In order to become Medicaid eligible in the State of New York, a Medicaid applicant cannot have greater than a set sum in assets, plus a primary residence and exempt assets. Under the federal law and the laws of the State of New York, Holocaust Reparations, which include German Reparations and Austrian Social Security Payments (received as Reparations), are exempt assets so long as the Reparation payments are "separately identifiable." Ideally, the recipient of Holocaust payments placed his/her payments into a separate account (whether a bank account or a stock brokerage account) and never used the Reparation payments. In fact, however, most people have not placed their Reparation payments into separate accounts.
In order to best preserve Holocaust Reparations as exempt from inclusion as an asset for Medicaid eligibility, we suggest that recipients of Reparations set up a separate account for all future Reparation payments. There is no need to establish a trust into which to place Reparation payments. We suggest that such recipients calculate the amount of Reparations received to date and place such amount into the same separate account or accounts, specifically identified as a "Reparation Account." In the case of spouses, each of whom are Holocaust survivors, each spouse should have their own identifiable accounts. The recipient should keep back-up documentation supporting the calculation of Reparations received. In most cases, such documentation can be obtained from Germany and Austria. The account should not be a checking account and none of the funds in the account should be used except when other funds are not available. If Reparation funds are spent, the amount spent cannot be replenished and returned to the account. Once spent, the exemption for the "spent" amount of Reparation payment is lost. Therefore, it is most important not to use the funds unless, and until, the funds are needed. Any interest and/or dividends earned on the Reparation funds are not exempt from Medicaid's calculation of income and resources and, therefore, included in Medicaid's analysis of available income.
Reparations are Unavailable in Estate Recoveries.
A question as to the treatment of Holocaust Reparations has been whether Reparations maintain their "exempt" status upon the death of the Holocaust survivor who has been a recipient of Medicaid services or whether Medicaid could make a claim against Reparations in an estate proceeding and recover any remaining Reparations. As set forth below, this office successfully argued that Medicaid cannot seek recovery against Reparations upon the death of the recipient.
Various local Medicaid offices indicated that they would take the position that Reparation payments lose their exempt status upon the death of the recipient and are, therefore, recoverable by Medicaid in an estate proceeding. Therefore, our office argued the issue with the Department of Health of the State of New York, which manages the New York State Medical Assistance Program. We requested that the State research whether Reparations are recoverable in an estate proceeding and to issue a directive to the local Medicaid departments. Recently, the Department of Health of the State of New York issued an administrative directive clarifying and explicitly stating that Reparations retain their exempt status and are not recoverable in an estate proceeding of a decedent who had been a Medicaid recipient.
One of our concerns of Holocaust survivors was that Reparations should be able to be retained by the Holocaust survivor to assist in the preservation of his or her quality of life without the fear that Medicaid would seek recovery of the funds upon their deaths. It was our observation that Holocaust survivors were unnecessarily transferring their Reparation payments to irrevocable trusts or to individuals under the belief that Medicaid would seek reimbursement from the Reparations upon their deaths, and, therefore, the funds would not be available for children, other loved ones or charities. It was also our observation that Holocaust survivors were paying for unnecessary legal services for the drafting of trusts and instructions for asset transfers. With this ruling from the Department of Health, Reparation recipients, who intend to go on Medicaid, should consult with their advisors as to the advisability of keeping their Reparation payments in their own accounts and not transferring such payments either to individuals or to trusts.
Possible Exemption of Reparation Payments Inherited from a Spouse.
A second issue pertaining to Holocaust Reparations is whether Reparation payments inherited from a spouse maintain their exempt status. This is an issue which our office investigated, and argued several years ago with HCFA ("Health Care Financing Administration," now known as "CMS" or the "Centers for Medicare and Medicaid Services"). We advocated that Holocaust Reparations should retain their exempt status, even when inherited by a spouse who is not a Holocaust survivor. Our argument was that the spouse of a Holocaust survivor, whether or not he or she is a survivor, suffers the psychological and emotional effects of the Holocaust together with the "survivor" spouse. The department of social work of a New York City hospital assisted with our advocacy and submitted case studies in support of our argument. Two congressman from New York City supported this advocacy before HCFA. We tested our argument with one particular case. HCFA ruled in this particular case that the inherited Reparations from the deceased spouse retained their exempt status in the hands of the survivor-spouse. However, HCFA stated that it would rule on the issue on a "case by case" basis. The Department of Health of the State of New York State has given us an informal ruling stating that it would only deal on this issue on a "case by case" basis, consistent with the HCFA statement..
Conclusion.
Holocaust Reparations, whether from Germany or Austria, are compensation, in some small measure, for the suffering of survivors. At least, in the final years of life, these Reparation payments should be able to be preserved for the enhancement of life without the fear that the State will take the funds upon death. In nursing homes, such funds are invaluable for the provision of those "extra" services not otherwise available through Medicaid, such as services provided by private companions. For a person at home, on Medicaid, such funds can be used to pay for rent and other needs, allowing the person to remain in his/her own home, whereas without the Reparation funds, these individuals would be compelled to go into nursing homes. This can be accomplished only if measures are taken at the earliest possible to identify and to separate Reparation payments into separate accounts, as well as retaining the Reparation payments until the funds are needed. Generally, it is never too late to identify Reparation payments and segregate such funds and to provide for greater financial security and greater quality of life.
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FOR INFORMATION AS TO FEDERAL INCOME TAXATION OF REPARATIONS, CLICK HERE.
Jay J. Sangerman's firm, Jay J. Sangerman, PLLC, is a boutique law firm which practices in the areas of trusts and estates and elder law. The firm is listed in The Bar Register of Preeminent Lawyers published by Martindale-Hubbell. The practice includes estate planning, estate administration and estate litigation; supplemental needs trusts; assisting in the settlement of tort claims by maximizing the settlement through effective estate planning; guardianship proceedings; Medicaid planning and eligibility; and hospital discharge planning and nursing home placement. The firm serves as a consultant to insurance companies and attorneys in the settlement of cases, as well as for estate planning upon the anticipated receipt of funds. The firm performs fiduciary accountings for trust departments, executors and trustees and guardians. Our clients include individuals, hospitals and nursing homes, financial institutions and insurance companies. Our firm introduced the United District Court for the Northern District of California decision entitled "Herbert Bondy, individually and on behalf of a class of similarly situated persons, Plaintiff, v. Louis Sullivan, in his official capacity as Secretary of the United States Department of Health and Human Services, Defendant" to the State of New York. This decision holds that Austrian Reparations (Austrian Social Security Payments) are to be treated in the same manner as German Reparations. The firm practices law in New York, Florida and New Jersey.
Jay J. Sangerman teaches Estate Planning and Gift Taxation at New York University School of Continuing and Professional Studies. Mr. Sangerman speaks extensively on Estate Planning, Elder Law and planning for disabled adults and children. Mr. Sangerman graduated cum laude from Yeshiva University's Benjamin N. Cardozo School of Law, where he was a member of Law Review, and an Alexander Fellow which provided him the opportunity to be a full_time student clerk to Chief Judge Jack B. Weinstein of the United States District Court, Eastern District of New York. Upon graduation, Mr. Sangerman worked for Fried, Frank, Harris, Shriver & Jacobson, where he handled complex litigation matters. Mr. Sangerman is admitted to practice in New York, Florida and New Jersey.
Jay J. Sangerman, PLLC maintains a website which contains articles pertaining to estate planning, Holocaust Reparation issues and Medicaid planning.
JAY J. SANGERMAN, ESQ.
Jay J. Sangerman, PLLC
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