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Illinois is about to adopt the draconian federal law called the Deficit Reduction Act (DRA). If you own a home or farm, or have savings or investments, and, within the next 5 years you may need care or assistance to continue living in your home, or may need to transition to assisted or supportive living, or may need care in a nursing home you need to take immediate action to protect yourself, your assets, and your loved ones.

Life Care Planning, Estate Protection, Disability,
VA & Medicaid Assistance Lawyers

Words to the Wise - Protect Yourself . . . Now!

At the risk of sounding like the boy you cried “wolf” once too often (because I have written about this subject for at least 4 years) you need to take heed that Illinois is finally about to adopt the draconian federal law called the Deficit Reduction Act (DRA).

This means you, the reader, need to take immediate action to protect yourself, your loved ones, your home, and your life-time savings, if you:
• Own a home or farm, or have savings or investments, and, within the next 5 years you:
• May need care or assistance to continue living in your home, or
• May need to transition to assisted or supportive living, or
• May need care in a nursing home.
First, a little background for context.

In 2005, Congress got very concerned about the rising cost of health care and, in particular, the cost of nursing home and other long-term care  –  the majority of which is paid for through the Medicaid program.  On February 8, 2006, Congress passed and President Bush signed into law the DRA.  The federal DRA law required Illinois to adopt rules to implement the DRA by July 1, 2006.  Those rules were written in May 2006 and passed “up the line” per this author’s June 2006 conversation with the two Illinois Assistant Attorney Generals who wrote the new rules.  Since that time, the DRA implementation rules have not been adopted and, thus, Illinois has been in violation of the federal DRA law.  Undoubtedly, this is a legacy of the Blago years.

On March 24, 2010, the Illinois Department of Healthcare and Family Services (the state agency that is in charge of the Medicaid program in Illinois) issued a 4 page document captioned “Summary of Long Term Care Eligibility Rules.” This author managed to obtain a copy through confidential sources. While neither the source nor I have seen the actual rules, the summary indicates that the DRA implementation rules are about to be adopted, and, to the horror of myself and other elder care and elder law professionals, will make Illinois one of the toughest states in the nation  –  much tougher than what was required by Congress when it enacted the DRA.

The summary provides for the following:
● Five year “look-back” period. [NOTE: this does not mean you cannot protect yourself or your assets if there is less than 5 years. It simply means that Medicaid is entitled to look at all asset transfers during the 60 month period prior to the application for Medicaid.]
● Expanded “penalty” period. Non-allowable transfers are subject to a penalty period for all transfers made on or after February 8, 2006. [NOTE: this means the rules will be retroactive to February 8, 2006. But it does not necessarily mean that all asset transfers made since that date will result in a penalty. The only way to know is to consult with an elder law attorney who is both knowledgeable and extremely experienced in handling Illinois Medicaid matters.]
● Annuities owned by the applicant or his/her spouse must be disclosed and the State must be made the remainder beneficiary.  Also, annuities are available assets if they are revocable, assignable, or can be sold. If an annuity is purchased within the 5 year look-back period, it will be considered a non-allowable asset transfer.
● The equity in a home or homestead farm cannot exceed $500,000 unless there is a spouse or a disabled, blind or minor child who lives in the home.
● Funds used to purchase a promissory note, loan, or mortgage will be treated as a non-allowable asset transfer unless there is written documentation that meet some very strict requirements.
● In determining the fair market value of farm property, farmland value tables established by the University of Illinois Farm Bureau may be used instead of the values used by those who know best – the local tax assessor
● Personal Care Contracts may be used but must be in writing and must meet very strict criteria.
● To cure a non-allowable asset transfer, only the full return of the asset will be permitted.
● Medical (and long-term care) expenses incurred during a penalty period cannot be deducted from income as they can be under the pre-DRA rules.

There are many other provisions covered in the summary.  Stay tuned to this monthly column for further updates and an in-depth analysis of the provisions of the new rules once they are published in the Illinois Register (a requirement prior to actual adoption of the rules).
This article is to be published in the July 2010 issue of the Southern Business Journal.