Fong Law Group

Grandparents Raising Grandchildren May Qualify for the Earned Income Tax Credit

Raising a grandchild can be tough financially, but grandparents should be aware that there is a tax credit available that could help them. Working grandparents who are supporting their grandchildren may qualify for the earned income tax credit, which could reduce the amount they pay in taxes by thousands of dollars or allow them to receive a refund. 

The earned income tax credit is a benefit for working people with low to moderate incomes and dependents, and this includes grandparents.  (Taxpayers without a dependent may also qualify, but it is more difficult.) To be able to claim the tax credit, you must be raising a child who meets the following criteria:

• Is your son, daughter, adopted child, stepchild, foster child, brother, sister, half brother, half sister, step-sister or a descendent of any of them, such as a grandchild or niece or nephew
• Is younger than 19 at the end of the year, younger than 24 and a full-time student at the end of the year, or any age and permanently and totally disabled
• Lives with you for more than half the year

In addition, to qualify for the tax credit your income must be below certain limits, depending on how many dependents you have. The limits for 2019 are as follows:

• One child.  Filing as an individual, your income must be less than $41,094. Filing jointly, your income must be less than $46,884.
• Two children. Filing as an individual, your income must be less than $46,703. Filing jointly, your income must be less than $52,493.
• Three or more children. Filing as an individual, your income must be less than $50,162. Filing jointly, your income must be less than $55,952.

The maximum amount of the tax credit also depends on how many dependents you have. In 2019, the following are the maximum credit amounts:

• $6,557 with three or more qualifying children
• $5,828 with two qualifying children
• $3,526 with one qualifying child

For more information from the IRS about the tax credit, click here.

New Rule May Make It Harder for Medicare Beneficiaries to Receive Home Care

It may become harder for Medicare beneficiaries to find home health care due to a new rule from the Centers for Medicare and Medicaid Services (CMS). Although the rule changes the way home health care providers are reimbursed, it could affect patient care as well. 

Starting in January 2020, Medicare will reimburse home health agencies at a lower rate when they care for patients who have not been admitted to a hospital first. CMS estimates that it will pay home health agencies approximately 19 percent more for a patient who hires the home health agency directly after leaving a hospital than a patient who was never in the hospital or was only an outpatient.  (The Center for Medicare Advocacy calculates that the disparity could be as high as 25 percent.)

In part due to pressure from Medicare to reduce costly inpatient stays, hospitals often do not admit patients, but rather place them on observation status to determine whether they should be admitted. These patients, if not admitted to the hospital for at least three nights, are not eligible for Medicare reimbursement of a limited amount of skilled nursing care and typically head home instead to continue care with Medicare’s home health care benefit.  

But a home health agency that cares for a patient who was in the hospital under observation will be reimbursed as if the patient had been an outpatient. This lower reimbursement rate means that home health agencies may be reluctant to provide care for patients who were under observation status or who haven't been in a hospital at all. 

If you are hospitalized, it is important to learn whether you are admitted or under observation. Hospitals are required to provide notice to patients if they are under observation for more than 24 hours. 

For more information about the new rule from the Center for Medicare Advocacy, click here. 

Medicaid's Asset Transfer Rules

In order to be eligible for Medicaid, you cannot have recently transferred assets. Congress does not want you to move into a nursing home on Monday, give all your money to your children (or whomever) on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return.

This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.

Example: If you live in a state where the average monthly cost of care has been determined to be $5,000, and you give away property worth $100,000, you will be ineligible for benefits for 20 months ($100,000 / $5,000 = 20).

Another way to look at the above example is that for every $5,000 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month. In theory, there is no limit on the number of months a person can be ineligible.

Example: The period of ineligibility for the transfer of property worth $400,000 would be 80 months ($400,000 / $5,000 = 80).

A person applying for Medicaid must disclose all financial transactions he or she was involved in during a set period of time -- frequently called the "look-back period." The state Medicaid agency then determines whether the Medicaid applicant transferred any assets for less than fair market value during this period.  The look-back period for all transfers is 60 months (except in California, where it is 30 months).  Also, keep in mind that because the Medicaid program is administered by the states, your state's transfer rules may diverge from the national norm.  To take just one important example, New York State does not apply the transfer rules to recipients of home care(also called community care).

The penalty period created by a transfer within the look-back period does not begin until (1) the person making the transfer has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer. 

For instance, if an individual transfers $100,000 on April 1, 2017, moves to a nursing home on April 1, 2018, and spends down to Medicaid eligibility on April 1, 2019, that is when the 20-month penalty period will begin, and it will not end until December 1, 2020.

In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be no money to pay the nursing home for however long the penalty period lasts.  In states that have so-called "filial responsibility laws," nursing homes may seek reimbursement from the residents' children. These rarely-enforced laws, which are on the books in 29 states, hold adult children responsible for financial support of indigent parents and, in some cases, medical and nursing home costs.  In 2012, a Pennsylvania appeals court found a son liable for his mother's $93,000 nursing home bill under the state's filial responsibility law.

Exceptions

Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility. These exempt recipients include the following:

• A spouse (or a transfer to anyone else as long as it is for the spouse's benefit)
• A blind or disabled child
• A trust for the benefit of a blind or disabled child
• A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).

In addition, special exceptions apply to the transfer of a home. The Medicaid applicant may freely transfer his or her home to the following individuals without incurring a transfer penalty:

• The applicant's spouse
• A child who is under age 21 or who is blind or disabled
• Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
• A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home
• A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

Congress has created a very important escape hatch from the transfer penalty: the penalty will be "cured" if the transferred asset is returned in its entirety, or it will be reduced if the transferred asset is partially returned. However, some states are not permitting partial returns. Check with your elder law attorney.

Will My Advance Directive Work in Another State?

Making sure your end-of-life wishes are followed no matter where you happen to be is important. If you move to a different state or split your time between one or more states, you should make sure your advance directive is valid in all the states you frequent.

An advance directive gives instructions on the kind of medical care you would like to receive should you become unable to express your wishes yourself, and it often designates someone to make medical decisions for you. Each state has its own laws setting forth requirements for valid advance directives and health care proxies. For example, some states require two witnesses, other states require one witness, and some states do not require a witness at all.

Most states have provisions accepting an advance care directive that was created in another state. But some states only accept advance care directives from states that have similar requirements and other states do not say anything about out-of-state directives. States can also differ on what the terms in an advance directive mean. For example, some states may require specific authorization for certain life-sustaining procedures such as feeding tubes while other states may allow blanket authorization for all procedures.

To find out if your document will work in all the states where you live, consult with an elder law attorney in the state. 

Reports Find Hospice Deficiencies Go Unaddressed

Hospice care is supposed to help terminally ill patients maintain their quality of life at the end of their life, but two new government reports find that serious problems in some hospices may be actually causing harm to hospice patients. The reports propose that additional safeguards are needed. 

Medicare provides a comprehensive hospice benefit that covers any care that is reasonable and necessary for easing the course of a terminal illness. Most hospice care is provided in the home or in a nursing home. State agencies or private contractors survey hospices to make sure they comply with federal regulations. If a hospice fails to meet a standard, the surveyor cites the hospice with a deficiency. 

A pair of reports by the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) found that from 2012 through 2016, more than 80 percent of hospices surveyed had at least one deficiency and one in five had a deficiency serious enough to harm patients. About 300 hospices were identified as “poor performers” and 40 had a history of serious deficiencies.

The reports found that the most common types of deficiencies involved poor care planning, mismanagement of aide services, and inadequate assessments of beneficiaries. Some of the most serious problems that were found included a beneficiary who developed pressure ulcers on both heels, which worsened and developed into gangrene, requiring amputation of one leg. Another beneficiary developed maggots around his feeding tube insertion site. Both of these beneficiaries had to be hospitalized, which hospice is meant to prevent. 

Meanwhile, the OIG found that it is hard for consumers to learn about which hospices are doing a good job. The Centers for Medicare and Medicaid Services (CMS) launched the Hospice Compare website in 2017, but the site does not include information from the surveyors’ reports. Hospices also do not have as strong reporting requirements as nursing homes. In addition, CMS has limited ability to discipline hospices other than to drop the hospice from Medicare. 

The reports provide a number of recommendations to CMS to improve monitoring of hospices, including the following:

• Expanding the data that surveying organizations report to CMS and using these data to strengthen its oversight of hospices 
• Taking steps to include the survey reports on Hospice Compare
• Educating hospices about common deficiencies and those that pose particular risks to beneficiaries
• Increasing oversight of hospices with a history of serious deficiencies
• Strengthening requirements for hospices to report abuse, neglect, and other harm 
• Ensuring that hospices are educating their staff to recognize signs of abuse, neglect, and other harm
• Improving and making user-friendly the process for beneficiaries and caregivers to make complaints. 

To read the OIG reports, click here and here.

For National Public Radio’s coverage of the reports, click here.

New Rule Once Again Allows Nursing Home Arbitration Agreements

The Trump administration is officially rolling back a ban on the use of arbitration agreements by nursing homes that was initiated under President Obama. The Centers for Medicare and Medicaid Services (CMS) issued a rule that once again allows nursing facilities to use arbitration to settle disputes with residents. 

Historically, nursing homes increasingly asked -- or forced -- patients and their families to sign arbitration agreements prior to admission. By signing these agreements, patients or family members gave up their right to sue if they believed the nursing home was responsible for injuries or the patient's death. The dispute had to be settled in private arbitration, and any injury to the patient did not have to be disclosed to the public. 

In 2017, CMS issued a final rule prohibiting nursing homes that accept Medicare and Medicaid from entering into binding arbitration agreements with a resident or their representative before a dispute arises. In doing so, CMS cited abundant evidence that resolving disputes behind closed doors was detrimental to the health and safety of nursing home residents. 

The nursing home industry immediately challenged this rule in court and a U.S. district court issued an injunction prohibiting it from going into effect. The Trump administration then announced it was reviewing the rule. 

The new rule, which takes effect on September 16, 2019, allows nursing homes to enter into pre-dispute arbitration agreements with residents, but prohibits nursing homes from requiring residents to sign an arbitration agreement as a condition for admission. The rule also adds a requirement that facilities give residents a 30-day period to rescind their agreement to arbitrate disputes. And it prohibits language in the arbitration agreement that prevents residents from contacting federal or state authorities. 

Although under the new rule nursing homes will not be able to require residents to sign arbitration agreements as a condition of admission, nursing home resident advocacy groups contend that the effect will in many cases be the same as forcing residents to sign.  

“[T]he circumstances surrounding the admissions process combined with the enormous disparity of bargaining power means that most prospective residents are unaware of the content of what they are signing or the significance of the decision to enter into a pre-dispute arbitration agreement,” the group Justice in Aging said in a statement. “In short, allowing facilities to ask residents to sign pre-dispute arbitration agreements is unfair to residents and their families and will harm their rights, safety, and quality of care.” 

To read the rule, click here.

Medicaid's Gift to Children Who Help Parents Postpone Nursing Home Care

In most states, transferring your house to your children (or someone else) may lead to a Medicaid penalty period, which would make you ineligible for Medicaid for a period of time. However, there are circumstances in which transferring a house will not result in a penalty period.  

One of those circumstances is if the Medicaid applicant transfers the house to a "caretaker child."  This is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's entering a nursing home and who during that period provided care that allowed the applicant to avoid a nursing home stay.  In such cases, the Medicaid applicant may freely transfer a home to the child without triggering a transfer penalty.  Note that the exception applies only to a child, not a grandchild or other relative.

Each state Medicaid agency has its own rules for proof that the child has lived with the parent and provided the necessary level of care, making it doubly important to consult with your attorney before making this (or any other) kind of transfer.

Others to whom a home may be transferred without Medicaid's usual penalty are:

• Your spouse
• A child who is under age 21 or who is blind or disabled
• Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
• A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home

Should You Sell Your Life Insurance Policy?

Older Americans with a life insurance policy that they no longer need have the option to sell the policy to investors. These transactions, called "life settlements," can bring in needed cash, but are they a good idea? 

If your children are grown and your mortgage paid off, you may decide that there is no longer a reason to be paying premiums every month for a life insurance policy, or you may reach a time when you can no longer afford to keep up with the premiums. If this happens, you may be tempted to let the policy lapse and get nothing from it or to surrender the policy for its cash value, which usually is a fraction of its death benefit. Another option is a life settlement. This allows you to sell your policy to an investor for an amount that is greater than the cash value, but less than the death benefit. The buyer pays all future premiums and receives the death benefit when you die. 

Life settlements offer seniors a way to get cash to supplement retirement income and help pay for living expenses, health care, or other needed items. They can be a good alternative to surrendering a policy or letting it lapse. But as with any financial transaction, you need to exercise caution. 

The amount you receive from a life settlement depends on your age, your health, and the terms and conditions of the policy. It is hard to determine if you are getting a fair price for the policy because there are no standard guidelines for life settlements. Before selling you should shop around to several life settlement companies. You should also note that the amount you receive will be reduced by transaction fees, which can eat up a good chunk of the proceeds of the sale. In addition, you may have to pay taxes on the lump sum you receive. Finally, the beneficiaries of your policy may not be pleased with the sale, which is why some life settlement companies require beneficiaries to sign off on the transaction.

Before choosing a life settlement, you should consider other options. If you need cash right away, you can borrow against your policy. If the premiums are too much, you may be able to stop premiums and receive a smaller death benefit. In some cases of terminal illness, you can receive an accelerated death benefit (this allows you to receive a portion of your death benefit while you are still alive). If you don't need the cash but no longer want the policy, another possibility is to donate the policy to charity and get a tax write-off. 

To find out the right solution for you, talk to your elder law attorney.

How to Plan Your Funeral

Thinking about your funeral may not be fun, but planning ahead can be exceedingly helpful for your family. It both lets them know your wishes and assists them during a stressful time. The following are steps you can take to plan ahead:

• Name who is in charge. The first step is to designate someone to make funeral arrangements for you. State law dictates how that appointment is made. In some states, an informal note is enough. Other states require you to designate someone in a formal document, such as a health care power of attorney. If you do not designate someone, your spouse or children are usually given the task. 
• Put your preferences in writing. Write out detailed funeral preferences as well as the requested disposition of your remains. Would you rather be buried or cremated? Do you want a funeral or a memorial service? Where should the funeral or memorial be held? The document can also include information about who should be invited, what you want to wear, who should speak, what music should be played, and who should be pallbearers, among other information. The writing can be a separate document or part of a health care directive. It should not be included in your will because the will may not be opened until long after the funeral. 
• Shop around. It is possible to make arrangements with a funeral home ahead of time, so your family does not have to scramble to set things up while they are grieving. Prices among funeral homes can vary greatly, so it is a good idea to check with a few different ones before settling on the one you want. The Federal Trade Commission's Funeral Rule requires all funeral homes to supply customers with a general price list that details prices for all possible goods or services. The rule also stipulates what kinds of misrepresentations are prohibited and explains what items consumers cannot be required to purchase, among other things. 
• Inform your family members. Make sure you tell your family members about your wishes and let them know where you have written them down. 
• Figure out how to pay for it. Funerals are expensive, so you need to think about how to pay for the one you want. You can pre-pay, but this is risky because the funds can be mismanaged or the funeral home could go out of business. Instead of paying ahead, you can set up a payable-on-death account with your bank. Make the person who will be handling your funeral arrangements the beneficiary (and make sure they know your plans). You will maintain control of your money while you are alive, but when you die it is available immediately, without having to go through probate. Another option is to purchase a life insurance policy that is specifically for funeral arrangements. 

Taking the time to plan ahead will be a big help to your family and give you peace of mind. 

Medicare Launches App to Help Beneficiaries Find Out What's Covered

At the doctor's office and want to know if a procedure is covered by Medicare? There is an app for that. Medicare has launched a free app that gives beneficiaries a quick way to see whether the program covers a specific medical item or service. 

The "What's Covered" app allows you to search or browse to learn what's covered and not covered under Medicare Parts A and B, how and when to get covered benefits, basic cost information and other eligibility details. You can also see a list of covered preventive services. The app does not give results for extra benefits that Medicare Advantage plans may cover but that Original Medicare does not, such as certain vision, hearing or dental benefits. 

Examples of the types of questions the app can answer include:

• When are mammograms covered?
• Is home health care covered?
• Will Medicare pay for diabetes supplies?
• Can I get a regular cervical cancer screening?
• Will my Medicare benefits cover a service to help me stop smoking?

Although the app provides beneficiaries with basic information, it doesn’t provide personalized information. It doesn't ask details about each user's specific insurance information, so it doesn't take into account the user's supplemental insurance, co-insurance, and deductibles. Essentially, the app provides another way for Medicare beneficiaries to get the same information that is available online and in the Medicare handbook.

The app is part of an initiative by the Centers for Medicare and Medicaid Services (CMS) focused on modernizing Medicare and empowering beneficiaries. Other initiatives include:

• Enhanced interactive online decision support to help beneficiaries better understand and evaluate the coverage options and costs of original Medicare compared to Medicare Advantage plans.
• New price transparency tools that let consumers compare the national average costs of certain procedures between settings, so people can see what they’ll pay for procedures done in a hospital outpatient department versus an ambulatory surgical center. 
• A new webchat option in the Medicare Plan Finder.  
• New easy-to-use surveys across Medicare.gov so consumers can tell CMS what they want.

To get the new "What's Covered" app, go here: https://www.medicare.gov/blog/whats-covered-mobile-app.