Serving Indiana Since 1975

May 2023 Newsletter

| May 18, 2023 | Firm News

May 2023 Newsletter

The information that follows summarizes some of the current issues in the areas of estate, tax and personal and business planning which may be of interest to you. Although this information is accurate and authoritative, it is general in nature and not intended to constitute specific professional advice. For professional advice or more specific information, please contact my office.

Medicare “Advantage” Plans.  Medicare “Advantage” (“MA”) plans may offer certain advantages, but there are drawbacks as well. For healthier people, they are great. For people who have certain health risks, they may not be such a good choice. Typical Medicare supplemental insurance (“Medi-Gap”) policies work with Medicare to pick up some or all of the out-of-pocket costs, such as the Part A hospital deductible or the 20% co-insurance payment under Part B. There are many different types of policies, ranging from Plan A to Plan F, each offering different standard benefits. Policies with the same letter might have different premiums depending on the company. The monthly cost can range from around $200 to well over $500 per month. An MA plan is under Part C, and combines Medicare Part A and Part B, and in most instances Part D as well, into one plan. With MA plans, Medicare pays the approved private insurance company’s monthly fee per patient to manage the patient’s care. Premiums can be as little as $-0- per month. MA plans have a yearly limit on out-of-pocket costs for all Part A and Part B services. Once that limit is reached, the insured pays nothing for services covered by Part A and Part B. MA plans cover all Medicare services and may also cover vision, hearing, and dental, as well as gym memberships and some meals. The biggest problem with an MA plan is that after coverage for a period of time if the patient desires to enroll in traditional Medicare, Medi-Gap plans are no longer required to accept them without underwriting. This requires passing a health screen and may prevent enrollment.

There are a number of possible problematic aspects of MA plans, but they do work very well for many people. They are less expensive and encourage people to shop for medical services carefully. A person with a healthier lifestyle may fare very well with an MA plan. When health issues arise, there may be more out-of-pocket expense during particular time periods, but overall, the monthly Medicare supplemental premium can be avoided. The important point to make in this discussion is that when a person is considering Medicare supplemental choices, the person should undertake a very thorough analysis of his or her circumstances and get as much information as is available in order to make an informed decision.

Common Asset Protection Planning Errors – Continued.  Another common asset protection planning error is to fail to capture resources which existed as of the “snapshot” date because a Medicaid application is not contemplated at that time. In spousal cases, when one spouse enters a nursing home (either from a hospital or directly from home), the “snapshot” date for Medicaid purposes is the first day of the first continuous period of institutionalization of at least 30 days. There are technical rules that apply to the counting of the days. Once the “snapshot” date has occurred, however, that date is etched in stone and does not change even if a Medicaid application is not filed for several years thereafter. The “snapshot” date is an important date. All of the resources that existed as of that date must be determined and valued. This will help to determine the resources that the community spouse may be entitled to retain later after Medicaid eligibility is obtained. It will be very difficult to go back several months or a year or more to obtain information that existed at that time. It may also be more difficult to document the admission and discharge history in order to establish that the “snapshot” date occurred. Consequently, if there is a fairly lengthy period of institutionalization in a hospital and/or a nursing home, or both, then once that 30-day period elapses, people are advised to “capture” all of the resources that existed as of the current date and to document the admissions and discharges. Having this information available will save time later and facilitate planning. Knowing that the “snapshot” date has occurred, and knowing what the assets were on that date, may even provide additional planning opportunities for possible future circumstances. In the same way that you contact your health care providers when you have health issues, when dealing with circumstances of this kind, people should contact an elder law attorney who is informed and experienced in dealing with these issues.

Mandatory Trust Distributions.  Previous issues of this newsletter have addressed various aspects of distributions from trusts. Trusts frequently include mandatory income distribution provisions. While such distribution provisions rarely create the problems that exist when “discretionary” distributions are allowed based on certain specified criteria, such as the criteria of “health, education, maintenance and support,” thought should be given to the reason why a mandatory distribution is being considered. Mandatory distributions are often made because it is felt that a trust beneficiary has a need for regular distributions. Consequently, there might be deemed to be a specific need for lump sum distributions on a regular basis to pay for particular needs or expenses. Also, a consistent and regular stream of distributions might facilitate a beneficiary’s planning for budgetary arrangements. If a trust provides for distributions of income, a regular distribution of income may not be sufficient. Income may vary from month-to-month and period-to-period, and the income being generated from a trust can be manipulated by the way the trust assets are invested. Mandatory distributions might help to obviate those problems. However, mandatory distributions, once set forth in the trust, will be locked in. A beneficiary may not need the money, or a beneficiary may be pursued by a creditor, and those distributions will not be protected from a creditor’s claims. If a mandatory distribution is going to be used, it should be well thought out. If it is going to be based on a particular amount, then consideration should be made to including a cost-of-living adjustment from time to time. It might also be appropriate to allow other distributions that are discretionary in nature based on particular criteria.

Additional Information.  Future issues of this newsletter will address other issues of current interest. Please contact my office with any questions that you might have.

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