Medicaid Overview

MassHealth currently accounts for approximately 29% of the Massachusetts budget.  Three out of every five people over the age of 65 in America today will require long-term care at some point in their lives.  According to the 2010 census, 13% of the United States population is age 65 or older.  Long-term care is clearly a pressing concern.

There are three means for paying the cost of long-term care:

  1. Long-term care insurance;
  2. Medicaid; or
  3. Private payment.

For many the private pay option often is not viable.  For those individuals who cannot afford or qualify for long term care insurance, the answer is Medicaid.

Medicaid Qualifications – Assets

For an individual to qualify for Medicaid in Massachusetts there are certain asset limitations that must first be met.  A single applicant cannot have greater than $2,000 in “countable” assets.  In cases where the Medicaid applicant (the “applicant”) is married, the spouse not applying for Medicaid (the “community spouse”) is entitled to keep what is called the Community Spouse Asset Allowance (the “CSAA”), which is currently $113,640.

Only countable assets are considered in determining applicant eligibility.  The best way to define countable assets is in the negative.  Countable assets include everything that are not “non-countable.”  Non-countable assets are as follows:

  1. The home and related personal property if located in Massachusetts and used as the principal place of residence.
  2. Business and non-business property essential to self-support.
  3. Loans or grants the terms of which preclude their use for self-support (scholarships).
  4. Funeral or burial arrangements for the applicant and the community spouse.
  5. Special needs trusts and pooled trusts.
  6. One vehicle per household is non-countable regardless of value if it is for the use of the community spouse.
  7. Medicaid Qualified Annuities.

Countable assets are all the other assets that the applicant or the community spouse own or to which they would be entitled, whether or not actually received.  Essentially, the state will take a “snapshot” of the couple’s countable assets on the date of the applicant’s entrance into the nursing home.  If the couple has $150,000 in countable assets at the time of the snapshot, the applicant will be allowed to keep $2,000 and the community spouse will be allowed to keep $113,640.  The remaining $34,360 will have to be “spent down” before the applicant will qualify for Medicaid.

Medicaid Qualifications – Income

In Massachusetts income is not a factor in determining eligibility.  However, income remains an important consideration for the community spouse.  The state will calculate the Minimum Monthly Maintenance Needs Allowance (“MMMNA”) for the community spouse; this is the amount of income that the Medicaid regulations deem the community spouse needs to survive.  If the community spouse’s income does not meet this amount, the shortfall will be made up from the applicant’s income with the applicant’s remaining income paid to the nursing home.  If the income of both the community spouse and the applicant do not meet the MMMNA, the community spouse can request a hearing to keep additional countable assets over the CSAA under the theory that these assets will be used to generate enough income to meet the MMMNA.  It is important to note that the asset allowance is only increased if the income from both spouses fails to meet the MMMNA.  If the income from both spouses meets or exceeds the MMMNA at the time of the application, there is no opportunity to keep excess assets and they must be spent down.  The question remains, what happens if the institutionalized spouse dies and his or her income ceases.  The community spouse will now not have enough income to meet the MMMNA, and not enough assets to generate the income to make up the difference.

Transfers of Assets

Transfers of assets by the applicant for less than fair market value can result in disqualifying the applicant from receiving Medicaid benefits for a certain period of time.  The disqualification period is determined by dividing the amount transferred by the average monthly cost to a private patient receiving nursing home care in Massachusetts.  The state currently sets the average rate at $8,333 a month, or $274 a day.  So if a person makes a gift of $27,400, the applicant is disqualified from being eligible for Medicaid for 100 days.  The kicker is that the disqualification period does not begin to run on the date of transfer, rather the disqualification period will not begin to run until the individual has made the gift, been admitted to a nursing home, applies for benefits and gets denied as a result of the initial gift.  The problem here is that by the time all of these criteria are met the applicant only has $2,000 and has no means of paying for nursing home care for that 100 day disqualification period.

The way to deal with the disqualification period is through the look back rules.  The state is only allowed to look at the applicant’s prior financial activities for a certain time.  The maximum look back period is 60 months.  In other words, an applicant could give away $1,000,000 and so long as a 60 month period has passed since the time of the gift, the gift would have no adverse consequences for qualifying for Medicaid.  This does require a much longer planning window for ensuring Medicaid qualification.


This is clearly a brief overview of the Medicaid eligibility rules and there are many exceptions and exclusions that are not discussed.  It is important that you discuss this with a qualified attorney with significant experience in the area before attempting to deal with Medicaid on your own.  There are many traps for the unwary.

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Protect Your Children: Pick a Guardian

Naming a guardian for your minor children is a difficult task.  However, it must be done.  The alternate to you naming a guardian is a judge, who does not know you, your children, or the guardian options, making the choice for you.

Who to Name

Remember, the guardian is the person who will be responsible for your child’s physical, emotional, and spiritual needs.  Your guardian should be a person who shares your values and will make the best health care, education, housing, and discipline decisions.  Do not exclude someone if you are concerned with their money management or financial resources. You can name someone else to take care of financial matters.

You should name one personal guardian (and one alternate, in case your first choice can’t serve) for each of your children.

Legally, you may name more than one guardian, but it’s generally not a good idea because of the possibility that the co-guardians will later disagree.  On the other hand, if you prefer that two people care for your child — for example, a stable couple who would act as co-parents — name both of them, so that they each have the legal power to make important decisions on behalf of your child.

Step 1:  List the qualities you want your guardian to have, keeping in mind that the needs of your child must come first.  If it would be too disruptive for your child to be uprooted and moved across the country, then list “lives locally” as one of your required qualities.  What are the values and ethics you want imparted to your child?  Is there a particular education – scholastic or religious – you want your child to have?  If you have more than one child, is it a requirement that they go to the same guardian?  Do you want your guardian to already have experience raising children, or do you feel your child would be too much of a burden on a family that already has kids?

Consider some of the following items

  • Parenting philosophy
  • Existing relationship with your kids
  • Age
  • Location
  • Religious beliefs or spiritual philosophy
  • Discipline style
  • Personal values

Notice that “financial resources” and “financial values” are not included on the list.  That is because it is your responsibility to provide sufficient financial resources for your children through your own assets or life insurance.  As mentioned above, your guardian does not necessarily have to be the one responsible for handling the financial resources you leave for your children.  You can name a separate person or couple to manage the financial resources you leave for your children.

Step 2:  List your potential candidates.  While most guardians are close relatives, don’t be afraid to list more distant relatives and friends.  Then start going through your candidates, comparing them to your list of qualities from Step One.  To avoid unhelpful arguments with your spouse, keep the discussion focused on the list of qualities.  Remember, the point is to pick the best guardian for your child, not the person you like the most.  Hopefully you’ll have five or six candidates who embody most – if not all – of the required characteristics.

To narrow the list down to one or two, consider some other traits that might not have been on your initial list of qualities.  For instance, if your child is very young, you might consider your potential guardian’s age and health.  Will he or she have the energy to keep up with a little kid?  Maturity and stability are also important factors.  Even if you have somebody else named to be in charge of the funds set aside for your child, the guardian needs to be someone you can trust to provide a secure home.

As a reminder, don’t be surprised if the perfect guardian does not emerge from this process.  The perfect can be the enemy of the good, if you are discouraged from naming somebody.  Remember, the idea is to make the best of a bad situation, and it’s better if you make the decision than if the court does.

Depending on the age of your children, you may also consider asking his or her preference.


You absolutely can name an out-of-state family member or friend as guardian.  You cannot expect, however, that the person will move to your state to raise your children.  Consequently, it is imperative to consider your child’s age, activities, and existing support system and the potential impact of uprooting your child.

Biological Parents

Be aware that a living biological parent will automatically be named a child’s guardian (assuming parental rights have not been terminated).  A divorce decree granting one parent full legal custody does not mean that the other parent’s parental rights have been terminated.

In these situations, it is still highly recommended that you name a guardian.  First, the estranged parent may voluntarily waive his or her rights as guardian.  Second, family and friends who are aware of the family dynamics and your wishes may challenge the estranged parent’s right to be the guardian.

Your Child’s Other Parent Is Your Same-Sex Partner

If you co-parent your children with a same-sex partner, you will probably want to name your partner as the personal guardian of your children.  Because some courts will be unfamiliar with your family structure, consider writing a letter to fully explain to the court why it’s important for your partner to be your children’s personal guardian.

Ask Don’t Assume

It is a good idea to talk to those you would like to name as guardian.  You, no doubt, view the nomination as an honor; however, some may view it as too much responsibility.  You should have the conversation now so that there are no surprises later.  And, if someone declines be understanding and grateful.

Naming a guardian is critical. You can always change the nominated guardian and you likely will over time as the child ages and relationships change.

Posted in Children, Estate Planning, Guardianship | 1 Comment

What Happens to Your Children If Something Happens to You

If you are killed or incapacitated in an accident, the police will typically show up at your house to notify the family.  If the police find your kids home alone, or with a babysitter, they will have no choice but to call in Child Protective Services and have your kids removed from your home until the system can figure out what to do, and that may take weeks or even months.

Having a Last Will and Testament to name permanent, long-term guardians for your minor children is vitally important, but it is not sufficient to protect your children in these situations.  First of all, the police typically won’t know where to find your Will, so your kids will often wind up in the hands of strangers until everyone can figure out what to do.  Even if the police did somehow obtain a copy of your Will, a Will doesn’t actually appoint guardians.  A Will only nominates guardians for your children after your death; a Court must make the actual legal appointment.  And a Will only works if you die, not if you become temporarily or permanently incapacitated.

A Will doesn’t even become effective until it is admitted to probate (which can take weeks or months after death), and then it can take additional weeks or months for the Court to officially appoint your guardians.  In the meantime, who is going to take care of your children?  Who is going to be authorized to obtain medical treatment if a child requires it?  Unfortunately, it is typically the Child Protective Services system.

Without advance legal planning for the care of your children, if the unthinkable happens to you, here’s what could happen:

  • Your children could be placed into the care of Child Protective Services (yes, even if you have a Will in place).
  • Your children could be put into the custody and care of someone you would never want.
  • A judge who doesn’t know you, or your family, will decide who will raise your kids, even if it’s the last person you would ever want.
  • Your family could get into a long, drawn out custody fight.
  • When your kids turn 18, they get a check for whatever assets are left.

I can help make sure this does not happen.  Call me to discuss your concerns and find out how I can help.

Posted in Children, Estate Planning, Guardianship | 2 Comments

Changes to the Federal Estate and Gift Tax

On December 17, 2010, President Obama signed into law, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Tax Relief Act”).

While the Tax Relief Act settles many issues regarding the federal estate and gift tax, it still leaves many of us in limbo as it is only effective until December 31, 2012.  At that time the old rules of a $1 million federal gift and estate tax exemption and tax rates as high as 55% return in full force.  Presumably Congress will act to extend the rules, but there is no guarantee.  Congress has made similar changes in the past and allowed them to lapse without reenacting them.  Anyone who has a loved one who passed in 2010 should be aware of the uncertainty that the lapse caused.

The Tax Relief Act makes the following changes to the federal estate and gift tax system:

  • Estate Tax. The estate tax has returned with a larger exemption of $5 million and a lower tax rate of 35%.
  • Gift Tax. The estate and gift tax exemption now are reunified, so that everyone now has a lifetime gift exclusion amount of $5 million per person and a 35% gift tax rate for gifts over $5 million.
  • Exemption Portability Between Spouses:  Under the Tax Relief Act any exemption that remains unused upon the death of a spouse who dies after December 31, 2010  is generally available for use by the surviving spouse, as an addition to the surviving spouse’s exemption.  A surviving spouse may utilize the predeceased spousal carryover amount in addition to his/her own $5 million exclusion for taxable transfers made during life or at death.  Note that if a surviving spouse is predeceased by more than one spouse, the amount of unused exclusion that is available for use by such surviving spouse is limited to the lesser of $5 million or the unused exclusion of the last deceased spouse.

Unfortunately, the changes made in the Tax Relief Act were not adopted by the Massachusetts Legislature.  Therefore, the Massachusetts estate tax exemption remains at $1 million per person.  Although the $1 million is referred to as an exemption, it is not a true exemption but really only a filing threshold to file a Massachusetts estate tax return.  For example, if your estate at death was valued at $1,000,001 you would end up being taxed on the total value of the estate and not just $1 over the exemption amount.

Because Massachusetts has no gift tax, a lifetime gift (no matter the size) does not create a Massachusetts gift tax.  There is a catch to this in that any lifetime gifts will reduce the Massachusetts $1 million exemption amount solely for the purposes of determining if a Massachusetts estate tax return will be required to be filed.  However, even with this reduction in the exemption amount, lifetime gifting can still result in huge estate tax savings for Massachusetts.  For example, assume a person has a $900,000 estate at death. If the person had made $1,500,000 of taxable gifts during his lifetime, the Filing Threshold would be reduced to zero because more than $1,000,000 was gifted during his lifetime.  Therefore, a Massachusetts estate tax return would need to be filed regardless of the amount of assets owned at the time of death.  The estate would still be a $900,000 estate and the Massachusetts estate tax owed would be $27,600 (the Massachusetts estate tax on a $900,000 estate).  If lifetime gifts had not been made, the taxable estate would have been $2,400,000 ($900,000 estate at death plus $1,500,000 of gifts), and the Massachusetts estate tax would have been $130,800 (the Massachusetts estate tax on a $2,400,000 estate). The lifetime gifts resulted in $103,200 of Massachusetts estate tax savings.

The Massachusetts estate tax savings are even greater with larger lifetime gifts. Therefore, large lifetime gifts will not eliminate your Massachusetts estate tax but will result in significant Massachusetts estate tax savings at no gift tax cost.

There are still many non-tax reasons why you should have your estate plan periodically reviewed and updated. At a minimum, you need to have documents in place that adequately address the following issues:

  • Your circumstances have changed;
  • If you become physically or mentally incapacitated during your lifetime, who will take care of your personal and health needs? Who will manage your assets?
  • Who will receive your property at your death?
  • Who will be in charge of your affairs after your death?

The new developments in the estate and gift tax present an opportune time to consider and possibly take advantage of some of these valuable estate planning techniques that may not be as favorable in the future.

Posted in Estate Tax | 1 Comment