SEPTEMBER 2024
CURRENT ISSUES IN THE AREAS OF ESTATE, TAX AND PERSONAL AND BUSINESS PLANNING
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.
Common Asset Protection Planning Errors – Conclusion. This will be the final comment in a fairly lengthy series of commentaries contained in previous issues of this newsletter. In those previous commentaries, several common mistakes that people make when planning for asset protection and applying for Medicaid were addressed in some detail. This last commentary relates to the explanatory letter that my office always sends to the Indiana Family and Social Services Administration (FSSA) when a Medicaid application is filed. These applications are filed online and the details provided are skeletal. We typically at the same time send a very detailed letter to the FSSA, which we will send by both fax and mail, together with all of the accompanying financial and related information that is necessary to establish Medicaid eligibility as well as the implications of a potential Medicaid penalty if one was incurred. That narrative explains all of the transactions and all changes in funds or other assets during the three month pre-eligibility period. The financial information includes not only the first day of the month of eligibility (which is generally the month when the application is filed), but also details of all accounts and assets for the three prior months. In general, if more detail is provided with better explanations, the processing of the Medicaid application and the eligibility determination will be easier and faster. All exhibits are numbered in a way that will reference the paragraph in the explanatory letter. This makes it easier for the FSSA representative to document and account for any changes in assets prior to the eligibility date. Numerous FSSA caseworkers have expressed appreciation for the efforts of my office relating to the filing of a Medicaid application, and my website in the testimonials section contains some statements from FSSA representatives acknowledging the efficacy of our procedures. The result is generally expedited approvals in our cases. However, when dealing with the FSSA, one must remember that we are dealing with a bureaucracy, and mistakes are commonly made. The problem then becomes one of sifting through the red tape with the goal of ultimately receiving a positive eligibility determination.
Nursing Home Discharge Pending Medicaid Eligibility. A nursing home cannot discharge a resident for non-payment while a Medicaid application is pending. Non-payment and discharge can occur only if the resident does not submit the necessary paperwork for third-party payment, or, after the third party (including Medicare or Medicaid) denies the claim and the resident refuses to pay for his or her stay. Any discharge is prohibited during the Medicaid processing period under federal law. However, if a resident contemplates applying for Medicaid, whether he or she is currently in the facility or not, and if the facility says that it does not have a Medicaid bed, then achieving Medicaid eligibility will not be sufficient for the facility to bill the Medicaid program and the patient will still be obligated to pay for his or her care until the resident is transferred to a Medicaid bed. In general, Medicaid beds are not identifiable beds or locations in facilities, but the reference to a Medicaid bed means generally that the census of the facility is such that there are Medicaid-certified beds still available for Medicaid billing purposes. Some facilities will limit access to a person who contemplates applying for Medicaid and some have even indicated improperly that a Medicaid bed was not available, when in fact one was. Most facilities, however, are honest about the representations they make regarding the availability of a Medicaid bed. If a patient does qualify for Medicaid and the facility in which that patient is residing does not have a Medicaid bed, then Medicaid payment would require that the resident transfer to a facility that does have a Medicaid-certified bed.
Single-Member LLCs. Effective July 1, 2024, several provisions of Indiana law were amended to apply in the situation where a sole member of a single member LLC was an individual and the individual dies not having a written operating agreement in place which contains provisions for the disposition of the deceased member’s interest in the LLC. These changes will prevent a member’s death from triggering an automatic dissolution of the LLC (which would leave no one alive having the authority to wind up the LLC’s business). Instead, the deceased member’s interest will pass to the member’s heirs or devisees, subject to the rights of creditors and the powers of a court-appointed personal representative of the estate. In order for these changes to apply, there must not have been a transfer-on-death (TOD) designation affixed to the deceased member’s interest to any surviving or existing TOD beneficiary, and there is either no written operating agreement at all, or if there is one, the operating agreement must be silent about what happens to the deceased member’s interest after his or her death. When I form LLCs, I always insist on an operating agreement. I also recommend that a TOD designation be affixed to the member’s member certificate, and I always insist on a member certificate actually being issued. I have reviewed countless LLC articles of organization and operating agreements when the issue of succession was not addressed, there was no operating agreement, or there was no member certificate issued. Chaos may be the result.
Change In Estate Or Trust Equitable Apportionment. Beginning July 1, 2024, a change was made in Indiana law pertaining to trusts and estates making distributions to reverse the current default settings in those instances and to confirm that if the fiduciary makes non-pro-rata in-kind distributions to multiple beneficiaries, the fiduciary has no obligation to track assets or to “equitably” allocate potential built-in gain or loss among those beneficiaries.
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.