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Today's Law: Medicaid and Personal Service Contracts and New Child Support Caps
December 28, 2009
by Forsyth & Forsyth TODAY'S LAW
Newsletter for clients of Forsyth & Forsyth December 28, 2009 No 91
MEDICAID AND PERSONAL SERVICE CONTRACTS
We are aging as a society, a trend with all sorts of implications. Take long term care. A conservative study predicts that 60% of persons reaching 65 will require long term care at some time in their lives. Viewed another way, a person has a 1 in 240 chance of being involved in an auto accident but a 1 in 2 chance of needing long term care during his life.
Younger family members used to provide much of this care. Not so today. Facilities have taken their place.
According to one insurer, the average cost of a semi-private room in a Rochester area facility is $120,450 per year. The average stay is 2 ˝ years, making the cost of the stay $301,125. These costs could double in the next 20 years.
Who pays for long term care in a facility? Not Medicare, which covers only certain short term stays following time in a hospital. Not private health insurance unless you purchase a special long term care policy. That leaves you. Once you spend down your resources, you become eligible for Medicaid.
Are there ways for you to spend down your resources and still preserve them for your family? Yes, but Congress made the task much more difficult in February of 2006.
Before that date a very popular way for you to accelerate your qualification for Medicaid was to make gifts to family members and to wait out a penalty period. The period ran from the date of the gifts. It now runs from the date of application for Medicaid and covers all gifts made within 5 years of application. This change has diminished the appeal of gifts.
Other techniques have emerged. One is a personal service contract. A family member enters into a written agreement to provide specific services for a relative still at home for compensation.
If the whole arrangement is done right, the payments made pursuant to the contract are not considered gifts. Instead, they will reduce the resources of the relative at a faster rate.
The state looks at contracts critically. You must keep a daily log of your services. The services must not duplicate those provided by a facility. The compensation must be fair market value and probably cannot be a lump sum paid in advance. You must report the compensation on your income tax return.
In other words, the family member must act like a third party hired through an agency that regularly provides such services. Taking such a businesslike approach to the care of a loved one may not appeal to the family member.
NEW CHILD SUPPORT CAP
Child support is determined by a formula. Combine the incomes of the parents and apply a percentage based on the number of children– 17% for one, 25% for two, and so forth. Whatever the percentage yields is prorated between the parents based on their respective incomes.
For twenty years the law set an $80,000 initial cap on combined income. A judge or child support magistrate could consider income above $80,000 in making an award under certain circumstances. Some judges and magistrates would regularly go over the cap but others would not.
Effective January 31, 2010, the cap on combined income increases to $130,000. A judge or a magistrate may still consider the excess under the same circumstances.
To protect children in the future from the erosive effects of inflation, the cap is tied to the Consumer Price Index. Every other January it will change based on the movement of the Index.
The Legislature felt that the new law reflects “current economic realities” and will generate child support on a “consistent and predictable basis.”
What remains unknown is how the new law will impact current support orders premised on the $80,000 cap. May a custodial parent obtain an increase in support from the noncustodial parent just because we have a new law? Or must the custodial parent show an increase in the children’s needs before the child support is increased?
In 2010 the courts should answer these questions and other questions about the new law.
UPDATE ON DON
Our father and retired partner continues his travels. Over Thanksgiving he, George, and other Forsyths chartered a sailboat in the Virgin Islands and played skipper in wonderful weather. Don even went snorkeling one afternoon.
The beginning of February he goes on a cruise for bridge-players in the Caribbean. Then the end of March he takes a month cruise from Florida to Rome, with assorted stops in between. He is looking forward to the warm weather.
If you have any questions about medicaid, the new child support laws or any other matter, please call us.
HAPPY NEW YEAR!
FORSYTH & FORSYTH
16 W. Main Street, Suite 110
Rochester, NY 14614
(585) 262-3400
www.forsythlawfirm.com
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