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My Loved One Is Getting A Settlement, Now What?


Settlements can be received from a variety of claims. More prevalent claims we see are from Personal Injury Claims and Medical Malpractice Claims. 

We have the honor of helping families and attorneys determine how to try and ensure that the receipt of a personal injury or medical malpractice award does not result in the loss of public benefits, such as Arizona Long Term care (ALTCS) benefits and Supplemental Security Income (SSI).  Many individuals who have been impacted by an accident or medical malpractice event are also receiving benefits from ALTCS or SSI to cover medical expenses, long term care costs and loss of income.  These two specific programs are available when someone has low income, low assets and meets the medical criteria.  The receipt of settlement money may mean the loss of these important benefits.

It’s important to determine whether the amount of money being received is sufficient to cover the health care and caregiving needs of the injured party.  If the funds are sufficient to meet all of the needs of the injured party, there may be nothing else to do.  However, for the vast majority of people, the costs of care far exceed the amount of money being received.  Remember to do your evaluation on the net amount that will be available, I.E. the amount after all of the medical liens are paid, outstanding debts are paid, attorneys’ fees and costs and any court costs are paid. Next, try and determine if there are immediate costs to be covered, such as the purchase of a handicap accessible van or other transportation, home accommodations, housing, assistive devices and other needs. 

A Special Needs Trust might be the vehicle needed to hold the funds once immediate expenses are paid and to try to ensure that the government benefits remain available.  These trusts are often referred to as “First Party Special Needs Trusts.”  Some of the hallmarks of these trusts are: they are funded with money of the injured party; the Trustee must follow specific rules in making distributions to or for the benefit of the injured party; and any funds remaining in the trust at the death of the beneficiary must be paid back to ALTCS and/or any other Medicaid programs that provided care. This must all be done before the funds can be used for any other purpose or distributed to other beneficiaries.

It’s important to remember that the money in the trust is for the sole benefit of the injured party.  For example, the trust can pay for transportation for the injured party, his/her share of the household expenses, his/her computer, phone, education, vocational training, funeral/cremation, entertainment and in some cases the vacation costs of the injured party and one other person if the injured party cannot travel alone.  These are the most common uses of a special needs trust.

As with all things legal, it’s complicated.  But we are here to help!

Written by: Jennifer Kupiszewski, Esq.

Terms Defined – Trusts Related to ALTCS

The Income Trust, Miller Trusts and Income Only Trusts

Arizona currently has a Medicaid program that helps pay for long term care costs for individuals with low income, low assets, and medical need. This program is called the Arizona Long Term Care System (“ATLCS”)—sounds like “ALL TEX.”  Remember that the applicant must meet all three criteria in order to qualify for ALTCS:  low income, low assets and be medically eligible.

If the applicant is unmarried, their total monthly gross income cannot exceed $2349 per month.  If the applicant is married, and the applicant’s gross monthly income exceeds $2349, but the total gross income of both married individuals together is less than $4698, then the applicant can still qualify.  If neither of those statements are true, most likely, the applicant can still qualify if an Income Only Trust, sometimes called a Miller Trust, is created.  This kind of trust is required if the income does not meet the income cap described above.  It is important to note that these trusts are NOT in any way related to decreasing assets in order to meet the asset cap. 

An Income Only Trust and a Miller Trust typically mean the same thing.  They are essentially two different terms for the same type of trust.  We like to use the phrase Income Only Trust because the only thing being deposited to the Trust is income.

Income usually consists of social security benefits and pension benefits.  However, it is possible that all or some part of a cash payment from the military might also need to be included, as well as guaranteed annuity payments and other payments received by the applicant or the applicant’s spouse.  Almost every ALTCS rule has an exception, so we would need to explore these details with you.
The goal of these trusts is to fully deplete the deposit each month.  There are very strict rules for managing the funds in the Trust which must be followed to become or remain eligible for ALTCS.  Generally, the income is deposited to the Trust, the Trustee then pays the allowable distributions, which typically include payment to the facility for some portion of the cost (called the Share of Cost or Room and Board fee). 

All income must be directly deposited to the new trust account. If the direct deposit has not yet been set up, then you will be required to manually deposit all income.  It’s important to keep in mind that at the death of the ALTCS recipient, any funds remaining may become the property of ALTCS.  Do not make any distributions from the trust after the death of the ALTCS recipient, not even for funeral costs, until and unless you have written approval from ALTCS or its collection agency, HMS.

Written by: Emily B. Kile, Esq.

Will ALTCS Take My House?

The Arizona Long Term Care System (ALTCS) is Arizona’s Long-Term Care Medicaid program.  The program covers day programs, some in home care, memory care centers, group homes, assisted living centers, nursing home care and many more services.  The purpose of ALTCS is to ensure that people with limited income and assets combined with medical needs are able to be served all while making sure the spouses of such individuals do not become destitute.

Some people are unwilling to explore the availability of using ALTCS because of the fear of losing the home.  There are usually two main concerns:  the house will make my loved one ineligible for ALTCS or, the State will take the home when my loved one dies.  

It is certainly true that to qualify for ALTCS the assets and income of the applicant must meet certain criteria. For a married couple where the spouse lives in the home, the house is an excluded resource regardless of the value of the home. The home must be the primary residence of the person receiving ALTCS. The home is also excluded from being considered a countable resource in these circumstances:

-The customer or spouse lives in the home property;

-The customer is absent from the home property due to institutionalization but the customer’s spouse or dependent relative lives in the property as his or her principle residence;

-The customer lived in the home property, is absent due to institutionalization, but intends to return to the home.

However, if the applicant is unmarried, the equity value of the home must not exceed $595,000 (2020) if it meets one of the criteria above. Additionally, while the property is for sale, it is also excluded. Although the rules might be confusing, in general, owning a residence is a not a reason to avoid using ALTCS services to help pay for care. 

That brings us to the second concern i.e., the State will get the house upon the death of the ALTCS recipient.  This can get complicated because ALTCS has an estate recovery program and lien rights.  Under the estate recovery program, ALTCS only recovers property that is subject to a small estate affidavit or a probate.  Therefore, a home owned with rights of survivorship and the survivor is living or where a beneficiary deed was recorded before the death of the ALTCS recipient, will avoid estate recovery.  

ALTCS also has the right to file a lien against real property. However, if a spouse is alive, a lien will not be filed.  Additionally, the State only has a right to file a lien against the real property if the ALTCS recipient was in a long-term care nursing home for 90 or more days with no intent to return home.  There are some additional exemptions to these rules as well.

While the rules are confusing, it is always beneficial to investigate whether an ALTCS application is worth pursuing.

Written by: Emily B. Kile, Esq.

Terms Defined: “Transfers” & ALTCS

What is a “Transfer” for ALTCS Purposes?

ALTCS (Arizona Long Term Care System) is Arizona’s Medicaid program that pays for long term care services. ALTCS might help cover the costs of home care, day programs, respite, assisted living centers, memory care or nursing home care. To be eligible for ALTCS benefits, the person must meet the income and assets limits while also meeting the medical criteria.

It is important to remember that ALTCS is a welfare program. As part of the application process, the applicant or his/her representative must tell ALTCS if the applicant has made any transfers or gifts within 60 months of the date of the application. “Transfers” or “gifts” refer to the applicant giving something away to someone for less than fair market value. The value of the gift will determine how long the applicant must wait before ALTCS will assist in covering the costs of care. This is called the “penalty period”, although I prefer to call it the “waiting period”.

There are some exceptions to this process. For example, any transfers between spouses has zero impact on eligibility. Transfers to disabled children or trusts for certain disabled persons also has no impact on eligibility.

However, other than a few exclusions, most transfers, whether to a charitable or religious entity or a family member or friend will unfortunately delay ALTCS eligibility. Even making tax free gifts of up to $15,000 per person per year will impact the timing of ALTCS eligibility. Please note that adding a child, or someone other than a spouse to a bank account will not impact eligibility. But, adding someone’s name to the deed to a home or other real property will.

While you must disclose any transfers made within the last 60 months, the period of ineligibility could be as low as a few days or as long as several years. Keep in mind that while the waiting period does not have time limits, the disclosure period does. For example, if you gave away $1 million and immediately applied for ALTCS, the person would need to wait approximately 11 years before ALTCS would help pay for care. If you gave away $15,000 and applied, the waiting period would be closer to two months.

ALTCS rules are complex, so please be sure you’re not making a decision that will negatively impact your end goal!

Written by: Emily B. Kile, Esq.

NEW Webinar – Estate Planning And Paying For Care: ALTCS and VA Benefits by Emily B. Kile, Esq.

Banner Health
Emily B. Kile, Esq.

Do you have questions about estate planning? Long term care planning? Well you’re in luck! This webinar, sponsored by Banner Health, features Emily B. Kile, Esq. who has over thirty years experience as an estate planner. The program starts with Emily explaining the basics of estate planning. The  audience was able to ask questions that are likely on your mind as well; an example being, “Why can’t an IRA be titled to a Trust?“. Emily goes on to explain Healthcare Powers of Attorney, Living Wills, Do Not Resuscitate instructions and how COVID-19 is currently impacting peoples estate planning decisions. As Emily is also an experienced long-term care planner, she touches base on the costs of long-term care and the available options to pay for such, including financial and medical eligibility for Arizona Long Term Care Services (“ALTCS”).
This webinar was created to help you understand the intersection of estate planning, long-term care and VA benefits so you can better protect yourself and your loved ones.

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