In the Wake of the Coronavirus Pandemic Estate Planning Should be Top of Mind

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by W.B. King –

The coronavirus pandemic is teaching Americans many important and critical lessons, but chief among them is the importance of thoughtful, informed planning, especially as it relates to personal finances and healthcare.

“As the recent COVID 19 pandemic illustrates, the process of preparing one’s last will, power of attorney, healthcare proxy, and living will is something that every adult, no matter their age, should have,” said Anthony Enea of the White Plains-based law firm, Enea, Scanlan & Sirignano, LLP.

“There are no guarantees in life, and death and illness are unfortunately part of life,” Enea added. “Having an estate and elder law plan and the appropriate advanced directives is the first line of defense in addressing the uncertainties of life.”

When it comes to estate and Medicaid planning, Enea, Scanlan & Sirignano Associate Stella King explained that there are benefits to being proactive as well as consequences for not taking action. Proactive measures include executing a durable power of attorney with broad gifting powers, placing real property and other assets in an irrevocable trust and purchasing long-term care insurance.

“You can protect your life savings from the cost of long-term care and ensure that your assets are managed the way you want during your lifetime in the event you become physically and/or mentally incapacitated,” said King. “Likewise, by signing a Health Care Proxy, Living Will, and HIPAA form, you can ensure that your wishes related to your health and medical care are carried out in the event you no longer have physical or mental capacity to make such decisions for yourself.”

If a person does not engage in advance planning, King added that life savings could be significantly reduced or exhausted due to the exorbitant cost of paying for long-term care, instituting a guardianship proceeding (if a person becomes mentally incapacitated and are unable to manage personal and/or financial affairs), probating a will or administering a person’s estate if a person does not have a will.

“By spending a little more than you might like to now, you will be saving yourself an enormous amount later,” said King.

When Westchester resident Joan Cavalluzi’s husband was unfortunately diagnosed with Alzheimer’s disease, she knew that he would need care at home. She also realized that the Medicaid application process would be difficult.

“I had no idea how to go about doing that,” said Cavalluzzi. She turned to a friend who recommended Enea, Scanlon & Sirignano.

“I was given the service of two attorneys who were extremely diligent and conscientious in my application for Medicaid. They knew exactly how to deal with every contingency regarding this application and the all-consuming process it requires,” said Cavalluzzi. “Although it was timely, it was finalized and successful. I am very grateful.”

Spousal Refusal Law

Like Cavaluzzi, many people turn to a lawyer or a certified public accountant (CPA) due to the complexities of navigating the laws related to estate and Medicaid planning. The New York Spousal Refusal Law Section 366(3)(a) of the New York Social Services Law is a Medicaid planning option that is often misunderstood, noted Enea. Florida is the only other state that has a spousal refusal law.

In New York State, Enea explained that “spousal refusal” allows the spouse of an applicant for Medicaid home care or Medicaid nursing home to refuse to use their assets and income for the support of their spouses. In most cases, he said the assets of the applicant spouse are transferred to the refusing spouse so that the applicant has less than the Medicaid resource level for eligibility for 2020 (i.e., $15,750 of non-IRA / retirement assets).

“At the time the application is filed, the spouse of the applicant signs a refusal letter. This triggers the approval of the applicant’s application, assuming all eligibility requirements are met, and also triggers Medicaid’s right to sue the refusing spouse for support,” said Enea. “Whether one will be sued by Medicaid or whether Medicaid will pursue a claim against the refusing spouse depends on a variety of factors such as the assets of the refusing spouse, the county where they reside and, of course, the amount of the claim.”

Enea said the main advantage of executing a spousal refusal is that the applicant spouse becomes eligible for Medicaid and that Medicaid can only pursue a claim for the amount they expended for the applicant’s case.

“This amount is significantly less than the amount it would cost the person needing the home care or nursing home services if they had to pay privately for same,” he noted.

Estate Planning Misconceptions

When approaching estate planning/Medicaid regulations, King explained that for those new to the process there are many understandable misconceptions. The most common of which is that the “five-year lookback period” applies to home care Medicaid. In New York State, she noted that the five-year lookback period applies to nursing home Medicaid only.

“In essence, in order to qualify for either home care or nursing home Medicaid, one’s total liquid non-retirement assets must be below $15,750 for the year 2020. With nursing home Medicaid, uncompensated non-exempt transfers of assets that occur within the five years prior to the filing of a Medicaid application will trigger a period of disqualification,” said King. “With home care Medicaid, however, applicants are free to transfer their assets out of their names in order to financially qualify for same without penalty.”

Another common misconception King noted is that Medicaid will seize personal assets. While it is true that if an individual is eligible for Medicaid and has assets in his or her name at death, Medicaid can make a claim against his or her estate, she said there are ways to protect personal assets.

“If all of one’s assets are non-probate assets (i.e., assets with a beneficiary designation, held jointly with another, or held in a trust) upon one’s death they automatically pass to one’s beneficiaries such that Medicaid cannot reach them.”

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