Last week we were discussing George’s dad and step-mother. Dad married Rita 5 years ago and now she needs nursing home care. Are Dad’s assets protected or must he spend them down towards Rita’s care?
Even though Rita came to the marriage with few assets and they’ve been together only a few years, Medicaid looks at them as one unit. Dad’s assets count when determining Rita’s Medicaid eligibility. George wasn’t thrilled with my answer. “But there are some options,” I told him.
One thing Dad could do is sell his home and buy another one. A home is an exempt asset as long as the healthy spouse is living in it, no matter the value. If his home is worth $500,000 or $600,000 or $700,000, it is exempt. But, George told me Dad wouldn’t want to move.
Another option is to purchase a Medicaid compliant annuity with the countable assets. This would convert countable assets to a stream of income. While assets in Dad’s name are countable towards Rita’s eligibility, income in Dad’s name is not. I told George that annuity route can be complicated. Not every annuity is a “Medicaid compliant” one and New Jersey still views these with a huge amount of skepticism, even though it is clearly permitted by the federal rules.
I explained to George that ultimately it is his father’s decision. If he does nothing and Rita lives long enough in a nursing home, Dad will have the house and $117,240 in assets before Rita can be covered by Medicaid. While Dad may want to pass on an inheritance to George and his brother, he also has made a commitment to care for Rita and he may have a very different view of what that means than George does.
It’s a potentially sticky situation. George was insistent that Dad’s wishes have always been clear about leaving his estate to his children. I told George that it’s up tol Dad, since the assets are still his. I would need to speak with him directly about it and give him the options.
How much should he spend on Rita’s care, $100,000, $200,000, $400,000? There isn’t a right or wrong answer. It’s not something you can look up in a book. It all depends on what Dad’s goals are, not George’s. And that in a nutshell is what makes second marriages so problematic when it comes to long term care. It is clear to me here that father and son have different interests here.
But, sitting down and working through the issues is critical to insuring that Dad’s wishes are honored. This is especially true because George is the person his dad will rely on to manage his finances and healthcare should his health begin to decline. George must have a clear understanding of what his dad wants and if we are to work with him to put a plan in place, he has to commit to carrying out what his father wants, whether or not it fits with what George wants.