Bench & Bar

MAY 2013

The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.

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A prepaid irrevocable funeral is also an exempt resource. If the money has been placed in a funeral trust, the trust must be irrevocable and no money can be returned to the family after the funeral. If the funds were used to purchase a single-premium life insurance policy, the funeral home must be the irrevocable owner and beneficiary of the policy. Again, no money can be returned to the family after the funeral. Any prepaid funerals over $10,000 must be reviewed by DMS in Frankfort. This is policy. There is no actual regulation. One car of any value is also excluded if available for transporting the resident for medical care. It need not actually be used for medical care, but you will need to produce a letter from the resident's doctor at the facility stating that the resident could use the vehicle to be transported for medical care. MEDICAID TREATMENT OF THE HOME AND OTHER REAL ESTATE ferred to another does not always mean it is a good idea. For a single applicant, the home is excluded as a countable resource during the first six months of institutionalization. A resident may have one or more short-term nursing home stays separated by time at home. This six-month period is a rebuttable presumption, and the resident may get additional periods by completing a short letter stating his or her intent to return home. Keep in mind that none of the resident's income can be used to maintain the house or pay the taxes while he or she is receiving Medicaid benefits. Therefore, it is usually the family who pays the bills to maintain the house, and that money may be lost when the house is sold since all proceeds from the sale of the home must go into Medicaid recipient's bank account. An adult child is disabled for Medicaid purposes if he or she meets the SSI definition of disability.13 This is the same as the Social Security definition. An adult child who is receiving Social Security Disability Income (SSDI) would qualify with proof of an SSDI Award Letter, even if such child does not live in the home. Also, most homeowner's insurance companies void coverage if a home is vacant for an extended period of time and the coverage has not been switched to a vacant home policy. Homestead rules are found in 907 KAR 1:645. Any other non-homestead real estate, including rental property, is considered an available resource in Kentucky. Exceptions There are some exceptions to the requirement that the home be sold. The home can be transferred in certain circumstances to a disabled adult child, a caregiver child, or a sibling, without incurring any transfer penalties. However, keep in mind that just because a home can be trans- The home can also be transferred to a "caregiver" of the resident who has lived with the parent in the parent's home for at least two years immediately prior to institutionalization14 and provided care such that without that care, institutionalization would have been needed at least two years sooner. Two letters from non-family members attesting to the above are required as proof, including one from the family physician. This exception applies only while the parent is alive. There is also a little-used exception allowing the home to be entirely transferred to a sibling who lived there for at least one year prior to institutionalization and who has equity in the home.15 Any amount of equity is sufficient, so long as the sibling and Medicaid recipient's names both appear on the deed and the deed is recorded. WARNING — If the property is owned in a Revocable Living Trust, it must be transferred to both parents before any transfer to exempt children. Kentucky applies a very literal interpretation of the law and trusts do not have children. Life estates in real property are also exempt resources. But remember two things: 1) the life estate is subject to estate recovery upon death; and 2) any remainder interest gifted may create an eligibility problem since it is a gift, just like any other gift. COUNTABLE RESOURCES FOR A MARRIED MEDICAID APPLICANT There are a number of protections built into the law to protect the CS from impoverishment. All assets exempt for a single Medicaid applicant are also exempt for a married couple. In addition, the family home and all adjoining land are also exempt regardless of value, and not just for six months. The home – no matter the value – is exempt as long as the CS is not also institutionalized. Personal property such as furniture, clothing and existing family jewelry is also exempt. Community Spouse Resource Allowance (CSRA) The amount of countable resources that a CS is permitted to keep is called the Community Spouse Resource Allowance (CSRA). The CS is allowed to keep half of the countable resources up to a maximum of $115,920 (2013). This figure is determined when a "snapshot" is taken of the couple's resources. This "snapshot" is called a Resource Assessment (RA). In Kentucky, you can – and should – do the RA as soon as one spouse enters into nursing home care. The spouse does B&B; • 05.13 11 no withdrawal requirement at any age on a Roth IRA. Nonetheless, Medicaid requires some withdrawal from each plan if the Medicaid applicant is at least age 59½, and prefers the withdrawal to be made monthly. Therefore, make sure at least $10/month is being withdrawn from each plan if the individual is age 59½. If the retirement account owner is over age 70½, make sure the monthly distributions total at least the yearly Required Minimum Distribution (RMD). Also withdraw the equivalent of an RMD from all Roth IRAs. These withdrawals now become income.

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