Legal Issues for Parents of Disabled Children

When your child attains the age of 18, there are a number of legal issues that you should address:

Heath Care Decisions

When your child attains the age of 18, you no longer have the authority to make health care decisions for your child.  If you want to continue to have a say in your child's    health care, then your child may designate you to serve as his/her agent with a health care advance directive.  If your child is not capable of executing a health care advance directive, then you may file in probate court to be named to serve as the guardian of your child.

With a Maine Health Care Advance Directive, your child may designate another person to make health care decisions for him/her.  This individual may make all health care decisions for your child, such as what medications they should take; whether surgery is appropriate; what doctors should treat them; and which hospital should provide them with care.  Also with the health care advance directive, your child may state his/her preferences with regard to the withdrawal of life sustaining treatment; organ donation; and funeral arrangements.

    An individual must have the capacity to understand and execute a health care advance directive and be 18 years of age or older in order to complete a health care advance directive.  If an individual is not capable of understanding the document and is not capable of making his/her own health care decisions, then a petition must be filed in the probate court for the appointment of a guardian to make those decisions for the disabled individual.

    If an individual is not capable of executing a Health Care Advance Directive, then the probate court may appoint a guardian to make decisions for that disabled individual (the "ward").  The guardian makes decisions on behalf of the ward, such as where the ward will live; whether the ward should be admitted to a nursing home or boarding home; and what medical treatment the ward will receive.  The Court may appoint a guardian to make all life decisions for the ward or the court may limit the authority of the guardian to specific matters.  The probate court will make the guardianship as least restrictive as possible.  With a full guardianship, the guardian has the same power over the ward as a parent has over a child who is younger than 18 years of age.

    If the ward does not have many assets, then the guardian has the authority to manage the ward's money and property.  If, however, the ward has substantial assets or real estate, then a conservator must be appointed by the court to handle the ward's finances.

    Unlike the agent designated under a health care advance directive, the court appointed guardian cannot be fired by the ward.  If the ward no longer wants to have a guardian or wants to change the person designated to serve as guardian, then a petition must be filed in probate court.

      Anyone who is concerned about the incapacitated person may file a petition with the probate court seeking the appointment of a guardian for another.  The probate courts are administered through the counties in Maine where the ward resides. Petitions for guardianship must be supported by a physician's report.  The report must document the incapacity and the need for the guardian, as well a plan of guardianship.  If the allegedly incapacitated person objects to the guardianship, then the court will appoint counsel to represent that person. 

Financial Decisions

When your child attains the age of 18, you no longer have the authority make financial decisions for your child.  If you want to continue to have a say in your child's finances, then your child may designate you to serve as his/her agent with a financial power of attorney.  If your child is not capable of executing a financial power of attorney, then you may file in probate court to be named to serve as the conservator of your child.  

With a financial power of attorney, your child may appoint someone (known as the “agent”) to stand in their shoes and act for them in financial and business matters.  The agent can do whatever is specified in the document.  Broad powers of attorney that allow the agent to do whatever your child may do (such as withdrawing funds from bank accounts, trading stock and paying bills) are the most common. 

    Granting broad powers to the agent is a double-edged sword.  The broad powers are necessary to enable a family member to take care of necessary affairs; on the other hand, every power poses a risk of abuse, a risk that the agent will not exercise his powers in the disabled individual’s best interest.  Thus, it is critical that your child have complete trust in the persons appointed to act as agent.  

    Powers of attorney may be drafted to grant the agent a great deal of authority or may provide the agent with only limited authority.  Your child may designate successor agents as well in the document, in the event that the primary designated agent is unable to continue serving.

    An individual may only execute a financial power of attorney if he/she is 18 years of age or older and if he/she has the capacity to understand the document.  If the individual does not have the capacity to understand the document nor the ability to handle his/her finances, then a petition must be filed in probate court for the appointment of a conservator to handle the finances of the incapacitated person.  Please beware of any form documents that you may find on the internet or on national computer programs, as those forms are often missing key provisions that are necessary in Maine for a financial power of attorney to be effective.

A conservator is a person who is appointed to protect and manage the funds and property of a person who is unable to manage his own assets due to a disability, or mental or physical illness (the "ward").  The conservator's role is in effect to step into the shoes of the incapacitated person and make the decisions for that person.  The assets of the ward must be protected and, where appropriate, invested in safe investments that are not speculative. The conservator may not engage in self-dealing with estate assets or anything that appears to be a conflict of interest. The conservator may not spend any of the ward's money for himself/herself without a prior court order.  

    The rule governing the investment decisions of the conservator is called the prudent investor rule. The rule states that a conservator "shall invest and manage trust assets as a prudent investor would, by considering the terms, distribution requirements and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill and caution". The Maine prudent investor rule requires that investments be diversified, unless special circumstances are present. In simple terms, diversification means that you should not put all of your eggs in one basket. It also allows the conservator to delegate investment functions to an agent.  The conservator, however, must exercise care skill and caution in selecting the agents.

    All monies belonging to the ward are carefully monitored by the court. Within three months of the appointment, the conservator must complete an "inventory" of the ward's assets and file it with the court. This is essentially a list of what the ward owns, with the value of each item as of the date of appointment.

    In addition, the conservator must file an accounting each year with the court, listing precisely how much money came into the estate and how the conservator has spent the money of the ward. The easiest way to keep track of your ward's funds is to open a checking account in his/her name.  If the conservator keeps all receipts and pays for everything by check,  the conservator will have a good record at the end of the accounting year.   The conservator's responsibility to fulfill the ward's legal  obligations includes making certain that  tax returns are accurately filed with the Internal Revenue Service and the state.

Health Insurance/Income Stream

When your child attains the age of 18, the Department of Health and Human Services and the Social Security Administration will no longer deem your assets to your child.   This means that your child, if he/she meets the Social Security definition for disabled, may financially qualify for MaineCare coverage and/or a stream of income from the Social Security Administration.  MaineCare is a comprehensive health insurance program, administered by the State, for disabled individuals who meet asset and income limitations.  The stream of income from the Social Security Administration is designed to assist your child with food, shelter, and clothing.

When a disabled child attains the age of 18, he/she should apply for MaineCare and Social Security Income ("SSI") benefits.  MaineCare and SSI are needs-based programs.  Essentially, MaineCare provides health insurance for disabled individuals and SSI provides a stream of income.  In Maine, a person who qualifies for SSI automatically becomes eligible for MaineCare coverage.  Thus, MaineCare and SSI often go hand in hand, and eligibility to receive SSI benefits of any amount will support eligibility for full MaineCare benefits.  

    A person must be aged, blind, or disabled to receive SSI.  The definition of “disability” for SSI is the same as that for Social Security Disability: "inability to engage in substantial gainful employment (to perform remunerative work as available in the national economy) due to a medically determinable physical or mental impairment that has lasted, or can be expected to last, for a continuous period of not less than 12 months.”  42 USC §1382c(a)(3)(A).  There are income and asset requirements, as well, to qualify for SSI.

    In Maine, an individual who does not qualify for SSI, however, may still be able to receive MaineCare.  If an individual does not qualify for SSI, he may apply directly to the MaineCare program for coverage.  There are a number of Maine programs that are more generous than SSI.  For example, a child may receive MaineCare benefits under the Katie Beckett program, yet not qualify for SSI.  Under the Katie Beckett program, unlike SSI, the parents’s assets are not deemed to the child.

Estate Planning

    If your child is receiving public benefits and receives an inheritance from you or other family members, then the inheritance could jeopardize his/her continued eligibility for those programs.  The preparation of a supplemental needs trust for any inheritance slated for your disabled child can protect his/her benefits.

Disabled individuals often need assistance and supervision to meet their daily living needs.  This assistance may take many forms.  A disabled individual may need 40 hours a week of assistance from an aide; or need coverage to pay for extensive and ongoing medical bills, or need a monthly stream of income because he cannot work.  Government programs are the safety net for most of our country’s severely disabled.  Individuals who are poor enough and sick enough to meet certain criteria may be eligible to receive public assistance, that over a lifetime can result in millions of dollars of assistance for that individual.

     If a disabled individual directly receives assets in any way, this can profoundly affect that individual’s eligibility for public benefits.  If a disabled person directly receives an inheritance, or receives a lifetime gift, or receives the proceeds of a personal injury settlement, that individual may lose all of his public benefits.  He may no longer be seen as impoverished and hence no longer meet the eligibility criteria for the public benefits.  What at first may seem like a cause for rejoicing may in fact wreak havoc on the delicate balance of public benefits that holds together the life of the disabled. 

    The Supplemental Needs Trust is a device for setting aside funds for disabled individuals.  Essentially, with a Supplemental Needs Trust the funds are seen as owned by the trust and not by the disabled individual.  Thus, the disabled individual is still poor enough to qualify for public benefits.  Without Supplemental Needs Trusts, the disabled individual would always have to live in poverty and would never be able to afford any luxuries.

          With the enactment of the Omnibus Reconciliation Act of 1993 (OBRA-93), these trusts have become an essential part of any estate plan or personal injury settlement for a disabled individual.  They may be set up by a third party, such as a parent, as a way to make a gift to a disabled child, or they may be set up with the funds of the disabled person, for example, to receive the funds of a personal injury settlement.  Each form of trust must be set up and structured in a different way. 

Supplemental Needs Trust

I.  In General

    Disabled individuals often need assistance and supervision to meet their daily living needs.  This assistance may take many forms.  A disabled individual may need 40 hours a week of assistance from an aide; or need coverage to pay for extensive and ongoing medical bills, or need a monthly stream of income because he cannot work.  Government programs are the safety net for most of our country’s severely disabled.  Individuals who are poor enough and sick enough to meet certain criteria may be eligible to receive public assistance, that over a lifetime can result in millions of dollars of assistance for that individual.

     If a disabled individual directly receives assets in any way, this can profoundly affect that individual’s eligibility for public benefits.  If a disabled person directly receives an 

inheritance, or receives a lifetime gift, or receives the proceeds of a personal injury settlement, that individual may lose all of his public benefits.  He may no longer be seen as impoverished and hence no longer meet the eligibility criteria for the public benefits.  What at first may seem like a cause for rejoicing may in fact wreak havoc on the delicate balance of public benefits that holds together the life of the severely disabled. 

    The Supplemental Needs Trust is a device for setting aside funds for disabled individuals.  Essentially, with a Supplemental Needs Trust the funds are seen as owned by the trust and not by the disabled individual.  Thus, the disabled individual is still poor enough to qualify for public benefits.  Without Supplemental Needs Trusts, the disabled individual would always have to live in poverty and would never be able to afford any luxuries.

      With the enactment of the Omnibus Reconciliation Act of 1993 (OBRA-93), these trusts have become an essential part of any estate plan or personal injury settlement for a disabled individual.  They may be set up by a third party, such as a parent, as a way to make a gift to a disabled child, or they may be set up with the funds of the disabled person, for example, to receive the funds of a personal injury settlement.  Each form of trust must be set up and structured in a different way. 

An important consideration when setting up a Supplemental Needs Trust is the type of public benefit that the disabled individual wants to protect.  Disabled individuals may receive a panoply of public benefits, such as Supplemental Security Income (“SSI”), MaineCare (Maine's Medicaid program), food stamps, housing assistance, and TANF (Temporary Assistance for Needy Families).   The requirements for a Supplemental Needs Trust depend on the types of public benefits that the disabled individual receives, as different benefits mandate different trust provisions.  The most important benefits to disabled individuals are MaineCare and SSI benefits.  For that reason, in this outline I will discuss the trust criteria for a trust that is designed to maintain a client’s eligibility for SSI and MaineCare.

MaineCare and SSI

    MaineCare and SSI are poverty programs.  Essentially, MaineCare provides health insurance for disabled individuals and SSI provides a stream of income.  In Maine, a person who qualifies for SSI automatically becomes eligible for MaineCare coverage.  Thus, MaineCare and SSI often go hand in hand, and eligibility to receive SSI benefits of any amount will support eligibility for full MaineCare benefits.  

    A person must be aged, blind, or disabled to receive SSI.  The definition of “disability” for SSI is the same as that for Social Security Disability: "inability to engage in substantial gainful employment (to perform remunerative work as available in the national economy) due to a medically determinable physical or mental impairment that has lasted, or can be expected to last, for a continuous period of not less than 12 months.”  42 USC §1382c(a)(3)(A).  There are income and asset requirements, as well, to qualify for SSI.

    In Maine, an individual who does not qualify for SSI, however, may still be able to receive MaineCare.  If an individual does not qualify for SSI, he may apply directly to the MaineCare program for coverage.  There are a number of Maine programs that are more generous than SSI.  For example, a child may receive MaineCare benefits under the Katie Beckett program, yet not qualify for SSI.  See Medical Assistance Eligibility Manual, Part 13.   Under the Katie Beckett program, unlike SSI, the parents’s assets are not deemed to the child.

II.  The First Party Supplemental Needs Trust

     A first party supplemental needs trust is a trust that is set up with the funds of the disabled person.  These trusts, for example, are used if a disabled person receives a settlement from a medical malpractice claim or if a disabled person inherits property outright from a parent.  If the disabled individual places his or her own funds into a supplemental needs trust, this is known as a first party supplemental needs trust.  

MaineCare and SSI Criteria for First Party Supplemental Needs Trusts

     Before a First Party Supplemental Needs Trust will pass muster with the Maine Department of Human Services or the Social Security Administration, it must adhere to the SSI  and MaineCare criteria for such a trust.

    First, the trust must be irrevocable.  Provisions, however, allowing for amendments for administrative changes to the trust and allowing for amendments necessary to make the trust compliant to protect public benefit eligibility are permitted.  Second, the trust must contain the assets of an individual who is under 65, when the trust is set up.  This exemption remains after the individual turns 65, as long as there are no changes in the terms of the trust after the individual turns 65.  However, the trust will not protect any assets added to the trust after the individual turns 65.

Third, the beneficiary must meet the SSI criteria for a disability.  The individual does not have to actually receive SSI, he only has to be able to meet the SSI criteria for disability.  DHHS will make its own determination of disability, if Social Security has not made an assessment. Fourth, the trust must be established for the sole benefit of the disabled individual.  A trust is considered to be established for the “sole benefit of” the individual if no other individual or entity can benefit from the assets transferred in any way, whether at the time the trust is established or at any time in the future.  The trust, however, may provide for reasonable compensation to trustees to manage the trust.

    Fifth, the trust must be established by the beneficiary’s parent, grandparent, legal guardian or a court.  If there is no guardian, surviving parent or grandparent, then the attorney may petition the probate court under its Single Transaction Authority (18-A M.R.S.A. §5-409) so that the court may establish the trust. Sixth, the trust must provide that after the disabled beneficiary’s death, the state will receive all amounts remaining in the trust up to an amount equal to the total medical assistance paid on behalf of the individual “after due payment of any legal obligations of the trust.”  The Department of Human Services is very strict in its interpretation of “legal obligations of the trust.”  At one time, DHHS would allow trust provisions that specified that before MaineCare was paid the trust could make payments, such as death taxes, expenses of last illness and funeral, and expenses related to administration and distribution.  The Department of Health and Human Services has rejected such provisions, and instead, only allows payments for “legal obligations of the trust” before MaineCare is reimbursed. 

III.  The Third Party Supplemental Needs Trust

    The third party supplemental needs trust is a trust that is funded with the assets of a third party, such as a parent or other relative for the benefit of the disabled person.  With a third party supplemental needs trust, a disabled individual can inherit property without losing his or her eligibility for public benefits.  A third party trust may be set up in a will as a testamentary supplemental needs trust or as a stand alone trust.  The most important distinction between the third party and the first party trust, however, is that there is no requirement for a pay back to the State after the disabled beneficiary's death with a third party trust.  Instead, after the death of the disabled beneficiary, the assets may then pass to the named remainder beneficiaries.

MaineCare Criteria for Third Party Supplemental Needs Trusts  

    The MaineCare criteria for third party supplemental needs trusts are set out in the Maine MaineCare Eligibility Manual and are quite simple. The trust must be irrevocable.   Also, such a trust should leave the amount and frequency of the trust distributions of trust income and principal to the discretion of the trustee.

DHHS will only view the assets available to the beneficiary if the terms of the trust make them available.  Hence, if the trust is completely discretionary, so that all distributions of principal and income are within the sole and absolute discretion of the trustee, then DHHS will not view any of the funds that are held in the trust as available to the disabled beneficiary.  The funds will only be seen as available, as they are made available by the trustee.  The MaineCare manual sets out examples of this rule that illustrate its application.  The MaineCare Manual provides the following examples:

An individual has a trust fund that was established upon the death of his parents based on their will.  From this he is to receive $500.00 from the interest each month and $10,000.00 every three years to buy a new vehicle.  The monthly payments are income.  The $10,000.00 is used to purchase an excluded asset (the old vehicle is traded in to purchase the new one).

This trust is irrevocable in accordance with the provisions above.  The terms of the trust specify the amount, frequency and for part of the payments (the $10,000.00) the purpose.  MaineCare policy treats interest payments as income and excludes the vehicle as an asset.

B.A trust was set up for the individual by his father who is deceased.  The individual is to receive $200 per month for as long as the fund lasts.  The fund currently has $140,000.  The individual can get all the funds in the trust if there is an emergency.

The $200 per month is considered income as long as this represents interest income.  The remainder of the fund is considered an asset (currently $140,000) since it can be accessed by the individual.

C.A trust is set up for the individual by her grandmother.  It is irrevocable and the trustee has full discretion in disbursement of the funds (totaling $75,000) based on the needs of the individual.

Since the trust is irrevocable, what is considered available to the individual is whatever the trustee, in her discretion, makes available.

See Maine MaineCare Eligibility Manual, Part 16.5, section 2.53.

Anyone may serve as grantor of the third party supplemental needs trust, and most importantly DHHS does not require a payback provision to the State.

Social Security Criteria for Third Party Supplemental Needs Trusts

     The Social Security criteria for the third party supplemental needs trust, also, are not nearly as complicated as the criteria for the first party supplemental needs trust.  As with MaineCare, the trust should leave the amount and frequency of the distributions of trust income and principal to the discretion of the trustee.  If the disabled individual has the legal authority to use the funds to meet his/her food or shelter needs, or if the individual can direct the use of the trust principal or income for his/her support and maintenance under the terms of the trust, the trust principal and income will be considered a resource for SSI purposes.

      Also, the disabled individual may not have the authority to revoke the trust.   If the disabled individual has the legal authority to revoke the trust, and use the funds to meet his/her shelter needs, then the trust principal is a resource for SSI purposes.  The Social Security regulations set their own standard for whether a trust that is termed “irrevocable” is actually treated as an irrevocable trust.  The revocability of a trust and the ability to direct the use of the trust principal depends on the terms of the trust agreement and/or State law.

     Anyone may serve as grantor of the third party supplemental needs trust, and Social Security  does not require a payback provision to the State.  

IV  Non Profit Disability Trust - Maine Pooled Disability Trust

    The “Non Profit Disability Trust” essentially is a first party supplemental needs trust with numerous beneficiaries and that is established by a non profit organization.  Such a trust has the advantage of being run by a professional, independent trustee and of taking smaller sums than a bank or trust company will require to act as trustee.

    To protect the MaineCare and SSI benefits of the disabled beneficiary, the non profit disability trust must meet the following criteria.  First, the trust must be established and managed by a non-profit association.  Second, the trust must maintain a separate account for each trust beneficiary.  For the purposes of investment and fund management, however, the trust must pool the accounts.  Third, the accounts in the trust must be established solely for the benefit of the disabled individual.  Fourth, the account must be established by either the individual, the individual’s parent, grandparent, legal guardian or by a court.  Fifth, to the extent that there are any amounts remaining in the beneficiary’s account after the beneficiary’s death, that are not retained by the trust, the trust must pay the state an amount equal to the total amount of medical assistance paid on behalf of the beneficiary after due payment of legal obligations of the trust.  Sixth, the individual must meet the SSI criteria for disability.  Finally, if beneficiaries are older than 65 years of age, the State may impose a penalty period on the disabled individual for funding the trust.  The penalty period is imposed if the individual is receiving MaineCare benefits under the long term care program.

    There is one such trust that has been set up in the State of Maine, the Maine Pooled Disability Trust.  Information about this trust may be found at its web site: www.mainepooleddisabilitytrust.org.  The Maine Pooled Disability Trust is administered by five trustees. The trust is irrevocable, and for investment purposes all of the funds are pooled.  However, each beneficiary has his own sub account.  For accounting purposes, all of the expenses and disbursements for each sub account are recorded and tracked separately.  During the lifetime of the individual, the funds in a sub account must be used only for the benefit of the disabled individual who is the beneficiary of the sub account.  After the death of the disabled individual, the trust retains 50 percent of any funds remaining in the trust sub account.  Those funds are used to assist other disabled individuals.  After the trust retains its percentage share, the trust is required to pay the State an amount equal to the total amount of medical assistance paid on behalf of the beneficiary.  Thereafter, whatever remains in the trust may be left to remainder beneficiaries specified by the disabled individual when the sub account was established.

    To join the Maine Pooled Disability Trust, there is a joinder fee of $900.  The disabled person (or his parent, grandparent, guardian or the court) must complete a sponsor agreement.  The annual administrative fee is $360.  Costs and fees related to specific sub accounts are charged to the sub accounts affected.  There is also an investment management fee of one percent (.01) annually based on the month end market value of the sub account.  The minimum amount needed to establish a sub account is $10,000.

V  Third Party Pooled Trust - Maine Trust for People with Disabilities

    There is one third party pooled trust in Maine, the Maine Trust for People with Disabilities.  Similar to the First Party Pooled Trust, funds are pooled for investment purposes but each beneficiary's sub account is tracked and recorded separately.  As with other third party trusts, however, after the death of the beneficiary, there is no pay back to the State. Instead, the remaining assets may pass to the remainder beneficiaries named in the Joinder Agreement when the sub account is established.  Information about this trust can be found at its web site:  www.themainetrust.com. 

    An account in the Maine Trust for People with Disabilities ("MTPD") must be created and funded with the assets of a person other than the disabled beneficiary.  The disabled beneficiary's own assets cannot be the funding source.  Because the disabled beneficiary cannot revoke the trust or direct the use of the trust for his support, the beneficiary's accounts assets will not affect MaineCare or SSI eligibility.  

    The Board of Advisors manages the daily operation of the trust.  The members of the board are appointed by the sponsoring nonprofit corporation.  Norway Savings Bank serves as the trustee and Old Port Pension Administrators provides bookkeeping and financial data administrative services.

    To enroll in the trust, a joinder agreement must be completed and there is a one-time enrollment fee of $500.  While a sub account is not funded, there is no annual fee. If a sub account is funded, but is inactive, there is a fixed fee of $250 a year.  After a sub account is funded  and active, there is a current annual fee of two percent of the value of the assets in the sub account, with a minimum annual fee of $500.  

    Only individuals who are residents of Maine and who have developmental disabilities may establish a sub account with this trust.

The Basics of MaineCare Planning

I.   OPTIONS FOR PAYING FOR LONG TERM CARE

    The average cost of one month in a nursing home in southern Maine is around $10,000.   There are four options open to families to pay these exorbitant costs.  

A.  Self Pay - The obvious first option is for your client to pay for his care from his own funds.  If a client cannot qualify for State assistance through the MaineCare program; no longer qualifies or does not qualify for Medicare coverage; and has no long-term care insurance, then this may be the only option available.

B.  Long-Term Care Insurance or Nursing Home Insurance - Long-term care insurance may cover both home health care, assisted living, and nursing home expenses.  Nursing home insurance covers only nursing home expenses.  Both long-term care and nursing home insurance are sold with:  annual or periodic premiums; premiums based on age; cost per day coverage; initial waiting periods; specific lengths of coverage (by time or amount); and inflation protection options.  Most policies provide that premium payments cease after the person is in the nursing home and benefits begin.  Companies will take the insured's medical condition into consideration before issuing a policy.  Attorneys should review policies with clients, as some policies are notorious for putting such stringent medical eligibility conditions (or provider conditions) on coverage that the client could not possibly utilize benefit provided.  

C.  Medicare - Medicare is available for up to 20 days of coverage for nursing home care (or up to 100 days with wrap-around insurance coverage), but only if strict requirements are met.  There must be a prior hospitalization of at least 3 days length.  Also, admission to the nursing home must be within 3 days of discharge from the hospital and the same condition that necessitated the hospitalization.  The care received in the nursing home must be SKILLED CARE.  Generally, individuals needing rehabilitational services will meet these requirements.  

D.  Medicaid/MaineCare - MaineCare, known elsewhere as Medicaid, is the Federal and State funded program that pays for long term care expenses when individuals are unable to pay for their own care. It is an income and asset based program which allows individuals and couples to retain some income and assets while receiving benefits.  Given that the cost of privately paying for nursing home care is so high, few people have the resources to pay longer than a few months for their own care and must look for assistance to government programs.  A critical part of counseling senior citizens is understanding the eligibility for these programs.  

II. MAINECARE PROGRAMS - IN GENERAL 

    MaineCare has numerous programs to provide medical coverage to impoverished individuals.  Each program has its own set of financial criteria.  To qualify for eligibility, an individual must demonstrate that he meets certain asset and income limitations.  Essentially, he must prove to the State that he is poor enough to be eligible for coverage.  Although many aspects of eligibility are similar for the various programs, it is essential to ascertain under which program your client seeks to obtain coverage.  That way, you will be certain to structure your plan to meet the specific criteria for the program.  In addition to financial eligibility criteria, many of the MaineCare programs carry medical criteria as well.  A person must meet certain medical criteria to qualify.

    Financial Eligibility.  The determination as to whether an individual meets the financial eligibility criteria is determined by the local Department of Health and Human Services ("DHHS") office.  When an application is submitted, a caseworker is assigned to determine whether an individual meets the financial criteria for eligibility.  Caseworkers are assigned a file based on the last name of the MaineCare applicant.  Each caseworker is assigned to handle cases based on a section of the alphabet, and/or certain areas of the county the particular office services.  There is a great deal of autonomy among various DHHS offices and even among caseworkers within an office.  Some caseworkers require more documentation and will require the applicant to jump through many more hoops before finding eligibility than others.  

      Medical Eligibility.  The determination as to whether an applicant meets the medical eligibility requirements for a program is made by the Goold Health Systems.  The State of Maine contracts with Goold Health Systems (GHS) to complete medical assessments for people who may need long term care. Goold assesses the level of care the individual requires and also processes the application for certain home care programs. 

    Various MaineCare programs.  A brief description of some of the MaineCare programs follows:

Nursing home Maine Care -  This program is for coverage for individuals who are cared for in a nursing home.

SSI related MaineCare - This program is provides MaineCare coverage for individuals who live in the community and who are disabled, under the Social Security criteria for disability.  These individuals, although disabled, do not receive SSI benefits.

Automatic Eligibility through SSI - This program provides for automatic MaineCare coverage for individuals once they began receiving SSI payments from the Social Security Administration.

Katie Beckett -  This program provides for MaineCare coverage for children who are very disabled and whose parents have too many assets and who income is too high for those children to qualify under other programs.  Unlike other MaineCare programs, the parents' assets are not deemed to the child and hence do not affect the child's eligibility for coverage.

Medicaid Waiver Program - In addition to coverage for medical expenses paid by other MaineCare programs, this program provides for nursing home level home care services in an individual's home.

Boarding Home/Assisted Living Coverage - This program provides coverage for individuals who are residing in assisted living facilities or boarding homes. 

    MaineCare Eligibility Manual.  All of the financial criteria for each program is set out in the MaineCare eligibility manual.  The manual is divided into 17 parts.  The information in the revised manual is now more easily accessible and set forth in a more logical progression.  The community MaineCare program is covered under Part 6; boarding home/assisted living in Part 12; nursing homes in Part 14; asset transfers Part 15; assets in Part 16; and Home Based Waiver Programs in Part 13; and Katie Beckett in Part 7.  The MaineCare Eligibility Manual can be purchased or can be found on the web site at:  http://www.maine.gov/dhhs/index.shtml.  

III.  MAINECARE COVERAGE: NURSING HOME  

    A.    In General

    Basic Requirements.  An individual must be aged 65 or older, blind or disabled.  Also, the individual must be a resident of Maine and a citizen of the United States or a lawfully admitted for permanent residence.  Residency does not mandate a period of time that an individual must live in the State but is instead dependent on intent.  The individual must live in the State voluntarily with the intent of establishing a home in Maine.  

    Medical Eligibility.  An individual must be must be found to be in medical need of care in a nursing home.  Again, the State of Maine contracts with Goold Health Systems (GHS) to complete medical assessments for people who may need long term care. Goold assesses the level of care the individual requires and also processes the application for certain home care programs. Their phone number is 207-621-1346. 

    A person meets the medical eligibility requirements for admission to a nursing facility if he requires extensive assistance or total assistance with three of the following five activities of daily living:  bed mobility; transfer; locomotion; eating; and toilet use.  Each of the listed activities, as well as what qualifies as extensive assistance or total dependence, are defined in the MaineCare Benefits Manual.  This is different manual than the manual that sets out the financial criteria for eligibility.  The section of the MaineCare Benefits manual that covers medical eligibility is DHHS Rules Chapter 101, Section 67.02-3(B).  As a general rule, an assessment is triggered when an application for nursing home benefits is submitted.  The State has taken the position that eligibility will not began until the assessment has been conducted and the individual has been found to meet the financial criteria for eligibility.  This means that if a MaineCare application is submitted on May 1, but the medical assessment is not actually conducted until June 1, for example, then the individual cannot receive coverage until after June 1.  We have appealed the State's position on the agency level and won, but the finding of the hearing officer is not binding on the State in other cases at this time.  There is support in the rules that the Department can override a Goold determination, or make an independent determination for eligibility prior to the assessment date.  This is not a strategy to be relied upon.

    Income Limitation.  The income of the institutionalized spouse must be less than the cost of privately paying for care at the nursing home.  Given that nursing homes cost close to $10,000 a month in the State, this is rarely a problem.  There is no income limit for the Community Spouse.  Any income received only in the name of the COMMUNITY SPOUSE never has to be spent on the nursing home expenses of the institutionalized spouse.  The income of the INSTITUTIONALIZED SPOUSE is then divided.  Some income is kept for the patient's personal use.  Some income, if necessary to maintain the community spouse comfortably in the community, is transferred to the community spouse, and some of the patient's income is paid to the nursing home.  Once the patient is eligible for MaineCare, then MaineCare supplements the patient's payment to the nursing home up to the MaineCare approved rate for that nursing home.

B.   Asset Limits

    All assets must be disclosed to the DEPARTMENT OF HEALTH AND HUMAN SERVICES when MaineCare benefits are sought. If married, it is immaterial in whose name assets are held.  All of the assets are aggregated and then certain assets are excluded from consideration. 

    1.  The Institutionalized Spouse

The institutionalized spouse may retain $2,000 in countable assets.  Countable assets are assets that are not specifically excluded from consideration.  Those specifically excluded are discussed, extensively, below.  In addition, the institutionalized spouse may retain $8,000 in savings.  Savings are defined as an account which earns interest or dividends, except that a checking account does not need to earn interest/dividends.  "Savings" is defined in the manual to include:  savings or checking accounts; IRA; Keogh, available cash value in an annuity, stocks, bonds, mutual funds and the cash surrender value of life insurance.  Note that an asset, such as money in the bank, can be considered both an investment and a countable asset.  Therefore, an individual can have $10,000 in the bank and qualify for benefits.  However, other assets do not meet both definitions.  A vehicle is a countable asset only.  Therefore, if a person owns a vehicle with a NADA value of $5,000 and nothing else, he will not qualify for benefits.  

    2.  The Community Spouse

For 2013, the Community Spouse may retain $115,920, under what is known as the Community Spouse Resource Allowance.  The amount normally increases every year; however as of the date of this submission, a 2014 increase is still not in effect.  

    3.   Excluded Assets

Certain assets are excluded from consideration and do not affect eligibility.  Although the institutionalized spouse may retain these excluded assets, it is often prudent to place even excluded assets in the name of the community spouse before the application is submitted, because of the Estate Recovery Act, which is discussed below.  The following assets are excluded from consideration and will not affect eligibility.

Primary Residence.  The home, which the individual or couple considers to be their primary residence and the land and all buildings on that land are exempt.  This exemption also applies to any adjoining land as long as it is not separated by real property owned by others.  The home is also an excluded asset if it is offered for sale at fair market value.  During periods of temporary absences of the individual or spouse, the home will still be considered to be an exempt assets as long as the individual indicates, on paper, his intent to return home.  If the client is not able to make this statement, then someone acting on the individual's behalf, such as the individual's guardian or agent, may sign such a statement. 

Effective with applications for MaineCare coverage submitted after January 1, 2006, the individual's equity interest in the primary residence may not exceed $750,000.  If the equity interest exceeds that amount, then the amount of equity over the $750,000 will be considered a countable asset.

To determine the fair market value, the State will review a statement of fair market value, such as an appraisal conducted by a certified appraiser;

The amount of the individual's equity interest is equal to the current market value of the home minus any encumbrances (this does not include a line of credit that has been utilized);

A reverse mortgage may decrease the equity value of the property, but must be structured so that no transfer of assets has occurred;

DHHS will insist on seeing "loan documentation to verify it is a valid transaction."

Regulations provide that "this rule does not apply if the spouse of the individual, or dependent, or a disabled child of the individual is residing in the home." 

        Real estate that is not the primary residence is excluded if:

It is up for sale at fair market value;

Two different, knowledgeable sources in a geographic area agree that the property cannot be sold due to a specific condition;

It is held in joint tenancy and the other owners sign a statement showing that they refuse to sell the property or documented evidence that such a statement was requested but not provided.

Life insurance.  All term life insurance policies are excluded assets.  With regard to whole life policies, they are excluded only if the combined face value of all whole life policies owned by the individual is less than $1,500.  Otherwise, the cash value of the whole life policies are includible.    

Annuities.  For annuities purchased on or after February 8, 2006, no transfer penalty will be assessed if:

The annuity was purchased with proceeds from a retirement plan; or

The annuity is irrevocable; is not assignable;  is actuarially sound as determined the Social Security Life Expectancy Table (www.ssa.gov/OACT/STATS/table4c6.html);and the annuity provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments.  

Furthermore, the annuity must name the State of Maine as the first remainder beneficiary.

If the annuity does not meet these criteria, then the current cash value (minus any penalty fees for withdrawal) is considered to be a countable asset.

Life Estates.  If a client owns a life estate, the value of the life estate is a countable asset unless it is exempted with an "intent to return home" statement.  The value of the life estate is determined by using the life estate tables in the MaineCare eligibility manual.  

If an applicant purchases a life estate (for example a life interest in a child's home) after February 8, 2006, the funds used to purchase the life estate are considered to be a transfer of assets unless the applicant resides in  the other individual's home for at least one full and consecutive year beginning with the date of purchase.  Transferring real estate and retaining a life estate is considered to be a transfer of assets and will result in a penalty period.  The amount of penalty will be determined by using the value of the remainder interest pursuant to the life estate table in the MaineCare eligibility Manual.

Mortgages/ promissory notes.  If a client is owed funds under a note, this is a countable asset.  The value of the asset is considered to be the principal to be repaid minus any repayments on principal that have been made.  A client can reduce the amount of the countable asset by obtaining from two sources in the business of buying notes, stating the amount the source would pay for the note.  If a client, however, chooses to use the open market value of the note, which undoubtedly would be discounted, the State will impose a penalty.  The amount of the transfer is the amount by which the presumed value exceeds the current sale value.  The date of the transfer is the date the note was signed by the debtor.  

As of February 8, 2006, funds used to purchase a promissory note, loan or mortgage will be considered a transfer of assets unless the repayment term is actuarially sound (as determined the Social Security Life Expectancy Table - www.ssa.gov/OACT/STATS/table4c6.html); as long as the note provides for payments to be made in equal monthly amounts during the term of the loan with no deferral and no balloon payments; and so long as the note prohibits cancellation of the balance upon death of the lender.

Rental Real Estate.  Real estate that is used as rental property is an excluded asset.  However, with eligibility decisions effective March 1, 2006, income producing property can be excluded only if after three years of operation, the property produces countable income that equals or exceeds 4.04%.   Fortunately, the test for income producing property to be an excluded asset is applied only after the property has three years of operation.  If the property is purchased  right around the time of the MaineCare application, it will not need to meet the three year income rule for three years.  

Prepaid funeral and burial:  Prepaid burial contracts purchased on or after March 1, 2006 are excluded as an asset if the contract is equal to or less than $12,000, regardless of who is named as a remainder beneficiary.  If the burial contract is more than $12,000, the estate of the MaineCare recipient must be named as beneficiary of any remaining funds, after payment is made for funeral and burial charges. 

Personal and household items.  Personal and household items of any value, that are held by the MaineCare applicant, or their spouse, are excluded.  

Motor Vehicles.  One vehicle is excluded so long as it is used to provide transportation for the household.  This includes vechiels that are unregistered, inoperable or in need of repair.  A second vehicle may be excluded if it is necessary for employment and/or to secure medical treatment.  If the applicant, however, resides in an assisted living facility or nursing home, the second vehicle cannot be excluded for use to secure medical treatment.  The manual provides that because facilities must provide a medicaid eligible individual with transportation to secure medical treatment, the second vehicle cannot be excluded for the resident of a facility. The individual also must be able to show a need for a second vehicle.  The example in the manual is one vehicle on the mainland and one on an island.

IV.  TRANSFER PENALTIES: NURSING HOME PROGRAM

    A period of ineligibility is imposed on an individual who applies for MaineCare coverage for care in a nursing home if the MaineCare applicant or his spouse has transferred an asset for less than fair market value.  With a penalty is imposed, the MaineCare applicant is ineligible for care for long term care services for that period of time.  It should be noted that the transfer penalties for coverage for individuals applying for care in assisted living/residential care facilities,are calculated the same but involve deductibles.  Transfer penalties that have run under the assisted living program do not count under the nursing home program.  

A.  Exempt Transfers

The following may be transferred without penalty:

The home if transferred to a disabled child; a sibling with an equity interest in the home who was residing in the home for at least one year before the MaineCare application; and a caretaker child, who resided in the parent's home for at least two years before institutionalization and whose care enabled the parent to stay out of an institution. 

Any asset transferred to a disabled child or to a trust for a disabled child.  The child must meet the criteria for disability under the Social Security Administration.

Assets transferred to a trust solely for the benefit of a disabled individual.

Transfers between spouses may be made without any penalty.

B.  Penalties for Transfers

Any transfer (either made in trust or outright) that was made more than five years before the MaineCare application will not have any effect on eligibility.  The look back period is five years.

To determine the penalty period for transfers made within 5 years of a MaineCare application, one must accumulate all of the transfers that have been made in the five year period before the MaineCare application. Divide the total amount of transfers by the state’s number for the average monthly private pay rate at the time of application for a semi private room in a nursing facility (at this time, $7,667).  

The transfer penalty begins to run from the later of:

The first day of a month during or after which the transfer for less than fair market value occurred; or 

The first day of the month the individual would be eligible for medical assistance, but for the transfer penalty. 

If both spouses are in facilities, then they may split the penalty period in effect for either spouse.  The remaining penalty period can be divided between the spouses into any combination of full months.  

If, when calculating the penalty period, there is a fraction left over after dividing the amount transferred by $7,667, then you must convert the remaining partial month into a dollar amount.  This is done by multiplying the number of whole months by the monthly private rate used in calculating the penalty period, and subtracting this from the total amount of the transfer.  The remainder is added to the cost of care for the first month of eligibility after imposing the penalty period.  

For example, a $50,000 transfer will result in 6.52 months of penalty.  So you multiply 6 by $7,667 to get $46,002.  You then subtract $46,002 from $50,000, which is $3,998.  This amount is added to the cost of care for the first month of eligibility for MaineCare coverage.

C.    Curing Penalty Periods

    Penalty periods may be cured by returning assets to the individual.  There is no penalty as of the month in which all of the assets are returned to the individual.  When only part of an asset or its equivalent is returned, a penalty period can be modified but not eliminated.  A penalty will remain in effect for the period of time during which the asset had been transferred.                

    Thus, individuals may make partial cures to stop penalty periods.  Because partial cures are permitted planners may utilize a reverse half loaf cure technique, whereby all assets are transferred from the MaineCare recipient and then returned in increments to cure outstanding penalty periods.

D.  Care giver Agreements

    DHHS views all payments to relatives for caregiving services skeptically and as a means for circumventing the transfer penalty rules.  For this reason, the State has imposed strict requirements on caregiver agreements.  If these parameters are not met, then the payments to the caregiver relative will be considered a gift.   The following criteria must be met:

The payment for services provided must take place at the time the service is rendered;

The services must be performed after written agreement has been executed between the applicant and provider;  

At the time of receiving the services, the applicant may not be residing in a facility;

At the time of the services, the services must have been recommended, in writing and signed by the applicant's physician, as necessary to prevent the applicant from residing in an assisted living facility or nursing home; and

The agreement must show the type, frequency and duration of the services being provided and the amount of consideration (money or property) being received by the provider/relative.

    E.  Disproving Presumed Transfers

The Maine Estate Recovery Act

After the death of a MaineCare recipient, if the decedent was fifty-five years or older when he received MaineCare benefits, the Department of Health and Human Services (DHHS) will assert a claim against the estate of the decedent or against the beneficiary of the decedent's estate.  The claim is limited to the amount paid by MaineCare for the decedent.

Estate includes all real and personal property in the decedent's probate estate and all other real and personal property in which the decedent had a legal interest at the time of death, to the extent of that interest.  This includes assets conveyed through survivorship, life estates, living trusts, and  joint tenancy.  Jointly held interests, however, in real property are specifically excluded from the definition of estate.  Hence, the State will not pursue a claim against real estate that was owned by the MaineCare recipient and another in joint tenancy.   

The Estate Recovery Act is very broad and claims may be filed against the probate estate in probate court; and in any court of competent jurisdiction against any property that the decedent had an interest as of the date of death.  If claims are filed in probate court, then they are subject to the creditor claims provisions of the probate code, the time period limitation of claims.

    A claim will not be enforced by the State until the decedent has no surviving spouse and no surviving child who is younger than 21 years of age or who is blind or disabled. 

A claim may be waiver if enforcement of the claim would create an undue hardship or if the costs of collection are likely to exceed the amount recovered.  A waiver may not be granted if the decedent or the waiver applicant had acted to lose, diminish, divest, encumber or otherwise transfer any value of the asset for the purpose of preventing recovery.

The person requesting the waiver must hold a beneficial interest in the member's estate.

The person requesting the waiver must either be a child of the decedent or must be over the age of 18.

If the State determines that a hardship exists, then the State may waive all or a portion of the claim.

An undue hardship exists when:

The collection would place the income of the person requesting the waiver below 180% of the current federal poverty level and the total value of the  household's assets is equal to or less than 180% of the current annual federal poverty level; or

The estate real property is the primary income-producing resource for the person requesting the waiver and enforcement of the claim would result in placing that person's income below 180% of the federal poverty level and the total value of household assets is less than 180% of the federal poverty level.

The request must be made within six months from the date of death or within thirty days from the notice of the State's claim, whichever is later.

The request must contain a written statement of the circumstances constituting the hardship waiver and all supporting documentation.

A portion of the decedent's estate will be exempt from estate recovery if a person can demonstrate that health care maintenance activities or personal  care services were provided to the decedent.

The person requesting the exemption must have provided health maintenance activities or personal care services during all or part of the two years immediately prior to the decedent's death  or institutionalization, which enable to the decedent to remain at home and avoid placement in an institution for care.  There must be corroborating statements from the decedent's medical care providers.

Personal Care Services are defined as activities of daily living or instrumental activities of daily living that were  provided to the decedent who at that time did not reside in a facility.  This includes bed mobility, transfer, locomotion, eating, toilet use, bathing, and dressing, meal preparation, routine housework, grocery, shopping and storage or purchased groceries, and laundry.

Health Maintenance Activities are defined as to include nursing, personal care services and additional activities that helped the individual life in the home and community and include catheterization, ostomy care, preparation of food and tube feedings, bowel treatments, administration of medications, care of skin with damaged integrity, occupations and physical therapy activities and transportation.

The request must be made within six months from the decedent's death or within thirty days from the notice of the State's claim, whichever is later.

The request must contain a written statement detailing the activities and services provided and all supporting documentation describing the care frequency and duration.

If the decedent received care, as defined in Section 5.01-9 and 5.01-10, the State may grant an exemption not to exceed $32,000 per year, prorated for each month of approved care.

If the decedent received care less than those services as described in the Estate Recovery rules, the State may grant an exemption not to exceed $12,000 per year, prorated for each month.

If the State's claim would otherwise deplete the estate, the State at its discretion may reduce its claim to permit whole or partial reimbursement of an heir of devisee who used his personal funds/resources to protect the value of the decedent's real property.  This request must be in writing and be supported by proof of payments made and the reasonableness of such payments. 

The request must be made within six months from the decedent's death or within thirty days of the State's claim, whichever is later.