One of the biggest problems that senior citizens ages 65 and older face is that they are frustrated by the fact that they have worked hard and sacrificed to save a nest egg for their later years only to face the possibility that they could lose everything to a long term care medical need, while others who spend and don’t worry about their finances can rely on government assistance to pay for all of their skilled nursing home costs.
Sometimes older parents and grandparents even wake up in the middle of the night worrying about how much their children will struggle having to provide care for their aging parents while the children watch the family finances go down the drain.
Senior citizens think that if they could wave a magic wand, they would want the following five things to occur:
1. They could live out their remaining years in comfort with peace of mind knowing that they will be able to keep what they have and protect it for the generations they leave behind.
2. The natural aging process will prevent them from being forced to deplete their life savings from having to spent on sub-standard care in a nursing home.
3. They can pass along the actual and intrinsic value of the family home to their loved ones when they pass away, without the government stepping in and taking the home from the descendants.
4. The children, and perhaps even the grandchildren, can enjoy the fruits of the senior citizens’ labor and their sacrifices, while using the inheritance as a stimulus for positive relationships which continues to last, in part, due to the financial value and emotional value of the legacy left behind.
5. The seniors leave their legal affairs in a way so that it is simple for the next generation to obtain the benefits of the legacy, without the relationship-scarring government intrusions that often get in the way.
Unfortunately, the consequences of failing to address this issue include:
· Medicare Doesn’t Cover Nursing Home Expenses. While Medicare will pay for some of the nursing home costs for the first 100 days of rehabilitation if you had a prior hospital stay of at least three days, you must pay 100% of the remaining costs of the skilled nursing facility (unless you qualify for Medicaid).
· Difficult to Qualify for Medicaid. Unless you have taken advantage of legal strategies years in advance, or unless you have nothing, you will not qualify for Medicaid and you will be responsible for 100% of skilled nursing home costs as a private pay patient.
· Married Couple with Only One Spouse Needing Skilled Care. If you can stay in your home but your spouse needs skilled long term care, you will be forced to deplete all your combined savings (no matter who’s name it is in) down to the limit known as the Community Spouse Resource Allowance.
· Both Spouses Need Skilled Care. Here’s where it can get downright devastating. Let’s say one spouse is dealing with dementia at home while the other spouse suddenly has a stroke, rendering that spouse unable to take care of their own self, but also unable to take care of the demented spouse. Both spouses then enter a nursing home incurring double the already-expensive nursing home costs. This is a situation where a life of savings that resulted in as much as a half-million dollars can evaporate lickety-split. The couple will not get a penny of help from anyone or any insurance company or any government program until they spend their combined assets (excluding the home and car – more on that later) down to less than $3,000.
· You are a Burden on your Children. You don’t want to burden your children by moving in with them or having them move in with you, but your prior lack of planning gives your family no choice but to force the children to care for you – it’s the only way to protect your savings and to protect the value of your home for your heirs. Your children give up the lives that they planned to lead in their 50’s and 60’s to care for you.
· Worst-Ever Last Will: “I leave everything to my spouse.” Many elderly couples get comfort from knowing they have a last will and testament in place leaving everything to their surviving spouse. But this can be a false sense of security. Let’s say Mom and Dad each own $200,000 of assets (total estate = $400,000). Dad dies with a Will leaving everything he owns to Mom. Mom now owns it all. When Mom later enters the nursing home, nothing is protected. The worst thing Dad could have done was write a Will lumping everything into Mom’s estate, and then forcing Mom to deplete the entire family worth on her skilled care expenses.
· You Thought the Government Could Not Touch Your Home. Many seniors mistakenly believe that their home is protected from nursing home expenses. Here’s the facts: when you enter a nursing home, you must deplete your entire life savings on the nursing home but you will not be forced to sell your house AT THAT TIME. Makes sense – the government wants you to be able to keep your home while you are in the nursing home just In case you get well enough to return to your home. However, when you die, Medicaid laws require the state to exercise the state’s Estate Recovery Rights by forcing your estate to sell your home and reimburse Medicaid for what they spent on you while you were in the nursing home. For example, let’s say you have a home and $350,000 in various financial assets. When you enter a nursing home, you must spend your $350,000 down until you have less than $2,000 remaining. Then, Medicaid will pay most of your nursing home cost. They will allow you to keep your home, but when you die, your home must be sold. If your home is worth $200,000 and Medicaid spend $199,500 on your care in the nursing home, then Medicaid will get that money back and your heirs will receive the remaining $500.
· Probates Required. What can make matters worse, is if there happens to be anything left in your name after you pass away, your children or other heirs must then hire an attorney or law firm to take all of the family member through an attorney-controlled, government-supervised probate proceeding. Families who must go through this often complain because it takes a long time to go through, it’s expensive (at a time when the family is trying to preserve all they can), it can be a lot of work gathering detailed family data and getting everything valued, and it can cause family animosity when unreasonable expectations are not met. And if you are married, no that your survivors must go through the probate twice: once when the first spouse dies to get that spouse’s name off of the assets, and then once again when the surviving spouse dies.
In a later post, we'll address what many people do to ATTEMPT to protect their estates, and why those attempts fail.