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Archive of Maine Elder Law Updates
July 26, 2006
Maine Proposes New Rules to Implement the On July 26, 2006, the Department of Health and Human Services published notice of a new rulemaking proceeding to implement changes to the MaineCare Eligibility Manual as required by the federal Deficit Reduction Act of 2005 (DRA). The proposed rules will make very significant changes to the way eligibility is determined for those seeking MaineCare reimbursement for long term care services in nursing homes and assisted living facilities, or those seeking benefits under the MedWaiver program for nursing home level services received at home. Although many of these changes are required under the federal DRA passed February 8, 2006, there some changes the Department has proposed that are not required, or that could be better implemented in these new rules. A public hearing on these proposed changes is scheduled for October 2, 2006, and the deadline for the public to comment on the proposed changes is October 12, 2006. We expect to comment on the proposal. Some of the key changes in the rules (if adopted) are: • The proposed rule will implement the DRA requirement that any penalties for gifts made on or after February 8, 2006 will not begin to run until the applicant (or spouse) is in a long term care facility and otherwise eligible for MaineCare but for the gift. This change is required by federal law, but we expect it will pose significant hardships for individuals who have made gifts within the past 3 to 5 years without realizing the harsh consequences when they later need long term care and have insufficient funds to pay for that care while the penalty period runs. If even minor gifts are made to charities, family members or others that total more than $500 in any calendar quarter, these gifts may impact a MaineCare application for up to five years. If you are currently involved in gifting of assets, or expect to do so in the future, you should contact an elder law attorney to understand how those gifts will adversely affect your future eligibility for MaineCare. • The proposal will implement the new 5 year look-back window for non-exempt transfers for all MaineCare long term care applications. This 5-year look-back will be implemented gradually for applications submitted on or after February 8, 2009; until that date, the existing 3-year look-back will apply. The 5-year look-back will result in many more transactions being scrutinized by the Department for possible gifting penalties, and will make it important to retain all financial records for at least 5 years. • A proposed change that is not required under DRA would make significant changes to the provisions relating to personal care service provided by family members. Under existing rules, so long as a written contract exists between the elder and the family member and the services are compensated at fair market value and are verifiable and documented, payment for such services is not considered a gift. Under the proposed change, any such payments to family members will be treated as gifts, thereby potentially making the elder ineligible for MaineCare benefits. Any persons currently paying family members for assistance at home to avoid having to go into a long term care facility should consult with an elder law attorney immediately to understand how those payments will be treated if and when MaineCare may be needed. • The proposed rule revises how gifting penalties are calculated, eliminating the current practice of rounding down and ignoring any fractional amounts. Once adopted, the rule will require that applicants apply any fractional penalty amounts to their cost of care contribution in the first month of eligibility for MaineCare. • The rule proposes significant changes to how annuities are counted when determining whether a MaineCare applicant or spouse meets the threshold for countable assets. The changes seek to require that MaineCare be named as the remainder beneficiary behind any surviving spouse or minor or disabled child for any remaining annuity payments on the death of the annuitant. The proposed provisions relating to annuities are difficult to follow, and are not well integrated. • The proposed rule will implement a DRA requirement changing the definition of primary residence. Under the new requirement, individuals with an equity interest in the home of greater than $750,000 would be ineligible for MaineCare unless a spouse or a dependent or disabled child is living there. If the applicant spends down the equity in excess of $750,000, then he or she could be eligible. • The proposal would implement changes to the treatment of payments made to Continuing Care Retirement Communities and Life Care Communities. • The proposed rule would make certain changes to the definitions of life estates, mortgages and promissory notes, and reverse mortgages. • The proposal adds new provisions regarding the standards for obtaining a hardship waiver if an applicant is ineligible for MaineCare benefits. We expect that, with the new harsher penalty provisions and longer look-back period, the number of applicants needing to seek hardship waivers will increase. * * * * * * * * * *
January 4, 2006 In late December, the United States Senate passed legislation that dramatically changes the rules for Medicaid (a.k.a. MaineCare) planning. The United States House of Representatives also passed the legislation, but needs to vote again for technical reasons. The House of Representatives is planning on reconvening January 30—31st. The two most important changes are a five year look back on all transfers made on or after the date this legislation is enacted (which is the date on which the bill is signed into law by the President) AND changing the time when transfer penalties take effect, by moving this penalty forward to the time of application, rather than the time of the gift. If you or a family member are in the process of gifting assets for the purpose of spending down for MaineCare eligibility you may want to consider making a lump sum gift immediately, in an amount equal to the total projected monthly gifting that you have previously planned for. If the lump sum gift is made before the enactment of this legislation, it appears that the gift will not be subject to the five year look-back or transfer penalty rule change. Every situation is different and this Memorandum is for informational purposes. Please contact our office immediately to schedule an appointment to review your case in light of these changes. This law will likely be in effect on or before January 30, 2006 so immediate action is necessary. * * * * * * * * * *
Client Alert: On March 31, 2005, Governor Baldacci signed into law Maine's budget for fiscal years 2006-2007. That budget contains several provisions that will significantly change the requirements of the MaineCare program, and therefore will impact clients' long term care and estate planning needs. The effective date for the new provisions is July 1, 2005. The purpose of this client alert is to advise our clients of the passage of these new MaineCare requirements and to encourage our existing clients to check in with us to determine whether these changes affect their situations. In a short client alert, we cannot provide answers to address our clients' specific and individual needs. The purpose of this Client Alert is to provide information about the key changes that will go into effect on July 1st so that clients can evaluate whether they need to consult with us or another attorney that specializes in elder law to evaluate specific impacts of these changes to them. The key changes to the MaineCare requirements, and our general recommendations on who might need to consult with an elder law attorney to determine the specific impacts to them, are as follows: 1. Gifting Penalties Beginning July 1, 2005, the Department of Health and Human Services (DHHS) will change the method by which it calculates penalties for MaineCare eligibility when a MaineCare applicant, MaineCare recipient or their spouse has made gifts of his or her assets to persons other than a spouse. What does it mean to you? Changes to the way DHHS will calculate transfer penalties make it vital for any clients who are or will be gifting to individuals other than a spouse to seek legal advice prior to July 1st to ensure that they understand how these provision will affect their long term care options. For example, clients who are currently gifting $7,500 per month to their children or others will need to change the amount of such gifts to avoid penalties that make the giver and the giver's spouse ineligible for MaineCare. The amount that can be safely transferred to children or other non-spouses will change on July 1, and again on or before January 1, 2006. 2. Changes to Estate Recovery Provisions Under the new law, DHHS will have new authority to recover MaineCare expenses paid for a recipient from the estate of the recipient's spouse once both spouses have died. After July 1, 2005, these new provisions will make it much harder to protect assets transferred to a spouse or a disabled child if the transfer occurs while either spouse is on MaineCare or after the death of the nursing home spouse. To enhance the effectiveness of the new "delayed estate recovery" provisions, the Probate Code has also been amended to require personal representatives to provide actual notice to DHHS whenever a decedent dies who is over age 55. What does it mean to you? In situations where one spouse is likely to need long term care paid for by MaineCare, the couple may want to consider transferring their home and other assets to the healthy spouse before long term care is needed, and certainly before applying for MaineCare. Further, a parent with a disabled child should consider transferring assets into a trust for the benefit of the child or outright to the child before applying for MaineCare. For couples that have one spouse on MaineCare already, they should consider transferring their home and any other significant assets into the healthy spouse's name prior to July 1, 2005. 3. Recovery against Jointly Owned Real Estate In the course of legislative hearings on the MaineCare changes, DHHS has stated that it believes it has authority under current law to pursue estate recovery against real estate that the deceased MaineCare recipient owned jointly with others. This position is contrary to current DHHS rules and contrary to past practice. We expect that there may be a rule change in the near future on this issue. What does it mean to you? Clients who own real estate jointly with their children or with individuals other than a spouse should consider whether changing the ownership of their real property would assist them in meeting their own individual goals. 4. Gifting Prohibition on Probate Courts Beginning on July 1, 2005, Maine Probate Courts will no longer be able to authorize conservators of incapacitated persons to gift the incapacitated person's assets to persons other than a spouse or disabled child, except in very limited circumstances. What does it mean to you? This provision makes it vital to ensure that all clients have good, up-to-date Durable Powers of Attorney that meet their individual goals and expectations before a person become incapacitated. 5. Other Upcoming Rule Changes The new laws direct DHHS to promulgate MaineCare rules which will make it harder for clients to access MaineCare benefits to cover their long term care costs. For example:
• The use of annuities to preserve assets will be severely limited. These changes will be effective only for MaineCare applications submitted on or after July 1, 2005, and DHHS is expected to adopt rules in the next few months that will specify how these general mandates will apply to individual cases. * * * * * * * * * * The Law Office of Patricia Nelson-Reade has been involved in the legislative process and wants our clients to understand that these changes are significant and will make MaineCare benefits harder to obtain. Some of the changes in Maine law may violate federal Medicaid laws, current Maine laws, and/or the equal protection clause of the U.S. Constitution, but any actions to challenge the legality of these provisions will take time to work their way through the process. Given the high cost of the MaineCare program, we expect that this round of changes is only the beginning, and that we will see further restrictions in the near future. We urge all of our clients to seek the help they need to minimize adverse impacts of these changes on their plans. * * * * * * * * * *
IMPORTANT LEGISLATIVE CHANGES FOR 2004 Changes to Maine Estate Tax We have previously reported that the Maine Legislature made significant changes in 2003 to the Maine estate tax law, making the Maine law independent or "decoupled" from the federal estate tax. During this most recent legislative session in 2004, the Legislature has made the "decoupling" permanent. The result is that some estates will continue to be subject to Maine estate tax even though they are too small to be subject to federal estate tax. For 2004, estates of $850,000 or more are subject to Maine estate tax. In 2005, that number will increase to $950,000, and it will level off at $1,000,000 for 2006 and beyond. The federal estate tax exemption, in contrast, will continue to rise between 2004 and 2010, with the result that Maine estates can be subject to substantial estate taxes even though no federal estate tax is due. Those who have estates of $850,000 or more should have their estate plans reviewed by a qualified estate planning attorney to ensure that these changes in Maine law have been considered. Upcoming Changes in Maine Trust Code The Maine Legislature has adopted substantial changes to the Maine Trust Code that will become effective on July 1, 2005. The legislation adopts the Uniform Trust Code, and will make Maine's trust law consistent with that of other States that have adopted the uniform law. Although the law does not become effective until July 1, 2005, once it goes into effect it will govern all trusts created before or after the effective date and to most judicial proceedings involving any trust whether those proceedings commenced before or after July 1, 2005, so practitioners need to be aware of its provisions and plan accordingly. Changes to Probate Code Provisions Governing Health Care Powers of Attorney In addition to adopting the Uniform Trust Code, the Maine Legislature also adopted important changes to the Maine Probate Code provisions governing Health Care Powers of Attorney. The changes make clear that an agent under a Health Care Powers of Attorney should be treated as the principal's personal representative for purposes of obtaining health information otherwise protected under the federal Health Insurance Portability and Accountability Act of 1996. This change should make it easier for agents to obtain important health information necessary in order for them to make appropriate decisions under Health Care Powers of Attorney. Recognition of Domestic Partners Another change made by the Maine Legislature this session was the enactment of statutory provisions recognizing domestic partners for certain purposes under the Maine Probate Code. The statute defines "domestic partner" as one of two unmarried adults domiciled together under long-term arrangements that evidence a commitment to remain responsible indefinitely for each other's welfare. The amendment creates a system to allow domestic partners who have registered with the newly-created Domestic Partner Registry to be treated similarly to a surviving spouse if a decedent dies without a will, and to have the same priority as a spouse for appointment as Personal Representative or as guardian or conservator of the estate of the partner. The new provisions also give registered domestic partners the same rights as a surviving spouse regarding custody of remains. MaineCare Legislation that did not pass One important bill that did not pass this session would have made significant changes to the MaineCare (Medicaid) eligibility and estate recovery laws. Although the proposed changes were not enacted, this is an issue that bears close watching. Many States are changing their Medicaid programs to restrict eligibility and to enhance the ability to recover Medicaid-covered expenses from the estate after the Medicaid recipient dies. We expect that there will be future legislative or rulemaking efforts to make similar changes in the MaineCare program. * * * * * * * * * *
Changes in Maine Estate Tax Law Changes in Maine's estate tax law in 2003 will significantly affect the tax burden for decedents' estates in 2004. To assist in responding to these changes, we have summarized below the key changes and their impacts on estate tax planning for taxable estates. While the summary provided below is not a substitute for legal advice about tax planning for particular estates, it provides an overview that will assist you in determining whether changes in the law may affect you and therefore whether you should consider reviewing your estate plan with legal counsel. Changes in Maine Law - The Maine Legislature revised the State estate tax law in 2003. Maine continues to ignore the federal estate tax law's 25% annual reduction in the State Death Tax Credit. Because Maine taxes estates at the same rate, but the federal offset is reduced, the result is a higher overall State and federal estate tax burden. Although the statute was passed on March 30, 2003. The change in Maine law applied to all estates of persons dying on or after January 1, 2003. - The changes to Maine's State tax law continue to ignore the federal exclusion amount in determining whether estates are taxable. While the federal exclusion increased to $1.5 million in 2004, the exclusion amount for Maine tax purposes is $850,000 in 2004. Thus, some estates will continue to be taxable by Maine even though they are not taxable at the federal level. - The law is only applicable through 2004. It is unclear whether a new law will be passed for 2005 and later years. Planning Considerations Resulting from Maine Law Changes - Married couples should also consider whether a "disclaimer trust" provides more flexibility in addressing changes to the estate tax laws. Disclaimer trusts allow a surviving spouse to disclaim all or a portion of any assets passing to the surviving spouse under the Will of the first spouse to die, with the Will set up such than any disclaimed assets pass to a credit shelter trust for the benefit of the surviving spouse. This technique allows the surviving spouse to determine after the death of the first spouse to die the amount that should be placed in a credit shelter trust to minimize overall State and federal estate tax liability for both spouses. * * * * * * * * * * Healthcare Advance Directives Anyone who has visited his or her doctor since April 2003 has likely received information about the new HIPPA (Health Insurance Portability and Accountability Act of 1996) regulations regarding privacy laws and health and personal information. We recommend that a new health care power of attorney be signed that includes language making it clear to healthcare providers that your healthcare agent may request and receive healthcare information under the new HIPPA laws. * * * * * * * * * * MaineCare (formerly Medicaid) The community spousal allowance was increased to $95,000 for 2005. Thus, for a married couple, the nursing home spouse may have $10,000 and the spouse living in the community can have $95,000 (possibly more) as well as assets that are exempt (primary residence, vehicle) and be eligible for MaineCare covered nursing home expenses. Some states, including Massachusetts, are changing their laws to reduce the amount of assets that persons relying on Medicaid can keep, as well as making longer penalty periods for persons who give assets away. Maine is observing these actions and may attempt to also tighten eligibility criteria in the near future. * * * * * * * * * * 2003 Medicare Act The Medicare Prescription Drug Improvement and Modernization Act of 2003 was signed into law on December 8, 2003. The act is 678 pages long and has a projected cost of $400 billion over ten years. The highlights of the Act include: - Availability of a prescription drug discount card in the spring of 2004 for purchases at lower prices negotiated by Medicare until the prescription drug benefit starts in 2006. The annual enrollment fee is no more than $30 and is waived for lower income applicants. The discounts are estimated to be 10-15%. - Prescription drug coverage becomes effective in 2006. There will be several plans to choose from at a premium of about $35 per month with a $250 deductible Medicare pays 75% of drug costs of up to $2,250 annually; it pays nothing for annual expenditures from $2,251 to $3,600; it pays 95% of drugs costs after the individual has spent $3,600. - New benefits: (1) an initial preventive physical exam for new Part B enrollees; (2) screening for diabetes and cardiovascular disease; (3) coordinated care for people with chronic illnesses. - Increase of 1.5% in payments to physicians. - Linking of Medicare Part B premium to income for the first time, starting in 2007. Currently, individuals pay 25% of the Part B premium, and the federal government pays the rest. Beginning in 2007, those with incomes of more than $80,000 will pay a larger percentage of the premium, capping the payment at 80% for those with annual incomes greater than $200,000. * * * * * * * * * * The Law Office of Patricia A. Nelson-Reade has extensive experience in advising clients on estate tax planning, and can assist in determining a plan that best meets the individual needs of its clients and their families. Please contact us at 207-828-1597 if you would like to set up an appointment to review how the changes in Maine law may affect your estate planning needs. |
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