On Thursday, November 14, 2013, the legislature passed an update to the Wisconsin Trust Code. This update has been in the works for well over a year now. However, at the last minute, the bill that had been crafted as an adoption of the Uniform Trust Code, was changed so that it also included provisions repealing some of the worst aspects of the Medicaid Estate Recovery and Divestment changes that were passed in Act 20, and that I have written about at length in this blog. This is good news! At the same time, some of the Act 20 changes were left intact.
This new bill was signed by Governor Walker on Dec. 13, 2013 as Wis. Act 92. The majority of the bill’s trust provisions will not be effective until 7/1/14, however, the Medicaid provisions I am going to talk about below are effective as of the date that the original provisions were effective, and thus, it is as though they never happened.
Here is a summary of the Medicaid changes, including what was repealed by this newly-signed law, and what parts of the prior Budget Act changes are still on the books. I am not going into the many changes that affect trust law and that were the main focus of the act.
WHAT WAS REPEALED. Act 92 repeals:
- The prohibition on transfer of excluded resources that I wrote about here. What this repeal means, is that the threat to family farms and businesses is off the table. It also means that other exempt resources, such as burial plots and cars, would not cause a penalty period if transferred.
- The prohibition on loans between family members that I mentioned here. This means that now, the simple fact that funds were loaned to a son or daughter will not create a divestment penalty. The loan does, however, have to meet all of the existing requirements of state law: it must be payable over the Medicaid applicant’s life expectancy, it must provide for fixed regular payments such as monthly, quarterly, or annually, and it must include interest at the applicable federal rate.
- It eliminated the cumbersome property notice requirements that I wrote about here.
- It eliminated the state’s ability to “void” certain property transfers.
- It repealed the statute that defined property available for estate recovery as “all real and personal property in which the nonrecipient surviving spouse had an ownership interest at the recipient’s death and in which the recipient had a marital property interest with that nonrecipient surviving spouse at any time within 5 years before the recipient applied for medical assistance or during the time that the recipient was eligible for medical assistance.” This means that the state cannot recover property by using a time frame that goes all the way back to five years prior to the application. The time frame is narrowed to that property that the Medicaid recipient has an ownership interest in at the time of death.
- It eliminated the cumbersome reporting requirements for trustees of living trusts that I wrote about here.
- It added a restriction that prohibits the state from recovering funds from irrevocable trusts.
The objectionable parts of the Budget Act that still remain are:
- The provision stating that if the community spouse transfers any resources within five years after the nursing home spouse becomes eligible for Medicaid, the community spouse’s transfer will create a divestment penalty for the nursing home spouse. This will still leave many couples in situations where the actions of the community spouse could create negative consequences for the nursing home spouse.
- The provision that requires any divested funds to be returned in full before a divestment penalty will be reduced or cancelled.
- Expansion of estate recovery to include many non-probate assets, such as life estates and living trusts. I wrote about this here and will write more about it at a later date.
- Expansion of estate recovery to allow recovery of assets at the time of the community spouse’s death, if he or she dies after the nursing home spouse. However, Act 92 does make some positive changes to this process. I wrote about the law in its original state here.There is a presumption that all of the assets owned by the community spouse at the time of his or her death also belonged to the institutionalized spouse and therefore can be recovered. However, this presumption can be rebutted. The positive changes to the process of spousal estate recovery are as follows:
- First, it includes the requirement that the presumption that all of the assets owned by the community spouse at the time of his or her death also belonged to the institutionalized spouse must be consistent with Ch. 766.31 and therefore incorporates marital property law into the determination.
- Also, it changes the proof needed to rebut the presumption by removing the “clear and convincing” standard.
- Finally, it reinstates the undue hardship waiver provision that was removed.
Therefore it will be extremely important to carefully document assets at the time of the first death. This is not something that many couples give much thought to, since most assets are owned jointly. In plain words, if you carefully document what assets belonged to the institutionalized spouse, such as bank account, etc., and continue to keep those assets separate from the community spouse’s assets even after death, you have a way to rebut the presumption that everything is recoverable. An elder law attorney can help you with this.
- The provision in prohibiting “spousal refusal” by stating that the department “may” deny eligibility if the institutionalized spouse and the community spouse do not provide the total value of their assets and information on income and resources to the extent required under federal Medicaid law, or do not sign the application for Medical Assistance. I wrote about the effect of this here.
- Expansion of estate recovery for Family Care Services, to include the full capitated rate instead of that actual cost of services the participant received. I wrote about this here.
Many advocates worked tirelessly to pursue the repeal of the terrible government overreaching that was included in Act 20, the biennial budget. This bill shows that the hard work paid off, at least in large part. Wisconsin Residents still have reason to be concerned, and to be careful. That being said, there are still many opportunities to plan well to preserve assets to the fullest extent possible.