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.”