On June 30, 2013, the Wisconsin Legislature passed Wisconsin Act 20. As noted in our fall issue, the new law dramatically changed certain aspects of the State’s Medicaid program for individuals who need long-term care. In general, the changes were aimed at allowing the State broader authority to recover funds paid on behalf of long-term care Medicaid recipients. Wisconsin Act 20 impacted a wide variety of laws, including laws relating to estate recovery, trusts, jointly-held property and life estates. The Act was accompanied by much controversy, and both the Elder Law Section of the State Bar and Wisconsin’s Chapter of the National Academy of Elder Law Attorneys advocated for a repeal or partial repeal of the new law.
As of this past December, the Wisconsin Legislature enacted a partial repeal of Wisconsin Act 20. The partial repeal is contained in Wisconsin Act 92, which adopts a modified version of the Uniform Trust Code and was enacted on December 13, 2013. Below is a summary of the provisions that were repealed.
- Wisconsin Act 20 provided that “exempt” assets (assets that do not impact a person’s eligibility for Medicare) could not be transferred to another person without the imposition of a divestment penalty. This provision has been repealed.
- Section 49.453(4c) of the Wisconsin Statutes, which was enacted under Wisconsin Act 20, imposed a divestment penalty on persons who entered into a promissory note or loan agreement with a “presumptive heir,” such as a child. This provision has been repealed.
- The provision that expanded the definition of what property may be subject to a claim by the State for recovery of funds paid on behalf of a long-term care Medicaid recipient has been amended to include “revocable trusts” rather than “living trusts,” and irrevocable trusts are now specifically excluded.
- Under Wisconsin Act 20, the State was allowed to recover funds paid on behalf of a long-term care Medicaid recipient from the estate of his or her surviving spouse using all real and personal property in which the surviving spouse had an ownership interest at the recipient’s death, including a marital property interest the surviving spouse had at any time within five years before the recipient’s application for benefits. This provision has been repealed.
- Wisconsin Act 20 also precluded the State from issuing undue hardship waivers to prevent recovery from the estate of a non-recipient surviving spouse. This provision has been repealed to allow waivers for hardship.
- The provision that allowed the State to void certain transfers of real property under Wis. Stats., § 49.4962, has been repealed.
- The provision that allowed the State to record a “request for notice” if certain real property in which a long-term care Medicaid recipient has an interest is transferred or encumbered has been repealed.
- Wisconsin Act 20 required trustees to provide the State notice of the death of a living trust settlor if either he or she, or his or her predeceased spouse, was the recipient of long-term care Medicaid benefits. This provision has been repealed.
- The requirement that trustees provide the State notice of the death of a beneficiary of a self-settled special needs or pooled trust if he or she was the recipient of long-term care Medicaid benefits has also been repealed.
- Wisconsin Act 20 held trustees personally liable to the State for any costs incurred in recovering funds paid on behalf of a long-term care Medicaid recipient from property distributed from the trust before any repayment to the State was made, and for any funds that the State was unable to recover from the persons to whom the property was distributed. This provision has been repealed.
- The provision that allowed the trustee of a pooled trust to retain only 30% of the balance of the trust after the death of a beneficiary who was the recipient of long-term care Medicaid has been repealed.
While the above provisions have been repealed, many of the changes that Wisconsin Act 20 made to Wisconsin’s Medicaid laws remain in effect today and have important implications for long-term care planning.
Wisconsin’s 2013-2015 Budget passed as Wisconsin Act 20 on June 30, 2013 and was published on July 1, 2013. The new law contains sweeping changes to certain aspects of the Medicaid program for individuals who need long-term care. Many questions have been raised, not only about the content of the new law and its effect on individuals who will become eligible for Medicaid benefits in the future, but also about the effective date of the changes, and whether the new law will affect those individuals who are already receiving benefits or who have already used planning techniques that were allowed under the old law. Part of the confusion stems from a delay in the actual implementation of the changes.
Procedural Issues/Effective Date of Implementation
A delay in effective date was written into the law that required Wisconsin’s Joint Committee on Finance (JCF) to approve an implementation plan that would be submitted by the Department of Health Services (DHS). In other words, the law was expected to become effective only after guidelines were in place for its implementation. In the meantime, the Elder Law Section of the State Bar and Wisconsin’s Chapter of the National Academy of Elder Law Attorneys advocated for a repeal or partial repeal of the new law which appears to violate several provisions of federal law.
Instead, on September 4, 2013, the DHS wrote a letter to the JCF requesting complete and immediate implementation of the new law, without developing a plan to address concerns and procedural issues. A hearing was held on the DHS’s motion for immediate implementation on September 18, 2013. The JCF granted the motion and gave the DHS permission to proceed immediately to implement the new law. The begin date for the implementation of the new law was October 1, 2013.
Limitations on Implementation
However, the permission to move forward was limited in certain areas of the new law. While the limitation prevents the DHS from acting on certain portions of the new law, those sections are not repealed. So while the law has still been changed, the DHS cannot enforce certain provisions. Nothing prevents the DHS from requesting implementation of these provisions in the future. The provisions that the DHS currently cannot enforce are:
1. Prohibition Against Transfer of Exempt Resources. Under the old law, certain assets were considered “exempt” in determining whether or not a person could become eligible for Medicaid. These exempt assets, such as vehicles, personal property, and certain business assets, could be transferred without imposing a divestment penalty against the individual who transferred them. The new law prevents the transfer of such exempt resources. As an example of the confusion that results from the lack of repeal, in this case, the new law provides that the transfer of exempt assets is a divestment, but the DHS cannot impose a penalty period, because this portion of the law was not allowed to be implemented.
2. Provisions Relating to Voiding Real Estate Transfers and Notices Related to Real Estate. The new law allows the DHS to record a “Request for Notice of Transfer or Encumbrance and Notice of Potential Claim” on any real property in which a recipient of Medicaid has a current ownership interest, including a marital property interest, as well as any interest owned within five (5) years before the individual applied for Medicaid. Again, these provisions remain law, but cannot yet be enforced.
3. Provisions Regarding Trusts. The new law requires trustees of certain trusts to give notice to the DHS of the death of the Settlor (for Living Trusts) or the beneficiary (for Special Needs Trusts). Again, the DHS is not allowed to enforce this portion of the law; however, the law regarding the notice provisions still stands, raising serious questions for Trustees of these types of Trusts.
4. Promissory Notes. The new law provides that it is a divestment to enter into a promissory note/loan agreement with a “presumptive heir” such as a child. This provision, while it remains law, cannot be enforced. If enforced in the future, and coupled with the potential enforcement of the new law preventing transfer of exempt assets, the transfer of family farms and businesses may be seriously impacted since many family farms and businesses are transferred to a child or other relative through gifts and promissory notes, or a combination of the two.
All other aspects of the new law relating to recovering funds from a Medicaid recipient’s spouse have been authorized and will be enforced. A brief summary of each of these provisions follows.
Estate Recovery in the Estate of the Surviving Spouse. Under the new law, once an individual qualifies for Medicaid, estate recovery has been expanded to reach into the estate of the surviving spouse to recover benefits paid on behalf of the spouse who received benefits. The new law presumes that all real and personal property in which the surviving spouse had an ownership interest at the recipient spouse’s death, including a marital property interest in property the surviving spouse had at any time within five years before the recipient applied for public assistance, is recoverable property.
Restrictions on Gifts by Spouse of Medicaid Recipient. Further, under the old law, once an individual qualified for Medicaid, the spouse was free to gift assets that were assigned to him or her as part of the Community Spouse Resource Allowance. These types of transfers would not impact the spouse receiving Medicaid. Under the new law, anything the spouse gives away within five years after the institutionalized spouse qualifies for Medicaid will be a divestment that will cause the institutionalized spouse to lose Medicaid.
Change in Start Date of Ineligibility Period. The new law delays the start date for periods of ineligibility. The period of ineligibility now begins the first day of the month following the month in which the individual receives advanced notice of that period of ineligibility.
Partial Cures Abolished. Another expansive change under the new law is the removal of the ability to partially cure a divestment ineligibility period by returning a portion of the transferred or “divested assets.” Under the new law, all assets, or cash equal to the value of the assets that were transferred, must be returned in order to cure a divestment penalty period.
Spousal Refusal Abolished. Spouses may no longer refuse to cooperate in a Medicaid application. Under the old law, if a spouse refused to disclose assets, the applicant was treated as a single person and the spouse could not be forced to provide support to the Medicaid recipient. The new law requires the spouse to provide the total value of assets and information on income and resource transfers. Marital Property Agreements continue to be disregarded for Medicaid eligibility purposes.
Minimum Monthly Income Calculations. The new law provides that if the spouse of an applicant asks to increase the minimum monthly maintenance needs allowance above the currently allowed amount, the DHS must evaluate the potential earnings of any retained assets as if they are invested in a single premium lifetime annuity.
Real Property/Life Estate Changes. The new law also seriously impacts life estates and jointly held property.
Abuse of the elderly often goes unreported. Many victims do not think of elder abuse as a crime, and for those who do, they may not be in a position to advocate for themselves due to infirmities of aging. Sometimes the perpetrator is a family member or caregiver, leaving the elderly victim worried that they will be unable to care for themselves if they report the abuse.
Elder abuse can affect people of all backgrounds and social status and can affect both men and women. The following are common categories of elder mistreatment:
- Physical Abuse – Inflicting, or threatening to inflict, physical pain or injury on a vulnerable elder, or depriving them of a basic need.
- Emotional Abuse – Inflicting mental pain, anguish or distress on an elder person through verbal or nonverbal acts.
- Sexual Abuse – Non-consensual sexual contact of any kind or coercing an elder to witness sexual behaviors.
- Financial Exploitation – Illegal taking, misuse, or concealment of funds, property or assets of a vulnerable elder.
- Neglect – Refusal or failure by those responsible to provide food, shelter, health care or protection for a vulnerable elder. This includes self-neglect, where an older adult is simply unable to care for his or her self, resulting in risk to their physical well-being.
- Abandonment – Desertion of a vulnerable elder by anyone who has assumed the responsibility for care or custody of that person.
An Annual Elder Abuse and Neglect report is compiled each year through a web-based system that tracks each county’s incident reports. In 2010, 5,285 cases of suspected abuse, neglect or financial exploitation involving older adults were reported in Wisconsin.
While self-neglect comprises almost 50% of such reports, financial exploitation follows as the most often reported elder abuse. Financial abuse continues to be a growing problem in this state, and older persons need to be cautious about what personal information they share with strangers who may contact them by mail, telephone or e-mail. The elderly are also often taken advantage of by family members and friends who become involved in an individual’s finances and have no legitimate reason for doing so.
Reporting Signs of Abuse
Knowing the signs of abuse and how to report it is the first step in preventing further abuse. If you suspect that an elderly person you know is being harmed physically, emotionally abused or financially exploited, you can make a report to your local Adult Protective Services agency. A listing of such agencies in Wisconsin can be found at https://www.dhs.wisconsin.gov/APS/Contacts/eaaragencies.htm. Such reports can be made anonymously, and given the sensitive nature of elder abuse issues, an investigating protective service worker will attempt to be as least intrusive as possible. While the outcome of an investigation may not result in a charge of “elder abuse,” individuals can be charged for stealing, battery, causing undo harm, domestic abuse, and other violations.
As a further remedy, in 2006, as part of an effort to better respond to violence against the elderly and other individuals at risk, Wisconsin adopted an individual-at-risk restraining order. Such restraining orders can prohibit contact with the elder-at-risk, or provide restrictions on the types of interactions that take place.
If you have questions regarding elder abuse or need assistance, in addition to reporting to your local Adult Protective Service agency, an attorney can also assist you in taking legal action.
Many people want to know when Medicaid will cover nursing home costs, which can cost over $70,000 a year or more for skilled care. Medicare only covers a small amount of the cost of nursing home care in limited circumstances. Below are some common “myths” about Medicaid eligibility.
Myth: You have to give away everything you own in order to qualify for Medicaid.
Truth: If you need nursing home care for other than a short-term rehabilitative stay, you will be expected to pay the private pay rate unless your assets are below a certain threshold as follows:
- A single applicant must have under $2,000 plus exempt assets;
- A married couple who both need care must have under $3,000 plus exempt assets;
- A married couple with one spouse who needs care and one spouse living at home can keep between $50,000 and $113,640.
Exempt assets include a vehicle, personal property, a funeral trust, and life insurance if the death benefit is less than $1,500. If an applicant for Medical Assistance is married, the residence is not a countable asset as long as the spouse is living in it, and the retirement assets of the spouse in the community are also exempt.
Myth: You must wait five years after giving anything away to qualify for Medicaid.
Truth: If you give money or property to your children, or to anyone else, you will be temporarily disqualified from Medicaid eligibility if the gift was made within five years of applying for Medicaid. The recipient of the gift is not required to return the money or property, nor are they otherwise liable for your care costs. The gift is called ‘divestment’ under the Medicaid rules.
• “Divestment” is the disposing of assets for less than fair market value. If an applicant for Medicaid has divested assets within five (5) years of applying for Medicaid, a disqualification period may result, which means that the institutionalized person will be ineligible for Medicaid for a period of time. The penalty period is calculated by dividing the total divested amount by the statewide average nursing home cost of care (currently $6,554; increases annually) in effect at the time of the Medical Assistance application. This number is the number of months of disqualification.
• The start date for the period of ineligibility will be (in most cases) “the date on which the individual is eligible for Medical Assistance under the State plan and would otherwise be receiving institutional level care . . . but for the application of the penalty period.” 42 U.S.C. §1396p(c)(1)(D).
Myth: You may give $13,000 to each of your children as a way to protect it from the nursing home and it will not be “divestment.”
False. Divestment includes transfer of any assets without any dollar limit. Assets are defined as “all income and resources of the individual or the individual’s spouse, including any income or resources which the individual or such individual’s spouse is entitled to but does not receive . . .” 42 U.S.C. § 1396p(e)(1).
Myth: A revocable trust will protect your assets from the nursing home.
False. If income and principal are available to the Grantor, the assets in the trust are available to pay for nursing home care and are not protected. A special needs trust can be used to protect the assets of a disabled individual who is now receiving public benefits, or who may become eligible for benefits in the future.
Myth: If you are married and your spouse is in a nursing home, he or she can qualify for Medicaid if you put all of your joint assets in your name.
Truth: Assets are counted, regardless of which name they are in. Furthermore, Marital Property Agreements are disregarded for Medicaid purposes.
For answers to more Medicaid questions and concerns, consult with an attorney who practices in elder law and disability planning.
The term “legal capacity” is heard often in a variety of legal situations, usually to define someone who is able to understand and appreciate the consequences of his or her actions. A person who lacks legal capacity cannot, for example, enter into a contract, give a power of attorney, make a Will, consent to medical treatment, or transfer property. The older we become, the more likely we are to suffer from a mental disease or disability that can diminish decision-making capacity. Fortunately, we can delegate an alternate decision maker by executing powers of attorney for finances and health care. In order to execute such documents, however, one must do so before they become incapacitated.
Unfortunately, there is no standardized procedure or test that will determine whether a given person has legal capacity. Such a determination must be made on a case-by-case basis, weighing all of the facts and circumstances. Proper execution of a legal document requires that the person have the mental “capacity” to understand the implications of the document.
Assessing whether someone has the required legal capacity is difficult on two levels. First, the requisite capacity can vary depending upon the type of legal document to be executed. For example, the legal capacity required to enter into a contract is different than the legal capacity required to make a Will or to execute a power of attorney. Second, a person’s abilities and function can vary from day to day depending upon the course of their illness, fatigue and the effects of medication.
It can be risky to prepare and execute legal documents on your own without representation by an attorney, particularly if legal capacity is questionable. An attorney who specializes in estate planning or elder law can advise you about the level of capacity necessary to execute a particular legal document and may also identify solutions where capacity is already diminished to the extent that legal documents cannot be executed.