February 2017

Be careful who helps you with Veterans Benefits

Posted on February 24, 2017 by Jim Koewler — No Comments ↓

The United States Department of Veterans Affairs has created a list of people and organizations that are allowed to help with VA benefits.

(Note: The Department of Veterans Affairs used to be called the Veterans Administration or VA before it was elevated to a Presidential Cabinet level department of the U.S. government. Many people, including me, still often call it the VA for short.)

The people and organizations are “accredited” by the VA to help with VA benefits. A list of VA accredited people is available on the VA’s website. (https://www.va.gov/ogc/apps/accreditation/)

Attorneys can be accredited. The are called accredited attorneys. People who are not attorneys can be accredited. They are called accredited agents. All people who get accredited must keep their training on VA benefits up to date to keep their accreditation.

In addition to the accredited attorneys and agents, a person can help someone apply for VA benefits once. Most often, these one-time helpers are children of the applicants.

In addition to accreditation requirements, no one (accredited or not) is allowed to charge a fee to help someone apply for VA benefits. Put another way, no one is supposed to accept money for help applying for VA benefits. The applicant isn’t supposed to have to pay. The applicant’s family isn’t supposed to have to pay. The applicant’s nursing isn’t supposed to have to pay. Plain and simple, it’s supposed to be free.

To be sure, certain people work for organizations that help veterans and their families apply for benefits, and, as employees, these people get paid. The organizations, however, don’t get paid to help with the applications. For example, in many states, certain state or local government employees are paid to help residents apply for benefits. In Ohio, we have county Veterans Services Commissions. These are government employees that receive a paycheck, but their pay does not depend on the number of people that they help. Similarly, many veterans organizations, such as American Legion, Veterans of Foreign Wars, and Disabled American Veterans, help with VA applications, but they do so at no charge to the applicant. These organizations are supported by donations and fundraisers that are completely separate from the help with VA applications.

There are some non-profit organizations set up to help with VA applications for Pension (more often called Aid and Attendance.) Such organizations can’t charge a fee. Some of them, though, explain that they expect a “donation” in return for help with the application. Is this “expected donation in return” a violation of the “no fee for application” rule? I’m not sure. Such a “non-profit” organization once offered to prepare my clients’ VA applications in exchange for a certain dollar amount donation per application. That offer didn’t pass my personal “smell test.”

Now, please remember that the VA Pension benefit is not available to an applicant whose wealth is over a certain limit. (The limit on wealth, comes from a complicated formula rather than a certain dollar figure, so I won’t go into detail on the wealth limit in this installment.) Certain non-profit often speak to residents of assisted living facilities about the Pension benefit, offering free help with Pension applications. Then, when a resident meets with the organization’s representative one-on-one, the resident is told that he/she has too much money to qualify. The residents who have too much wealth are then referred to someone who can help them become “poor enough” to qualify for the Pension benefit. According to the information I have received over the years, the referrals to help someone become poor enough to qualify are almost always to someone who offers to sell an annuity that the VA won’t count as “wealth” because the annuity has a long surrender period.

(Feb. 27, 2017 Ed. Note: I received a comment in response to this post from someone with the Academy of VA Pension Planners explaining that VA doesn’t care about a surrender period for an annuity. If the person can access the funds, the funds count as wealth in the eligibility determination. I admit that I don’t know whether the comment that I received is true or if the position taken by the annuity salesperson that VA won’t count an annuity with a surrender charge is true. BUT, I have witnessed an annuity salesperson claim that VA won’t count annuities with surrender charges. My concerns expressed below about such annuities if the owner would need Medicaid are great enough for me to dislike such an approach no matter VA’s position on them.)

Now, there is nothing inside current VA rules that indicates that a long surrender period annuity violates VA policy. If the person’s income and VA benefit cover his/her care costs for the rest of his/her life, then everything is fine. If the person’s care costs exceed the income plus VA benefit, problems can arise.

If the person needs to go on Medicaid to get all of his/her care costs paid, then the money placed in the annuity is now considered for Medicaid eligibility. (Medicaid doesn’t ignore annuities with a surrender charge the way that the VA ignores them.) The annuity will probably have to be cashed in, and the surrender charge lost, before the person can get Medicaid coverage. Depending on the age of the annuity, that surrender charge can be huge.

Many elder law attorneys help people who want to get VA benefits, and sometimes that help includes becoming “poor enough” to qualify for VA Pension (in the same way that elder law attorneys can help people become “poor enough” to qualify for Medicaid for long term care.) None of the elder law attorneys that I know use the “bait and switch” tactic that these annuity salespeople use. The elder law attorneys that I know do not get your attention with the “free” help with applications as a way to get your attention.

So, when considering VA benefits (especially VA Pension,) if you want help from someone who does many such applications, look for someone accredited and be wary of “free” help and of organizations that you’ve not heard of before that have official sounding names.

My thanks to Craig Hannus of Gateway Advisors in Mentor, Ohio for suggesting this topic.

My apologies for not posting last week. I did not have time to prepare something that I considered satisfactory.

ABLE Accounts for People with Special Needs

Posted on February 9, 2017 by Jim Koewler — No Comments ↓

ABLE Accounts seem to be here to stay.

ABLE stands for Achieving a Better Life Experience. ABLE Accounts are financial accounts through which someone with special needs can spend money for many things that will enhance the person’s quality of life.

In Ohio, where I practice, they are called STABLE accounts. The ST stands for State Treasurer. (A politician can’t help but put his/her name on something.) Oddly, Ohio is one of the leaders in the U.S. in making ABLE accounts available. Ohio is the first state to make them available

These accounts are “special” accounts for people who have disabilities. They receive favorable tax treatment and will not (in most instances) impact the person’s government income (SSI) and health (Medicaid) benefits. In exchange for the tax treatment and lack of impact on government benefits, these accounts will have a number of limitations, so the politicians’ words “enhance the quality of life” and the “better life experience” are bits of puffery.

To be sure, ABLE Accounts will be useful. In fact, there is one particular use of these accounts that is quite a big step forward. Still, despite the highfalutin words of Congress, an ABLE account is not a panacea.

I’ve discussed ABLE accounts before. The February 2, 2015 installment described the federal legislation that created the ABLE account. The April 17, 2015 installment discussed how an ABLE account can be used to help qualify for SSI (Supplemental Security Income) and for Medicaid.

THE BASICS

The person who owns the ABLE account must be disabled or have been disabled before age 26. There is talk of raising the age, but nothing has happened yet.

The person can have only one ABLE account. Not one per state per person – only one per person, nationwide.

Anyone can contribute to an ABLE account. The total of ALL contributions cannot exceed $14,000 per year. This number is pegged to the amount of a gift that does not trigger the requirement to file a gift tax return. As the gift tax exclusion goes up with inflation, so will the ABLE account maximum contribution amount. Unlike the gift tax exclusion, however, the ABLE account deposit isn’t on a per person basis. The maximum is per account per year, not per donor to the account. For example, if Dad deposits $14,000 into child’s ABLE account in January 2017, no one can give anything more to the account until 2018. Deposits are NOT tax deductible, though.

If an ABLE account holds more than $100,000, SSI will be shut off until the value falls back below $100,000. Medicaid will not be shut off, though. With a maximum contribution of $14,000 (unless interest rates really jump or the stock market takes off,) it will be seven years before any ABLE account gets to that amount.

Whatever is left in the ABLE account when the person dies will go to pay Medicaid first (up to the amount that Medicaid spent on the person.) If the person relies on Medicaid for health costs, he/she should not allow the ABLE account to accumulate.

Money in a ABLE account can grow tax-free. (It’s sort of like a Roth IRA that way. The initial deposit isn’t pre-tax money, but the growth of the money in the account is tax-favored.) In fact, if the contents of the ABLE account are spent on disability-related expenses, the growth isn’t taxed. If, though, ABLE funds are used to pay some expense that is NOT disability-related, there’s a 10% penalty on that expenditure. It’s important to take great care when spending ABLE funds.

Ohio’s STABLE account can be invested in mutual funds or in a checking account. There are different mutual fund choices to allow for aggressive investors or cautious investors. (Remember that the ABLE account is a Medicaid-payback account, so these mutual fund options are attractive only to someone who is sure that he/she will NOT rely on Medicaid for care. I suspect that only a few people who are eligible to open ABLE accounts can fairly expect not to use Medicaid.) Because of the likelihood that many or even most people may come to depend on Medicaid during their lifetimes (becuase of the likelihood of people needing long term care,) I cannot stress how bad an idea it seems to allow an ABLE account to accumulate above one’s near-term needs. (Use, if possible, a Wholly Discretionary Trust if trying to allow accumulation of the money.

An ABLE Account is going to be almost as easy to use as a checking account. It can have a debit card as well. Because expenditures from the ABLE account lose their protection if not made for “disability related expenses,” avoid the debit card. The debit card is a mistake waiting to happen.

THE MOST IMPORTANT USE OF AN ABLE ACCOUNT

An ABLE account can be used to pay for housing.

That may not seem important, but it is.

Supplemental Security Income (SSI) is the source of income for a great number of people who are disabled before age 26 (the age by which someone must be disabled to qualified for an ABLE account.) An SSI recipient over age 18 can have his/her payments be reduced if the recipient receives help paying for housing. That reduction can be up to a third of the SSI payment that the person could otherwise receive.

People who are disabled as children tend to live with Mom and Dad for most or all of their lives. Mom and Dad may be well to do, living in an expensive house. The fair market rent to live in an expensive house can easily exceed one third of the maximum SSI payment, $245. (The maximum SSI payment for 2017 is $735.) For that matter, the fair market rent to live in an expensive house can easily exceed the entire SSI maximum of $735. The SSI recipient doesn’t have enough SSI income to pay fair market rent, so the SSI payment gets reduced.

Mom and Dad (or anyone else, for that matter) can place enough money into an ABLE account (as long as the total deposits during the year don’t exceed $14,000) to allow the child to pay his/her fair share of the monthly cost of the house. Then, the child/ABLE account beneficiary pays money out of the ABLE account to pay Mom and Dad for housing.

(Having the disabled person pay fair share of housing avoids tax issues while payment of “rent” runs into those tax issues. Receiving reimbursement for the fair share of housing doesn’t create income. Receiving rent creates income. That rental income can be offset by the cost of keeping up the house, but it still creates a great deal of tax recordkeeping. Collecting only the fair share of costs doesn’t create an income tax issue as long as documentation of the total cost is checked occasionally and the fair share gets adjusted when someone moves out of the house, such as a sibling moving out for college. Despite the ease of the fair share method, when calculating an SSI reduction, the Social Security Administration uses the fair market value approach.)

There are plenty of other disability-related expense that are eligible to be paid by a Wholly Discretionary. An ABLE account’s ability to pay for housing and remove the possible loss of SSI income is, in my mind, the single best use of an ABLE account.

2017 Ohio Medicaid Financial Standards for Long Term Care – Update

Posted on February 1, 2017 by Jim Koewler — No Comments ↓

Okay! I’ve got to stop trying to post an update of this information right after the first of the year. Too many of these financial eligibility limits trickle out during January.

So, here’s an update of my early January 2017 post.

The Medicaid program helps pay for long term care (nursing home, assisted living, or in-home care) for many seniors. The Medicaid rules allow the patient and the patient’s spouse to keep certain amounts of their savings and certain amounts from their monthly income. As of January 2017, Ohio’s Medicaid program allows the following amounts:
Savings patient can keep: $2,000
Savings spouse at home can keep: $24,180 – $120,900
Monthly income patient can keep: $50
Monthly income allowance for spouse: $2,003 – $3,023
Monthly housing allowance for spouse at home: $601
Monthly utility allowance for spouse at home: $513
What Medicaid pays nursing homes each month: $6,570
Limit on equity in home: $560,000
Monthly gross income above $2,205 triggers the need for a Qualified Income Trust (aka Miller Trust)

Note: Because this information is an update of the Medicaid “financial standards,” it also appears on my website’s Medicaid page.

P.S. I’ll try to remember to publish the 2018 values in February next year rather than rushing to publish in early January and then having to correct myself.