You started planning for your retirement from your very first paycheck many years ago. Each month a small portion of your pay went into your retirement account even though you knew it would be decades before you would need the money. You knew not to just wait until retirement to hope for the best.
When you decided to get married, months of preparation went into the event, from arranging a venue to hiring a photographer, ordering flowers, arranging for catering and planning a honeymoon. You were smart enough to know that this was too important to leave it to chance.
Each year when you take a vacation, you PLAN a vacation. You decide where you want to go and how to get there, where you plan to stay, what you plan to do while there and have an idea about where you want to eat. You don’t just leave town and hope for the best.
Every Thanksgiving, you think about who is coming over, what to cook and what to assign to others to cook and bring with them, when dinner will be served and where people will sit to eat. No one would just throw together a Thanksgiving dinner without proper planning! That would be disastrous.
And yet, people are retiring every day with little more than a savings account set up to see them through their retirement years. While there is nothing wrong with having money set aside for retirement, many people are unprepared for the range of challenges they will be facing as they grow older. Financial advisors help people save for retirement and that is a good thing. But the mistake people make is thinking that all they have to do to be ready for retirement is to have saved enough money to be comfortable. In that sense the financial planning industry has done a great disservice to our senior population. As the saying goes, there are some things that money can’t buy, even in retirement!
The bottom line is this: People simply do not PLAN for that time in their lives between retirement and their funeral! They may have saved money for that time in their lives, but they have done little more than that in terms of planning. Therein lies the problem.
There are three broad categories of needs that retired people have, and they are:
An individual’s medical needs will change as they age and as they grow from being completely independent to becoming more dependent on others for care. Their mobility might be challenged or their eyesight or hearing. Their memory almost certainly will suffer. Where will they live and do they have a vote in the matter? How will they pay for it? Who will be writing those checks? What about their spouse? What changes will be needed if one spouse dies?
Their financial needs can change too but not often for the better. After retirement, many people grow accustomed to living on a fixed-income but when they are faced with the additional cost of a caregiver in their home, or with having to relocate to assisted-living, their budgets are not prepared for thousands of dollars of new debt each month. The forecasts their financial advisor gave them are not so accurate any longer!
Their legal needs too must be updated if they are being proactive. Who do they trust to pay their bills for them and manage their financial affairs if they are in a nursing home? Who do they trust to make healthcare decisions? Do they prefer burial or cremation and if they have already paid for plans, where is the contract?
Many families express a desire that their life savings should pass to their children and grandchildren rather that be used to pay for nursing home care. The family farm that has been in the same family for generations? They don’t want to see that go to Medicaid if it can be helped. The lake house where everyone gathers for family vacations? They don’t want to see it sold to pay for nursing home care. Other than having a vague notion in their minds about their preferences though, many families do nothing more than hope that things will work out they way they want them to.
In 35 years of practicing Elder Law, I have never once met a client who said that they can’t wait to move to a nursing home. No one wants to go to a nursing home and many families even have an understanding that the children will never place a parent in a nursing home. And yet, here in Alabama we have over 26,600 nursing home patients at any given time. Between age 65 and your funeral, on average you have a 50/50 chance of spending time in a nursing home. So, it pays to plan as if it might happen even if you might get lucky and never need a nursing home.
So how does a person go about this sort of planning?
The best place to start is to meet with an Elder Law attorney. Most larger cities have several firms that specialize in this field. It is different from estate planning, just know that. Every Elder Law attorney is an estate planning attorney but not every estate planning attorney is an elder law attorney.
Your Elder Law attorney will guide the conversation to cover topics related to your current and future medical needs, your current and future financial challenges and what benefits you might be entitled to and will review your current estate planning documents to see if they will serve you well into the future. She or he might also discuss Veterans benefits and Medicaid planning, two key elements to elder law. If they don’t bring it up, you should.
The following is a summary of what you need to know about Medicaid in Alabama. Medicaid (not Medicare) will pick up all of your nursing-home care costs each month over and above your monthly income ONCE YOU QUALIFY for the program. So, if your Social Security income is $1,500 per month, and nursing homes cost $8,000 per month (and they do), then Medicaid will pick up the difference, or $6,500 per month - once you qualify.
Qualifying for benefits is hard though and Medicaid is not in the business of being charitable or forgiving, so it can be an uphill battle to become qualified. You must meet five basic requirements to be eligible:
The requirement that trips up many people is the asset transfer requirement. Many people will think they can move a bank account, CD, stocks and bonds, real estate or some other asset to their children and protect it from Medicaid. They cannot. Whatever else you might think about government bureaucracy, don’t assume Medicaid is not thorough. They are. If you have an asset or had one within the last five years, they will find it. If they find an asset that you did not disclose, you also have fraud to contend with. Full disclosure is therefore the only course of action.
But what if you want to protect an asset from having to be considered by Medicaid? Is there a way to do it?
Yes, there is, HOWEVER, planning must be put in place at least 5 years PRIOR to a Medicaid application. Planning is essential here. Planning well ahead of actual need is critical. If you have a 50/50 chance of going into a nursing-home, would it make sense to protect your life savings from the cost of nursing-home care? Or do you have an extra $8,000 a month to spend for the next three years?
Below is a list of some frequently asked questions that we see and hear from people who are already in this situation:
Medicaid will take all my spouse’s income and I will have nothing to live on.
Medicaid has a “MMMNA” or “Minimum Monthly Maintenance Needs Allowance” which is $2,155 per month for 2020 (this amount changes each July). The Community Spouse’s income cannot fall below this amount, so Medicaid allows them to keep a portion of their spouse’s SSA.
Medicaid will take my home away from me if I place my spouse in a nursing home on Medicaid.
The “well spouse” is considered in Medicaid’s eyes as the “Community Spouse” and can continue living in the home uninterrupted for the duration of their life. Medicaid will place a Lien on the residence which must be paid once the residence is sold.
The parent can transfer their residence to their child to get it out of their name so Medicaid cannot take it.
This is a huge misconception and totally incorrect. This would be considered an illegal transfer and Medicaid would penalize the Claimant for the amount of the Fair Market Value of the home at the time of transfer. This means the Claimant would not qualify for Medicaid until this penalty is paid off.
My wife and I own a farm which has been in my family for generations. If we go into a nursing home on Medicaid, my family will lose everything.
Generational property can be bought and sold to other family members. As long as the family member(s) pay the Fair Market Value of the property, there is no problem keeping the farm in the family.It can be purchased by one family member or divided by many family members.
I can’t afford to place my dad in a facility for Medicaid as they will take everything I have.
Medicaid does not look at the assets of the “Sponsoring” family. That is, the person who helps the individual apply for Medicaid is not in any way encumbered by Medicaid. Only the individual on Medicaid and his or her spouse are responsible for those items not paid by Medicaid.
My parents are both slipping a little but I don’t know how to begin this process!
We see this all the time. Chances are that your parents want to leave things to you after they are gone but want their life-savings to take care of them for as long as possible while they are here. Without proper planning, that might be unachievable, so ask them if they would spend an hour of time, talking with an attorney who helps seniors just like them? We can review with them their goals and point out pitfalls along the way that might interfere with those goals.
My mother continues to live at home alone even though Dad died a couple of years ago. I want her to move but she won’t consider it!
And why should she move? Her church, Post office, grocery, drug store and friends are all in her neighborhood. On the other hand, you probably aren’t, and as she comes to rely on your more and more for help, it will become a burden for you to drive across town just to pick her up. Too, her neighborhood might not be as safe as it was decades ago and your concern for her safety is warranted. There may be several reasons why she should move, but change comes slowly to everyone, especially those who have many memories in their old home. Ultimately it is her decision, even if you are her POA.
Mom and Dad have their home, CDs, a savings account and some stock and I am concerned they will lose it all, and their home, if either of them have to go into a nursing home!
Without proper planning, there is a good chance you are right. Nursing homes cost at least $8,000 per month and the cost is NOT covered by Blue Cross, TriCare or Medicare. It is private pay until their money runs out. If they each have $300,000 of excess cash sitting around to be used for nursing home care, they might not need to plan. If they aren’t so lucky though, understanding the rules and the exceptions has a real dollar value! It would be devastating for one to enter a nursing home and the one still in the home have to suffer with no end in sight. Protecting their home and protecting their nest-egg is central to Medicaid planning. Not planning well ahead of need is a recipe for disaster though.
My mother remarried and signed a pre-nup. She thinks this will protect her if her new husband has to go into a nursing home.
Pre-nuptial agreements are wonderful tools in second marriages but they provide absolutely no protection should either of them have to enter a nursing home. Her assets are at risk for his nursing home care costs!
My father has been gifting all the kids $10,000 per year to spend down his estate in case he has to enter a nursing home.
This is a common mistake. The IRS says that any person can gift to any other person up to $15,000 (not $10,000) per year and it is a tax-neutral event. However, Medicaid has a different set of rules and their rules say that ANY gift made within five years of needing Medicaid will create a transfer penalty. So, if your Dad applies for Medicaid, they will ask that all the $10,000 gifts he has made over the last five years be returned to him and then spent down on his nursing home care before Medicaid will begin. This may be impossible to achieve, so he might want to get some professional advice going forward.
I am already my mom’s POA, but I’m now being told I don’t have the authority to make certain decisions for her!
Yes, many older Powers of Attorney don’t provide needed powers that the adult children need and now you have to go through a lengthy and expensive Conservatorship to gain the needed authority! It makes sense to have the POA reviewed while it can still be modified rather than take a chance like this.
Medicaid planning is there to help seniors and their families understand the rules they must follow in those three areas we mentioned- legal, financial and medical. Following the rules saves money, avoids delays and many times keeps the government out of the family’s business. No one wants the County Conservator taking over every aspect of a person’s life, from where they live and what they wear to who can visit them, but that can be the outcome of not planning. No one wants to have to sell their home to pay for care but that can be the outcome to not planning. Life is hard enough. There are no gold stars for making life harder on yourself or your family. Think about the other planning you have done throughout your life. What is more important than planning for your family’s future? Don’t wait until it is too late to get these plans in place. None of us know where we will be tomorrow much less five years from now!