Last week we were discussing Mary and her mom. Mary opted not to do long term care planning for her mom at age 95. At age 100 she called me again. We met and Mary asked me, again about long term care planning. I told her that Mom would need to live 5 years, now to 105, and spend about another $600,000 (costs had gone up) before we could apply for Medicaid. Mom was now down to $800,000.
Mary’s response was, “I guessed wrong the first time, so, although I don’t think she will live to 105, I will plan against that risk.” Mary was especially concerned because she was an only child, had divorced her husband a number of years ago, and did not have much in the way of assets herself. “Mom had always planned to leave me enough for me to survive on when she’s gone”, Mary related.
Well, the rest of the story is that Mom made it to age 103. We never did apply for Medicaid. But, looking at it in hindsight, had Mary made the decision the first time we met, Mom would have been on Medicaid at age 100, saving approximately $360,000.
You might ask “why should Mary get this windfall? She is cheating the government.” But, is that really the case? Mary now has about $250,000, not a whole lot for someone who is on a fixed income and could live another 20 to 30 years. Mary may well find herself living in poverty, needing government handouts years before she ever might need long term care.
The lesson to be learned is that planning isn’t about predicting what is going to happen. It’s like buying insurance. I buy life insurance to protect my family should I die. I am buying peace of mind, protection against a scenario that could occur. I am not “betting” on my mortality. If I don’t die while the policy is in force I won’t be upset that my family didn’t “collect”.
It’s the same thing with long term care planning. If thoughts of nursing home care are keeping you up at night or occupying your thoughts during the day, you ought to manage that risk. Most 95 year olds don’t make it to 100, especially when they are at a nursing home care level. Mary thought her mom wouldn’t make it either. But, in the end, her mom wasn’t like most 95 year olds.