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December 7, 2006
DO YOU HAVE A HARDSHIP?
My prediction is that hardships will become very common for all of us baby boomers. By hardship, I am referring to the harsh rules affecting all seniors who make a gift in any amount, and need nursing home care within 5 years. These changes are the result of the passage of the Deficit Reduction Act (DRA) on February 8, 2006.
This situation, that will be all too familiar in the near future, deals with seniors who have made gifts of any amount to family, friends or charities and need nursing home care within 5 years. The DRA and the updated MassHealth regulations say that if you made a gift within 5 years of needing nursing home care, the gifts must be returned.
This article deals with what happens when those gifts cannot or will not be returned. Let’s look at an example:
Example: Bob is 70 years old. He sold his home for $250,000 on March 1, 2006 and moved into an elderly housing complex. Bob paid $50,000 for his grand-daughter’s first year of college tuition upon the sale of his home. On December 1, 2006 Bob’s health declined and went to Happy Trails Nursing Home who charges $325 per day.
The $200,000 that Bob retained will be enough to pay for about 21 months of nursing home care at which time he will have less than $2,000 remaining. This will be the time that the penalty will commence for having paid $50,000 for his granddaughter’s tuition. This penalty will be about 7 months. The only way to eliminate the penalty is to return the gift and that can’t happen in this case. So, what is Bob to do?
Bob could apply for a waiver of the disqualification period. MassHealth will waive the penalty period when all of the following circumstances exist:
· The nursing home resident is facing eviction for non-payment, and
· The nursing home resident has tried to get the money back and the recipient is unwilling or unable to return it, and
· The denial of MassHealth for medical care would endanger the nursing home resident.
The usual course of events would be that Bob applies for MassHealth and would be denied for having made the gift. Typically, you have 30 days to appeal a denial for MassHealth benefits. Here is where there is a trap for the unwary. To appeal based on a hardship, you must appeal within 15 days. If you miss the 15-day period, you lose the right to appeal under a hardship.
Let’s face it, almost all seniors make a gift to their children, grandchildren or charities at some point during their lifetime. A lot of times the gifted money has been spent and can’t be returned. The requirement that all gifts made within 5 years of entering a nursing home be returned is unfair as well at the technical requirement that requires an appeal be made within 15 days of a denial. I can only hope that our new Democratic Congress fix this problem.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds Masters in accounting and a Masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org