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.”
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.
Is the Pressure Really Off?
April 9, 2012
Charlie had been transferred to a nursing home when his wife Doris called. Medicare was paying for his care but she had just learned coverage would stop in another week and the private pay cost of care was $11,000 per month. I could hear the panic in her voice when she said the $200,000 of assets plus her home was all she had.
I explained to Doris that the home is an exempt asset which she can keep as long as she continues to live there but the $200,000 is countable and must be spent down to $100,000. Some of that money must be spent towards nursing home care but I told her that we could also help her spend the rest in a way that most benefits her since the amount she is entitled to keep is not much for her to live on. She hired us to help her get through the spend down process and file the Medicaid application and we got to work. Several months later, we were just about ready to file the application and then Charlie passed away.
Doris had been through a lot in the past year since Charlie’s health had reached a crisis point. But even so, his passing was quite a shock after 50 years of marriage. I told her that, obviously, we don’t need to file for Medicaid, but that we should discuss the next steps after things settled down for her a bit. She appreciated that and I made a note to reach out to her in a month.
Actually, about 6 weeks later we connected. Her first statement to me, one I hear often, was “I guess we don’t need to do the planning anymore”. That’s a very natural response. The immediate crisis which caused her to reach out to us – facing a $132,000 a year long term care expense – was no longer a concern. The pressure was off, so to speak. What I told Doris, however, was the opposite.
She and Charlie had been totally unprepared and it had cost them. Doris was down to $100,000 in assets and a house worth $300,000. With Charlie’s passing she lost half of their income – one Social Security check and 50% of Charlie’s pension. Doris would have to make this money last for the rest of her life, including covering her own long term care needs. These were the negatives. But she had one positive. She is healthy. So time is on our side – but here is the key – provided we take advantage of it. Next week I’ll tell you what I told Doris.
BFF and TTYL – What the Heck am I Talking About?
March 5, 2012
Yesterday, we kicked off my book tour for my new book, “Be Nice to Me – I Pick Your Nursing Home” with an event and book signing at CareOne in Livingston. My 3 children, who Laurie and I expect to be part of our support system when we reach elder status, were all there. It is hard to imagine them in that role right now since they haven’t yet reached college age. (My oldest, who appears on the cover of the book, just turned 18.) But, as with any parent/child relationship, the question that we must address is “are we even speaking the same language?”
In today’s technology heavy world, new language and terms seem to pop up overnight. If you have children who text frequently, you might be familiar with shorthand such as BFFL (best friend for life) or TTYL (talk to you later). I recently received an email that has been circulating, suggesting some texting codes for seniors. BFF stands for best friend’s funeral and TTYL means talk to you louder.
Amusing, perhaps, but it illustrates a point. In trying to speak with our parents about the difficult and uncomfortable subjects of aging and long term care, we have to first ask ourselves whether we are even speaking the same language. If we aren’t communicating then we can’t begin to solve the problem.
And that is the reason I wrote the book. So many families don’t know how to begin that process. Many need an impartial professional to help them move forward, motivate them to take action. A great first step is to educate yourself and “Be Nice to Me” is the perfect place to start. A compilation of short stories and features, it is designed to illustrate, through real life situations, the danger that long term care poses for unprepared families and how to fix it. For more information go to www.benicetomebook.com and if you’d like to host a book event at your organization or facility contact us at 973-994-2287.
For those of you wondering about the follow up to Part 1 of last week’s post, I’ll post the solution next week so stay tuned.
A Family Owned Business Long Term Care Nightmare (Part 1)
January 23, 2012
George built his manufacturing business from scratch. He and his wife, Claire, had raised a family of 2 boys and a girl, but George treated the business like another child, nurturing it from infancy to maturity. It had allowed him to provide for his family, putting all 3 children through college, and it now also supported his boys, John and James, who both joined the business and are raising families of their own. At 70, George still worked full time. He loved it and couldn’t see retiring. But then tragedy struck when George suffered a stroke.
At first, it looked like George would make a complete recovery, but then he suffered a setback, a second stroke resulting in permanent paralysis. It became clear that he would need long term care. Claire didn’t want to place him in a nursing home, thinking she would be able to care for him at home. Very quickly, however, the family realized that they would need home health aides. Providing care is exhausting, physically and emotionally, and Claire, at 70, just couldn’t provide the round the clock care that was needed.
For the first time, George’s family faced the reality of the long term care system and they were shocked. George and Claire never did buy long term care insurance. The health insurance plan that they had for years through the business, they soon learned, didn’t cover the type of custodial care George needed. They were facing $100,000 a year in expenses and no insurance coverage for it.
That’s when John called us, hoping we could help. I went over the financial numbers. George and Claire owned a house and about $800,000 in investments. George also owned the business and the building which houses the business, John estimated the combined value at over $1,000,000 but he wasn’t confident in those numbers since they had never before valued either. Then John asked the $64,000 question. Could they get any help, meaning government benefits?
I explained how Medicaid works, that it’s a needs based program. Claire, as the healthy spouse, could keep the house and just under $110,000 before Medicaid would cover George’s care. “Does that include the business and the building?”, John asked. “Dad always talked about a succession plan to transfer ownership to James and I, but he just never got around to doing it.” Next week I’ll tell you what I told John.
My Name is on Mom’s Checking Account (Part 2)
January 16, 2012
Last week we were discussing Melissa and her mom. Melissa has been handling Mom’s finances for several years as agent under Power of Attorney – or so she thought. We discovered that actually Melissa is a co-owner on the account. She can still write checks, pay Mom’s bills, and access her account so does it really matter that she is co-owner rather than acting as an agent with respect to the account?
Melissa’s co-ownership carries with it certain legal rights and responsibilities. Firstly, if Melissa is a co-owner, the assets in Mom’s account are now subject to Melissa’s creditors being able to reach it. For example, if she is sued and a judgment is obtained against her, the account can be accessed to satisfy that judgment. We can’t say it’s Mom’s money. The same thing applies if Melissa files for bankruptcy. Any account which she is listed as a co-owner may be seized by the bankruptcy court and trustee.
If Melissa is married and goes through a divorce, the joint account might be considered marital property in a divorce proceeding. Melissa’s husband could assert a right to one-half of the account. It doesn’t matter that it was always Mom’s money and that she didn’t intend to give it to Melissa.
Ownership means that Melissa can legally take the money for her own purposes, even though that wasn’t the intention. That may not be a concern in her case but in some instances it could be an issue. It might be tempting for a co-owner to “borrow” some of the money in the account. That could be a real problem if the parent needs the money for his/her care needs.
Co-ownership of a bank account typically means joint with right of survivorship. What most people don’t realize is that this changes how that account passes when an owner dies. Mom’s account will not pass under her will to Melissa and her 2 siblings, but instead, will pass only to Melissa as the surviving co-owner, even though Mom never intended it. Melissa can honor her mother’s wishes and share the proceeds with her brother and sister, but legally she is not required to do so. If she does, it will be considered a gift from Melissa, potentially subject to gift tax payable by Melissa.
This unexpected change could cause bad feelings amongst family. Let’s alter the facts a bit. What if Melissa maintained that Mom really intended to leave her the account in gratitude for the time Melissa spent on Mom’s behalf? If she never communicated that to her other children, Melissa is left to explain it. At worst, her siblings could sue her to try to establish that Mom never intended that result. At best, the bad feelings could linger for years and cause family disharmony.
To the untrained eye, three little letters “POA”, may not seem like much. But as you see, without proper legal guidance, they can add up to a whole lot of heartache for families.
My Name is on Mom’s Checking Account (Part 1)
January 9, 2012
It’s an issue I deal with frequently as an elder law attorney. Melissa tells me she has been handling Mom’s finances for several years. She writes checks from Mom’s checking account and transfers funds from Mom’s other accounts, as needed, to pay the bills. She says she does it because she has power of attorney. Upon further inquiry I learn she is actually co-owner on the account. Does that matter? Is there a difference?
Yes, it matters and yes there is a difference. Let’s look first at the difference. A power of attorney is a document in which the principal designates an agent to act on the principal’s behalf. A financial power of attorney will typically give the agent the power to conduct financial transactions, such as pay bills, access bank and investment accounts, conduct real estate transactions, pay taxes, etc. It can be as all-encompassing or limiting as the principal wishes.
With respect to bank accounts, the power of attorney will give the agent the ability to write checks on the prinicipal’s behalf. The agent will sign his/her name followed by the initials “POA” . If Melissa is Mom’s agent, then she is acting in a fiduciary capacity and must act in Mom’s best interest. The assets in that account are still owned by Mom. However, if Melissa is a co-owner of the account, then those assets become hers or, in some cases, one-half of the assets become hers.
It is very easy to misunderstand the difference and in many cases we have found that people are under the impression they have set up a POA situation when in fact they have made their “agent” a co-owner. A careful review of a monthly bank statement can reveal the answer. If Melissa is an agent under power of attorney, her name would not appear on the bank statement or it would appear with the initials “POA” after it. She produced a recent statement and it listed Mom and Melissa’s names but no “POA”. A call to the bank confirmed that Melissa is a co-owner of the account.
Now that we understand the difference, let’s go back to my first question, “Does it matter?” We’ll delve into that next week.
Mom Has $1,000,000 – She’ll Never Run Out of Money (Part 2)
January 2, 2012
Last week we were discussing Paul’s mom, 88 years old and in need of nursing home care. She has $1,000,000 in assets so first impressions suggest that she won’t ever need Medicaid. But, upon further examination, we might want to reconsider that conclusion. Here’s why.
Paul’s initial statement about never qualifying, or thinking he might need, Medicaid for his mother is a common one. It assumes that there is one sole concern, long term care for Mom. While that is certainly the primary concern, in this case it isn’t the only one. As we learned, Paul’s brother, Bill, is unable to support himself. Although he hasn’t been deemed disabled or been clearly diagnosed as far as Paul knows, Bill will likely need assistance the rest of his life.
Mom attempted to address his needs by leaving a portion of her estate to Paul to help provide for Bill’s needs (as I have written in previous posts, not the optimum way to do this. A trust for Bill’s benefit is a much better way to go). The more she spends for her care, however, the less there will be to support Bill. That’s why Medicaid is important here.
I told Paul I could help but we’d have to act quickly. We could set up a trust and transfer a portion of his mom’s assets to that trust. But we need to keep enough assets in her account to cover 5 years of nursing home care. Why? Because when we apply for Medicaid we’ll need to show, that from the date we apply going back 5 years, that she didn’t make any transfers for less than fair value, which, of course, she would have done.
I know what you may be thinking. Why should the government pay for her care when she has the money to pay for it herself? But is it really that simple? Life rarely is. Bill has no way to support himself. He’ll end up destitute and Paul doesn’t have the means to support him. Mom had always intended to provide for his care. She just didn’t go about it the right way. Luckily, Paul called us with enough time to fix things. Mom will still pay plenty towards her care, probably close to $600,000 if she lives 5 years but there should be enough left for Paul to provide for his brother.
Paul’s scenario is not all that uncommon. Families are often wrestling with more than one problem at a time. Long term care is the most pressing one but there other competing interests. It is, therefore, critical that you take a wider view of the landscape and over a longer time frame. Which means that you might not have enough money as you think you have and it may be time to put a better plan in place.
