Restitution, Pension, Property Claims for Victims of Nazi Persecution
Applications, processing and asset protection, preparation and utilization of Victim of Nazi Persecution Restitution Trust® and Trust for Inherited Payments to Victims of Nazi Persecution™
Special Planning for Survivors of the Holocaust and their Heirs
Unique Asset Protection and Opportunities for Survivors of the Holocaust
The issue of how best to protect the assets of U.S. citizens who were both Survivors of the Holocaust and who have received financial compensation, because they were victims of Nazi persecution, is a complex one, sometimes leading to confusion and misunderstandings. Misleading information disseminated to the community has jeopardized the assets of this special community. As attorneys with years of experience in this area of restitution law, it is our firm that the best way for victims of Nazi persecution to protect their assets for themselves and their heirs is through the establishment of Victim of Nazi Persecution Restitution Trust ® .
Some individuals, firms and organizations sometimes recommend joint or separate bank accounts and irrevocable trusts as means of protecting these special assets. However, such suggestions are fraught with dangers offering some protection, but not the full range of protection as many areas as does the Victim of Nazi Persecution Restitution Trust ®. It is clear from the asset protection planning chart on page 12 that separate or joint bank accounts offer minimal protection to restitution recipients. An irrevocable trust, on the other hand, while offering substantial asset protection, fails to offer several of the most appealing and critical points offered by Victim of Nazi Persecution Restitution Trust ®. These include the Grantor’s continuous control of his or her assets, including the ability to modify or even fully revoke the Victim of Nazi Persecution Restitution Trust ® which, by definition, is precluded if an irrevocable trust is established.
Based on years of experience with hundreds of clients, we reiterate that the type of asset protection provided by a Victim of Nazi Persecution Restitution Trust ® is more comprehensive, more flexible, and more secure than that offered by any other option.
Asset Protection for Victims of Nazi Persecution and their Heirs
Modified Fact Sheet
(originally prepared at the request of the Library of Congress in March 2001)
Goal: To preserve a significant portion of the assets of Victims of Nazi Persecution in the event the need arises for long-term health care.
Method: Creation of Victims of Nazi Persecution Restitution Trusts ®
allows eligible persons to receive U.S. Governmental assistance for medical benefits (i.e. Medicaid), without “spending down” assets to poverty levels as normally required;
allows the complicated and time-consuming task of preparing a restitution payment history to be completed BEFORE the time constraints of a Medicaid application begin; and
allows currently held assets to be recognized as restitution payments in the eyes of the Centers for Medicare & Medicaid Services (“CMS”) previously known as the Health Care Financing Agency (“HCFA”).
Advantages of Victims of Nazi Persecution Restitution Trusts ®
Provides Medicaid exemption for multiple assets.
Unifies assets under one entity.
Allows Grantor to maintain control of disposition of assets.
Allows client to retain assets in his or her individual name.
Provides flexibility due to its revocability.
Provides directions for asset management in the event of incapacity without the necessity of a guardianship proceeding.
Eliminates burden on spouse or next-of- kin to guess Grantor’s intent in the event of incapacity.
Empowers family members to take action on behalf of the Grantor, since assets remain under Grantor’s control.
Simplifies distribution of such assets to multiple beneficiaries.
Eligibility: Persons must be:
a. American citizens or resident aliens;
b. former victims of Nazi persecution ether having received and/or currently receiving compensation in the form of restitution (“Wiedergutmachung”), pension (German/Austrian social security payments) or property claims from Germany, Austrian or other occupied areas; or anticipating receipt of newly available funds resulting from recent settlements; or
c. heirs of the victims of Nazi persecution who inherited restitution funds from the Survivors.
That the above referenced forms of compensation are not recognized as exempt assets in the eyes of Medicaid when, in fact, they ARE considered by CMS to be exempt assets.
That the creation of a Victim of Nazi Persecution Restitution Trust ® can wait until a person becomes ill and in need of extended care when, in fact, such delay may only result in unnecessary expenses.
Illustrations of Clients Benefitted
by Establishing a Victims of Nazi Persecution Restitution Trusts ®
EXAMPLE A – Protection of Community Spouse’s Assets
Mr. A, a restitution recipient, is aware that, by claiming Spousal Refusal, he would be eligible to seek Medicaid benefits for his wife, who is in a nursing home.
Mr. A believes that, since his assets exceed Medicaid limits by almost $200,000.00, he will be sued by Medicaid to provide contribution for his wife’s care after she receives Medicaid.
Mr. A is not aware that any current assets he holds could be made exempt for Medicaid purposes by qualifying them as co-mingled restitution payments.
– By qualifying Mr. A’s assets as restitution they become exempt from Medicaid. – Mr. A can never be required to contribute to his wife’s care because in the eyes of Medicaid he has no assets to contribute. – Further, by placing those assets in a Victim of Nazi Persecution Restitution Trust® they are protected in the event Mr. A ever needs nursing-home care himself, and are protected from Medicaid Estate recovery.
EXAMPLE B – Assuring Auxiliary Care and Testamentary Intent
Ms. B, a restitution recipient, suffered a stroke and, after a brief hospital stay, is discharged to a nursing rehabilitation center from where she is, unfortunately, unable to return home.
Because Ms. B has assets in excess of $185,000, she is advised that she would need to pay privately for her Nursing Home care, in this case $9,000.00 a month. With the addition of private duty nurses, Ms. B would likely exhaust her substantial assets within 15 months.
Upon our review of Ms. B’s history, we determined that she is immediately eligible for Medicaid despite her assets.
We filed an application for Medicaid and transferred her assets into a Victim of Nazi Persecution Restitution Trust ®.
We instructed her attorney-in-fact not to make any further payments to the nursing home, pending the decision on Ms. B’s Medicaid application, which was subsequently granted. – Thus, Ms. B’s. assets were preserved and, via the Trust, remained a source of funds available to provide her with private duty nurses. The Trust also ensured that Ms. B would be able to pass a legacy to her family, friends and favorite charities.
EXAMPLE C – Need for Anticipatory Planning
Mrs. C, a recipient of Wiedergutmachung and a widow’s pension, had assets in excess of $400,000.00 prior to entering a nursing home.
Before contacting us, Mrs. C had received professional advice about initiating a standard Medicaid plan which called for her to transfer a large proportion of her assets to her only son and pay the nursing home during the “wait out” ineligibility period resulting from this transfer (approximately 36 months).
Concerned that during the first 13 months of this ineligibility period, Mrs. C had spent over $110,000.00 of her own assets for nursing home care, Mrs. C’s son called us to assess whether his mother’s restitution might provide an alternative to exhausting her remaining funds.
Our calculation of Mrs. C’s restitution payments revealed that, over time, she had received restitution in excess of $430,000.00 and was thus presently and immediately eligible for Medicaid benefits. – Unfortunately, because Mrs. C had waited to consider restitution planning, none of the assets which she had already paid would be returned. – While Victims of Nazi Persecution Restitution Trusts ® shield a person’s assets from the reaches of Medicaid, Medicaid reimbursement provisions only apply to money privately paid to a nursing home within three months of filing a Medicaid application.
Thus, as illustrated above, the clients who discover their entitlement too late will needlessly and irrevocably be forced to spend their own funds.
EXAMPLE D – A Reparation Account is Not Enough
· Client D has received $30,000.00 in reparation payments and is advised to establish the “Client D Reparation Account” at her bank. Client D eventually applies for and receives Medicaid and dies two years later.
· Since the Reparation Account was established in the name of Client D, a formal Probate proceeding is required to appoint an executor to distribute the funds to Client D’s beneficiaries. (Probate is not required for funds in a Victim of Nazi Persecution Restitution Trust ® )
· Additionally, prior to distribution, the Executor will receive Notification from the Department of Human Resources stating that no distributions can be made by the executor until such time as Medicaid has had an opportunity to review the matter and determine whether a Medicaid recapture demand is appropriate. (Medicaid picks up estate names from the Surrogate’s Court and still has the right to review whether recapture is appropriate against the estate of any Medicaid recipient).
· Therefore, the administration of the estate will be delayed while Client D’s executor either hires an attorney or makes his own attempt to prove to Medicaid that the new Department of Health regulations apply to these funds and that, therefore, there should be no recapture. ( Remember that the new Department of Health guideline states that Medicaid “should” not recapture – this is precatory, not mandatory language and therefore the status of these funds can be reviewed and debated ad nauseam and the resolution may be uncertain.
– Victims of Nazi Persecution Restitution Trusts ® avoid the delays of probate of this asset and preempts debate by Medicaid as to whether this asset should be recaptured. Client D’s Reparation account does not properly protect these funds, does not provide for use of these funds if Client D is incapacitated and could potentially prevent the intended beneficiaries from receiving these funds.
EXAMPLE E – Failings of a Jointly Held Reparation Account
Client E knows about Client D’s plan. He also read some articles about Medicaid planning and consults both a social worker and an Elder law attorney regarding the protection of his reparation money, his failing health and his compelling need to secure long term health care assistance. Client E is advised that a Reparation Account in his name is insufficient and that what he should do is establish a “Client E Reparation Account “ held jointly at his bank with one of his nephews.
Client E feels comfortable with this account. He is happy that his nephew has access to the money in the account and believes that, upon his death, the account will be transferred to his nephew by operation of law. He believes that this will avoid the expense and inconvenience of probate and, therefore, Medicaid will not review this account.
However, Client E’s plan still creates potential problems. As is the case with all jointly held assets, situations can arise that will totally defeat this alleged solution. For example:
Client E’s nephew withdraws the money from the account, as he is legally entitled to do, and leaves Client E with no assets whatsoever.
If Client E’s nephew unexpectedly predeceases Client E, then Client E will be in the same position as Client D was in Example D above.
Client E’s nephew survived Client E and upon his uncle’s death he closed the account, kept the money and ignored his uncle’s wishes that this money be divided evenly with his three cousins. As a joint owner of the money he was legally able to ignore his uncle’s wishes.
Client E’s nephew (in this instance well intentioned and meaning to distribute the funds according to his uncle’s wishes), unfortunately had a problem with the IRS and has to pay off his tax lien. As a joint owner, Client E’s reparation account may be lost to the IRS.
– The possibilities for disasters regarding jointly held reparation accounts are endless and are easily avoided with the establishment of a Victim of Nazi Persecution Restitution Trust ®.
EXAMPLE F – The Proper Plan
Client F and his spouse are both victims of Nazi Persecution. They have received conflicting advice about restitution asset protection from the various attorneys and social service organizations they have consulted. Unfortunately, Client F and his wife are frail, making it essential to address the issue of their long term health care.
Client F has received $150,000.00 in Restitution and his wife has received $225,000.00. Additionally, the couple received $250,000.00 in 1983 as a result of a property settlement and, recently, they also received special payments for slave labor. In total, Mr. and Mrs. F have received approximately $625,000.00 in restitution payments.
Their current net worth is, coincidentally, also $625,000.00, which is maintained in various banks and brokerage accounts. Although Mr. and Mrs. F are close to their children, they want to maintain control of their own assets; they want to prevent, or at least limit, the access the children have to the funds; and, further, they want to ensure that the influence of their sons and daughters-in-law would have no impact on their testamentary wishes.
– Client F and his wife can accomplish their goals by properly establishing Victims of Nazi Persecution Restitution Trusts®, along with properly drafted Powers of Attorney and Health Care Proxy documents. They can identify, protect and maintain absolute control of $625,000.00 of their assets (the current total amount of restitution payments), receive Medicaid assistance and, under New York guidelines, preserve this unique Medicaid exemption for the next generation.
EXAMPLE G – Beware of Nursing Homes
Trude, a senior citizen, is admitted into a nursing home. Although Trude has no resources, she receives a monthly restitution income, which is payable to her by virtue of her status as a victim of Nazi persecution. The nursing home assists Trude in preparing a Medicaid application so that her nursing home care expenses may be covered by the Medicaid program.
In conjunction with its preparation of her Medicaid application, the nursing home prepares Trude’s Net Available Monthly Income statement (NAMI) which states how much of her income is payable to the nursing home. In preparing the NAMI, the nursing home calculates that Trude’s restitution income is payable to the nursing home. The nursing home proceeds to collect her restitution income for several years.
– Issue: Did the nursing home err in including Trude’s restitution income as part of the NAMI resulting in the overpayment to the nursing home of Trude’s exempt restitution income?
– Discussion: The nursing home erred in including Trude’s restitution income as part of the NAMI resulting in the overpayment to the nursing home of her exempt restitution income. Generally, pursuant to Medicaid guidelines, a Medicaid recipient’s monthly income in excess of a personal needs allowance is payable to the nursing home against the cost of care, with the exception of income that is considered an exempt source of income. Pursuant to the guidelines, restitution income is a source of exempt income that should not be considered when determining an individual’s eligibility for Medicaid and should not be considered when determining the (NAMI). Accordingly, since Trude is a recipient of restitution income payable to her by virtue of her status as a victim of Nazi persecution, the nursing home should never have included such income in the NAMI. Therefore, Trude is able to recover this money from the nursing home and to amend the NAMI to reflect that her restitution income is not payable to the nursing home.
EXAMPLE H – Failings of Some Social Service Agencies
A social services agency (the “Agency”) is appointed as guardian of the person and property of an incapacitated person (the “IP”), a long time client of the Agency. The IP’s assets amounted to one hundred twenty thousand ($120,000.00) dollars. The Agency is aware that the IP receives approximately eight hundred ($800.00) dollars per month in restitution payments payable to the IP by virtue of her status as a victim of Nazi persecution.
The Agency has determined that throughout her lifetime, the IP has collected in excess of Two Hundred Thousand ($200,000.00) dollars in restitution. The Agency hired private health aides to provide the IP with private pay home care assistance. The Agency spent down the IP’s entire assets, and then applied for Medicaid assistance for her home care needs.
– Issue 1: Since the Agency was aware that the incapacitated person was a as a victim of Nazi persecution, was it incumbent upon the Agency to immediately investigate whether the incapacitated person was eligible for benefits under the Medicaid program?
– Discussion: Since the Agency was aware that the IP was a victim of Nazi persecution and a recipient of restitution, it was incumbent upon the Agency to immediately investigate whether the incapacitated person was eligible for benefits under the Medicaid program.
Pursuant to section 1(a) of the Victims of Nazi Persecution Act of 1994, Public Law 103-286 (the “Act”), restitution payable by virtue of a person’s status as a victim of Nazi persecution is considered an exempt resource. The statute provides in pertinent part as follows: “Payments made to individuals because of their status as victims of Nazi persecution shall be disregarded in determining eligibility for and the amount of benefits or services to be provided under any federal or federally assisted program which provides benefits or services based, in whole or in part, on need.” Since Medicaid is a federally assisted program, the Act applies to the Medicaid program. Accordingly, as the guardian of the incapacitated person, once the Agency learned that their ward was a restitution recipient, it was incumbent upon them to investigate whether she would be Medicaid eligible. With her exempt resources intact, the incapacitated person would have been able to retain and privately pay for services of care, in addition to that which would be covered by the Medicaid program.
– Issue 2: Since the incapacitated person had received over $200,000.00 in restitution payments during her lifetime, an amount greater than the value of her $120,000.00 assets, was she eligible for Medicaid assistance at the time that the Agency was appointed her guardian?
– Discussion: Since the incapacitated person had received in excess of $200,000.00 in restitution payments during her lifetime, an amount greater than the value of her present day assets in the amount of $120,000.00, she was eligible for Medicaid assistance at the time that the Agency was appointed her guardian.
– Issue 3: Did the Agency err in spending down the assets of the incapacitated person prior to applying for Medicaid.
– Discussion: The Agency erred in spending down the assets of the incapacitated person prior to applying for Medicaid. Once these exempt assets are identified, if it is determined that the restitution sums received are equal to or greater than the person’s present day assets, then that person may immediately be deemed Medicaid eligible, without the necessity of a transfer or spending down of assets.
Special Medicaid Rules for Survivors of the Holocaust
To qualify for Medicaid assistance for long term health care needs an applicant must demonstrate financial need. A Medicaid recipient may only retain “resources” (assets) determined to be exempt by Medicaid or within Medicaid’s financial limits.
For all US citizens, essential personal effects such as clothing, furniture and automobiles and minimal cash can be retained by the individual as exempt funds while the individual can qualify for Medicaid assistance. Also included are an irrevocable burial trust or a burial fund; and a resource account which varies from state to state and which is adjusted on an annual basis.
For Survivors of the Holocaust, a unique benefit is that all funds received as a result of being a Victim of Nazi Persecution, by a Holocaust Survivor or inherited by a Holocaust Survivor or their family are considered to be exempt resources when applying for Medicaid long term health care assistance. These payments received by Survivors and their families, totaled from the date of the initial award (Bescheid) of payments, are not includable in a determination of eligibility for Medicaid assistance. However, these accumulated reparation payments must be properly identified as such to be exempt. The best way to do this is by identifying the correct amount of these payments, creating a Victim of Nazi Persecution Restitution Trust ® and depositing an amount of money equivalent to that which was received as compensation into this Special trust. (Additional information about Nazi Victim Restitution Trusts ® is included in this text.)
Other than utilizing this unique form of protecting exempt restitution funds available to Survivors of the Holocaust, in order to achieve Medicaid financial status, individuals are forced to either “spend down” their assets or make “transfers” of these assets to the “poverty” level to obtain the assistance that Medicaid provides.
A “spend down” is achieved when a person has exhausted his or her assets, usually by paying for their own health care. Once a person’s assets are exhausted in this manner, application may be made for Medicaid.
The transfer of assets method of achieving Medicaid financial status will enable a person to obtain Medicaid while preserving a significant portion of their assets for their family. However, caution and strict compliance with Medicaid transfer of asset guidelines is essential. The transfer of assets by either the applicant for Medicaid or the applicant’s spouse, to a person other than their spouse, must be accomplished 5-years prior to the Medicaid application (the new “look-back” period) in order to be eligible for Medicaid assistance. If such transfers are not accomplished well in advance, a period of ineligibility occurs unless an exemption (such as the unique exemption for Survivors) applies.
Simply depositing funds received as a result of Nazi Persecution is not the best plan as it fails to afford the planning protections that establishing a properly drafted revocable trust, such as a Victim of Nazi Persecution Restitution Trust ® provides for Survivors during their lifetimes and their intended beneficiaries upon death.
With careful planning a reparation recipient may maintain financial independence as well as being able to:
* avoid financial devastation resulting from the high cost of long term health care at home or in a Nursing facility;
* bypass a Medicaid review against their estate;
* provide protection to a spouse, children and heirs by maintaining reparation exemptions on inherited reparation funds; and
* avoid financial devastation resulting from the high cost of long term health care.
It is well documented that persons who receive compensation as a result of Nazi persecution are entitled to receive Medicaid (U.S. Governmental assistance for medical benefits), without “spending down” all of their assets to poverty levels as is normally required as a prerequisite to receiving Medicaid benefits.
Through legislation enacted by Congress in 1994, American citizens who were both victims of Nazi persecution and reparation recipients can receive Medicaid benefits while remaining in possession and control of their funds. This category includes even those whose assets would otherwise be considered too great to receive such governmental assistance without spending down or divesting themselves of their assets. Most importantly, during the lifetime of the recipient, these protected assets may be used at his or her discretion for supplemental care or whatever purposes he or she desires.
As a result, many Reparation recipients are, unknowingly, financially eligible for Medicaid despite the fact that their entire savings remain intact. Therefore, all necessary steps should be taken to ensure that assets are not needlessly wasted on nursing care which would otherwise be provided to them at no expense. This being said, there is a series of very detailed steps which must be taken to produce the type of proof and history required by Medicaid to create such an exemption. Researching a recipient’s reparation history, making the proper calculation of said accumulated reparation and the segregation of these funds into the proper form of account is essential to insuring that funds are not wasted or lost. This is neither a brief nor minor undertaking. The research, correspondence, review and interpretation of up to 50 years worth of materials, and the calculation of receipts in a foreign currency, the value of which has fluctuated greatly during this time period, is an extremely complex task. Those who attempt to garner such evidence without expert assistance will likely face insurmountable difficulties.
Establishing Victims of Nazi Persecution Restitution Trusts ® ensures that a person’s assets are protected without loss of control and provides the means to preserve their legacy.
Anticipatory discussion and planning are critical for all victims of Nazi persecution who are receiving compensation.
Information disseminated to the general public regarding asset protection for senior citizens does not fully address the concerns of victims of Nazi persecution.
Post Death Benefits of Proper Planning for Survivors of the Holocaust and their Heirs
Victim of Nazi Persecution Restitution Trust ®, Victim of Nazi Persecution Restitution SuccessorTrust and Trust for Inherited Payments to Victims of Nazi Persecution continue to provide the most comprehensive and certain method of planning for and safeguarding the assets of Survivors of the Holocaust who have received restitution as a result of being victims of Nazi persecution. The advantage to establishing such Trusts during one’s lifetime is that it allows the recipient to diversify their accounts while maintaining the legal exemption umbrella created by the Trust. In addition, it provides a means of fulfilling the Grantor’s testamentary wishes and passed a Medicaid exempt legacy to the heirs of the Survivor.
Protection of Children and Heirs by Maintaining a Trust for Inherited Payments to Victims of Nazi Persecution
By exempting reparation funds from Medicaid estate recovery, the new legislation clearly opens the door for a much anticipated opportunity; the passing of Medicaid exempt reparation from generation to generation.
The concept that the exemption of these assets can survive the death of the recipient demonstrates that if properly structured, reparation assets, passed into the hands of a surviving spouse, “Second Generation Survivors” or more remote heirs, can also be exempt resources for the purpose of their own Medicaid eligibility. Thus, reparation funds should be specifically set aside by the recipient/survivor for the dual purpose of establishing his or her own eligibility and ensuring that
such assets maintain their exemption in the hands of the heirs. The best means of achieving this goal remains the establishment of a Victim of Nazi Persecution Restitution Successor Trust, which can, by its terms make these provisions. A properly drafted Victim of Nazi Persecution Restitution Successor Trust extends the exemption of these reparation funds so that, at a later date, these assets will be protected from Medicaid even though vested in an individual other than the original recipient.
Short Cuts that May be Penny Wise and Pound Foolish
1. Separate Reparation Accounts
Reparation recipients should be encouraged to exempt the maximum amount of their current assets by identifying them as accumulated, co-mingled reparation payments. Once identified, these reparation funds need to be segregated from the reparation recipient’s other funds. The importance of this “segregated” account cannot be overemphasized, and is one of the most misunderstood aspects of the reasons for Restitution planning.
– Reparation Accounts
Simply titling one’s account a “reparations account” is a grave error. As previously detailed herein, reliance on the generosity of the Department of Health in their interpretation and administration of the provisions of “02 OMM/ADM-3″ is an unnecessary risk. This should never be done.
– Joint accounts
While joint accounts (sometimes known as the “poor man’s trust”) can be useful in limited situations, they fail to adequately protect against the multiple contingencies that may occur. The following reasons may illustrate further why the Elder law community believes that joint accounts are not a sufficient form of estate planning:
Creditor protection: Joint accounts are subject to creditor claims. If one joint tenant is a judgment debtor, a creditor claim can be made against at least half of this account because each tenant is presumed to be possessed of the whole. The claim can, in some cases, extend to the whole account.
Disability of beneficiaries: The subsequent disability of a joint account holder can lead to court interference with the management of the property, which could further result in the use of such account for the benefit of the now disabled joint tenant. Court interference could incur increases in attorneys’ fees relating to the transmission, use and management of the joint property.
Death of the joint beneficiary: Should the beneficiary of a joint account predecease the account holder, the account holder’s testamentary intent could be thwarted due to the account holder’s not being allowed to name a successor beneficiary on the account; the account holder’s failure to subsequently name a new beneficiary; or the account holder’s lack of capacity to do so on the death of the joint beneficiary. Similarly, situations may arise where the account holder may wish to benefit more than one party on an account. However, if one of the parties predeceases, the survivor obtains the whole account and none is preserved for the family of the predeceased beneficiary.
Establishing Victim of Nazi Persecution Restitution Trust ® ensures that a person’s assets are protected without loss of control and provides the means to preserve their legacy.
Anticipatory discussion and planning are critical for all victims of Nazi persecution who are receiving compensation.
Information disseminated to the general public regarding asset protection for senior citizens does not fully address the concerns of victims of Nazi persecution.