JULY 2024
CURRENT ISSUES IN THE AREAS OF ESTATE, TAX AND PERSONAL AND BUSINESS PLANNING
Significant changes in Indiana Medicaid rules will become effective August 8, 2024. In order to get this information out and make it available to my numerous clients and others who may have implemented an asset protection plan, or those who may be contemplating doing so, or may be contemplating Medicaid eligibility in the context of nursing home or assisted living care, it is very important that interested persons be made aware of these significant changes.
Retirement Accounts. Indiana has long had a set of rules pertaining to retirement accounts in the case of a husband and wife, when one spouse is seeking eligibility for Medicaid and the other spouse continues to live in the community. That rule has been that the community spouse’s retirement accounts are exempt, which means that Medicaid eligibility can be achieved by dealing only with the Medicaid recipient’s retirement accounts and the couples’ other countable assets. The community spouse’s IRAs have been exempt for approximately ten years irrespective of the size of the account. Effective August 8, 2024, retirement accounts as defined in the Indiana Administrative Code, which include IRAs, 401k plans, Keogh plans, and many other types of retirement accounts, will no longer be exempt for the community spouse. The Medicaid recipient’s retirement accounts have always been countable and it was necessary to liquidate them, or to annuitize them, in order to qualify the Medicaid recipient for Medicaid eligibility. This has not changed. Beginning on or after August 8, 2024, a community spouse’s retirement accounts will become countable, which means that in order to qualify the Medicaid recipient for Medicaid, most, if not all, of the community spouse’s retirement accounts will have to be liquidated. This means that taxes must be incurred and then appropriate planning arrangements put in place in order to eliminate the excess resources (which would include the after-tax funds from the retirement account liquidation) so that the remaining funds do not exceed the allowed community spouse resource allowance. For people who are in the process of planning for possible future Medicaid eligibility, it may be an appropriate planning strategy for community spouses to begin to liquidate their retirement accounts over as short a period of time as will result in taxes at a level that the spouses do not find to be confiscatory. For those of you who have an asset protection plan in place, it may be time to revisit that plan. For those of you who have been accelerating your retirement account withdrawals, it may be appropriate now to consider accelerating those withdrawals even faster. However, do not do anything without first getting appropriate professional advice.
Service Agreements. A new Indiana policy regarding compensation for services will be effective on or after August 8, 2024. Beginning then, if family members or others are providing services to a Medicaid recipient (or to a person who may ultimately become eligible for Medicaid), it will be necessary to have an actual written agreement that lists the services to be provided to the Medicaid applicant, the payment rate for the services being provided, and the care to be provided by the provider. It must be signed and notarized. The fair market value of the services must be reasonable and lump sum payments for future services will not be allowed. It will be necessary to maintain a detailed log of the services provided which includes the value of the services, the frequency and duration of the services, and a description of the services. Any payments made for services that do not comply with the new requirements will be deemed to be a transfer which is subject to a Medicaid penalty in the same way as a “gift” would give rise to a penalty due to the transfer of assets.
Qualified Income Trusts (a/k/a Miller Trusts). A Qualified Income Trust (QIT), also called a Miller Trust, is required for people receiving a nursing home level of care, or care under a Medicaid waiver, whose income exceeds the Special Income Level (SIL), which changes each year but which is currently $2,829 per month. It is based on gross income. If the Medicaid applicant’s or recipient’s income exceeds the SIL, at least the excess must be run through a QIT. Those funds are then spent toward that person’s care. Beginning August 8, 2024, there are only certain specific allowed distributions from a QIT. These include a monthly personal needs allowance for the beneficiary of the QIT if that person has deposited his or her entire monthly income into the trust (this is the $52 personal needs allowance that is available to a person receiving a nursing home level of care). A monthly amount can be paid to the spouse in order to provide the community spouse the minimum monthly maintenance needs allowance for the spouse, but not more than that, and incurred medical expenses may be paid. Previously, there were no specific limitations on how the funds in a QIT could be used as long as it was for the benefit of the beneficiary. According to the new policy, any other use may be considered to be inappropriate, although that is not clear, nor is it clear what the result would be if Miller Trust funds are used in a way that are deemed to be unsatisfactory. The new policy says that allowable distributions may include those being made for the specified purposes, but it does not necessarily preclude other expenses. Nevertheless, it is very important for people to be aware that there may very well be increased scrutinization of Miller Trusts going forward. People receiving care under a Medicaid waiver, particularly those in an assisted living facility which participates in the Medicaid waiver for assisted living care (of which there are only a few in the Evansville area) often accumulate substantial amounts in a Miller Trust. This is due to the fact that there is a limitation on the amount that needs to be spent toward assisted living care, with Medicaid picking up the balance of the cost, which means that there may be quite a bit of money going into the Miller Trust each month that may not be needed. Of course, there is a pay-back requirement to the State of Indiana to reimburse the State for Medicaid benefits provided, but until then, if funds are accumulated, it may be appropriate to use those funds for various purposes from time to time. The increased scrutinization of Miller Trusts may make this more difficult and may increase the risk that an inappropriate payment might be deemed to affect a Medicaid recipient’s Medicaid eligibility.
Additional Information. Future issues of this newsletter will address other issuesof current interest. Please contact my office with any questions that you might have.