If We’re on Hospice, Why Bother with Long Term Care? (Part 2)
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.