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November 1, 2023 18 mins

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Don't make this costly mistake. Medicare, Medicaid, and managing your money can be confusing territory. Tune in to this episode with Elder Law Attorney Bob Mannor & Amy Persails, Planning Services Director at Mannor Law Group, and walk away with a deeper understanding of these complex systems that could save you or someone you care for thousands of dollars. 

Bob & Amy clear some of the confusion between Medicare and Medicaid, breaking down the critical differences between the two. They also unpack the nitty-gritty of the 'look back' period, discussing how a significant money gift, or even paying for care, in the past five years could lead to penalties.

As we journey further into the labyrinth of Medicaid planning, Bob and Amy discuss the crucial role timing plays when considering gifting and warns not to confuse gifting for Medicaid with gifting for IRS or gift tax purposes. 

Above all, Bob & Amy stress the importance of guidance from a certified elder law attorney in your Medicaid planning journey. This is a conversation you can't afford to miss.

Host: Attorney Bob Mannor
Guest: Amy Persails
Executive Producer: Savannah Meksto

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ABOUT US:
Mannor Law Group helps clients in all matters of estate planning and elder law including special needs planning, veterans’ benefits, Medicaid planning, estate administration, and more. We offer guidance through all stages of life.

We also help families dealing with dementia, Alzheimer’s disease, Parkinson’s disease, and other illnesses that cause memory loss. We take a comprehensive, holistic approach, called Life Care Planning. LEARN MORE...

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Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Amy Persails (00:00):
You're listening to advice from your advocates a
show where we provide elder lawadvice to professionals who work
with the elderly and theirfamilies.

Attorney Bob Mannor (00:10):
Welcome back to advice from your
advocates.
I'm Bob Mannor.
I'm a certified elder lawattorney in Michigan.
I'm really excited about ourpodcast for today.
So we have Amy Purcells, theplanning services director Law
Group Manor .
Welcome, Amy, thank you.
So, Amy, what is a planningservices director?

Amy Persails (00:31):
good question.
I am majorly responsible forMedicaid, making sure that we
get everyone qualified forMedicaid and overseeing our
elder care coordinators, oursocial workers in the office
that are helping with life careplanning so, basically, we do

(00:53):
both the legal and the financialand the care advocacy and
you're kind of in charge of allof that, right, yep?

Attorney Bob Mannor (00:59):
And so we have some social workers and
care navigators and you are sortof their boss, yes, okay, so
today our topic is a veryimportant one because there's a
lot of confusion around this,and so we're gonna focus on
Medicaid.
So for those that have listened, often, you know the difference
between Medicare and Medicaid,but if this is the first time

(01:22):
you're listening, let's describewhat's the difference between
Medicare and Medicaid.

Amy Persails (01:27):
So Medicare would be a benefit that you get once
you're 65.
There are other ways to get itbut, once you're 65 and you
collect Social Security, you getthe Medicare benefit, so it's
deducted from your SocialSecurity benefit.
It's a health insurance programthat you sign up for.
You can change yearly inOctober and you know, just use

(01:52):
as your health insurance.
You can get supplemental plansand things like that, and then
you know that's.
That's basically the just ofMedicare, right.
And then Medicaid is agovernment program just like
Medicare, but it is more forpeople who need help paying for

(02:13):
care.
They need care in the nursinghome.
Depending on your income, youcould get a in-home assistance.
Sometimes even independentliving or assisted living all
those programs, depending on ifthey qualify or the, the
Independent or assisted livingswork with that program.

Attorney Bob Mannor (02:35):
We'll probably do a new podcast about
that program and the incomelimits at another time.
We heard some encouraging newsrecently that we they might
change those income limits,which would be a real benefit
for the seniors in Michigan.
But the difference betweenmedic?
I'll give the example of myparents.
My father had open heartsurgery.

(02:56):
It cost hundreds of thousandsof dollars.
He paid almost nothing out ofpocket, right, because Medicare
paid for the vast majority of ita government benefit.
I want to make that clearbecause sometimes people say, oh
, I don't want the governmentpaying my bills.
Well, guess what?
The government does pay yourbills if you have open heart
surgery now?
Blue Cross paid a portion of it, but only probably 20%, and

(03:16):
Medicare paid about 80% ofhundreds of hundreds of
thousands of dollars.
My mother, on the other hand,had Alzheimer's and she needed
care too, but Medicare paidnothing for that.
Blue Cross paid nothing forthat.
So Medicaid is also aninsurance program, also an
insurance program that you'vepaid into all your life and

(03:37):
Unfortunately you have to jumpthrough more hoops to qualify
for Medicaid Right, and your jobone of your jobs, among others
is to help people jump throughthose hoops, exactly so that we
make sure that you don't have togo broke or lose all your money
or impoverish your spouse oryour family because you have
Alzheimer's or dementia insteadof heart disease.
Yes, unfortunately.
So we're going to focus on oneparticular rule, and this is one

(04:01):
of the confusing rules of whatwe call gifting.
So sometimes the word gifting,or that I call it the G word,
because I don't want people todo gifting.
So let's talk about gifting andI'll give you my standard story
.
This was many years ago.
I went to get my haircut at thebarber shop.
My barber at the time was, Ithink, 90 years old and a great

(04:26):
guy loved him.
I haven't seen him in a fewyears, but he retired, obviously
.
But somebody came in and theywere saying because this is what
men do sometimes we go tobarbershops and talk to each
other, and so especially old menand so we ask this guy comes in
and he's talking to me, mybarber, where I'm sitting in his

(04:48):
chair, and he says well, Idon't know what to do about mom,
she can't live alone anymore.
I don't know what to do.
We don't know how to pay forthis, I don't know what we're
going to do.
And the barber said well, I'lltell you exactly what to do.
This is the barber, not me.
Yes, the barber says just takeall the money she has left over,

(05:08):
take it out of her account, putit in your account, or put it
in a gun safe, or something likethat, and then you apply for
Medicaid and everything will befine.
Amy, what do you think of that?
Answer no, no, please don't dothat.

Amy Persails (05:23):
It causes so many problems later.
It's fraud first of all.
Right.
You go to jail for that.
It's just not the way to go.
There's much better planning inways that we can help with
those types of things.

Attorney Bob Mannor (05:40):
Because basically, what we're getting at
is that there is a couplethings that we have to make sure
that unpeople understand.
There is a look back.
So what is the look back?
What does that mean?

Amy Persails (05:51):
So, and then the last five years, if you've given
away any of your assets.
Or tried to hide them, or triedto hide them, then you're
subject to a penalty forMedicaid purposes.
So if you're trying to get thatMedicaid benefit because you're
paying for a $15,000 monthnursing home, you are subjected

(06:14):
to that $15,000 penalty and ifyou gave away a substantial
amount of money, all of thatcould go towards someone's going
to put that bill.

Attorney Bob Mannor (06:26):
Yeah Well, in fact it could be worse.
It could be that the penalty isworse than if you had just kept
the money and paid for it onyour own, that the penalty is
actually bigger than the moneythat you tried to save.

Amy Persails (06:37):
Yes, yes, because some facilities cost $15,000 and
the penalty is only based on asmaller amount of that.

Attorney Bob Mannor (06:44):
Why do we?
Why don't we just not tell themabout it?

Amy Persails (06:49):
Because again, that's fraud.

Attorney Bob Mannor (06:51):
And you could go to jail.
And they have this thing calledasset verification.
Yes, so guess what?
The government, for better orworse, sees everything and they
can and they do see do.
Whenever anybody applies forMedicaid, they're gonna do
what's called asset verification.
And In my mind I'm sure this isnot how it really works, but in
my mind there's some supercomputer somewhere and they put

(07:13):
your name and self-security inthere and they see every
financial Transaction you'vedone in the last few years and
they will see that you tookmoney out.

Amy Persails (07:21):
Yes, yes, and I mean all of those things will
come back and and you have toanswer to them.
And even if you've appliedbefore, or you applied this time
and it went through what it was, fine, the next time it may not
, so and there's other branchesof the government that could
find it later.

Attorney Bob Mannor (07:39):
So right happens to and we we often see
this.
We're dealing with this, withthis asset verification, all the
time.
Right, because they'll findthings that don't even exist.
Not only do they find thethings that did happen, they'll
find things that, well, okay,well, you had this account Two
years ago.
Where'd that money go?
And usually, when it's ourclients, the answer is well, we

(08:01):
were paying for care, we werepaying for our life, and we
spent that money and we canprove it right, and so that's
okay.
But that's how thorough thatasset verification is.
Okay, well, what about?
Why can't we just make up astory and say that we lost the
money at a casino or somethinglike that?

Amy Persails (08:19):
that's frog right and that's not something you
should do.
But you know if, if thegovernment, when you turn in
bank statements and they go backthrough that super computer and
check things out, they can seeif a casino is something that
you normally do.
You know they can see yourtransaction histories, they,

(08:41):
they look at all those types ofthings and if you are saying you
went to the casino one time, ofblue are your money, they're,
they're likely, you know, to bevery skeptical about that.

Attorney Bob Mannor (08:52):
Well, not only skeptical.
I think the presumption is thatyou have to prove it.
So I have two responses to that.
One is to talk about how youhave to prove what you say is
accurate, and then I have alittle story to tell about super
computers.
So it's unrelated but it'splaying story.
So our interesting story to me.
So the first thing is that Ialways say this, that in

(09:16):
Medicaid that you're guiltyuntil you can prove yourself
innocent.
You don't.
When you say, well, how do theyknow I didn't just go to the
casino, the answer is they don'thave to know, they just have to
raise the red flag.
They just have to say whathappened to this money and then
it's the applicant's job toprove what happened to that
money.
That's why we either have todocument things properly or

(09:36):
handle things correctly withregard to checks and things like
that.
We don't like people dealingwith cash transactions because
the unless you kept a receipt,you might not be able to prove
that.
So the idea is, even whenyou're doing things right, they
might question you and you can'tprove that you what you did
with the money.
So their presumption is it's agift unless you can prove

(09:57):
otherwise.
So you're guilty until you canprove yourself innocent.
It's not like criminal law.
You're applying for a benefitthey, if they challenge it, you
have to prove it wrong.
So it made me laugh when youtalked about the supercomputer.
My dad Worked at GM and he wasone of the first people to work
on computers back in like the50s, and so the first computer

(10:20):
he worked on that it was somekind of super computer at the
time which I'm sure probably hasthe capacity of our cell phones
are lost, probablysignificantly lost, and it took
up like a city block.
That's what the computer tookup and it was this considered
the super computer.
There were like five of them inthe world.
He got to work on it in the 50s, but I'm sure that it doesn't

(10:43):
even have the capacity of youknow of any Technology we have
today.
So I just thought that wasfascinating, but you Okay, so
let's get back to the topic.
All right, so dealing withgifting.
Is there ever a situation wherewe might use gifting as a
strategy that it would be legal?

(11:04):
For us as attorneys yes, and youdon't mean us gifting, you mean
us giving advice.

Amy Persails (11:10):
Yes, correct.
Yes, clients come into us allthe time.
We do give them advice ongifting, but it's strategic
gifting, which means that youhave to do it at a certain time.
I had a client yesterdayquestioning me well, why can't I
just give away you?
Know you're telling me I couldgive away this amount of money.

(11:32):
Well, no, I don't know theamount until it's that time.

Attorney Bob Mannor (11:36):
Yeah, that's a good point.

Amy Persails (11:37):
So I really don't have those numbers until it's
time to actually apply and sendin the qualifications for the
Medicaid.
And we have to do itstrategically.
It has to be done a certain way.
You have to do an exact amount,so you have to.
You know, I have to go throughall the numbers and it takes
quite a while to get through allthose numbers and determine

(12:01):
what the best option is for you.

Attorney Bob Mannor (12:04):
So that's a very good point.
The timing of it almost alwaysit's not in advance.
Most people would assume oh,you want to give the money away
in advance, before you need thatcare.
Problem with that is then youdon't know how much money to
give away.
And if you give away too muchor too little it's going to
cause problems because there'sconsequences, there's penalties

(12:25):
for gifting.
So when we talk about strategicgifting we're saying, okay,
it's going to be morefinancially favorable to incur
that penalty, but we have tomake sure we don't incur too
much or too little of a penalty.
And the only way to do that isto do it when we're ready to
file the Medicaid application.

(12:46):
Okay, so we're not doing it inadvance.
It seems very counterintuitive.
Almost everybody would assumethat you can't gift after you
move into the nursing home.
The reality is that's exactlythe time that we knew that.
And it doesn't mean nursinghome.
It could be home care orassisted living or any of those
types of things.
But the idea is the timing iscritical.
And then the other part, whichis extremely difficult to figure

(13:08):
out, and we've got a system todo that is exactly how much, and
it has to be very precise, wetalked about threading a needle.
This is like I don't know howit could make that worse Mixing
metaphors.
Threading a needle in ahaystack you first have to find
the needle and then you have tothread the needle.
It is extremely complicated andnothing that I would ever
advise people to do on their own.

(13:29):
I can't imagine how somebodycould do it on their own without
years of experience andexpertise in this.

Amy Persails (13:36):
Yes, takes me hours.

Attorney Bob Mannor (13:38):
Yes, exactly.
And you've been doing it forhow many years?
Nine, nine years, all right,what about?
My accountant or my financialadvisor told me that I can give
away a certain amount every year, whether it's 10,000 or 16,000
or whatever, that I'm allowed togive away that money every year
.
So that's right.
I don't have to tell you aboutthat, right?

(13:58):
No-transcript.

Amy Persails (14:00):
No, that's not right.

Attorney Bob Mannor (14:04):
So for accounting purposes, for your
taxes for the IRS income tax.

Amy Persails (14:10):
Right for income tax.
Yes.

Attorney Bob Mannor (14:12):
And gift tax.

Amy Persails (14:14):
Sure you could do that and that only really
benefits you if you have morethan $12 million.
So if you have more than $12million, it doesn't benefit you
anyway.
It's not going to If you haveless than $12 million Right
there's no gift tax in the stateof Michigan unless you have
more than $12 million.

Attorney Bob Mannor (14:34):
So here's how this works Basically.
They have something called andthis gets a bit complicated, so
stay with me they have somethingcalled a unified credit, and
the unified credit is that youcan give away, currently up to
$12 million either during yourlifetime or after your death,
and so they have to keep trackof that.
And so if you give away somemoney, you have to report it to

(14:58):
the IRS so they can subtract itfrom the $12 million that you're
allowed to give away eitherduring your lifetime or after
your death.
But then they say, oh, butthere's a certain amount you can
give away every year that youdon't have to report to the IRS,
and I think that might be 16 or17,000.
This year it was 10,000 for somany years, so that's why people
come up with that 10,000.
But the reality is that hasnothing to do with Medicaid.

(15:20):
So technically, if you give away$1,000, that could be a penalty
for Medicaid.
Okay, now there's someexceptions to that rule and you
can talk to us about theexceptions, but the general rule
is, if you give away $1,000,you'll get a $1,000 penalty, or
possibly more than thatassociated with, or a time
penalty associated with, givingthat money away, if you've given

(15:40):
away within five years ofneeding Medicaid meaning nursing
home, home care, assistedliving, those types of things
and so I get it.
I understand why we still havebankers and financial advisors
and accountants and yourneighbor and the barber all
saying, oh, you can give away acertain amount every year
because the IRS says you can.
But we're not dealing with theIRS, we're dealing with

(16:02):
Department of Health and HumanServices, which doesn't care
what the IRS rules are.
They've got their own rules.
So giving away any money is notexempt for Medicaid.
It might be exempt for IRS orgift taxes.
Okay, so as sort of an overallquestion, do you think it's a
good idea to give away money, tohide it or to try to give it

(16:25):
away so that you don't have toworry about spending down for
Medicaid?

Amy Persails (16:30):
No, never, unless you're working with a certified
elder law attorney, someonethat's experienced in Medicaid
planning, and you want to makesure that you find a good
attorney that can help you andguide you through all of that.

Attorney Bob Mannor (16:46):
So very good.
And the key on this is, I thinkyou should always ask.
So ask us if you have a need togive away some money.
And sometimes I'll say, okay,well, if we can prove that it's
not to hide money or it's not toavoid the Medicaid rules,
things like that.

(17:06):
Sometimes there's a way to dothat.
So, for example, if you give acertain amount to your church
every year and we can show thatyou consistently did that, we
can show that you did not dothat for Medicaid purposes, and
so again it goes back to thatrule that they assume you're
guilty until you can proveyourself innocent.
So how would we prove our selfinnocent in that we can show
we've been doing it for years,if you've given a certain amount

(17:28):
to your kids or grandkids forChristmas every year and we show
that you've done it year afteryear.
Now if the year before you gointo nursing home, or two years
before you go into nursing home,you give, you used to give away
50 and now you give away 1000each of them, no, they're going
to say that's not a pattern ofgifting.
Occasionally there arecircumstances that we can say,
okay, well, that's okay, youknow, if you've got $2 million

(17:51):
and you want to give away$20,000, that's different than
if you've got $100,000 and youwant to give away $1,000, it
really is different.
They're going to treat itdifferently and so the less you
have, the less likely it is thatyou can give it away without
penalty penalty.
So well, thank you, Amy, forexplaining all of this.
This has been very helpful andinteresting, and thanks for

(18:14):
listening to advice from youradvocates.
Don't forget to subscribe.
You can subscribe at ourwebsite, mannorlawgroup.
com, or any place that youlisten to podcasts.
You can subscribe and you'llget notices of our future
podcasts.
Thanks for listening and we'llsee you next time.

Amy Persails (18:40):
Thanks for listening.
To learn more, visitmannorlawgroup.
com.
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