Spouse and "Spousal Refusal" in New York

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maineminder
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Spouse and "Spousal Refusal" in New York

Post by maineminder » Mon Feb 12, 2018 8:26 pm

Unfortunately Dad is very likely to need nursing home care very soon and Mom is still in her home. He's currently in rehab after being in/out of the hospital, but unfortunately he is bed ridden and our hope is rehab will get him to the point where he can take care of his own basic needs. Mom/Dad are roughly 80.

A nursing home facility is probably next after his medicare benefits run out as Mom will probably not be able to take care of him at home. Mom has ruled out home care at this point.

We have consulted with an Elder Law Attorney who has recommended my Mom use "Spousal Refusal' to help cover his costs. They are of modest means in a HCOL area. Assets are primarily in his larger IRA, Mom with a very small one and a joint investment account that contains an amount that is greater than the allowable asset limit in NY. 70% of the assets are in Dads IRA. Income is a pension, both are collecting SS and the RMDs coming out of the two IRAs. House is paid for and the equity is less that the allowable amount in New York. The "spousal refusal" plan is part of a broader plan that includes transfer of assets to Mom, updated power of attorneys, updated health care proxies, transfer of the house deed to Mom and eventually a medicaid allowable trust to help protect Moms assets when/if she needs similar care. This latter piece I'm not quite sure of the details.

I've seen quite a few threads on this, but none appear to answer these questions. I will ask the attorney these but am interested in others thoughts.

When being admitted to a nursing home facility the applications I've seen require a listing of their assets. These will be fully disclosed. I understand that medicaid covers on a month by month basis. When do we apply for medicaid? Prior to Dad going into the nursing home or after he's already been admitted? Assuming he is admitted mid-month. We've been told he would be private pay for the first partial month. What I'm not clear on is if we should have applied for medicaid support by then.

If he does qualify for medicaid his income is over the amount Mom is allowed to keep ($3k or so in NY). I understand that anything over that will need to be allocated to his care. Is math like this? Contribution = Pension + his SS + his RMD - her allowance? Who sends the bill? Medicaid or the nursing home and I assume Mom is required to pay it?

Last question. The RMD will require state/federal income taxes to be paid. Will the income calculation reduce the RMD allocated to his care to cover taxes that are required?

ChrisC
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Re: Spouse and "Spousal Refusal" in New York

Post by ChrisC » Tue Feb 13, 2018 8:48 am

maineminder wrote:
Mon Feb 12, 2018 8:26 pm
Unfortunately Dad is very likely to need nursing home care very soon and Mom is still in her home. He's currently in rehab after being in/out of the hospital, but unfortunately he is bed ridden and our hope is rehab will get him to the point where he can take care of his own basic needs. Mom/Dad are roughly 80.

A nursing home facility is probably next after his medicare benefits run out as Mom will probably not be able to take care of him at home. Mom has ruled out home care at this point.
If Dad can get to the point where he can take care of his basic needs -- toileting, bathing/showering, eating, transitioning,
etc, then a skilled nursing facility might not be the best fit for him. Have your parents considered temporary home care which could later lead to care for both of them in independent living or assisted living facilities, which would be far cheaper than skilled nursing facilities and the quality of care for both of them might be better than Medicaid driven care.

maineminder wrote:
Mon Feb 12, 2018 8:26 pm
We have consulted with an Elder Law Attorney who has recommended my Mom use "Spousal Refusal' to help cover his costs. They are of modest means in a HCOL area. Assets are primarily in his larger IRA, Mom with a very small one and a joint investment account that contains an amount that is greater than the allowable asset limit in NY. 70% of the assets are in Dads IRA. Income is a pension, both are collecting SS and the RMDs coming out of the two IRAs. House is paid for and the equity is less that the allowable amount in New York. The "spousal refusal" plan is part of a broader plan that includes transfer of assets to Mom, updated power of attorneys, updated health care proxies, transfer of the house deed to Mom and eventually a medicaid allowable trust to help protect Moms assets when/if she needs similar care. This latter piece I'm not quite sure of the details.


Not familar with the Spousal Refusal approach, but wondering is the house deeded solely in Dad's name or is it jointly titled? If solely titled in the name of Dad, the transfer would certainly trip lookback and count entirely as an asset for Medicaid resources that must be spent down. The contemplated strategy seems to consume a lot of planning to leverage Medicaid for Dad and then subsequently to do that for Mom, but I would think twice or three times about this for your parents as they might have enough resources to get better care for both of them without reliance on Medicaid-- this would mean draining their resources but isn't their resources designed to give them better quality of care?
maineminder wrote:
Mon Feb 12, 2018 8:26 pm
I've seen quite a few threads on this, but none appear to answer these questions. I will ask the attorney these but am interested in others thoughts.

When being admitted to a nursing home facility the applications I've seen require a listing of their assets. These will be fully disclosed. I understand that medicaid covers on a month by month basis. When do we apply for medicaid? Prior to Dad going into the nursing home or after he's already been admitted? Assuming he is admitted mid-month. We've been told he would be private pay for the first partial month. What I'm not clear on is if we should have applied for medicaid support by then.
If Dad's current rehab facility will also be his skilled nursing facility, I'm sure there are folks on staff there who can handle the application process with Medicaid -- at least that's what happened to my Mom, 11 years ago. We later used an Elder Care Lawyer to take over the application process because of a number of complicating factors.
maineminder wrote:
Mon Feb 12, 2018 8:26 pm
If he does qualify for medicaid his income is over the amount Mom is allowed to keep ($3k or so in NY). I understand that anything over that will need to be allocated to his care. Is math like this? Contribution = Pension + his SS + his RMD - her allowance? Who sends the bill? Medicaid or the nursing home and I assume Mom is required to pay it?
Not sure how this would be handled, perhaps this article I found with a google search is helpful for your issues. http://www.koldin.com/Koldin-Law-Center ... tate.shtml
maineminder wrote:
Mon Feb 12, 2018 8:26 pm
Last question. The RMD will require state/federal income taxes to be paid. Will the income calculation reduce the RMD allocated to his care to cover taxes that are required?
Not sure I'd be very worried about this as with the level of care your parents will have to finance, especially if they were to find private pay facilities, they will likely have substantially reduced income taxes at least for 2018 and 2019 with the new tax bill.

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dodecahedron
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Re: Spouse and "Spousal Refusal" in New York

Post by dodecahedron » Tue Feb 13, 2018 9:05 am

ChrisC wrote:
Tue Feb 13, 2018 8:48 am
maineminder wrote:
Mon Feb 12, 2018 8:26 pm
Last question. The RMD will require state/federal income taxes to be paid. Will the income calculation reduce the RMD allocated to his care to cover taxes that are required?
Not sure I'd be very worried about this as with the level of care your parents will have to finance, especially if they were to find private pay facilities, they will likely have substantially reduced income taxes at least for 2018 and 2019 with the new tax bill.
I agree with ChrisC that there may be minimal income tax concerns if your father needs to be in a nursing home for medical reasons, since there will be huge itemized medical deductions that will more than offset any taxable income.

On the other hand, I don't understand why you think the monthly amount your father needs to pay out of his IRA will be limited to his RMDs. I would think that until his IRA is fully drained, your father will be expected to pay the entire monthly bill. So I would expect that his IRA distributions will be much greater than his RMDs.

bsteiner
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Re: Spouse and "Spousal Refusal" in New York

Post by bsteiner » Tue Feb 13, 2018 9:16 am

dodecahedron wrote:
Tue Feb 13, 2018 9:05 am
... I don't understand why you think the monthly amount your father needs to pay out of his IRA will be limited to his RMDs. I would think that until his IRA is fully drained, your father will be expected to pay the entire monthly bill. So I would expect that his IRA distributions will be much greater than his RMDs.
Medicaid varies considerably from state to state, and sometimes within a state. In some states, an IRA is an asset like any other asset. In other states, the IRA isn't considered an asset, but the distributions are considered income. So one should consult with an elder law (Medicaid) attorney in the applicable state.

maineminder
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Re: Spouse and "Spousal Refusal" in New York

Post by maineminder » Tue Feb 13, 2018 9:40 am

ChrisC wrote:
Tue Feb 13, 2018 8:48 am
If Dad can get to the point where he can take care of his basic needs -- toileting, bathing/showering, eating, transitioning,
etc, then a skilled nursing facility might not be the best fit for him. Have your parents considered temporary home care which could later lead to care for both of them in independent living or assisted living facilities, which would be far cheaper than skilled nursing facilities and the quality of care for both of them might be better than Medicaid driven care.


Not familar with the Spousal Refusal approach, but wondering is the house deeded solely in Dad's name or is it jointly titled? If solely titled in the name of Dad, the transfer would certainly trip lookback and count entirely as an asset for Medicaid resources that must be spent down. The contemplated strategy seems to consume a lot of planning to leverage Medicaid for Dad and then subsequently to do that for Mom, but I would think twice or three times about this for your parents as they might have enough resources to get better care for both of them without reliance on Medicaid-- this would mean draining their resources but isn't their resources designed to give them better quality of care?

If Dad's current rehab facility will also be his skilled nursing facility, I'm sure there are folks on staff there who can handle the application process with Medicaid -- at least that's what happened to my Mom, 11 years ago. We later used an Elder Care Lawyer to take over the application process because of a number of complicating factors.

Not sure how this would be handled, perhaps this article I found with a google search is helpful for your issues. http://www.koldin.com/Koldin-Law-Center ... tate.shtml

Not sure I'd be very worried about this as with the level of care your parents will have to finance, especially if they were to find private pay facilities, they will likely have substantially reduced income taxes at least for 2018 and 2019 with the new tax bill.
Thanks ChrisC for your thoughts.

Your first point would be my first choice as well, once he can take care of his basic needs he should go home. Mom does not want home care as she believes it would require 24 hour care. We will continue to have this conversation. Unfortunately for me I don't live in the immediate area and I can't be there on a daily basis. Moving them both to an assisting living community may be an option that needs to be explored.

The deed is in both names, but it is below the amount that medicare allows in equity as a spouse is currently living there. I don't think it has to move iimmediately but the attorney recommended we eventually move it into Moms name alone.

I am very concerned about the level of care he will receive as a medicaid recipient, but if I'm understanding this correctly he actually goes in as private pay and then the spouse elects 'spousal refusal'. But the attorney was pretty clear that once he is in the nursing home there is no difference in care. Not sure if I agree.

My guess now is that once rehab is over he will remain there. I'll see out someone on the staff that may be able to help.

Since Dad's IRA is currently taking the RMDs the IRA is not considered a countable resource. This can be found in the 'Medicaid Reference Guide' and was confirmed by the attorney.

At this point I'm just trying to understand the rules. It seems complicated which has me a bit concerned.

As you and dodecahedron have pointed out, the tax implications should not be a concern.

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dodecahedron
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Re: Spouse and "Spousal Refusal" in New York

Post by dodecahedron » Tue Feb 13, 2018 9:47 am

bsteiner wrote:
Tue Feb 13, 2018 9:16 am
dodecahedron wrote:
Tue Feb 13, 2018 9:05 am
... I don't understand why you think the monthly amount your father needs to pay out of his IRA will be limited to his RMDs. I would think that until his IRA is fully drained, your father will be expected to pay the entire monthly bill. So I would expect that his IRA distributions will be much greater than his RMDs.
Medicaid varies considerably from state to state, and sometimes within a state. In some states, an IRA is an asset like any other asset. In other states, the IRA isn't considered an asset, but the distributions are considered income. So one should consult with an elder law (Medicaid) attorney in the applicable state.
Good to know, thanks! That information seems quite relevant to decisions about Roth conversions and more generally the decisions to take distributions from defined contribution plans or possibly to annuitize from them long before a possible need for LTC.

ChrisC
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Re: Spouse and "Spousal Refusal" in New York

Post by ChrisC » Tue Feb 13, 2018 12:25 pm

maineminder wrote:
Tue Feb 13, 2018 9:40 am
Moving them both to an assisting living community may be an option that needs to be explored.
If you're considering that, you might want to also consider CCRCs, which would take care of their needs as they progress into different levels of care. Here's a link to reference materials for CCRCs compiled by another forum:
http://www.early-retirement.org/forums/ ... 86124.html

maineminder
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Re: Spouse and "Spousal Refusal" in New York

Post by maineminder » Tue Feb 13, 2018 12:58 pm

ChrisC wrote:
Tue Feb 13, 2018 12:25 pm

If you're considering that, you might want to also consider CCRCs, which would take care of their needs as they progress into different levels of care. Here's a link to reference materials for CCRCs compiled by another forum:
http://www.early-retirement.org/forums/ ... 86124.html
Thanks, I have a look at that. For others this link also provides a searchable database in the counties I'm looking at.

https://www.caring.com/local/states/con ... n-new-york

JoeRetire
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Re: Spouse and "Spousal Refusal" in New York

Post by JoeRetire » Tue Feb 13, 2018 1:05 pm

maineminder wrote:
Tue Feb 13, 2018 9:40 am
I am very concerned about the level of care he will receive as a medicaid recipient, but if I'm understanding this correctly he actually goes in as private pay and then the spouse elects 'spousal refusal'. But the attorney was pretty clear that once he is in the nursing home there is no difference in care. Not sure if I agree.
I agree with the attorney.

pshonore
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Re: Spouse and "Spousal Refusal" in New York

Post by pshonore » Tue Feb 13, 2018 1:20 pm

dodecahedron wrote:
Tue Feb 13, 2018 9:47 am
bsteiner wrote:
Tue Feb 13, 2018 9:16 am
dodecahedron wrote:
Tue Feb 13, 2018 9:05 am
... I don't understand why you think the monthly amount your father needs to pay out of his IRA will be limited to his RMDs. I would think that until his IRA is fully drained, your father will be expected to pay the entire monthly bill. So I would expect that his IRA distributions will be much greater than his RMDs.
Medicaid varies considerably from state to state, and sometimes within a state. In some states, an IRA is an asset like any other asset. In other states, the IRA isn't considered an asset, but the distributions are considered income. So one should consult with an elder law (Medicaid) attorney in the applicable state.
Good to know, thanks! That information seems quite relevant to decisions about Roth conversions and more generally the decisions to take distributions from defined contribution plans or possibly to annuitize from them long before a possible need for LTC.
As an example, from https://www.esslawfirm.com/blog/2015/05 ... lity.shtml
All too often it comes as a huge surprise to my clients when they learn that IRA's, Keogh's, 401k's and other qualified retirement accounts that are in pay out status (meaning one is receiving his or her required minimum distribution or a regular periodic payment) are not counted as an available resource (an asset which effects eligibility) for Medicaid eligibility purposes. Hypothetically, one could have a million dollar IRA and/or 401K and still be eligible for Medicaid nursing home or home care so long as he or she is receiving his or her required minimum distribution (RMD). However, the RMD is counted as available income for Medicaid eligibility purposes and may disqualify you for Medicaid.

Thus, when one is applying for either Medicaid home care and/or Medicaid nursing home care, irrespective of whether or not one has attained age 70 ½, it will be necessary that one take his or her RMD in order that the retirement account not be counted as an available resource for Medicaid eligibility purposes.

Because the owner of a Roth IRA is not required to take a minimum distribution, for Medicaid eligibility purposes the full amount of the Roth IRA is considered an available resource for eligibility purposes irrespective of the age of the Medicaid recipient in New York.

As there is not a taxable event resulting from a distribution from a Roth IRA or liquidation of a Roth for both Medicaid nursing home or home care, the transfer of the Roth to one's spouse or to a blind or disabled child as an exempt transfer (no effect on eligibility) is generally easy to accomplish.
However, not sure what happens if RMD "as income" is large enough to exceed Medicaid income limits. Also not sure how one "transfers" a Roth to a spouse or child? Also think a spouse may be required to contribute part of their income,if any, to pay nursing home bills although that can certainly vary by state as well. And how does one take an RMD before 70 1/2?

cestan
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Re: Spouse and "Spousal Refusal" in New York

Post by cestan » Tue Feb 13, 2018 1:44 pm

JoeRetire wrote:
Tue Feb 13, 2018 1:05 pm
maineminder wrote:
Tue Feb 13, 2018 9:40 am
I am very concerned about the level of care he will receive as a medicaid recipient, but if I'm understanding this correctly he actually goes in as private pay and then the spouse elects 'spousal refusal'. But the attorney was pretty clear that once he is in the nursing home there is no difference in care. Not sure if I agree.
I agree with the attorney.

not true. had it happen to our family. went into nursing home/rehab with medicare and after his days were up used private pay till no more assets. then switched to medicaid. got same care but one month later nursing home sent him to hospital for fever(?) nursing home refused to have him come back since they said all their medicaid beds where in use. Had to go to medicaid nursing home which was much worse then facility he was in before. talking to hospital social worker, she says it happens all the time. nursing homes refuse to take residents back when source of funding is now medicaid.

maineminder
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Re: Spouse and "Spousal Refusal" in New York

Post by maineminder » Tue Feb 13, 2018 2:10 pm

pshonore wrote:
Tue Feb 13, 2018 1:20 pm
However, not sure what happens if RMD "as income" is large enough to exceed Medicaid income limits. Also not sure how one "transfers" a Roth to a spouse or child? Also think a spouse may be required to contribute part of their income,if any, to pay nursing home bills although that can certainly vary by state as well. And how does one take an RMD before 70 1/2?
Again, testing my knowledge and understanding based on what I heard from the attorney. Please chime in if any of this seems incorrect.

What I believe is that New York is a 'medically needy' state rather than a 'income cap' state. What this means is medicaid will cover the difference between what medicaid determines as your income and the medicaid cost for care (30% or so lower than private pay in the area I'm looking at) once eligibility has been determined based on assets ($120K limit in this area of NY). You contribute all your income (pension, ss, RMDs, plus any other medicaid determined income) minus a spousal allowance which is roughly $3K and minus an allowable minimum for the nursing home patient ($30 or $50). The nursing home cost is not free if you have income over the allowable amount.

The math here is one of my questions as I haven't found a New York specific example of how it works but this is my understanding based on how the attorney explained it. Trying to validate this with someone else's experience.

As pointed out earlier depending on the income determination other choices may be less expensive as the total cost of care may be less that the amount medicaid wants you to contribute.

wanderer
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Re: Spouse and "Spousal Refusal" in New York

Post by wanderer » Tue Feb 13, 2018 2:44 pm

This is an aside, but want to suggest caution when consulting an elder-care attorney. Do a reality check, especially if they propose significantly changing the investments.

My dad, who had dementia, fell at home and needed to go into a nursing home (Indiana, 2012). Mom, who had POA over my dad's IRAs, consulted a local elder-care attorney. The attorney advised her to move these accounts into new bank annuities in her name, and then file for medicaid support for my dad, would be left with his SS and small pension. The lawyer would charge a nominal fee and help "manage" these new accounts, with a promise of more financial security and less tax.

Fortunately, my mom smelled a rat and declined. Dad lived 2 years in the nursing home. Mom paid for it out of dad's income and IRA fund (private pay), and was able to deduct all the nursing home costs as medically necessary (dementia, wheelchair-bound with essentially no ADL capability).

This was a LCOL area, with nursing home costs at $7,200/mo.

mouses
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Re: Spouse and "Spousal Refusal" in New York

Post by mouses » Tue Feb 13, 2018 3:05 pm

I'm not sure if this is an allowed comment, but note that medical deductions were planning to be done away with in the new tax law, and just got put back in by the skin of their teeth. If in the future, they are done away with, it will be catastrophic for this type of planning.

ChrisC
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Re: Spouse and "Spousal Refusal" in New York

Post by ChrisC » Tue Feb 13, 2018 5:06 pm

mouses wrote:
Tue Feb 13, 2018 3:05 pm
I'm not sure if this is an allowed comment, but note that medical deductions were planning to be done away with in the new tax law, and just got put back in by the skin of their teeth. If in the future, they are done away with, it will be catastrophic for this type of planning.


The new tax law, I believe, provides for medical expense deductions for at least tax years 2018 and 2019, and lowers the AGI threshold for itemizing the deductions. But who knows what happens afterwards. The NY Times did an article on how cruel and devastating in impact this would be for many who have family members in LTC and rely on the medical expense deduction to finance medical care. I know first hand with my BIL with MS and in an assisted living facility that eliminating the medical deduction would throw an enormous monkey wrench in our planning and care for him. This would really impact people who want to private pay LTC and are not impoverished enough to be eligible for Medicaid.

bsteiner
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Re: Spouse and "Spousal Refusal" in New York

Post by bsteiner » Tue Feb 13, 2018 5:34 pm

wanderer wrote:
Tue Feb 13, 2018 2:44 pm
This is an aside, but want to suggest caution when consulting an elder-care attorney. Do a reality check, especially if they propose significantly changing the investments.

My dad, who had dementia, fell at home and needed to go into a nursing home (Indiana, 2012). Mom, who had POA over my dad's IRAs, consulted a local elder-care attorney. The attorney advised her to move these accounts into new bank annuities in her name, and then file for medicaid support for my dad, would be left with his SS and small pension. The lawyer would charge a nominal fee and help "manage" these new accounts, with a promise of more financial security and less tax.

Fortunately, my mom smelled a rat and declined. Dad lived 2 years in the nursing home. Mom paid for it out of dad's income and IRA fund (private pay), and was able to deduct all the nursing home costs as medically necessary (dementia, wheelchair-bound with essentially no ADL capability).
...
While it lends itself more to small firms or sole practitioners, there are some good elder law (Medicaid) lawyers. The lawyer who handles your estate planning should know some of them.

Annuities are sometimes used in Medicaid planning. In some states, if you buy an annuity, it may no longer be considered an available resource, but instead the annuity payments may be considered income. It may depend on the specifics of the annuity. However, I'm not sure that the annuity would need any "managing" other than collecting the annuity payments.

RudyS
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Re: Spouse and "Spousal Refusal" in New York

Post by RudyS » Tue Feb 13, 2018 5:51 pm

maineminder wrote:
Tue Feb 13, 2018 12:58 pm
ChrisC wrote:
Tue Feb 13, 2018 12:25 pm

If you're considering that, you might want to also consider CCRCs, which would take care of their needs as they progress into different levels of care. Here's a link to reference materials for CCRCs compiled by another forum:
http://www.early-retirement.org/forums/ ... 86124.html
Thanks, I have a look at that. For others this link also provides a searchable database in the counties I'm looking at.

https://www.caring.com/local/states/con ... n-new-york
I've been looking at CCRC's for us. All that have the lifecare option require you be in "good" health when you first move in. Something to consider as you search.

maineminder
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Re: Spouse and "Spousal Refusal" in New York

Post by maineminder » Wed Feb 14, 2018 8:22 pm

I thank everyone for their posts. Obviously a difficult time for our family.

I've spent a lot of time reading this forum over the years and I'm always impressed with the depth of knowledge of the collective group. How this knowledge is communicated by the members is truly exceptional no matter the topic.

This forum is a true gem.

Again, thank you.

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