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April Harris Jackson

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How does someone get an inheritance from a trust?

How does someone get an inheritance from a trust?

What is a trust?

Trusts are a legal tool that can be used for many purposes including estate planning, asset protection, and income tax minimization. Trusts are a way of managing property with the intention of protecting it so that it can be passed on via inheritance to future generations.

Trusts establish a fiduciary relationship that allows a third party to hold a person’s assets on behalf of that person’s beneficiary or beneficiaries. The person establishing the trust and designating the beneficiaries is known as the “settlor” or “trustor,” and the third party who holds the assets on behalf of the beneficiaries is the “trustee.” 

Why do people create trusts?

Why do people create trusts in the first place? How do you know if you need a trust? First, people create trusts to control and protect their assets, especially for after they pass away. Trusts provide legal protection for the trustor’s real and personal property, and can also provide protection from creditors. Second, people create trusts because they are concerned about their money being spent on someone other than who it was intended for. Trusts are established to make sure that the trustor’s assets are distributed according to their wishes. If you have significant assets, especially a significant amount of real estate assets, or you have very specific wishes about how and when you want your assets distributed after you pass away, a trust might be for you. The best thing to do is talk to your attorney, who will help you determine whether a trust is the best way to protect your assets.

A beneficiary cannot just “take” an inheritance out of a trust

Since the purpose of a trust is to protect your assets, beneficiaries cannot just take their inheritance out of the trust as they please. The trustee must follow the terms of the trust established by the trustor.   

Minors & age clauses within trusts

People under the age of 18 legally cannot control their own money. A trust may be established for a minor beneficiary in order for them to have financial resources during their minority, but these resources are managed by the trustee according to the terms established by the trustor. For example, a trustor may include that their beneficiary receives a regular allowance from the trust.  

However, turning 18 does not necessarily mean that the beneficiary will automatically have unlimited access to the trust. Many trustors include payout clauses that extend the trust for a certain amount of time after the beneficiary turns 18. The policy behind this is that, while an 18-year-old may legally be able to control money and property and enter into contracts, the late teenage and early adult years are still a very developmental stage of life. An 18-year-old very well may not have the maturity and money management skills required to handle a significant amount of assets. Age clauses allow for the beneficiary to continue receiving periodic funds from the trust, but provide another level of protection of the trustor’s assets until the beneficiary reaches an age of presumed maturity, usually when the beneficiary reaches their mid-20s. 

Trusts for beneficiaries with special needs

These types of trusts are intended to provide for individuals with special needs while also allowing them to retain government benefits like social security or Medicaid. The Trustee will distribute funds from the trust as needed, or on a regular schedule, to take care of the special needs beneficiary’s living expenses and health care needs. 

pile of papers that belong to a family estate plan with a trust and inheritance. there is a close up of a hand holding a pen, glasses, and a calculator
Do you have assets that need to be directed to a beneficiary in a specific manner?

The terms for receiving an inheritance are set when the trust is created

Overall, money moves from a trust only according to the terms set forth at the creation of the trust. This may mean a periodic payment to the beneficiary distributed by the trustee, lump-sum payment to the beneficiary at a certain age, or both. Assets cannot be removed from the trust unless the terms provide for it. To obtain assets from the trust that are not provided for within the terms of the trust, you likely will have to go to court. 

In conclusion

When it comes to estate planning, there are many ways that you can distribute your assets according to your wishes. One of the most popular ways is to create a trust.

There are many types of trusts out there. A trust can be either revocable or irrevocable and it can have unique clauses for receiving an inheritance. Trusts are in many ways the opposite of a will. A will is used to distribute property after someone dies, while a trust is set up while someone is alive and involves giving up control over the assets.

Not sure if a trust is right for you? Discuss your financial and family situation with a qualified attorney first.

Will TennCare take my house? A Primer on Estate Recovery

a house with a for sale sign in front of it. Tennessee will go through tenncare estate recovery to be reimbursed for long-term care.
TennCare will use estate recovery on TennCare payments for long-term care.

Long-term medical care is expensive – but where does the money come from?

This week I want to talk about TennCare Estate Recovery. Over the last few blog posts, we have gone over the benefits available to those who qualify medically and financially for TennCare Choices, Tennessee’s long-term care Medicaid program. We have also discussed how we can help our clients adjust their finances so that they can qualify. This week we want to discuss how TennCare recoups the cost of providing long-term care services.

TennCare rules can be confusing

A long time ago, my friend told me that her grandmother had to give away her house because she could not afford to pay for medical care and needed to qualify for Medicaid. This is really unfortunate! Her grandmother clearly didn’t understand the rules of Medicaid. Unfortunately, people like my friend’s grandmother get bad information about Medicaid, the services that are available, and the requirements to become eligible. I wish I could have told my friend’s Grandmother that she could have kept her house. This leads me to my main point…

TennCare will not take your house while you are living in it. 

However, TennCare estate recovery allows TennCare to get reimbursed for any funds that they spent on behalf of someone after that person dies. In other words, the state will eventually try to get reimbursed for the money they spent on your long-term care.

According to current TennCare rules, a single person can own a house that is worth up to $603,000, or land with a house worth over $603,000, without any concern about being ineligible for TennCare due to their home.  However, you will want to talk to your attorney and financial advisor about how you may be able to continue to pay the costs of maintaining a home if you are in skilled nursing care. 

How and when does TennCare get reimbursed for your long-term care?

For most of us, TennCare is not going to take your home even if you are living in a facility. Concern about your real estate should arise if you were hoping to pass your real estate to your family when you die. While TennCare will not try to get repaid for their expenditures during your lifetime, they will seek reimbursement after you pass away. 

For example…

Roberta has a home worth $250,000 and no other assets. She was in a skilled nursing facility for two years and received TennCare services for which they paid $125,000. After Roberta passes away, her estate will be expected to pay $125,000 back to TennCare before the family receives any money. Since there is a house worth $250,000, the family would be expected to sell that house and give half the proceeds to the state. This process is called estate recovery.

living room of someone who is in long-term care. The family wants to keep the house. They need a lawyer to help them with probate
Work with a probate attorney to resolve an estate recovery claim.

Is there any way we can keep the house in the family?

Estate recovery is something that TennCare takes seriously, and will go to great lengths to make sure that they are properly reimbursed. However, they will not take your home while you are living in it.

I want to be clear: A loved one receiving TennCare benefits while alive does not mean that Tennessee will later attempt to collect the money from YOU. The debt is not yours. If you have a loved one who passes away while on TennCare, your probate attorney will work with you to resolve that estate recovery claim so that TennCare can get reimbursed for any funds they spent on behalf of the deceased.

You can find more information through the Estate Recovery division here.

If you have a family member that was on TennCare or needs to get on TennCare, contact us at 615-846-6201. We’re here to help! 

How do I qualify for Medicaid?

Long-term care is expensive

Many people have sufficient income to maintain a regular lifestyle but are unable to afford the high cost of long-term care. With the average cost of long-term care around $7,000.00 a month, it is incredibly difficult for most families to afford it, even more so after retirement. That’s why it’s a good idea to plan for qualifying for TennCare, also known as Medicaid.

Evaluate and restructure your assets to qualify for TennCare

do you know how to qualify for tenncare? Image is of a man in a long-term care facility. He is taking a walk with a nurse and his partner.
It’s worthwhile to know how to qualify for TennCare

As we discussed in our blog last week, there are certain criteria you need to meet to be eligible for TennCare. As an elder law attorney, one of my jobs is to help families get their loved ones qualified for TennCare while maintaining resources available for the rest of the household.

One of the ways that we do this is by restructuring a family’s assets. We do this by turning resources that are countable for TennCare purposes into items that TennCare does not count as part of its eligibility assessment

This process is known in the elder law community as a spend-down. The goal of the spend-down is to make you or your loved one eligible for TennCare as far as your assets are concerned. If you are overqualified for income-based criteria, we can use a special type of trust called a Qualified Income Trust, or a Miller Trust, to reduce your income. The goal of a spend-down is to maintain the quality of life for all family members including those who need long-term care. 

Image of a scooter as a mobility device. Buying a scooter is a good way to spend down your assets to qualify for tenncare
Bob might benefit from purchasing a quality mobility device

What is a “spend-down”?

For example…

Bob needs to go into long-term care. Bob is eligible based on his income. He makes $2,000.00 a month of social security retirement income. Bob also has a house, a car, and $50,000.00 in the bank. Bob is widowed and his children are adults. 

We need to do something with at least $48,000.00 from Bob’s bank account in order to make him eligible for TennCare. His house and his car are not countable for TennCare purposes in most cases. What can we do? 

  • Make improvements to his home that would improve his quality of life and access to the things that he needed in the home. This might include: 
    • Grab bars in the shower or hallway.
    • A ramp into the main entrances.
    • Paving the driveway or expanding it closer to the door 
    • Widening doors 
  • Buy some things for Bob that his Medicare did not cover, such as:
    • Hearing aids
    • Dentures
    • Eyeglasses
    • Top of the line mobility devices 

There may be other things that would improve Bob’s quality of life. There are things we can spend money on or convert into income. I am also going to suggest to everyone that they use the money to make arrangements for end-of-life needs if they have not done so already. Since at some point Bob’s children will need to make arrangements for his burial or cremation, paying for it now from his excess funds is a great way to make those funds unavailable for TennCare purposes and meet a future need. 

image of a smiling older gentleman sitting with his daughter. Do you know how to qualify for medicaid?
Bob has peace of mind because he has plans in place for long-term care

Bob might want a Care and Savings Assessment

It’s not easy getting approved for TennCare / Medicaid, and we know it! That’s why we offer help in planning your steps to qualify. It doesn’t matter what your starting point is, we’re here to help you navigate the process with one goal: get our clients the quality of care that they need. Contact us if you would like to make plans for qualifying for TennCare.

Will TennCare Choices pay for my Mother’s nursing home?

Last week we defined TennCare and how it applies to our clients. This week I want to go more in-depth with how TennCare serves Tennesseans with long-term care. 

Many people believe that Medicare benefits will cover nursing home care once an individual is 65 or older, but this simply isn’t true. While Medicare covers the first 100 days, it doesn’t cover long-term assisted living. Read more about Medicare here

TennCare Choices logo for Tennessee Medicaid Long-Term Services and Support
Choices” is Tennessee’s Medicaid program for long-term care services and support

Back to TennCare/Medicaid…

My Mom doesn’t have long-term healthcare insurance. What are my options? 

  1. Payout of pocket until you run out of cash – This is an unrealistic option for most families. Nursing home care is expensive. Not a lot of people have an extra $7,000-$11,000 a month in their bank accounts.  
  2. Do a reverse mortgage on her home. 
  3. Qualify for the TennCare / Medicaid program called “CHOICES”

As you can see, options 1 and 2 are very unpleasant and leave nothing left for a loved one’s legacy. However, option 3, CHOICES, is definitely something worth looking into.

What is CHOICES?

CHOICES is the category of TennCare that provides Long-Term Services and Supports (LTSS) such as nursing home care.

What is the process for getting qualified for CHOICES?

In order to be eligible to receive benefits from TennCare/Medicaid your loved one must first qualify within these three categories:  

  1. Medical eligibility 
  2. Income threshold
  3. Asset threshold
Wheelchair bound woman looking up at a nurse in white while at a nursing home for long-term care
Being medically and financially eligible is necessary for TennCare approval

How does someone become medically eligible for TennCare CHOICES?

The state of Tennessee will determine who is medically eligible to receive TennCare Long-Term Services and Support (LTSS) by using a pre-admission evaluation (PAE). This PAE is used to determine if the applicant can do basic life skills on their own without help. The PAE will also determine if the applicant is safe in their current environment. 

The PAE is a strict evaluation and it is performed on a case-by-case basis. An applicant must receive a score of 9 or higher on a 26 point scale in order to be considered medically eligible for TennCare Long-Term Support Services. 

For example, a caregiver or healthcare provider may be asked about a patient’s level of ability to do things and how much assistance is needed. 

The following Activities of Daily Living (ADLs) are covered in the PAE evaluation: 

  • Transfering
  • Mobility
  • Communication
  • Medication
  • Orientation
  • Eating
  • Behavior

If you or your loved one is unlikely to get to a nine or higher on the PAE, it is always appropriate to ask for a “safety determination” evaluation as an alternative route of becoming medically eligible for Choices. 

How can someone become financially eligible to receive CHOICES

You must be able to prove that the applicant has a low income and little assets. As of January 2022, an individual applying for TennCare CHOICES cannot have an income exceeding $2,523.00 per month. Additionally, the applicant cannot have more than $2,000 in assets. This includes any money in the bank and investment accounts but also requires consideration of retirement accounts, life insurance policies, real estate, artwork, jewelry, and any other valuables. When we talk about the assets for a couple of things get a little more complex. The most important thing is that both the applicant and their family are taken care of, both medically and financially. 

Graceful Aging Legal Services, PLLC Logo for the Care and Savings Assessment - It is a graph with lines slowly going down.

My Mom is over the limits for income and assets? What do we do? 

If the applicant is in excess of the amounts we can plan for that! We have a tool to help people who have excess income and assets yet need to qualify for TennCare/Medicaid called the “Care and Savings Assessment”. With this Care and Savings Assessment, we work to determine the best way to structure you or your loved one’s finances, either now or in the future. We plan so that our clients have the peace of mind knowing they can qualify for TennCare if and when they need it! 

In conclusion 

It is often helpful to have an attorney assess your financial situation and offer recommendations on how those finances may be restructured to qualify for TennCare Long-Term Services and Support (LTSS). As an experienced TennCare planning attorney, I can help you evaluate your risk and create a plan that takes care of everyone in the family.

Are you ready for help with TennCare planning? Contact us and we can discuss your plan. Next week we will go over some examples of how we restructure an individual’s finances to meet their needs for long-term care. 

Protect Your Stimulus Payment!

Protect Your Stimulus Payment!

At the end of 2020, Congress approved new stimulus payments for most Americans. Stimulus payments by direct deposit are already going out. The Treasury Department is sending others by check or debit cards in the mail. Under President Biden, we may see more stimulus payments coming as well.

With that in mind, let’s consider those who may have limited income and receive means-tested assistance, such as TennCare or Supplemental Security Income (SSI).  Those individuals or their loved ones may be concerned that the additional funds contributed to their bank account may disqualify them from benefits.  However, the Social Security Administration has clearly said that stimulus payments do not count as income for means-tested assistance- at least not in the year it is received.  For those receiving TennCare, you have twelve months to spend your stimulus payment.

If you care for someone in a facility, the facility may try to claim the stimulus payment on behalf of the patient. This is especially true if the facility is the Representative Payee for the patient’s Social Security check. However, the stimulus payment belongs to the patient, not the facility. It is not part of the patient liability payment for TennCare.

While a facility may request payment for debts owed before a patient received TennCare, they cannot hold stimulus payments hostage. A patient or their legal representative may agree to have the funds held in a patient trust account at the facility.

No matter who holds a stimulus payment, it must be used for the benefit of the recipient. If you care for someone who received one, consider what these funds might be used for to improve their quality of life for the year ahead.

If you have any questions about a nursing home trying to keep your loved one’s stimulus payment, book a call with us now.