New Law Threatens Seniors

New Law Threatens Seniors

The long-anticipated implementation in Illinois of a 2006 federal law will soon devastate many seniors and their loved ones. That federal law, and the new Illinois rules, will "lawfully rob" many of their life-time savings, "legally steal" the homes and farms of many others, prevent untold numbers from qualifying for governmental benefits, wreak untold suffering on thousands, and impose tremendous havoc on the medical and long-term care delivery systems in southern Illinois. That federal law is called the Deficit Reduction Act (DRA).

Readers of this column got a huge "heads-up" last month when I scrapped what I had planned to write about, and instead exposed the contents of a memorandum that I obtained from a confidential source. That memo disclosed Illinois' plans to finally implement the DRA. Unfortunately, we learned that the current plan is to implement the new rules retroactively to February 8, 2006.Those who missed last month's column can view it on line at http://www.sbj.com, page 17.

The effects of the new DRA rules are best understood by comparing the new rules with the old rules. Under the old rules, a gift or transfer for less than fair market value within a three-year "look-back period" caused a "penalty period" equal to the actual cost of care. Under the new rules, the "look-back period" is extended to five years and the "penalty period" for an uncompensated gift or transfer is calculated in the same manner.

Thus, for example, if Sue gave Sara $30,000 and later entered a nursing home where the monthly cost was $3,000, the "penalty period" would be 10 months under both the old and new rules. If the gift was made more than 10 months prior to Sue making an application for benefits, under the old rules the "penalty period" will have expired. However, the new rules impose a far different method of calculating the "penalty period." In short, "penalty periods" do not expire under the new rules.

This is the key difference between the old rules and the new rules, the one that will cause the most damage to seniors and their loved ones, and to the health-care system:

● Under the old rules the "penalty period" started when the gift or transfer was made;

● Under the new rules the "penalty period" does not begin until the senior:

■ Is in a nursing home or otherwise receiving a nursing home level of care; AND

■ Has spent down to the asset limit for nursing home eligibility ($2,000 in Illinois); AND

■ Is otherwise eligible for benefits . . . but for the "penalty period".

The challenge for nearly all seniors will be how to pay for care once a "penalty period" is triggered if there is no money in the senior's name. The challenge for nursing homes and other care facilities will be how to have their bills paid for if the senior has no money and is unable to qualify for government benefits due to a "penalty period." For example: in March 2010 Mary transferred $30,000 to son Bill. In June 2010 Mary enters a nursing home, costing $3,000 per month. In January 2011, Mary runs out of money. Because Illinois plans to implement the new rules retroactively to February 8, 2006, Mary will not qualify for benefits until April 2012, ten months after she has run out of money and thirteen months after the "penalty period" would have expired under the old rules.

If the foregoing were not enough, there is more to be disclosed which will be covered in coming months.

In the meantime, it is critically important that you work with an elder law attorney who knows how the new rules will work . . . an elder law attorney who has years of experience helping families protect themselves. While the DRA closed some planning options for seniors, it opened up other planning options. Work with a knowledgeable elder law attorney and you will be able to protect your home, your farm, and your life-time savings.

The important thing is to begin NOW. Don't delay. Every day of delay could potentially cost you and your loved ones dearly.

This article will be published in the August 2010 edition of the Southern Business Journal at www.SBJ.biz. Scroll to page 16.

Habiger & Associates Elder Law Office (HAELO) provides legal services to elderly or disabled persons in Southern Illinois. The founder of the firm, Richard Habiger, is an elder law attorney with more than 30 years experience. We are an Elder Law and Life Care Planning Law Firm that provides legal and care coordination assistance, including: Medicaid planning; asset protection; estate protection; Medicaid applications; Medicaid appeals; VA pension benefits planning and applications for veterans and their surviving spouses; planning for those with Alzheimer's, dementia, or other forms of memory loss, and those who have suffered a stoke; Hospice planning; and special needs planning, including special needs trusts and supplemental needs trusts.

HAELO is located in Carbondale Illinois, and serves clients in twenty-seven Southern Illinois counties south of Interstate 70 highway. Southern Illinois Counties: Jackson County, Williamson County, Union County, Franklin County, Perry County, Saline County, Jefferson County, Hamilton County, Johnson County,  Randolph County, Wayne County, White County, Washington County, Edwards County, Monroe County, Wabash County, Richland County, Clay County, Marion County, Clinton County, Bond County, Fayette County, Effingham County, Jasper County, Crawford County, Massac County, Pulaski County, Alexander County, Pope County, Hardin County, Gallatin County, and Lawrence County.
Southern Illinois Cities & Towns: Carbondale, Murphysboro, Carterville, Herrin, Marion, Anna, Vienna, Metropolis, Harrisburg, West Frankfort, DuQuoin, Benton, Chester, Pinckneyville, Mt. Vernon, McLeansboro, Carmi, Fairfield, Nashville, Waterloo, Centralia, Salem, Albion, Mt. Carmel, Flora, Olney, Lawrenceville, Newton, Robinson, Jonesboro, Eldorado, Shawneetown, Ridgway, Sparta, Golconda, Johnston City, Marissa, Coulterville, Carlyle, Ullin, Tamms, Elizabethtown, Galatia, Wayne City, Cobden, Lake of Egypt, Goreville, Brookport, Olive Branch, Cave-in-Rock, Carrier Mills, Energy, Cambria, Zeigler, Royalton, Christopher, Rosiclare, Sesser, Okawville, Woodlawn, Thompsonville, Steeleville, Raleigh, Olmsted, Baldwin, Villa Ridge, Mounds, Tunnel Hill, Red Bud, Trenton, New Baden, Ewing, Dix, Norris City, Creal Spring, Bridge Port, Sumner, Waltonville, Breese, Aviston, Germantown, Whittington, Vandalia, and Ina.