenses (UMEs) greatly affects your Medicaid and VA pension eligibility.  Think of UMEs as medical expenses for which you are actually out-of-pocket – health insurance premiums, any co-pay associated with medical care, and the cost of drugs or treatments not covered by your insurance.  Similarly, the cost of help with IADLs is often not covered by long term care insurance (LTCI) while the cost of assistance with ADLs typically is.  Finally, ADLs for purposes of Medicaid vary slightly from ADLs for purposes of the VA Pension.  We can help you understand all of this.   Keep in mind, too, that while Medicare will pay for a short-term period of rehabilitation (typically 100% for the first 20 days and 80% for the next 80 days), it will not pay for long-term care.  Medicaid pays for long-term care for those who are eligible.

My Issue is Dementia

While some seniors require assistance with physical needs, others are physically strong but must live in a protective environment due to dementia.  Companion care at home may be adequate to a point but seniors can become a danger to themselves or others by wandering off, leaving a stove turned on or putting metal in a microwave.  Hallucinations can even make a senior violent toward loved ones.  Once someone with dementia becomes a danger to him or herself or others, he or she may need to move to a memory care facility or a nursing home that specializes in memory care.  Such protective care should be deemed to be a medical expense (for VA pension purposes) once the senior achieves a certain score on a cognitive performance test.  Unfortunately, very few memory care facilities accept Medicaid. At Corley Law Firm, our goal is to help you protect your assets while becoming eligible for Medicaid and/or VA Pension benefits.  And the strategies we employ to speed benefit eligibility also help to protect you against unscrupulous people who prey on the elderly and infirm.  Sadly, this is an ever-increasing concern.  More detailed information about Medicaid and VA pension benefits is found below. 

MEDICAID

With Medicaid, it’s not the rules that matter, but the exceptions to those rules.  Generally speaking, you will not be eligible for Medicaid until both your assets and your income are below certain limits.  But certain assets are not “countable” toward that limit.  For example, your home (up to an equity limit that is adjusted annually but is now over $636,000) with typical household furnishings and possessions, does not count.  So what does count?  All monies in a checking, savings or investment account, mineral interests, a second home or car, the cash surrender value of most life insurance policies, monies in an IRA, 401k or other retirement account, and most other assets.

What Are the Asset and Income Rules?

The “rule” is that an applicant for Medicaid can have only $2,000 in countable assets.  If the applicant is married to someone not on Medicaid, that spouse may retain one-half of your joint assets, up to $137,400.  In addition to these resource limits, the “rule” is that an applicant’s household income must be less than $2,523.00 per month (all 2022 figures). These asset and income “rules” are precisely where Corley Law Firm can help you! 

What Can I Do to Protect My Assets?

By planning before the need for long term care arises, you can protect and preserve almost unlimited assets, including the family farm or home, or other property you want to leave to future generations.  We accomplish this by creating an irrevocable trust and then transferring your assets to that trust.  In addition, we will prepare for you a General Durable Power of Attorney, Health Care Power of Attorney, HIPAA Authorization, Living Will, and other documents integral to a comprehensive estate plan.  And, if properly funded, this irrevocable trust will allow you to avoid the cost, tedium and time delay required by the probate of a Will.  In essence, long term care planning accomplishes everything that general estate planning does, and, in addition, it protects your assets from creditors, long term care expenses and those who prey on the elderly. If we create an irrevocable trust for you, you will be the trust maker, often referred to as the grantor or settlor of the trust.  But, unlike with a revocable trust that we create for general estate planning purposes, you cannot be a trustee or a beneficiary.  Rather, you must cede complete control over all of the assets that you transfer to the trust.  You can name one or more adult children, close friends or a niece or nephew as trustee, or you can name a corporate trust officer.  Once created, an irrevocable trust cannot be amended or revoked.  However, assets may be sold, reinvested by the Trustee and distributed consistent with the trust terms.  The irrevocable trust holds assets.  It will not affect your Social Security income, retirement pension and other income that you receive each month; that income will still come to you, and you will have complete control over how to spend it.  And you may choose to transfer less than all your assets to a trust; however, any assets left outside the trust must then be used to pay for your care if that need arises and may delay your eligibility for benefits. An irrevocable trust will protect assets – and make them “not countable” for Medicaid and VA pension purposes – only if it is created and funded (your assets are transferred to it) at least 60 months (5 years) before you or your spouse applies for Medicaid, or 36 months (3 years) before you or your spouse applies for the VA pension.  So don’t wait until it’s too late to take the necessary actions!  Medicaid ignores a pre-nuptial agreement (and VA may); Medicaid will always look at household assets irrespective of an agreement between spouses.  For that reason, when mature clients come to us for a pre-marital agreement intended to protect their children’s inheritance, we sometimes recommend an irrevocable trust instead.   

What If My Income is Over the Limit?

You likely will not need long term care Medicaid benefits until you require extensive home health care or move to an assisted living facility or nursing home.  At that point, your unreimbursed medical expenses (UMEs) will likely cost several thousand dollars a month.  If your gross monthly income exceeds the income limit stated above but does not greatly exceed the cost of your monthly UMEs, we can create a qualified income trust, often referred to as a Miller Trust, and assign your income to that trust, so that your income does not make you ineligible for Medicaid.  The good news is, a Miller Trust need not be created until you need it – no advance action is required.  But once created, strict rules apply to disbursements from the trust.  And, on the death of the Medicaid recipient, assets remaining in the trust will go toward reimbursing Medicaid.

I Need Help Now!

“Crisis” Medicaid planning is undertaken once a person requires assistance with activities of daily living and substantial health care expenses must be incurred.  We can then employ certain strategies to save close to one-half of total household assets (up to about $260,000).  However, these strategies cannot be undertaken if an owner of those assets loses mental capacity before signing a carefully drafted, comprehensive durable power of attorney.  A “standard” power of attorney will typically not suffice.  Therefore, if you are not ready to create an irrevocable trust, we recommend that you at least be sure you have signed a power of attorney that will allow your loved ones to engage in this planning if needed after you lose mental capacity.  And a dementia diagnosis does not typically mean it’s too late.  If the person diagnosed still can name his or her spouse and children, and describe assets owned, she or he likely still has the mental capacity to sign a power of attorney and other estate planning documents.

Estate Recovery

The biggest disadvantages of crisis planning are that it can save far less assets than proactive planning while costing as much or more, and even if you are successful in obtaining Medicaid benefits your assets are then subject to estate recovery by the Department of Human Services (“DHS”).  To explain, after a Medicaid recipient dies, DHS can assert a claim against his or her real and personal property in an effort to obtain reimbursement of all sums expended by Medicaid.  However, if you are survived by a spouse, DHS will not pursue estate recovery.  Note also that estate recovery does not come into play if your assets are owned by an irrevocable trust.  So why bother with crisis planning?  We can save some portion of the Medicaid applicant’s assets and advise you regarding proper “spend down” to achieve faster eligibility, and the Medicaid rate for health care is lower than the private pay rate.  In essence, the amount DHS is entitled to recover will be less than what you would have paid for the same care without Medicaid.

VA Pension

The VA Pension provides tax-free income to any qualified veteran, the surviving spouse of such veteran, a dependent child in the custody of the veteran or surviving spouse, or an adult child of the veteran who became disabled before reaching 18 years of age.  No overseas deployment, combat duty or injury in the line of duty is required, nor does the medical condition being treated need to be in any way related to the veteran’s military service.  At Corley Law Firm, our VA practice is focused on persons aged 65 or older who seek help with long term care costs. 

How Much Help Can I Get?

The highest level of income available under the VA Pension is paid pursuant to the Aid and Attendance (A&A) rating.  As of December 1, 2021, the A&A pension benefit for someone with no dependent children is:
  • For a married veteran, $2,431/month ($29,175/year);
  • For a single veteran, $2,051/month ($24,610/year); and
  • For a surviving spouse of a veteran, $1,318/month ($15,816/year).
This tax-free income is paid directly to the veteran or qualifying family member so it can be used to help pay for home healthcare, assisted living, memory care or nursing home costs.  Lesser pension amounts, paid for a “Basic” or “Housebound” rating, are also available.

VA Pension vs. VA Compensation

VA Pension is different from VA Compensation.  VA Compensation is awarded to any veteran who was injured, or who aggravated an injury, in the line of duty if it left the veteran with a disability rating of 10% or greater.  Compensation is not dependent on the veteran’s income or assets.  Corley Law Firm does not handle VA Compensation cases. 

Who Can Get the VA Pension?

To be eligible to receive the VA Pension, the veteran must:
  • Be age 65 or older, or permanently and totally disabled, or a patient in a nursing home receiving skilled nursing care or receiving SSDI or SSI.
  • Have served 90 or more days of active duty (except a veteran serving since 1980 must have served at least two continuous years), at least one day of which was during a wartime period.
  • Have received a discharge that was other than dishonorable; and
  • Have a household “net worth” of no more than $138,489 (as of 12/1/21).  But many assets, including a primary residence with land up to two acres, and family transportation vehicles, are not counted toward “net worth,” and some income is counted.

The “wartime periods” are: 

  • World War II     — December 7, 1941, to December 31, 1946
  • Korea               — June 27, 1950, to January 31, 1955
  • Vietnam           — August 5, 1964, to May 7, 1975 (Feb 28, 1961 if actually in Vietnam)
  • Gulf War          — August 2, 1990,  to a date yet to be determined.

What Information Do I Need to Calculate Net Worth?

If a veteran meets the first three criteria above, the net worth limitations can often be satisfied by creating an irrevocable trust and transferring to that trust most of the assets owned by the veteran and his or her spouse.   As discussed under Medicaid, the creation of an irrevocable trust requires giving control over your assets (but not your current income) to your children or other third parties of your choosing (who will serve as Trustees of your trust).  The trust will also avoid probate, protect seniors from those who prey on the elderly, and be a major part of a comprehensive estate plan.  But such a trust must be created, and the assets transferred to it, at least three years (36 months) before applying for the VA pension.  With such strategic planning, assets owned by the trust will not count as part of your “net worth.”  In other words, assets in the trust are not subject to any limitation. 

In the absence of such strategic planning, a primary residence (with reasonable lot size up to two acres), family transportation vehicles and reasonable personal possessions are not counted toward net worth.  But to calculate net worth, we must know the type and fair market value of each asset owned by the veteran and anyone in his or her household (typically just a spouse), the gross income of each member of the household, and the unreimbursed medical expenses of each person in the household.  This income includes social security, retirement pension, interest, dividends, required minimum distributions from retirement plans, farm income, mineral interest income and all other income.  Note that “gross” income is the amount of social security, retirement pension, or other income received from any source before any deduction for taxes, insurance premiums or other withholding. 

Effective October 18, 2018, Congress enacted a three year (36 month) “lookback” period and asset transfer penalty for the VA Pension similar to the 60 month lookback period applicable to Medicaid.  Therefore, we must also know about any asset transfers that anyone in your household has made in the three years before you apply for the VA pension – including the fair market value of the asset at the time of transfer, the date transferred, and the price paid for it (if any).

Is There an Income Limit? And What Are UMEs?

Your income, on its own, doesn’t matter to the VA.  What matters is your IVAP, or “income for veterans’ affairs purposes.”  Your IVAP is your household’s gross income less the cost of your household’s unreimbursed medical expenses (UMEs).  If your social security benefits are extremely low and you have no other source of income, you may qualify for the VA Pension without UMEs.  But most people have too much income to qualify until their household’s UMEs exceed or approximate the monthly income of all persons in the household.  UMEs include:

  • all amounts paid to a nursing home.
  • all amounts paid to an assisted living facility or memory care facility that provides significant help with activities of daily living (ADLs) (otherwise, the amounts paid to a caregiver for help with ADLs count as a UME, but the room and board paid to the facility does not).
  • if properly documented, payments to friends or family members who provide home health care.
  • out of pocket physician and hospital costs; and
  • premiums for health insurance, including Medicare, and for traditional long term care insurance.


ADLs
 include bathing, dressing and undressing, toileting and ambulation, as well as provision of a protective environment needed due to dementia.  

I’m Not a Veteran but My Spouse Was

For a surviving spouse to qualify for the VA Pension, she or he must have been married to the veteran for at least one year prior to the veteran’s death and lived with the veteran at the time of that death (subject to a separation due solely to hospitalization, nursing home stay, or abuse).  With a very narrow exception, the surviving spouse cannot have remarried.  A woman who was never legally married to a veteran but who has a child by the veteran may also be eligible.  If you seek surviving spouse benefits, please bring us your marriage license or certificate and your veteran spouse’s death certificate, in addition to the veteran’s military discharge papers.

Other VA Benefits

Once the VA A&A Pension is awarded, a veteran is eligible for free eyeglasses, hearing aids, medications, medical equipment and incontinence supplies.  These may be obtained at a VA hospital or by U.S. Mail.

If you are medically and financially eligible for VA Pension benefits without strategic planning, you can obtain free assistance with a VA Pension application from a veteran service officer.  Most counties in Arkansas have one.  The websites va.gov/pension and veteranaid.org are also quite useful.

Request a Consultation

If you wish to plan for long term care costs, with or without Medicaid and/or VA Pension eligibility, please request a consultation regarding Long Term Care Planning.  We will send you a VA and Medicaid Planning Questionnaire which, when completed by you, will give us an overview of your health condition, veteran status (if any), assets, income, typical monthly UMEs and other factors.  At the initial consultation, we will review your completed Questionnaire, answer any basic questions, and give you a brief overview of the applicable rules and our planning process.  If your situation is straightforward, we will present options to you and, if possible, direct you as to the appropriate steps to take on your own.  For that reason, we charge $600 for the initial consultation up to 2 hours. You will get the most value for your money if you bring the completed Questionnaire with you to the appointment and all decision makers attend; that means both spouses, if married and each has mental capacity, and anyone who holds a power of attorney or acts as a guardian or trustee for the prospective applicant or spouse (also bring the power of attorney, guardianship papers or trust).  Adult children and other advisors are welcome.  If you wish to discuss VA pension benefits, please bring your military discharge paper with you (typically a DD-214 for service in the Korean Conflict or any subsequent war). If you need further assistance with benefit eligibility planning, we will ask you to sign an Engagement Agreement, pursuant to which we will further analyze your Questionnaire (and likely other information we request from you), and issue you a report with our planning recommendations.  You will then be free to engage us to undertake the strategies we recommend, or not.  If want us to create an irrevocable trust and other estate planning documents we will do so within the agreed time frame (typically two to four weeks after receipt of all needed information), when you will return to sign the documents.  At any stage, we will accept a Visa or MasterCard in payment for our services, but we assess a 3% fee when doing so.  ​ If at the conclusion of the initial consultation you do not wish to engage us to do further work, but you later have additional questions, we will be pleased to help you – whether in person, by phone or email – at our standard hourly rates; we will bill our time in one-tenth of an hour (6 minute) increments.