Elder Law Basics Series: Medicaid Eligibility

In a prior post in the Elder Law Basics post, I explained the difference between Medicaid and Medicare. For elder law purposes, the main distinction is that Medicaid pays for long term care services whereas Medicare provides traditional health insurance and only pays for short-term nursing home stays. In this post, I’m going to address what makes a person eligible for Medicaid, or as we call it in Minnesota, “Medical Assistance.”

First, it’s important to understand that there is a distinction between income-based Medical Assistance (MA) for low-income adults and MA for long term care (MA-LTC). Qualifying low-income adults and children may receive health insurance benefits through MA and there is no asset limit to qualify. But if you have a disability and need a nursing facility level of care either in a skilled nursing facility, assisted living facility, or at home, then income-based MA will not cover what you need. In that case, you need MA-LTC or what is referred to as a “waiver program.”

MA-LTC covers long term care services, which are skilled nursing services offered in a traditional nursing home setting. “Waiver programs” cover the same services, but in a community-based setting, such as assisted living facilities, memory care facilities, or at home. There are several different waiver programs offered in Minnesota for various needs, including the Community Access for Disability Inclusion (CADI) waiver for persons with disabilities under age 65 and the Elderly Waiver (EW) for disabled persons 65 and up. The financial eligibility rules for MA-LTC and all waiver programs are substantially the same even though each program is designed for people with different needs.

For MA-LTC and all waiver programs, there is an asset limit for both the person receiving benefits and their spouse, if they are married. For the person receiving benefits, the asset limit is $3,000. This figure has not changed in many years, and seems unlikely to change soon. For the person’s spouse, they are limited to $126,420, but unlike the MA recipient’s asset limit, the spousal asset limit is adjusted annually for inflation. Certain assets do not count toward either spouse’s asset limit, including their primary residence, one vehicle, and personal belongings (like clothing, electronics, furniture, etc.). All other property, however, does count toward the asset limit, including retirement accounts (IRAs, 401(k)s), most trust accounts, and all other real estate (farmland, cabins, etc.).

In addition, the MA recipient’s income is calculated and contributed toward the cost of their care, with certain limited exceptions, such as a personal needs allowance ($102 per month), and in some cases additional income may be given to the spouse to cover excess housing costs. The income calculation for waiver programs can be quite complicated, and some people may not qualify for a waiver program if their income exceeds their care costs. But the spouse of an MA recipient is not required to contribute their income for the MA recipient’s care, in other words, there is no “spousal income deeming” for MA. This makes possible certain asset protection strategies such as planning with Medicaid-compliant annuities.

In addition to the basic financial eligibility requirements, the MA applicant must meet additional criteria based on their needs. For example, they must require a nursing home level of care, which means they typically must be evaluated by a public health nurse as part of what is called the MNChoices Assessment. And for MA-LTC or MA-EW, they must be 65 and older; or, for CADI they must be under 65.

These are just the most basic elements of eligibility and because every person’s situation is different, even though you or your loved one may meet these basic criteria, there may be other considerations before you or your loved one should apply. For example, you may be ineligible for benefits if the applicant or their spouse gifted assets within the last five years. There are also special asset limit rules for families that own small businesses or farms. If you are looking for more information about qualifying for MA, please contact me to discuss your situation.

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Chemical Spills on the Farm and CERCLA

While many farmers are moving away from reliance on chemical fertilizers and pesticides, most farmers still depend on synthetic chemicals to boost soil fertility and combat weeds. For example, most corn and soybean farmers in the Midwest apply anhydrous ammonia to soils in the spring and fall to add the nitrogen to their soils that plants need to grow. Farmers depend on anhydrous ammonia because it contains more nitrogen than alternative sources, it is easy to obtain from their suppliers, it can be applied many weeks before planting, and it’s generally the least expensive source of nitrogen.

But anhydrous ammonia has a number of drawbacks, including the fact that it must be stored as a pressurized liquid and it requires special equipment to transport and apply the chemical, which when released as a gas can be harmful to people. In fact, the federal government lists anhydrous ammonia as an “extremely hazardous substance.” If there is a spill or “release” of an extremely hazardous substance, the person in charge is required to immediately report the spill or face stiff penalties, including fines of over $57,000.

Because most farmers and farm cooperatives deal with these chemicals at some point, it’s important to know what you must do if a spill occurs and to communicate that information to everyone you work with. The Comprehensive Environmental Response, Compensation and Liability Act (or CERCLA) requires a person in charge of a farm or other facility to immediately report a spill of any hazardous substance. The most important thing to remember is that, if a spill occurs, you must call the National Response Center immediately. How soon is “immediately?” Within 15 minutes, according to EPA policy. If you fail to call the National Response Center within 15 minutes of discovering the spill, the EPA will most likely bring civil penalty claims against you for as much as $57,317 per incident. The maximum penalty amount is adjusted annually for inflation. Note that calling 911 or other first responders is not sufficient to satisfy the legal requirement. Rather, your first call must be to the National Response Center (NRC). The NRC will coordinate any local response.

Are there exceptions to calling the NRC within 15 minutes? Not really. The only exception is if you are physically unable to make the call, such as where all phone lines are down or where no one is physically able to reach a phone. Since most of us have cell phones in our pockets at all times, there usually will not be an excuse to not make the call.

In addition, if you store anhydrous ammonia on your farm or at your business in quantities in excess of 500 pounds, you may also be subject to additional requirements under the Emergency Planning & Community Right to Know Act (EPCRA) and Section 112(r) of the Clear Air Act (CAA). These laws require you to report inventory of extremely hazardous substances to state and local authorities, to implement a chemical accident program, and submit a Risk Management Plan to EPA, among other things.

If you have questions about whether your farm or business is complying with federal regulations or is adequately prepared in the event of an accident, please contact me and I’d be happy to help.

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Save the Date: Farmland Access Summit Oct. 21

We know that farmland is changing hands rapidly, and there are many factors at play that are accelerating this trend. The farming generation is aging and farmers are ready to retire. Current economic trends are pushing some farmers into an early retirement or causing them to sell land to satisfy creditors. Land is also changing hands through inheritance. Even so, most beginning farmers report that access to farmland is the biggest hurdle they face to success. But if farmland is to remain in farming we certainly need beginning farmers to keep working farms operational. And we want to make farmland accessible to anyone who wants to farm, not just those with the easiest access to capital.

But how do we accomplish these goals? That’s a question that the Farmland Access Summit and its participants will be looking to answer together. If you’re interested in these issues, you may want to save the following date: October 21, 2019. The Summit is sponsored by Renewing the Countryside and is being organized by a group of people representing a variety of organizations and professionals who work with farmers and in farm transitions, including me. The Summit will take place in Red Wing, MN, the day before the National Farmland Viability Conference begins. And if you have the chance to stay for that conference as well, it should be a great educational and networking experience for professionals who work with farmers and in agribusiness. The National Farmland Viability Conference is held only every other year in a different location each time, and this year Red Wing, Minnesota had the honor of being chosen. Registration for the Farmland Viability Conference is already open, with details on speakers and topics to come.

So, watch this space for more details as we firm up the slate of speakers and topics for the Farmland Access Summit.

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Help for Farmers Facing Flood Damage and Financial Stress

Just last fall we were talking about the record number of farm bankruptcies due to low crop prices. Now, many farmers are suffering losses due to widespread floods throughout the Midwest caused by heavy snow and rain, and a significant number of farmers have lost their barns when the heavy snow caused the roofs to collapse. Farming is a business that is heavily depending on the weather, which is never easy to predict and impossible to control. Most farmers are familiar with risk management tools like crop insurance and diversification, but what do you do when everything goes wrong at once? This seems to be the question on the minds of many.

Fortunately, there is help. The following is a list of resources available to assist farmers facing these and many other challenges this spring, as compiled by the Minnesota Farmers Union:

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My Spouse Needs Nursing Home Care -- Do We Need to Divorce?

When I am asked about nursing home care for married people, one of the questions that almost always comes up is this: “Do we have to get divorced?” Or, in a similar vein: “Should we get divorced?”

There is a misconception about long-term care that has been around for a long time, which is that a married couple should or must get divorced when one spouse needs care. It’s like an urban legend that just won’t die. And it adds unnecessary stress in a situation that is already very stressful for families. So, let me put it to rest once a for all:

No, you don’t need to get divorced.

And, most people shouldn’t get divorced.

Here’s why: If you need to rely on Medical Assistance (also known as “Medicaid”) to help pay for long-term care in a nursing home, assisted living facility, or at home, the program requires the ill spouse to spend their assets down to just $3,000. But the program also provides for a community spouse asset allowance that is much greater than that. This year, the community spouse asset allowance is $126,420, and the figure is adjusted annually based on the rate of inflation.

In addition, there are certain benefits to staying married. For example, the well spouse can remain living in the marital home, and the home will not be counted toward either spouse’s asset limit. The well spouse may also receive an additional income allocation from the income of the ill spouse if the well spouse’s income is too low, which is helpful in situations where the ill spouse was the primary earner and may be receiving a larger amount in pension or social security income. The well spouse may also be allowed to keep additional income producing assets if their income falls below a certain minimum threshold. Moreover, the program allows married couples to annuitize assets, converting available assets to an income stream for the well spouse, and the well spouse’s income is not required to be spent on care costs. So, for all these reasons, staying married is often more advantageous than getting divorced.

So, why does the myth that people have to get divorced persist? It may be because in some unique situations, divorce is the best option. For example, in a second marriage where the couple signed a prenuptial agreement, a divorce may provide for an appropriate redistribution of assets that better protects and provides for the well spouse. But these cases are generally rare and require the advice of a knowledgeable attorney to determine if divorce is appropriate. In most cases, divorce is simply not the best option.

If you or someone you knows is in this situation and is wondering what to do, contact an experienced elder law attorney for advice.

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What Is Elder Law?

When I introduce myself as an attorney practicing elder law, the next question I usually get is, “what is that?” Recently, someone asked, “what’s the difference between ‘elder law’ and ‘estate planning?’ Isn’t it the same thing?”

Although there is certainly some overlap between the disciplines of estate planning and elder law, the two are not the same. In this post, I’ll briefly summarize the differences and why those differences are important.

Elder Law is Interdisciplinary

Instead of focusing on a field within the practice of law, elder law takes as its focus the whole person. Traditionally, elder law is a practice that crosses disciplinary boundaries. For example, an elder law attorney may have experience with estate planning, health care law, landlord/tenant law, real estate law, and personal injury. That’s because an elder client may present with a number of issues, such as a person who is injured in an assisted living facility, has issues with the facility’s housing agreement, and also has trouble paying for care. These issues cross over into personal injury law, housing law, and health care law. Not all elder law attorneys practice in all of these disciplines, and some may focus in a certain area, but often an elder law attorney has some familiarity with all of these issues and can help the individual client navigate similarly complex situations. By focusing on a client population instead of an abstract discipline, elder law attorneys gain skills and experience in the challenges that face this population and how best to assist clients who are similarly situated. With these unique skills, an elder law attorney can provide superior service to seniors and their families.

Estate Planning, Plus

In my practice, I sometimes think of elder law as “estate planning, plus” or “estate planning 2.0.” Increasingly, traditional estate plans are being complicated by the high cost and unpredictability of long term care. In part, this is due to demographic changes, like the fact that aging “baby boomers” are greatly increasing the number of people in need of long term care. And in part the change is due to the ever increasing cost of care. The average cost of nursing home care in Minnesota is over $7,000 a month, and for memory care it can be twice that. Estimates indicate that around half of all people will require long term care services, which means more and more people need to factor long term care costs into their retirement planning and estate plans.

A traditional estate planning attorney primarily deals with wills and trusts and is concerned mainly with minimizing the cost of transferring assets at death, which might include tax planning or probate avoidance. But a traditional estate planning attorney may not understand the impact that an illness requiring long term care may have on a client’s intentions to pass assets on to the next generation, and may not know how to leverage the resources available to minimize the financial impact of necessary care. That’s where an elder law attorney can make a difference. For a client who is concerned about the impact that the need for long-term care may have on their business succession plan or their wealth transfer objectives, an elder law attorney can provide invaluable guidance.

Peace of Mind

An elder law attorney can provide their clients with a sense of assurance that, if long term care is anticipated, all necessary care will be provided without totally derailing the clients’ other objectives, such as providing for a spouse or disabled child, or leaving a legacy for the next generation. When faced with a diagnosis like dementia or Parkinson’s, clients often fear that they will lose everything they own or will have to divorce their spouse. The elder law attorney can help the client in this situation to develop a plan to ensure that their quality of life will not suffer even though their cost of care increases dramatically. An elder law attorney can help clients navigate the maze of complicated healthcare programs, rules, and regulations, and provide guidance on care and housing alternatives to meet a client’s goal to age in place as long as possible. With the tools that an elder law attorney can provide, clients can feel empowered to take back control of the process and make a plan that suits them.

If you’re interested in talking with an elder law attorney to find out more, please contact me or someone at my firm, Fafinski Mark & Johnson, PA, for assistance.

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2019 By the Numbers: Key Figures in Estate Planning and Elder Law

2019 By the Numbers: Key Figures in Estate Planning and Elder Law

A summary of the key facts and figures you need to know for estate planning and long-term care planning in 2019.

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New Year's Resolutions for Your Estate Plan

The beginning of a new year is an invitation to review what you’ve accomplished the prior year and to think about what things you might like to accomplish this year. As your make your 2019 New Years Resolutions, I’d like to suggest that you take some time this year to think about your estate plan.

If you don’t have a plan yet… consider making one! Keep in mind that just because you haven’t done any formal planning doesn’t mean you don’t have a plan. Without your own plan, the government will make decisions for you. State laws govern what happens to your assets when you pass away, and in some cases state laws govern who makes decisions for you if you need help doing so. But these default rules are set aside if you make your own plans and turn those plans into legal documents. So, if you don’t yet have a plan, make a resolution in 2019 to sit down with an estate planning attorney and discuss your wishes and make a plan. If nothing else, make sure you get a health care directive if you don’t already have one.

If you already have an estate plan… consider reviewing it to make sure it’s still consistent with your wishes. Ask yourself whether there have been any major life changes since you last did your estate planning documents. Have you moved? Has a spouse, child, or other beneficiary or person named in your documents passed away? Have minor children reached adulthood? Did you give or loan money to a beneficiary, and you want that beneficiary’s share reduced to reflect that? Were you or your spouse diagnosed with a long-term, serious illness that may require long-term care? Was a beneficiary diagnosed with a permanent disability? Have you acquired real estate? Do your assets now total more than $3 million? Did you or a beneficiary go through a divorce? Do your documents simply not make sense to you anymore? If you answered “yes” to any of these questions, you should talk to an estate planning attorney about whether your documents need to be updated or changed.

Estate planning doesn’t have to be expensive or complicated, and knowing that you have a plan in place provides significant peace of mind for both you and your family. Contact me or one of our estate planning attorneys at FMJ to discuss options for your estate plan in the new year.

Happy new year!

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Powers of Attorney: Friend or Foe?

A power of attorney is a legal document that gives a person the ability to manage financial affairs on behalf of another. In legalese terms, we often say that the “principal” gives a power of attorney to the “attorney-in-fact,” who can then add themselves as a signor on the principal’s bank accounts. Minnesota has a form power of attorney known as the Statutory Short Form Power of Attorney, which is great because it’s easy to use and most banks in the state recognize and honor it. But it’s not without some serious pitfalls.

The ease with which someone can print and sign a power of attorney and the incredible breadth of powers this document gives the attorney-in-fact has made it the number one tool for financial exploitation. Most financial exploitation of vulnerable adults is perpetrated by family members, and most of them are doing it using a validly-executed power of attorney. In some cases, powers of attorney are obtained by fraud or duress, such as by misleading someone about the nature of the document they are signing, or by forcing a vulnerable adult to sign under the threat that their caregiver will cease taking care of them. And in some cases, I believe that the power of attorney was given voluntarily, but at some point in time the caregiver or family member began misusing the document for their own personal gain out of a sense of entitlement or because provisions were never made to appropriately compensate the caregiver.

Despite these pitfalls, I still recommend to my clients that they have a power of attorney. Why? Because the alternative is worse yet. If something happens to you and you have not given a power of attorney to anyone, the only alternative is to go to court and ask a judge to appoint a conservator for you, which is an expensive, time-consuming, and expensive process for you and your loved ones.

That said, there are ways to protect yourself and your loved ones from financial exploitation using a power of attorney. First, hang onto your original power of attorney. You can give your attorney-in-fact a photocopy initially and inform that person where they can obtain the original if they need it. Without an original, the attorney-in-fact cannot actually use the power of attorney, so this adds an extra barrier to accessing your accounts and assets.

Second, choose your attorney-in-fact very carefully. This should be someone you trust implicitly. When in doubt, you can always nominate two people and make them act together, this way there is a system of checks and balances in place.

Third, if your attorney-in-fact will also be providing care to you, make sure there is a plan in place for appropriate compensation for that individual. Voluntary caregivers provide a substantial economic benefit both to the person receiving care and to society as a whole. “In 2013, about 40 million family caregivers provided 37 billion hours of care worth an estimated $470 billion to their parents, spouses, partners and other adult loved ones.” (AARP.) Make sure you honor your caregiver by having a written agreement with them that clarifies the amount of compensation they will receive and how they will be reimbursed for out-of-pocket expenses. And make sure the agreement is communicated to other family members.

If you have questions about your power of attorney or how to protect yourself or a loved one from financial exploitation, contact me or one of my colleagues at FMJ.

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What's the One Document Everyone Needs?

I’m often asked what are the essential legal documents that everyone needs. While it’s true that most people need to put an estate plan in writing and most will need to decide between a will or a trust plan, there is really only one document that everyone needs, and it’s not a will or a trust. It’s a health care directive.

If you are reading this and you don’t have a health care directive, get one. Anyone over the age of 18 needs a health care directive. Why? While a health care directive can do a number of important things, the most important thing it does is nominate someone else to make health care decisions for you if you cannot. If a serious illness or accident happens and you become brain dead but remain on life support, do you have someone with the legal authority to make the decision to remove life support? Or if you have a terminal condition, is there someone who can decide for you whether to pursue treatment or palliative-only care? As some people like to say, who can “pull the plug” without having to go to court to get a court order to do it? If you don’t have a health care directive, then then answer is, no one.

You might think that, if you’re married, your spouse can make these decisions. But, there is no law in Minnesota that makes your spouse the default decision-maker for your healthcare decisions. If you want your spouse to be able to make those decisions without question, then you need to have a health care directive.

You might also think that, if you’re a young person, your parents can make health care decisions for you. Again, not necessarily. For people over 18, your parents no longer have legal authority to make healthcare decisions for you. So again, if you want your parents to have this ability, you need to sign a health care directive. If you have a child who just turned 18, I strongly recommend you have them sign a health care directive in case something were to happen to them.

In addition to nominating someone to make health care decisions for you, a health care directive can also state your wishes regarding organ donation and final disposition of your remains. There are many different forms available for health care directives, and some are quite short while others go into great detail regarding your wishes for your health care (a popular one is called the “Five Wishes”). Most physicians and clinics can also provide you with a health care directive form. You can choose any form you like, but it must have the following components to be valid in Minnesota: It must be dated and signed by you, it must nominate at least one person to act as your health care agent, and it must be either witnessed by two people or notarized. If you use witnesses, at least one cannot be a healthcare provider, and none can be your agent (or agents). Also, keep in mind that your spouse or close family member cannot notarize your documents based on legislation passed last year.

If you need a health care directive or have questions, contact me or one of my colleagues at FMJ.

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How to Talk to Family About Long Term Care Needs

The holidays are fast approaching and soon we’ll all be gathering together with our families to share meals and spend rare quality time with our loved ones. It can be a fun, exciting, and stressful time of year. For many people, the holidays are when we first notice that there may be problems in our families, especially as parents or grandparents grow older. You may notice that the home is not as clean and tidy as you remembered, or that mom or dad is having a lot more difficulty moving around the house. Maybe the laundry isn’t getting done because it’s on a different floor that is no longer accessible. Or maybe there isn’t any food in the refrigerator because driving to the store is getting too difficult. Or perhaps important appointments or medications are being forgotten or skipped.

Most people need more support as they grow older, but because we live in a culture that emphasizes independence above all else, it’s extremely difficult for people to ask for help or even to accept help when it is offered. This can make it very hard for family members to raise concerns about health, safety, or isolation with their elder relatives. But the truth is that these conversations are too important not to have, even though they are difficult. Most people when asked say that they want to remain at home as long as possible and even die at home. But most people don’t die at home. Why? Because they don’t tell their loved ones what they want when they’re able to express their wishes, and they don’t develop a plan for making their wishes a reality. As the saying goes, if you’re not making a plan, then you’re planning to fail.

So, how can family members facilitate these important conversations around the holidays?

First, it’s important to acknowledge that no two families are alike. What works for one person or family might not work for you. Consider how you have broached difficult issues in the past. What worked (or didn’t work) then? What can you learn from these past experiences that you can apply to this situation?

Second, remember that your elder relative is an independent adult, even if they now need help. There is a tendency in many families to treat their elders more like children than grown-ups simply because they may have developed some cognitive difficulties or may require assistance with activities of daily living. But with the proper support, our elders can still make appropriate decisions on their own. “Supported decision-making” is an emerging concept that seeks to balance respect for the autonomy the individual with the need to protect the individual’s health and safety. Remember, if we’re lucky we’ll all get old someday, and when it’s your turn, how will you want to be treated? Try to find a way to support your loved-one’s wishes while also ensuring their health and safety is provided for.

Third, if at first you don’t succeed, try again. It can be difficult for someone who may be struggling mightily to hide the fact that they need help to be confronted by a child or grandchild with an offer of assistance or a remark of concern. They may feel shame, sadness, or anger about their situation, which may cause them to be defensive or in denial. But by showing genuine concern and allowing the person time to process their emotions and reactions, you may make more progress than if you simply confront the person and never bring it up again.

Fourth, get help if you need it. Sometimes enlisting a trusted advisor or friend to speak with your loved one can help. Maybe your elder relative doesn’t want to talk to you about it, but they would talk with their pastor or rabbi, a close friend, their banker or lawyer, their physician, a different relative, or someone else they trust. Most people have at least one person that they trust and whose opinions they respect and admire — seek out that person to help you.

Finally, use “I” statements instead of “you” statements. Instead of saying, “you’re forgetting to take your medication and you’re driving me crazy!,” try saying, “when you forget to take your medications, I get afraid that you will become seriously ill and I’m afraid of losing you and seeing you suffer.” Using “I” statements shifts the conversation away from judgment and blame. And by depersonalizing the problem, “I” statements open up space for both sides to come up with creative solutions without anyone feeling defensive.

Once you are able to identify your loved one’s wishes for their care as they age, it’s important to take the next step and make a plan. How will you pay for care if they want to remain at home? Under what circumstances would you all agree that staying at home will no longer work? If transitioning out of the home, what housing with services options are the best for your loved one? Are there assets that need to be protected from long term care costs to provide for other family members? Engage the services of an elder law attorney to help you answer these questions and make a plan that honors your loved one’s choices and ensures that they’ll be safe and healthy.

And, may you and all your loved-ones share a safe, healthy, and happy holiday season!

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Elder Law Basics Series: Medicare vs. Medicaid

This post is the first in a series that I’m calling “Elder Law Basics.” The idea is to give a brief introduction to the essential elements of a law practice focused on serving the needs of the elders in our community, and to help readers understand what is meant by the term “elder law.” Elder law encompasses many things because the practice is focused on a population not on a distinct set of laws. But because the practice spans so many disciplines that we usually think of as separate — like estate planning and landlord-tenant and healthcare — it can be confusing to understand what an elder law attorney actually “does.” (By the way, “agriculture law” suffers from the same form of confusion. It too is interdisciplinary in scope and focuses on a population — farmers — rather than a particular legal discipline. What can I say, I like to wear a lot of different hats!)

I’d like to start out this first post by focusing on a health-law aspect of my elder law practice, and a topic that generates a lot of confusion and misinformation in the broader community. I’m talking about Medicare and Medicaid.

A lot of people confuse Medicare and Medicaid, but they are two separate healthcare insurance programs that originate with the federal government and involve some administration at the state level as well. Medicare is a health insurance program primarily for people over 65, although people who are permanently disabled or have certain diseases may also qualify for insurance coverage through Medicare. Medicare has four parts: Part A, which is known as “hospital insurance,” Part B, which is known as the “health insurance” part and covers some preventive care; Part C, which is “Medicare Advantage,” a sort of hybrid of Parts A and B; and finally, Part D, which is prescription coverage. Medicaid is also a health insurance program, but it pays for healthcare when a person can no longer afford to do so. A person may qualify for Medicaid if their income is too low, or if they’re over 65 or disabled and require long term care but cannot afford to pay for it. There are income and asset limits to qualify for Medicaid, and I’ll discuss those in a later post.

For now, I want to highlight some things about Medicare that most people aren’t aware of. First, you might not know that if you’re 65 and receiving Social Security, you’ll be automatically enrolled in Medicare Parts A & B. But what about people who are still working at 65? Do they need to enroll? The answer is that it depends. If you’re actively working and receiving health insurance through your employer (or your spouse’s employer), and if the company has more than 20 employees, you do not need to enroll in Medicare. But, if the employer has fewer than 20 employees, Medicare will still be considered the primary payer, and you should enroll to avoid a penalty. If you’re 65 and not collecting Social Security yet, it’s a good idea to talk with a professional about whether you should be enrolling or not so that you don’t lose coverage or have to pay a penalty.

In addition, Medicare Part A pays for hospital stays (up to 150 days), and skilled nursing facility stays that follow at least a 3-day inpatient hospital stay (up to 100 days). When it comes to skilled nursing care, many people are told by their healthcare provider that Medicare will stop paying for skilled nursing care if the patient does not show improvement. That is not true. According to a recent settlement agreement with the Centers for Medicare and Medicaid Services, there is no legal requirement that a patient demonstrate improvement for Medicare to continuing paying for care. Medicare must continue to pay for care so long as it is medically necessary for up to a maximum of 100 days.

Many people also need home health care due to age-related illnesses or after a hospital stay. Many people and care providers don’t realize, however, that Medicare Part A also pays for in-home care. So long as the care is ordered by a physician and the patient is “homebound,” which simply means they need assistance with moving (for example, a cane, walker, or wheelchair), Medicare will pay for up to 28 to 35 hours of in-home care per week, and there is no limit on how long the person can continue receiving care at home.

One big issue that has come up in Medicare cases over the years is something called “observational status.” In order to qualify for Part A coverage for a hospital stay or for skilled nursing care following a hospital stay, the patient must be considered in in-patient (not out-patient) care. Many hospitals are categorizing patients as out-patient by putting them on “observational status.” Hospitals may be afraid that they will lose money on Medicare patients, so they avoid this by making the patient’s hospital stay not qualify for Medicare coverage. Since most patients have no way of knowing whether they’ve been admitted as in-patient or whether they are on observational status, all patients are entitled to a “Medicare Outpatient Observation Notice” (MOON) within 36 hours of hospitalization. Patients on observational status can and should dispute their status with their care provider.

If you or a loved one have questions about Medicare or Medicaid, feel free to give me a call or contact my firm for more information.

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New Veterans Administration Pension Benefit Rules Went Into Effect October 18

The Veterans Administration just rolled out sweeping new eligibility rules for veterans and their spouses who require long-term care. The rules apply to needs-based pensions, such as Aid & Attendance, which is a program that helps veterans and their families to offset the cost of out-of-pocket medical expenses. For example, a veteran or their spouse who receives care at home or in a facility can receive additional money each month from the Aid & Attendance pension if their income falls below a certain threshold as a result of out-of-pocket medical costs.

Until this month, in order to qualify for Aid & Attendance, the government only took into account a family’s monthly income and medical expenses. Although there was a ballpark maximum asset amount a family could have, there was no hard and fast asset limit. Better yet, there was no lookback period for gift transfers and no gift penalties imposed, which made the program more attractive compared to Medical Assistance (Medicaid). Now, that is no longer the case.

The new rules establish a maximum “net worth” limit, which takes into account both assets and annual income of the veteran and their spouse. That net worth limit is pegged to the community spouse resource allowance under Medicaid, which this year is $123,600. If a veteran and their spouse (if married) have annual income (less out-of-pocket medical expenses) plus total assets in excess of this asset limit, they can no longer qualify for Aid & Attendance. They will have to either reduce assets or reduce income (keeping in mind that an increase in care costs can have the effect of reducing income), in order to qualify. The veteran or spouse’s primary residence, including 2 acres surrounding the home, is excluded from the asset limit.

In addition, the new rules impose a 36-month lookback period for transfers of assets for less than fair market value. (This is less stringent than the 60-month lookback period for Medicaid.) The penalty period is calculated by taking the sum of all gift transfers made within the lookback period and dividing it by the maximum monthly pension amount, which determines the number of months that the veteran or spouse is ineligible for VA pension benefits. A penalty period begins to run on the first of the month following the date of the last gift transfer. Only gift transfers that result in financial eligibility are penalized, however; if the veteran or spouse was already below the net worth limit, or if they were close to it, the penalty is reduced or can be zero depending on the circumstances.

The takeaway: Veterans and their families who are considering applying for Aid & Attendance benefits through the VA should consult a VA-accredited attorney like me as soon as possible to determine whether they need to wait to apply due to the new transfer penalty rules and whether they meet the new net worth limit. Please contact me if you have questions.

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GRATs Make the News -- But What Are They?

As an attorney, I’m always a bit tickled when a relatively obscure estate planning device makes the national news. Just a couple years ago, the untimely passing of Prince (legendary Minnesota musician and personal favorite of mine) brought the importance of estate planning to the national stage. Even more recently, the passing of Aretha Franklin, another great talent who neglected to make a will, has reiterated the point. Even so, the statistics reveal that the vast majority of Americans do not have any estate plan in place. But this post is not about celebs who failed to plan, but rather celebs who planned quite well, and what we can learn from them.

In a recent investigation by the New York Times, reporters revealed that President Trump’s father, Fred Trump, a billionaire in his own right, used something called a “GRAT” to pass his fortune onto his children. The Times revealed that, using this GRAT, Trump’s estate paid far less in estate taxes than it otherwise might have had to do. So, what is a GRAT?

A GRAT is a grantor retained annuity trust. It has its origins in an estate tax loophole in Internal Revenue Code Section 2702. Section 2702 was enacted in 1990 to eliminate what were called grantor retained income trusts (or “GRITs” — see, isn’t this fun?). Congress wanted to stop people from being able to transfer assets to their children in a trust while retaining the income to themselves and using the income to offset the transfer taxes that would ordinarily be owed to the government. While the law outlawed “GRITs”, it continued to allow a very similar arrangement so long as the grantor received a fixed amount of income, or an annuity, instead of a variable income stream. Thus, the GRAT was born.

The advantage of a GRAT is its ability to freeze the present value of an asset for transfer tax purposes even though the asset continues to appreciate. Suppose you have an asset that you know is going to grow in value in a big way — say stock in a closely held company that’s about to go public. Later on you might want to gift the stock to your children, but by then the stock will be so valuable you might have to pay gift or estate tax on it; but you don’t want to give the stock to your children now before it appreciates. If you create a GRAT, you can transfer the stock to the GRAT, the GRAT will pay income to you for a fixed term (2-10 years is typical) based on the present day value of the stock, the annuity income can zero out the transfer tax obligation you would otherwise have, and your children will later receive the stock after it has grown in value, tax free. In short, you transfer an asset to the GRAT, the GRAT pays you pack the initial value of the asset upon the date of transfer, and then your children receive the appreciated asset later on, tax free (or tax reduced).

You might be thinking that you have lots of assets — stocks, real estate, etc.—that are likely to appreciate, so why aren’t we all using GRATs? First, because most people today will never owe any estate or gift tax. The current federal estate tax exemption is $11.2 million per person. That means a married couple can transfer $22.4 million combined tax-free. If you’re wealth is below this figure, a GRAT probably isn’t for you. Second, if your asset fails to appreciate as expected, there’s no advantage. The assets in the GRAT have to appreciate at a rate greater than a rate established by the IRS under Internal Revenue Code Section 7520, and that can be hard to predict in the real world. Third, if the grantor dies before the end of the GRAT annuity term, the whole thing is included in the grantor’s gross estate for the calculation of the estate’s tax obligation. That’s a lot of “what ifs”!

Last, there are alternatives to GRATs that most people should consider. If you live in a state, like Minnesota, that has a state estate tax exemption that is much lower than the federal exemption, you could still have to worry about estate tax even if you don’t have a Trump-sized portfolio. For these folks, an irrevocable life insurance trust (ILIT) or charitable giving may be a more appropriate, less risky, and less complicated alternative.

So, while GRATs aren’t for everyone, estate plans are. Borrow a play from the Trump family play book and contact a lawyer today to get started on your estate plan. An attorney like me or my colleagues at FMJ can help you find the right plan for you.

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Farmer Co-ops and Illegal Price Fixing

Farmers are commonly known as “price takers” not “price givers.” This is because most farm operations are small in comparison to agribusiness suppliers. This was certainly true when the first farmer coops were created in the 19th century, and even more true today in the wake of mega mergers in the agriculture industry. As the industry continues to consolidate, prices for farm inputs tend to go up as competition among suppliers decreases. When farmers join together to form a cooperative, they can aggregate their buying power, putting them on a more equal footing with larger corporations.

Recognizing the value of farmer coops, the US legislature passed the Capper-Volstead Act in 1922 to protect farmer coops from charges of unfair competition. Normally, under antitrust laws, separate individuals cannot work together to fix prices in their industry, since doing so would be anti-competitive. The Capper-Volstead Act makes an exception to this general rule for cooperatives comprised of agricultural producers. It’s one of the many unique exceptions in US law that applies specifically and exclusively to farmers. The law is important because, without its protections, farmer cooperatives that set prices for their goods would be illegal.

But not every farmer cooperative meets the qualifications for Capper-Volstead exemption from antitrust laws. The coop must meet very specific requirements. The requirements come in two flavors: (1) Structural, and (2) Functional. The first structural requirement is that all coop members must be agricultural producers. If even one member is not a producer, the whole coop loses its exemption from antitrust laws. This can be a difficult question today as more farms grow their operations to include things like processing, packing, or marketing agricultural products. Therefore, it is important to include provisions in the coop’s bylaws stating that membership is limited to producers and for the coop to regularly review its membership to make sure that all members are still primarily agricultural producers.

The second structural requirement is that the coop must be operated for the “mutual benefit” of its members. This generally means that the coop is democratically controlled by its members and that profits are returned to farmer members. The third structural requirement is that the coop must provide for only one vote per member or, instead, the coop cannot permit more than an 8% return on member equity. Usually, the simplest thing is to provide for one member-one vote. The fourth and final structural requirement is known as the 50% rule: the coop cannot deal in the products of nonmembers in an amount greater than the products of its members. These requirements are intended to further essential cooperative principles, such as democratic control, open membership, and cooperation.

The functional requirements are the things that a coop can and cannot do. The only activities a coop may lawfully engage in are processing, preparing for market, handling, or marketing of agricultural products of its members. Anything beyond these activities is illegal. For example, a farmer coop may not acquire competitors for anti-competitive purposes; it may not coerce customers, suppliers, or nonmembers into doing business with them; it may not conspire to eliminate a competitor; and it may not conspire with other businesses or groups to fix prices. In essence, farmers may cooperate to gain equal footing among corporations; but it may not conspire to crush its competition. As an example, a large cooperative of mushroom growers was discovered to have been buying up competitors’ mushroom farms, selling them at a loss, and saddling the properties with a perpetual deed restriction stating that no mushrooms could be grown on those farms any longer as a way of controlling the mushroom supply and driving up prices for its members. The cooperative was sued alleging antitrust violations. Though the coop raised Capper-Volstead antitrust immunity, the federal district court was not persuaded.

If you have questions about cooperative antitrust immunity or what should be in your coop’s bylaws, contact me or another of my super smart colleagues at FMJ!

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The Importance of Regulatory Compliance for Ag Suppliers

If you’re in the business of selling farm inputs to farmers, you may not know that simply having the wrong label on a product could result in a fine of almost $20,000 per sale. What may seem like an inconsequential difference between one label and another could result in crippling fines when it comes to the sale of products regulated by the U.S. Environmental Protection Agency. Earlier this year, the EPA raised its maximum fine amount to $19,446 for violations of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). Just ten years ago, the maximum fine per violation was just $6,500. Products regulated and subject to penalties under FIFRA include pesticides, herbicides, fungicides, and similar products.

Under FIFRA, all pesticides must have a label approved by EPA, and the label must be displayed on the product. The label provides instructions on safe handling to ensure the safety of the applicator as well as the safety of the environment. Two products can have very similar sounding names, but still have very different labels, which can make following FIFRA a regulatory challenge. If a product has been mislabeled, each sale of that product is considered a separate and independent violation. So, if a coop makes 1,000 sales of a mislabeled product, they could incur fines of almost $19 million.

The best medicine is always prevention, which is why it’s important to have someone on staff whose job it is to ensure compliance with all applicable state and federal regulations. For businesses that have an internal audit program in place, EPA rewards self-reporting of violations by offering reduced fines so long as the audit program complies with certain criteria. It is important to remember that all self-discovered violations must be reported to EPA within 21 days. EPA has an eDisclosure system for online reporting.

For businesses already facing a potential fine, it’s important to understand the process and your rights. EPA will first send a Notice of Intent to File Administrative Complaint. This Notice will inform the violator of the basis for the alleged violation and a proposed fine. The violator has the opportunity to negotiate with EPA to reduce the fine by, for example, implementing a Supplemental Environmental Project (SEP) to mitigate the harm caused. After a Complaint is filed against the company, the company has the opportunity to appeal the fine to an Administrative Law Judge (ALJ) who works for the agency. From there, the business can appeal the ALJ’s decision to the Environmental Appeals Board (EAB), which is the last stop before the violator can appeal directly to federal district court. As you can see, the appeals process can be lengthy and expensive, which is why prevention is so important.

For more information on EPA compliance or if you have questions, contact me or my colleagues at FMJ for help.

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Employment rules to know when employing commercial drivers

Farmer co-ops and farm businesses that employ commercial drivers for trucking or hauling products need to be aware of certain employment laws that apply specifically to commercial drivers.  Failure to follow these rules could lead to fines, suspension of business, and impoundment of commercial vehicles.

1. US Department of Transportation Drug & Alcohol Policy.

Most employers have some type of drug and alcohol policy for their employees that restricts the use of intoxicating substances while on the job.  What you might not know is that, for commercial drivers, the federal Department of Transportation requires employers to have a specific drug and alcohol testing program in place and to inform their employees about the drug and alcohol testing policy.  Failure to do so can result in fines, suspension of business, or vehicle impoundment.

The rules are complicated, but in essence employers must perform drug and alcohol tests on all commercial drivers of vehicles with a gross vehicle weight rating of 26,001 or more pounds.  Testing must be undertaken prior to employment, at random, when there is reasonable suspicion of substance use, after an accident, when an employee is returning to duty after being removed, and follow up testing as necessary.  Employers may contract with an authorized service agent to provide the testing services.

In addition, employers must have a written policy and must provide the policy to their employees.  It's a good idea to include this policy in the employee handbook or manual.

More information is available at the DOT's website and in the DOT's Employer Handbook.

2. Special overtime rules for commercial drivers.

Most employers know that you're supposed to pay employees time and a half for hours worked in excess of 40 hours per week.  But, this rule does not always apply to commercial drivers.  If you don't know the rules, you might be paying too much or too little in overtime to your employees.

The rule is called the "motor carrier exemption."  Ordinarily, under the Fair Labor Standards Act, an employee is entitled to one and one-half times their "regular rate" for all hours worked over 40 that week.  But under the Motor Carrier Act, some employees are exempt from this requirement.  An employee is exempt if:

1. They are employed by a motor carrier (transportation industry) or motor private carrier (the employee transports the employer's goods);

2. They are employed as a driver or have other duties that affect the safety of operation of motor vehicles (includes, among others, someone loading goods on and off a vehicle or servicing a vehicle);

3. The employer's vehicles have a gross vehicle weight rating of at least 10,001 pounds; and

4. The employee drives or reasonably could drive across state borders.

If an employee meets all four criteria, the employer is not required to pay time and a half.  The employee is still subject to state and federal minimum wage requirements, however.

These rules are complicated, and a violation of these rules can come with expensive fines or obligations to pay back wages, which is why consulting an attorney with experience in this area is important.  Contact me or the other great attorneys at Fafinski Mark & Johnson, P.A. if you have questions or concerns.

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Minnesota's Beginning Farmer Tax Credit

Minnesota is one of just three states that now offers farmland owners a tax credit for leasing their land to a beginning farmer.  And, unique to Minnesota, the credit extends to farmland sales too.  Click through to learn more.

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Medicaid Estate Recovery in the News

Until recently, Minnesota was one of the states that recovered not just long-term care services but all Medicaid services provided to persons 55 and older.  But no one really noticed.  Why?  Because until 2014, to be eligible for recoverable Medicaid services you had to meet strict asset eligibility rules.  For instance, for a person to qualify for long-term care services, you cannot have more than $3,000 in available assets.  For these folks, estate recovery didn’t seem so bad because there wasn’t much to recover at the end of that person’s life.  But in 2014, Minnesota participated in the Medicaid expansion under the ACA (“Obamacare”).  This expansion lifted the asset limitation for folks under 65, greatly expanding the number of people who qualified for insurance paid for through Medicaid.  Suddenly, many more people were enrolled in a program for which estate recovery rules applied.

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