Six prior installments of Bill and Sue’s “Elder Care Journey” began in May 2020, with an update last week. To experience this family’s elder care journey from the beginning, read the first six parts of Bill and Sue’s story here: https://keystoneelderlaw.com/elder-care-journey/
Bill died in a nursing home early this year, about a year after he became bedridden with a chronic disease. His wife, Sue, had entered a different nursing home five years earlier. Partly because of how Covid affected nursing home admission policies, as well as reducing the ability to transfer between facilities, Bill and Sue were in different facilities when Bill died.
When Bill was discharged from the hospital to the nursing home, we advised Joe about how to reduce Bill’s resources to less than $2,400 so he could apply for Medicaid. Bill also had a prepaid burial plan.
Joe made sure that another person’s name was on Bill’s checking account as a joint tenant with a right of survivorship. Even though Joe could access Bill’s funds as his agent by using the Power of Attorney (POA) document during Bill’s life, the usefulness of any POA document ends upon the death of the person who gave authority. When a person receives Medicaid in a nursing home and has only a small amount of money remaining, adding a child as a joint owner to a bank account is the simplest way for the child to get full ownership of funds when the parent’s dies.
Sometimes, a financial institution will set up an account with a provision to transfer it on death (“TOD”) or make it payable to a specific heir on death (“POD”). TOD or POD accounts are good tools in some instances, but they are not specifically excluded by law from Medicaid estate recovery, as are joint-tenant accounts.
While the Department of Human Services (DHS) may pursue Medicaid estate recovery when assets exceed $2,400, when assets are less than $10,000, a financial institution may release the funds to the next of kin without the process of probate. DHS is less likely to pursue estate recovery without probate.
After Bill died, the family home passed without probate to Joe and his wife, Gail, who had used a life estate deed to purchase a “remainder interest.” Bill had been the “life tenant.” There was no need to pay a 2% real estate transfer tax, but Joe and Gail were required to pay a 4.5% Pennsylvania Inheritance Tax on the entire value of the house.
Although the issues of probate were avoided, the Medicaid-compliant annuity that Bill used during the application process provided for beneficiaries in case Bill died before all annuity payments were made. As required by the Medicaid process, the primary beneficiary was DHS, to the extent of any Medicaid funds paid for Bill’s care in the nursing home.
In Bill’s case, his son, Joe, had increased Bill’s income with a Medicaid-compliant annuity to enable payment during the time that Bill was required to pay privately because of his carefully calculated final gift to his children. DHS never actually paid for any of Bill’s care. When Bill died with three months of annuity payments remaining, Sue and the two children were the equal contingent beneficiaries.
Because Sue was receiving Medicaid in a nursing home, she really could not benefit from the additional income. However, the “spousal election” rules required her to claim a one-third share. Since the total size of Bill’s monthly annuity payment and Sue’s one-third claim of three months of annuity payments was around $4,000, rather than lose the $4,000 to the cost of Sue’s care, Joe increased his mother’s modest burial reserve. Joe’s sister, Mary, will be the contingent beneficiary after the funeral home makes its primary claim.
Joe had one more chore. Since Bill was older than Sue and had been the primary breadwinner, part of their retirement strategy was for Bill to claim his federal pension at a reduced level so that Sue would have a survivor’s benefit after he died. Upon Bill’s death, Joe notified the Office of Personnel Management (OPM), which stopped Bill’s monthly pension check. OPM sent Joe forms to fill out to claim Sue’s survivor’s benefit.
Medicaid rules require recipients to claim any income due to them. So, even though every dollar that Joe claimed on Sue’s behalf would be required to be turned over to the cost of her nursing care, he filled out the paperwork. OPM did not make it easy.
As with other federal agencies such as the VA, SSA and IRS, OPM does not recognize a valid power of attorney document. The federal government believes that this extra step helps to protect older persons from abusive actions of POA agents; but the process can feel unnecessarily burdensome to a dutiful agent. Joe was required to produce two legal affidavits that, among other details, would explain why Sue cannot act for herself, why she does not need to be the subject of a guardianship action, and why Joe can be trusted to act for her.
OPM sent a lump sum of around $30,000 to Sue for survivor’s income that was due but unpaid since the death of Bill. This money made Sue “over-resourced” for Medicaid; so, to maintain Sue’s eligibility, Joe wrote a $30,000 check to the DHS estate recovery office. When the OPM income began to flow regularly on a monthly basis, new paperwork with the nursing home and DHS was required to report the increase in Sue’s income.
Sue’s eligibility was not affected. The nursing home did not get to keep additional money. The amount of subsidy DHS provided to the nursing home was reduced by the amount of Sue’s increased income.
Most paperwork related to both Bill and Sue’s elder care journeys has been completed. The primary remaining issue is Sue’s ongoing care plan. We hope that an epilogue of Sue’s journey will be that her final days were peaceful and seemed like a smooth landing in the nursing home.
Dave Nesbit, Attorney