Preparing to age gracefully

For the Monitor
Tuesday, February 07, 2017

Nursing homes. Long-term care. Medicaid. These are all words that make people of any age cringe.

It is an area though that is very specialized.

A few years ago, a woman came into my office for a review after having drafted her will, trust and powers of attorney a couple years prior. I asked her how things were going and she said not good.

She had been diagnosed with Alzheimer’s, and it had progressed to the point she was unable to do math. Now this was a very big deal to her, as her life’s work was that of a physicist. Math was her world.

She looked at me and asked me what’s our plan? When I replied with a description of her estate plan, she shook her head and said, “No, what happens when I can’t remember where the stairs are? Who do my kids call? How do they know where to write the check from, and what if I can’t afford the check?”

So as an attorney it got me thinking how this is a common problem for a lot of people.

The first step is understanding what exactly long-term care is. Think about the things we do every day: Get out of bed, go to the bathroom, take a shower, get dressed, eat breakfast and have our minds.

One day we can’t do two of those things. When that happens, we need what is called long-term care.

You can get that care in your home or in a facility.

Costs for such care can range from anywhere between $3,000 and $15,000 per month on average. Few people have extra income to cover those costs. So what can they do?

There are only three ways to pay for such care.

You pay the bill out of pocket

Long-term care insurance pays the bill

The state Medicaid program pays the bill

When the average stay in a nursing home is three years, seven years if you have a mental diagnosis, spending all of the money you worked so hard to save is rarely palatable.

Many people don’t have long-term care insurance since it is expensive. Many insurance companies are no longer offering it either.

That leaves Medicaid. What does that look like? I hear people getting trusts all the time, don’t those protect you? What exactly is a trust? These are questions that frequently go unanswered and the internet can’t provide a straight answer to.

To qualify for Medicaid there are a lot of rules. The general overview though is that you have to meet financial qualifications on both your assets and income.

The person who needs the care, so long as their income is less than the monthly long-term care bill, is eligible. The income of the spouse not in need of long-term care is not counted for purposes of eligibility.

On the asset side, it gets more complicated. Add up everything (stocks, bonds, bank accounts, cash in life insurance, retirement accounts) for both spouses. If you have more than $120,200, you don’t qualify. If you are single, then the amount of assets cannot exceed $2,500.

Your primary home is exempt from the amount above so long as one of you is living in it.

Any gifts you have made in the last five years are going to be added to the asset limit.

There are exceptions to the above rules, but they are all case specific. Essentially the assets have to be “spent down” in order to meet the asset limitation before the state will pay for the nursing care bill.

How do you spend them down? There are several tools you can use, such as certain types of trusts, personal care contracts, fixing up the house, purchasing a newer car, some financial tools, prepaying funeral expenses, and, of course, paying the bill out of pocket in the meantime.

Having your lawyer, accountant, financial advisor and home health care company create a plan, so your family knows what number to call when anything happens, makes it much easier to age gracefully in a complicated long-term care world.

(Jenny Rivard is a lawyer and the owner of American Wealth Protection, which provides legal, financial and tax services to the elderly.)