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By Michael E. Russell

Michael E. Russell

To the readers who have missed the Investing 101 column by Ted Kaplan, I have spoken to his lovely wife Elizabeth and will try to follow in his footsteps.

To say that present times are challenging is an understatement. Supply chain issues, higher gas prices at the pump, heating oil and natural gas prices are expected to increase by 60% this season. We have seen shortages at the supermarket and shortages of corks for wine bottles!!! We have housing shortages, federal deficits approaching $25 trillion. We have an economy that is still robust with 10.2 million jobs unfilled.

The 10-year treasury is now at 1.62% and  analysts are expecting an increase to almost 3%. We have not seen rates this high in almost 12 years. A key measure of the bond market as quoted in The New York Times expects inflation to increase by 3% per annum over the next 10 years. It appears that the Federal Reserve will have to take major steps to halt this inflation creep.

In spite of these negative factors, investor’s wealth increased by $9.7 trillion, 23.5% for the year!

That being said, the University of Michigan’s survey stated that this has not trickled down to the average family. Their economic outlook shows the lowest confidence in the economy in more than 10 years. What this says is that employment is up, wages are up, but their income in real terms is down. The Consumer Price Index has jumped 0.9% in October, bringing the year-over-year increase to 6.2%. The most in more than 3 decades!

For many investors, according to Randall Forsyth of Barron’s, the growing concerns about rising prices and interest rates present a problem. In this scenario, bonds may not serve as a buffer in the classic 60/40 equities to bonds portfolio.

Morningstar is looking for a 7.5% gain in equities next year while analysts at Bank of America believe the S&P will be flat.

With all the potential negative news out there, I still believe there are stocks with solid dividends that have potential for growth.

A conservative play is New York Community Bank, NYCB. This bank has over 1200 branches with a dividend of 6%.

I believe that the major energy suppliers are attractive at these levels. Energy demand is high and will continue to be so.  ExxonMobil, XOM, is currently trading at $63. This is 25% below its 5 year high. It is paying a 5.5% dividend.

In closing, let me wish everyone a healthy holiday season.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

It’s human nature to want to make things easier for our loved ones — and to have great concern about adding any stress to their lives. In fact, 72% of retirees say that one of their biggest fears is becoming a burden on their families, according to the Edward Jones/Age Wave Four Pillars of the New Retirement study. 

How can you address this fear? First, don’t panic. In all the years leading up to your retirement, there’s a lot you can do to help maintain your financial independence and avoid burdening your grown children or other family members. Consider these suggestions:

Increase contributions to your retirement plans and health savings account. The greater your financial resources, the greater your financial independence — and the less likely you would ever burden your family. So, contribute as much as you can afford to your IRA, your 401(k) or similar employer-sponsored retirement plan. At a minimum, put in enough to earn your employer’s matching contributions, if offered, and increase your contributions whenever your salary goes up. You may also want to contribute to a health savings account (HSA), if it’s available.

Invest for growth potential. If you start investing early enough, you’ll have a long time horizon, which means you’ll have the opportunity to take advantage of investments that offer growth potential. So, in all your investment vehicles — IRA, 401(k), HSA and whatever other accounts you may have — try to devote a reasonable percentage of your portfolio to growth-oriented investments, such as stocks and stock-based funds. 

Of course, there are no guarantees and you will undoubtedly see market fluctuations and downturns, but you can help reduce the impact of volatility by holding a diversified portfolio for the long term and periodically rebalancing it to help ensure it is aligned with your risk tolerance and time horizon. Keep in mind, though, that diversification does not ensure a profit or protect against loss in a declining market.

Protect yourself from long-term care costs. Even if you invest diligently for decades, your accumulated wealth could be jeopardized, and you could even become somewhat dependent on your family, if you ever need some type of long-term care, such as an extended stay in a nursing home or the services of a home health care aide. The likelihood of your needing such assistance is not insignificant, and the care can be quite expensive. In fact, the median cost for home health services is nearly $55,000 per year, while a private room in a nursing home can exceed $100,000, according to Genworth, an insurance company. To help protect yourself against these steep and rising costs, you may want to contact a financial professional, who can suggest an appropriate strategy, possibly involving various insurance options.

Create your estate plans. If you were ever to become incapacitated, you could end up imposing various burdens on your family. To guard against this possibility, you’ll want to ensure your estate plans contain key documents, such as a financial power of attorney and a health care directive.

It’s safe to say that no one ever wants to become a financial burden to their family. But putting appropriate strategies in place can go a long way toward helping avoid this outcome.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Couples who are both U.S. citizens receive the benefit of the unlimited marital deduction on federal estate and gift taxes. The idea is that the surviving spouse pays any estate tax at their death.

In contrast, transfers from a U.S. citizen to a non-citizen spouse do not enjoy this benefit. The IRS figures they may return home to their own countries and avoid U.S. estates taxes at their death. Instead, lifetime transfers to non-citizen spouse are only tax-free up to the annual exclusion amount –$159,000.00 in 2021.

Remember, with the current high federal estate tax exemption, a U.S. citizen can gift up to $11.7 million dollars during their lifetime or at their death to anyone, including a non-citizen spouse. But, for high net worth international couples or those planning for when the estate tax exemption is lowered, a Qualified Domestic Trust (“QDOT”) is as an exception to this rule.

A QDOT allows the marital deduction for property passing to a non-citizen surviving spouse. It does not avoid estate tax, just defers it until the surviving spouse’s death. The overall purpose is to ensure that the IRS will eventually be able to tax property for which a marital deduction is claimed.

The requirement that the surviving spouse place property in a QDOT ensures that if the marital deduction is allowed, the property will still ultimately be subject to death tax.

A QDOT, like a qualified terminable interest property trust (“QTIP”), mandates that all income be paid to the surviving spouse and that no other person have an interest in the trust during their lifetime. However, QDOTs have additional requirements and limitations, such as:

• At least one Trustee must be a domestic corporation or a U.S. citizen.

• The trust must be subject to and administered under the laws of a particular state or the District of Columbia.

• Property placed in the QDOT must pass from the decedent to the surviving spouse in a form that would have qualified for the marital deduction if the surviving spouse was a U.S. citizen.

• The trustee must have the right to withhold the estate tax and pay it to the IRS.

The IRS imposes different security requirements depending on if the assets in the trust exceed $2 million dollars, whether the trustee is a U.S. Bank, and what percentage of the trust property is located within the United States. These requirements ensure the IRS get its due on the surviving spouse’s death.

A QDOT can even be set up after the U.S. Citizen spouse passes away. A trust created for the spouse which fails to meet all of the requirements can be amended to qualify as a QDOT. Additionally, under certain circumstances, an executor can, with the permission of the surviving spouse, make an irrevocable election to a QDOT.

A QDOT would not be needed if the surviving spouse becomes a U.S. citizen before the deceased spouse’s estate tax return is filed. This is usually nine months from date of death, but can be extended six months. Multinational spouses should seek out an experienced estate planning attorney, as the rules are complex and always changing.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

QUESTION: I recently heard about the concept of an ABLE account. Is this something that I should explore for my disabled child?

ANSWER: There are several planning techniques that you can take advantage of to protect assets on behalf of your child with special needs. ABLE accounts are tax-advantaged savings and investment accounts for disabled individuals. ABLE accounts were created under the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014, known as the ABLE Act. The Act recognizes that living with a disability can be costly. 

Before exploring ABLE accounts, it is important to understand the different options available when planning for a disabled child’s future. At the outset, Supplemental Needs Trusts, also known as Special Needs Trusts (“SNT”), are often used to protect assets for disabled individuals.  Assets and income in an SNT can be used for a disabled individual’s benefit without disqualifying them for benefits.  A properly drafted SNT enhances the quality of life of a person with disabilities without interfering with any government benefits, such as Supplemental Security Income, Medicaid, FAFSA, HUD and SNAP/food stamp benefits.

Generally speaking, there are two categories of Supplemental Needs Trusts: a First-Party SNT and a Third-Party SNT. A First-Party SNT protects assets that belong to the disabled individual (e.g., a personal injury award). A Third-Party SNT is funded for the benefit of the disabled person using the assets of someone other than the disabled individual (e.g., an inheritance from a parent). An important difference between the two trusts is the distribution of assets upon the death of the disabled person. Specifically, a First-Party SNTs must pay back any monies paid by Medicaid during the disabled person’s lifetime. In contrast, a Third-Party SNT does not have to pay back Medicaid.

The creation of an ABLE account is an important step forward for special needs planning. An ABLE Account can be used on its own or in conjunction with a Supplemental Needs Trust. To be eligible for an ABLE account, a person must have a qualifying disability that was present before the age of 26, with one of the following: 

◆ Classified as blind (as defined in the Social Security Act);

◆ Entitled to Supplemental Security Income or Social Security Disability Insurance because of the disability; 

◆ Have a disability that is included on the Social Security Administration’s List of Compassionate Allowances Conditions; or

◆ Have a written diagnosis from a licensed physician documenting a medically determinable physical or mental impairment which results in marked and severe functional limitations, that can be expected to last for at least a year or can cause death.

An ABLE account can be created by the disabled individual, parent, guardian, or power of attorney. ABLE accounts provide a simple, tax advantaged way to save and pay for disabled individuals’ qualified expenses without jeopardizing eligibility for critical government benefits. Some examples of qualified expenses include housing, transportation, education, assistive technology, and legal fees. If the ABLE account is used for non-qualified expenses, the individuals do not lose eligibility. Instead, the earnings portion of the withdrawal is treated as income and is subject to federal and state taxes, as well as a 10% federal tax penalty.

Importantly, total annual contributions to ABLE accounts cannot exceed the federal annual gift tax exclusion ($15,000 in the year 2021). Up to a certain amount, the money in an ABLE account will not interfere with Supplemental Security Income (“SSI”) or Medicaid benefits. However, there are limitations for individuals receiving SSI. Specifically, when an ABLE account balance over $100,000 exceeds the SSI resource limit (on its own or combined with other resources), the SSI payments are suspended. SSI resumes when the countable resources are again below the allowable limit. Medicaid benefits remain unaffected. 

Similar to the above mentioned First-Party SNT, when an ABLE account beneficiary dies, there is a payback to Medicaid for Medicaid-related expenses. This payback exists regardless of who made contributions to the ABLE account.

Creating and funding an ABLE account can provide a disabled person with a sense of autonomy, while preserving government benefits.  Questions about setting up and managing an SNT, or an ABLE account, should be directed to an experienced estate planning attorney who practices special needs planning.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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By Michael Christodoulou

Michael ChristodoulouIf you’ve been investing for many years and you’ve owned bonds, you’ve seen some pretty big changes on your financial statements. 

In 2000, the average yield on a 10-year U.S. Treasury security was about 6%; in 2010, it had dropped to slightly over 3%, and for most of 2020, it was less than 1%. That’s an enormous difference, and it may lead you to this question: With yields so low on bonds, why should you even consider them?

Of course, while the 10-year Treasury note is an important benchmark, it doesn’t represent the returns on any bonds you could purchase. Typically, longer-term bonds, such as those that mature in 20 or 30 years, pay higher rates to account for inflation and to reward you for locking up your money for many years. But the same downward trend can be seen in these longer-term bonds, too — in 2020, the average 30-year Treasury bond yield was only slightly above 1.5%.

Among other things, these numbers mean that investors of 10 or 20 years ago could have gotten some reasonably good income from investment-grade bonds. But today, the picture is different. (Higher-yield bonds, sometimes known as “junk” bonds, can offer more income but carry a higher risk of default.)

Nonetheless, while rates are low now, you may be able to employ a strategy that can help you in any interest-rate environment. You can build a bond “ladder” of individual bonds that mature on different dates. When market interest rates are low, you’ll still have your longer-term bonds earning higher yields (and long-term yields, while fluctuating, are expected to rise in the future). When interest rates rise, your maturing bonds can be reinvested at these new, higher levels. Be sure you evaluate whether a bond ladder and the securities held within it are consistent with your investment objectives, risk tolerance and financial circumstances.

Furthermore, bonds can provide you with other benefits. For one thing, they can help diversify your portfolio, especially if it’s heavily weighted toward stocks. Also, stock and bond prices often (although not always) move in opposite directions, so if the stock market goes through a down period, the value of your bonds may rise. And bonds are usually less volatile than stocks, so they can have a “calming” effect on your portfolio. Plus, if you hold your bonds until maturity, you will get your entire principal back (providing the bond issuer doesn’t default, which is generally unlikely if you own investment-grade bonds), so bond ownership gives you a chance to preserve capital while still investing.

But if the primary reason you have owned bonds is because of the income they offer, you may have to look elsewhere during periods of ultra-low interest rates. For example, you could invest in dividend-paying stocks. Some stocks have long track records of increasing dividends, year after year, giving you a potential source of rising income. (Keep in mind, though, that dividends can be increased, decreased or eliminated at any time.) Be aware, though, that stocks are subject to greater risks and market movements than bonds.

Ultimately, while bonds may not provide the income they did a few years ago, they can have a place in a long-term investment strategy. Consider how they might fit into yours.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

The removal of a Trustee is not easy. It takes more than a disagreement or general mistrust of the fiduciary to have him or her removed. General unresponsiveness is not a ground for removal.

Surrogate’s Court Procedure Act § 719 lists several grounds for the removal of a trustee. Reasons include that the trustee:

• cannot be served due to absconding or concealment;

• neglects or refuses to obey a Court order;

• is judicially committed, convicted of a felony or declared an incapacitated person; or

• commingles or deposits money in an account other than one authorized to do business with the trust.

Most of the time issues with trustees are not so straightforward. Unresponsiveness is certainly a problem for the beneficiary, but not enough on its own to warrant removal by the court. Courts are generally hesitant to remove trustees since removal is essentially a judicial nullification of the trustmaker’s choice. Courts take the position that removal of a trustee is a drastic remedy and not every breach of duty rises to the level necessary to warrant removal.

There are generally two procedures for the removal of a trustee. The preferred way is to follow the instructions provided in the trust for removal. The trust document may provide that the beneficiaries can remove the trustee by unanimous or majority vote for any reason or for due cause. If the trust was created in a Will, called a testamentary trust, removal still must go through the Surrogates Court. If an intervivos trust, there is no need to go through the courts so long as the procedure for trustee removal laid out in the trust is followed.

If the trust document is silent on the removal of a trustee or requires court intervention to remove a trustee, a party must petition the Surrogate’s Court for removal of the trustee. To petition the Surrogate’s Court for removal of a trustee, you must have legal standing. Typically, co-trustees and beneficiaries of the trust have legal standing. The court will remove a trustee if the bad acts are proven. However, it is often an expensive and lengthy process that involves the exercise of discretion by a court generally hesitant to remove a chosen trustee. The court is under no obligation to remove the trustee.

In the case of unresponsiveness, the court intervention could be enough to prod the trustee. If an unresponsive trustee has demonstrated animosity toward the beneficiary that results in unreasonable refusal to distribute assets or has a conflict of interest, the court may remove the trustee. The court could also refuse to remove a trustee, but find that distributions are reasonable and order the trustee to make distributions to the beneficiaries through a court mediated settlement. Trustees cannot simply ignore their fiduciary duty.

Removal of a trustee should only be undertaken if it can be proven that the assets of the trust are in danger under the trustee’s control. Mere speculation, distrust or unresponsiveness will not be enough to remove a trustee. If you are dealing with an unresponsive trustee and suspect that the trustee is mismanaging the trust or not fulfilling their duties, you should contact an attorney that specializes in estate litigation to review your options.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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By Michael Christodoulou

Michael ChristodoulouIt’s unfortunate but true: As we age, we encounter more health-related issues – and they carry a price tag that can get pretty high in retirement. Will you be ready for these costs?

Perhaps your first step in preparing yourself is knowing what you may be facing. Consider this: 80% of Americans 65 and older have a chronic condition and 42% live with a disability, according to the National Coalition on Aging and the Centers for Disease Control and Prevention, as reported in a recent Edward Jones/Age Wave survey titled Four Pillars of the New Retirement: What a Difference a Year Makes. 

The study also found that retirees’ greatest financial worry is the cost of health care and long-term care – concerns that have increased during the COVID-19 pandemic.

And health care is likely going to be one of the largest expenses in retirement – the average couple might spend $10,000 to $12,000 per year on health care costs. Nonetheless, you can boost your confidence about meeting these costs by making the right moves.

Here are a few suggestions:

Take advantage of your health savings account. If you’re still working, consider contributing to a health savings account (HSA) if it’s offered by your employer. This account allows you to save pretax dollars (and possibly earn employee matching contributions), which can potentially grow, and be withdrawn, tax-free to help you pay for qualified medical expenses in retirement.

Incorporate health care expenses into your overall financial strategy. As you estimate your expenses in retirement, designate a certain percentage for health care, with the exact amount depending on your age, health status, income and other factors. You’ll certainly want to include these costs as a significant part of your planned retirement budget.

Learn what to expect from Medicare. You can enroll in Medicare three months before you turn 65. Before you sign up, you’ll find it helpful to do some research on what Medicare covers, or perhaps even attend a seminar or webinar. On the most basic level, you’ll need to choose either the original Medicare program, possibly supplemented with a Medigap policy, or Medicare Advantage, also known as Medicare Part C. Given all the variables involved – deductibles, copayments, coinsurance, areas of coverage and availability of your personal doctors – you’ll want to choose your plan carefully.

Protect yourself from long-term care costs. No matter which Medicare plan you choose, it won’t cover much, if any, of the costs of long-term care, such as an extended stay in a nursing home. You may want to consult with a financial advisor, who can suggest options to protect you and your family from long-term care costs, which can be considerable.

And of course, do whatever you can to stay healthy, before and during your retirement. It’s been shown that exercise and a balanced diet can help you feel better, maintain your weight and even reduce the likelihood of developing some serious illnesses.

By making the right financial moves and taking care of yourself, you can go a long way toward managing your health care costs in retirement – and enjoying many happy and rewarding years.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Medicaid will pay the long-term care needs for individuals who meet certain income and asset criteria. This means that Medicaid will pay the high cost of home care or nursing home care for seniors. 

Since Medicaid is a means tested program, many people believe that they cannot access benefits. This common misconception results in people failing to plan ahead and spending down most of their assets before realizing their mistake. Yet, even with little planning, families can preserve funds by moving assets out of the Medicaid applicant’s name.  

While everyone’s situation is different, the one irreplaceable document every senior needs is a durable power of attorney. 

A durable power of attorney allows an agent to step into the applicant’s shoes as a fiduciary. A comprehensive power of attorney allows the agent to transfer assets, gain eligibility and apply for Medicaid. This is crucial if the applicant has become incapacitated — or cannot easily meet with an attorney. Without giving an agent the authority to do this planning, optimal asset protection may not be possible.

Community Medicaid covers home care needs in the home. There is currently no lookback period for Community Medicaid. This means an applicant can transfer assets one month and apply for Medicaid benefits the following month. 

In contrast, with Chronic Medicaid — which covers nursing home care — there is a 5-year lookback. Thus, an applicant is penalized for transfers made for less than fair market value or “gifted” within the 5 years immediately before institutionalization. But, there are certain exempt transfers that can be made within the 5-year lookback period which make an applicant immediately eligible for Chronic Medicaid. 

Exempt transfers include transferring an unlimited amount of money to a spouse or disabled child. To effectuate these  transfers, the Medicaid applicant must either complete the paperwork or have a valid power of attorney allowing another to do so. 

Often, the Medicaid applicant does not have capacity to transfer the assets or complete the application.  The agent under a power of attorney can do this emergency planning and preserve assets even in the eleventh hour. The only alternative when there is no power of attorney and the applicant has no capacity, is applying to the court for guardianship.

When protecting income in the Community Medicaid setting, a pooled income trust is typically required. An applicant for Community Medicaid has an income limit of $904.00 per month, plus the cost of  health insurance premiums. Individuals with income that exceeds this level must contribute the excess income to their cost of long term care each month. 

This can be avoided with the establishment of a pooled income trust. If the Medicaid applicant does not have capacity, an agent through a power of attorney will need to establish a pooled income trust on their behalf. The power of attorney must specifically grant the agent the authority to establish trusts. Without such a power, the excess income cannot be preserved.

Finally, the actual Medicaid application and corresponding paperwork needs the Medicaid applicant’s signature. If the applicant is unable to sign the paperwork, an agent under a power of attorney may sign the paperwork on their behalf. Additionally, numerous financial documents must be submitted (i.e. proof of income, tax returns, bank statements). Gathering this information from specific institutions requires a power of attorney granting such authority. 

A valid and comprehensive power of attorney is an integral part of any estate plan, especially when dealing with Medicaid eligibility. The power of attorney is used in every step of the process and proves to be invaluable in preserving assets and income.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

If you’re getting close to retirement, you’re probably thinking about the ways your life will soon be changing. And one key transition involves your income — instead of being able to count on a regular paycheck, as you’ve done for decades, you’ll now need to put together an income stream on your own. How can you get started?

It’s helpful that you begin thinking about retirement income well before you actually retire. Many people don’t — in fact, 61% of retirees wish they had done better at planning for the financial aspects of their retirement, according to an Edward Jones/Age Wave study titled Retirement in the Time of Coronavirus: What a Difference a Year Makes.

Fortunately, there’s much you can do to create and manage your retirement income. Here are a few suggestions:

Consider ways to boost income. As you approach retirement, you’ll want to explore ways of potentially boosting your income. Can you afford to delay taking Social Security so your monthly checks will be bigger? Can you increase your contributions to your 401(k) or similar employer-sponsored retirement plan, including taking advantage of catch-up contributions if you’re age 50 or older? Should you consider adding products that can provide you with an income stream that can potentially last your lifetime? 

Calculate your expenses. How much money will you need each year during your retirement? The answer depends somewhat on your goals. For example, if you plan to travel extensively, you may need more income than someone who stays close to home. And no matter how you plan to spend your days in retirement, you’ll need to budget for health care expenses. Many people underestimate what they’ll need, but these costs can easily add up to several thousand dollars a year, even with Medicare.

Review your investment mix. It’s always a good idea to review your investment mix at least once a year to ensure it’s still appropriate for your needs. But it’s especially important to analyze your investments in the years immediately preceding your retirement. At this point, you may need to adjust the mix to lower the risk level. However, you probably won’t want to sell all your growth-oriented investments and replace them with more conservative ones — even during retirement, you’ll likely need some growth potential in your portfolio to help you stay ahead of inflation.

Create a sustainable withdrawal rate. Once you’re retired, you will likely need to start taking money from your IRA and 401(k) or similar plan. But it’s important not to take too much out in your early years as a retiree, since you don’t want to risk outliving your income. A financial professional can help you create a sustainable withdrawal rate based on your age, level of assets, family situation and other factors. 

By planning ahead, and making the right moves, you can boost your confidence in your ability to maintain enough income to last throughout your retirement. And with a sense of financial security, you’ll be freer to enjoy an active lifestyle during your years as a retiree.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC

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By Nancy Burner Esq.

Nancy Burner, Esq.

The Consumer Directed Personal Assistance Program (CDPAP) allows Medicaid long term care recipients to choose their own home care attendant, including family members, rather than hiring an aide from a home care agency.

Under the standard Medicaid process, after Medicaid approval, the recipient undergoes an assessment with a Managed Long-Term Care plan (MLTC). The assessment determines the number of hours of care Medicaid will provide. After the assessment process, the Medicaid recipient signs up with a home care agency that is under contract with the preferred MLTC. The agency sends the aides to provide the care and Medicaid covers the cost.

Home Care aides are limited to assisting patients with activities of daily living (ADLs), which include but are not limited to walking, cooking, light housekeeping, bathing, and toileting. But, aides cannot perform “skilled tasks” such as administering medication or assisting with insulin injections. The aide can give certain cues, such as placing the medication in front of the patient indicating it is time to administer.

While many of our clients enrolled with an MLTC and home care agency are happy with the care provided, this is not the case for everyone. Some patients need an aide who performs skilled tasks. This is especially true for patients who live alone. Other patients already have a caregiver that they prefer to use instead of a home care aide they do not know.

CDPAP allows almost any individual to act as a paid caregiver, except for a legally responsible relative, such a spouse or guardian. A child, for example, who takes care of his or her parent can get paid under CDPAP. There is no prerequisite to get certified as a home health aide or a registered nurse. Training occurs at the home and the aide is not restricted to solely assisting with ADLs- but can also assist with skilled tasks.

It is important to note that under CDPAP, an aide is an independent contractor, not an employee of the agency. The patient is thus responsible for hiring the aides, scheduling the care, and ensuring the plan is carried out. Additionally, the patient cannot take advantage of some of the benefits an agency provides, such as sending in backup care if the current aide is sick or if an emergency arises.

Navigating Medicaid’s various programs can be confusing. It is important to discuss your options with an elder law attorney who has extensive Medicaid long term care experience. This way you get the best care that matches your specific needs.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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