// BLOG
Quite Possibly the Best Mother’s Day Gift Ever
May 14, 2012
Amanda was in an excited state when she called, wanting to make an appointment immediately for she and her mom. Amanda lives out of state but was coming home for Mother’s Day and would stay another day to meet with me. I calmed her down and asked her to share with me her concerns. Mom had remarried two years earlier and both she and her husband, Joe, were in their late 60’s. I had a good idea of what she would tell me next.
Joe began experiencing health problems a few months ago. He was hospitalized with what turned out to be an infection. Last month he was rehospitalized with what the family thought was a stroke but was another infection. Joe is now back home with a home health aide that is not covered by insurance.
Amanda’s concerns were about the future. What if Joe needs nursing home care? He doesn’t have long term care insurance and has savings of $150,000. “Can we protect Mom’s money”, she asked. “Mom has a home in which she and Joe live in, a vacation home at the beach that we vacationed at as kids and about $400,000 in savings. Mom and Joe signed a prenuptial agreement so she can keep her assets, right?”
“Well, yes”, I replied, “but she’ll need to get divorced first because that agreement says Mom can keep her assets if and when she gets divorced. Otherwise they are subject to Medicaid’s spend down requirements.” I explained to Amanda that Medicaid treats the married couple as “one unit”. Mom will be able to keep her primary home but the rest of their assets – not just Joe’s – must be spent down to just under $114,000. I could tell that she wasn’t happy with what I was saying.
I asked Amanda about their income. She told me that Mom has Social Security of $1000 but Joe worked for the state and has a $4000 per month pension which Mom receives if she survives him. I explained that if she divorces Joe she won’t be entitled to that pension.
I told her that there are options but we need to work quickly. Amanda’s desire for the appointment intensified. She told me that her mom really cares very much for Joe but she is also experiencing sleepless nights thinking about the possibility of losing everything she has, including the beach home.
I sat down with Amanda and her mom the day after Mother’s Day. Mom told me she really doesn’t want to divorce Joe if she can help it. I told her that a divorce could protect her assets but she would lose Joe’s pension, leaving her with only her Social Security. She’d need to make up the lost income from interest on her investments. She then asked if there is any other option.
We discussed Joe’s prognosis. He had experienced two hospitalizations in the past several months, both resulting from infections. Joe was not exactly a “young 68” but he also was making a decent recovery and it didn’t sound like nursing home care is imminent. I recommended that we move some of Mom’s assets, including her beachfront home, to a trust and if we can get through enough of the Medicaid 5 year look back, using Joe’s and perhaps some of Mom’s funds to pay for his care, we could protect those assets. I explained that any monies transferred to a trust would cause a Medicaid penalty – a period of ineligibility – if we applied for benefits in the next 5 years.
The key, however, is to start the 5 year clock running now. It is possible that Joe may not need care for several years – even the entire 5 year timeframe. And if that’s the case, we don’t want to waste the opportunity to protect everything. “But what happens if he needs care in 6 months”, Amanda asked me. Well then, we can always go the divorce route and invoke the prenuptial agreement, if we have to, I told her.
Amanda and her mom looked at each other with a sense of relief. Mom told Amanda she was so happy to know she could protect her assets, take care of Joe and sleep at night again. She said, “You didn’t need to give me a Mother’s Day gift this year. This is the best gift I could ever have received.”
Is Your Home an Exempt Asset Under Medicaid Rules . . .
May 7, 2012
or must it be sold and the proceeds spent down first?
Click on http://www.youtube.com/HauptmanLaw to see my answer.
If We’re on Hospice, Why Bother with Long Term Care? (Part 2)
April 30, 2012
Last week we were discussing Carla and Dennis. Carla reached out to us, not really thinking we could help her, but because her friend kept urging her to call. Her husband, Dennis was on hospice and didn’t have much longer to live. But, in our conversation, I focused on Carla’s needs. This is what I told her.
At 70, and with the past several years having taken their toll on her health, Carla needs to think about life after Dennis and her own long term care needs. She does not have long term care insurance and Dennis has no life insurance. Carla will also lose almost 70% of their income because Dennis’ pension and her Social Security check will stop, although she will continue to receive his $1500 of Social Security.
I was painting a pretty bleak financial picture. In all likelihood, Carla will need to sell her home to generate more income and keep her expenses down. Even so, she may need to dip into her savings to meet basic needs. I then explained to her that if she needs long term care she’ll spend her savings at an even faster rate. Carla responded, “that’s ok. I can qualify for Medicaid, right?”
I told Carla she will have to spend all her assets before qualifying for Medicaid but if she wants to have care administered at home, rather than in a nursing facility, Medicaid benefits may not cover all her needs. That’s because, if she needs 24/7 round the clock care, the only place she can get it paid for currently under any Medicaid program is in a nursing home.
Carla asked if she could gift money to her children to hold for her. I told her that Medicaid “looks back” 5 years to find gifts and other “transfers for less than fair value” in order to impose a Medicaid penalty or waiting period for benefits. I also told her that gifting money outright isn’t a good idea because she will likely need that money so we need to put it someplace safe, where it is assured to be when she needs it.
But, I piqued Carla’s curiosity when I told her that there is a way to avoid the 5 year look back and Medicaid penalty – but we must act quickly. That’s because it requires changing Dennis’ will and retitling assets. You see, the Medicaid penalty applies to transfers made during life, but not at death.
My plan of action involved changing Dennis’will to leave his assets to a trust for Carla’s benefit and not to Carla outright. But, because Dennis and Carla own most of their assets jointly with right of survivorship, we also need to change the ownership of their assets to allow the will to do its job.
I suggested to Carla that we put her home and $100,000 in trust, leaving approximately $150,000 in her name. She agreed and that’s what we did. I was able to prepare a new will and a trust for Carla’s benefit, visit with Dennis and Carla to have them execute both documents and then retitle the home and an investment account to enable those assets to be transferred – by way of the will – into the trust.
We were able to complete all this just a few days before Dennis passed away. We then helped Carla with the probate of Dennis’ will and completion of the transfer of assets. Carla is struggling to adjust to her life now, having devoted so much of her time over the last several years to caring for Dennis. But, as she moves forward, she and her children can take comfort in knowing that by working with us they were able to take advantage of our knowledge and understanding of how the laws work so we could put Carla in the best position possible to protect her assets and make it easier for her children to help manage her care if and when she need it.
If We’re on Hospice, Why Bother with Long Term Care Planning?
April 23, 2012
Carla called me only after much urging from her friend. Carla’s husband, Dennis, had lung cancer and it had spread throughout his body. The end of his battle was nearing and he had been approved for placement on hospice, an approach to medical care where the goal is to enhance the quality of life for patients with terminal illness but who are likely to die within 6 months. It appeared that Dennis only had weeks to live and a long term nursing home stay wasn’t a likely scenario. So, why was she calling me? Let’s take a closer look.
Carla told me the last several years have really taken a toll on her health. She is 70 but starting to slow down physically. She said she has put knee replacement surgery on hold. It was clear that Carla’s focus was completely on Dennis but her friend recognized that she also needs to focus on “life after Dennis”. That’s why Carla was calling, although I don’t think she realized it entirely.
I asked her about her finances. Dennis had a pension of $2500 and Social Security of $1500. Carla, who didn’t work outside the home during the years she raised their 3 children, only received Social Security of $750 and no pension. She also told me that Dennis’ pension would stop once he died. She remembered that he took the maximum pension option when he retired a few years ago but that there would be no survivor option if she outlived him. I told her that she would lose one Social Security check as well, keeping the larger one.
I asked Carla about their assets. She and Dennis owned their home which she estimated to be worth approximately $300,000 with no mortgage. They also had savings totaling $250,000. They had no life insurance and no long term care insurance. I asked about their legal documents. Carla said she and Dennis had both executed powers of attorney and health care directives several years ago. Their wills she estimated to be about 20 years old, prepared when her children were of school age. Their wills left everything to the surviving spouse and then alternatively to the children.
As I mentioned, Dennis was now on hospice. Carla had set up a hospital bed on the first floor and brought Dennis home. At this point he was bedridden. A hospice nurse was coming to the home several times a week. Although very tired, Carla said that Dennis was completely lucid. She then asked me what exactly I could do to help her.
It was clear from her question that her focus was on Dennis. She wasn’t thinking about her own needs but I was. Although not easy for her to do, I asked Carla to shift her focus for a few minutes. I asked her about her own health and long term care needs. She again told me she would address it after Dennis’ passing.
“Who will care for you”, I asked, “if you need long term care in the future.” Carla told me her children don’t live nearby and she never really thought about it. She wants to be cared for at home, just as she is doing for Dennis, but she recognized that it won’t be easy. I then told Carla that we could help her try to accomplish that but there are steps that we need to take immediately, without delay. Next week I’ll give you the details.
Is the Heat Really Off? (Part 2)
April 16, 2012
Last week we were talking about Charlie and Doris. We were in the midst of spending down assets and preparing to file a Medicaid application for Charlie, a nursing home resident, when he passed away. So no need to do anything further as far as long term care planning – right? Well, actually no, that’s wrong.
I explained to Doris that putting a plan in place now to protect her assets would insure that her children won’t need to respond in crisis if and when she needs care, in the way that she had to when Charlie became ill. It will be much more difficult for her children to provide that care. They have their own lives and young children to care for.
I also told her that if we set up a plan to protect her assets now, we could then qualify for Medicaid benefits without spending down everything she has first – provided we can get through a 5 years waiting period. That is what is known as the 5 year Medicaid look back. She knew exactly what I was talking about because she didn’t have the opportunity to do that when Charlie took ill.
Why is this so important? Not necessarily for the reason you may think. Some people think of it as “cheating the government” if I set aside some of my assets in a way so that I can qualify for government benefits without spending them first. To understand why that’s not true you first must realize that the State decides what it will pay for and what it won’t pay for. You’ve spent all your money, only to find that there isn’t a government program that will cover your needs. Now what? You’re out of luck.
On the other hand, if you’ve planned ahead, set aside some funds, and waited through the necessary period of time – the 5 year look back – you can qualify for government benefits available that might help you but you also have those same funds ready to supplement your needs. Doris wants to remain at home as long as possible. I explained to her that there are government programs that cover some amount of care at home but if she, at some point, needs round the clock nursing home level care she’ll need to go to a nursing home when she runs out of money – unless she has set aside funds as part of a long term care plan. She can then qualify for government aid to pay for some of the care and she’ll have the funds set aside to pay for the rest That’s how she can stay out of a nursing home.
I can always tell the exact moment when someone “gets it” – that “aha” moment. What I was saying suddenly clicked with Doris. Setting aside assets could mean she could qualify for VA benefits since Charlie had been a Korean war veteran. It also means she could qualify for home based Medicaid benefits which could help pay for her care needs and keep her out of a nursing home. It also means she could pass on a legacy – albeit a small one – to her children and that was something, she told me, that was always very important to Charlie.
Doris recognized the mistake she and Charlie made in failing to plan ahead. She knew that she didn’t want to repeat that mistake again. Lesson learned and so we got to work immediately on putting a plan in place for Doris and her family.
