Mom Has $1,000,000 – She’ll Never Run Out of Money (Part 2)
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.