Tools to balance the fight between health care costs and bankruptcy?

[sebvad]

Background: Elderly father has Alzheimers/vascular dementia and is moved into a care facility who's business plan is to bankrupt their residents in exchange for care. In order to qualify for entry, one has to demonstrate sufficient net worth to overcome their internal hurdle (we don't know what the min qualifying NW amount is), and once he's in - he's in. The particular care facility we selected has a benevolence fund that kicks in once all his money is gone so he won't be kicked out - but it's pretty clear that as his Alzheimers progresses and he requires advanced care, w/in a year he'll be bankrupt as the cost of care escalates.

Which has us thinking about generational wealth protection. We're not billionaires by any stretch - but we've done ok. We'd love to be able to 'carve out' enough from a nest egg to qualify for entry into such a facility should the need arise - but 'carve out' the rest to shield/protect it to fund inheritances, charitable gifting, etc so that - again if the need arises and we find ourselves in a care facility - they don't take it all.

I know that predicting the future is difficult, and laws change - but are there legal instruments available that we should consider with an estate attorney to this effect, such as trusts? I'm not familiar enough with this topic to be able to suggest other tools even if they're the wrong ones to get the juices flowing to start a discussion...

 

[Car-Guy]

In order to qualify for entry, one has to demonstrate sufficient net worth to overcome their internal hurdle.


The particular care facility we selected has a benevolence fund that kicks in once all his money is gone so he won't be kicked out

Sounds odd to me but I've never looked into such a thing... What happens when this "benevolence fund" runs out of money? Charities, financial assistance foundations, etc, often do.

 

[marko]

Sounds odd to me but I've never looked into such a thing... What happens when this "benevolence fund" runs out of money? Charities, financial assistance foundations, etc, often do.

OP could be talking about a CCRC which have similar "guarantees".

IMO, other than that, its likely too late to set up mitigation vehicles for the father, but not too late for those still healthy.

OP needs to see an estate attorney asap.

 

[street]

Sounds odd to me but I've never looked into such a thing... What happens when this "benevolence fund" runs out of money? Charities, financial assistance foundations, etc, often do.

State, county or feds flip the bill for nursing home stay when you run out of money or assets. Any way that is my understanding, please correct me if I'm wrong.

 

[athena53]

State, county or feds foot the bill for nursing home stay when you run out of money or assets. Any way that is my understanding, please correct me if I'm wrong.

That's my understanding. Medicaid pays the bill if your assets are below a certain amount ($120,000- $130,000). Because Medicaid pays LTC facilities so little they want people who can afford to pay the sticker price for (typically) at least 2 years but they don't throw you out if you then qualify for Medicaid. It's much harder to find a facility that will take Medicaid from Day One.

I see "Suggested posts" on FaceBook from lawyers who want to help you protect your assets against LTC costs. They may involve irrevocable trusts but I'm not sure. (One poster here a few years ago found that his parents couldn't get into a CCRC because their assets to buy in were tied up in an irrevocable trust. Yeah, that's what "Irrevocable" means. )

Another tactic is to give away funds and assets far earlier than you expect to need them for LTC. Right now Medicaid has a 5- year "lookback" and will attempt to take back any asset transfers in the 5 years before you enter LTC.

IMO, it's only fair for your funds to go to LTC if you have them. DS and DDIL know that my primary financial priority is not outliving my savings. I also don't want to have them searching frantically for a facility that accepts Medicaid or trying to take me in when I'm senile, immobile and/or incontinent.

 

[harllee]

The CCRC (continuing care retirement community) where my mother lives does not take Medicaid but they have a trust fund to pay the costs for those who eventually run out of money so they do not have to leave the facility. The trust fund is not used very often because to get in the facility you have to have a pretty high net worth.

 

[ncbill]

Here if a facility covers a certain (low) percentage of residents from their own internal resources instead of putting them on Medicaid they get a 100% exemption from property tax...might be the same in the OP's state.

An irrevocable Medicaid trust is one way to shield assets...they are usually setup so the income goes to the person institutionalized but the principal goes to other beneficiaries after death...note there is a FIVE year look-back on any assets transferred to the trust.

Since I personally have visited numerous stand-alone nursing homes where I'd rather be hit by a bus than live in any one of them my decision is to purchase LTCi by age 60 and either stay at home or a private room at an assisted living facility (ALF) that offers increasing levels of assistance.

After watching mom bed-ridden for the better part of a decade before her death from a non-Alzheimer's form of dementia my health care directive will soon be modified to specify nothing but palliative, comfort care (not even oral antibiotics) once I'm diagnosed with any terminal disease, including dementia.

 

[Car-Guy]

OP could be talking about a CCRC which have similar "guarantees".

IMO, other than that, its likely too late to set up mitigation vehicles for the father, but not too late for those still healthy.

OP needs to see an estate attorney asap.

State, county or feds flip the bill for nursing home stay when you run out of money or assets. Any way that is my understanding, please correct me if I'm wrong.

I guess I was thinking the OP was talking about a high(er) end facility, but maybe not.

 

[Walt34]

See an elder law attorney practicing in the state where your father is immediately. As in make the phone call Monday morning. This being Saturday you have the entire weekend to search online to find one.

Just before my FIL was admitted to a full nursing care facility we went to see an elder law attorney who was able to outline a plan that was a bit complex and had a lot of moving parts, but in the end it would have shielded half of FIL's assets. In his case he passed before the plan had any effect but it was by a matter of a month or two. This was also specific to the state of Maryland and probably won't work in most other states. Although Medicaid is a federal program it is administered by the states and state rules do vary, sometimes significantly.

The point is, right now you don't know what the rules are and most general attorneys probably don't know either - this went very deep into the rabbit hole of Medicaid regulations in Maryland. See an elder law attorney.

 

[Sunset]

Around here in IL, when looking we found OK to nice facilities that would keep a person once they run out of assets (remember most get SS, so there is ~$25K income) required 3 years worth of cash. Roughly $300K.

Some facilities, admitted they would kick out a person once they went to medicaid... those stayed off our list.

We felt happy and glad there was enough $$$ to pay to get into a nice place, and didn't care if all the money was spent.

 

[youbet]

The CCRC (continuing care retirement community) where my mother lives does not take Medicaid but they have a trust fund to pay the costs for those who eventually run out of money so they do not have to leave the facility. The trust fund is not used very often because to get in the facility you have to have a pretty high net worth.

+1

That's what we've found in our shopping and investigations of Type A CCRC's. They are really on top of what kind of ongoing income and assets you need to have in order to be admitted and remain financially sound over time. They know with a very high probability you'll make it OK financially. And, to no surprise, they prefer ongoing income such as SS and pensions over assets which are difficult for them to accurately track and be sure that you aren't giving them away or similar.

In addition to your ongoing income and assets, they also use tactics such as moving you to a smaller apartment and eliminating any refund of buy-in your heirs might have eventually had coming.

One guy (salesman) we've worked with quite a bit told us they've had zero payouts from their benevolent fund in years. They're pretty watchful about the finances of applicants and have the goal of not having solvent residents subsidizing non-solvent residents as much as possible. He also said no one has been asked to leave. A few have tapped their future entry fee refunds.

It's definitely a different ballgame than being in a NH where they accept Medicaid.

 

[braumeister]

The CCRC (continuing care retirement community) where my mother lives does not take Medicaid but they have a trust fund to pay the costs for those who eventually run out of money so they do not have to leave the facility. The trust fund is not used very often because to get in the facility you have to have a pretty high net worth.

At one of the CCRCs I'm looking at, they commented on how proud they were that last year their fund paid over a million dollars. My candidate places are all very solvent as far as I can determine, and although I can afford them, that was a very nice thing to hear.

 

[youbet]

At one of the CCRCs I'm looking at, they commented on how proud they were that last year their fund paid over a million dollars. My candidate places are all very solvent as far as I can determine, and although I can afford them, that was a very nice thing to hear.

What was the original source of the million bux? I assume the fees paid by solvent residents but maybe something else comes into play?

Do you feel like they are diligent in vetting applicants and just ran into some real outliers in these cases?

 

[braumeister]

What was the original source of the million bux? I assume the fees paid by solvent residents but maybe something else comes into play?

Do you feel like they are diligent in vetting applicants and just ran into some real outliers in these cases?

Yes, it's from surpluses built up over the years.

There are probably more outliers than you might expect. I spoke to a couple of residents who had been there over 20 years, currently in their 90s and they were just delighted to be there.

(Of course, in my 90s I'd be delighted to be anywhere. )

 

[youbet]

^^^^^

My fear would be that this could turn into a situation like that which exists with LTCI. Under-pricing early on has resulted in significant premium increases today. But, hopefully, that's not the case with CCRC's and the number of folks needing to be subsidized won't grow and cause current fees for solvent residents to increase.

In addition to direct subsidies, the methods I can think of that could be used to fund an insolvent resident include:

1. Diminishing the refundable portion of their original buy-in fee (often several hundred $K) which could cover several years.

2. Moving them to an apartment with the smallest monthly fee.

3. Ongoing income such as SS or pension.

 

[pb4uski]

Sounds odd to me but I've never looked into such a thing... What happens when this "benevolence fund" runs out of money? Charities, financial assistance foundations, etc, often do.

Benevolence fund is a new one to me but it is not uncommon for nursing homes to have an entry reqirement that a resident can pay somewhere betwween 12-24 months of private pay and they will accept Medicaid nursing home coverage and a portion of the patient's SS after the patient's money has run out.

While I can understand the OP's frustration with the high cost, to characterize it as "business plan is to bankrupt their residents in exchange for care" isn't at all helpful without knowing what the cost is. It costs a lot of money to have a decent facility, staff, etc. In January 2012 my great aunt entered a nursing home where the private pay rate was $8,100/month. With just CPI it would $10,700 today but I suspect that it is probably a lot more than that.

If the OP doesn't like the cost then the OP and have his elderly father live with them and have visiting nurses. Just think of all the money that they s/he would save!

My pet peeve is medicaid long-term care planning where parents twist their financial affiairs into pretzels to put the cost of long-term care on us taxpayers when they have available assets rather than use those assets for their care.

While if structured correctly it medicare long-term care planning may be legal, IMO it is borderline fraudulent so I'm certainly not inclined to offer the OP any advice on how to put the cost of their long-term care on me and my kids so their kids can get a larger inheritance. Sorry.

 

[braumeister]

I don't see a problem at the places I'm considering. They have a wide variety of plans for funding your stay there, and they do vet applicants very carefully for both income and health status.

^^^^^

My fear would be that this could turn into a situation like that which exists with LTCI. Under-pricing early on has resulted in significant premium increases today. But, hopefully, that's not the case with CCRC's and the number of folks needing to be subsidized won't grow and cause current fees for solvent residents to increase.

In addition to direct subsidies, the methods I can think of that could be used to fund an insolvent resident include:

1. Diminishing the refundable portion of their original buy-in fee (often several hundred $K) which could cover several years.

2. Moving them to an apartment with the smallest monthly fee.

3. Ongoing income such as SS or pension.

 

[RunningBum]

I'm not sure exactly what the asset requirement for my mother was but she'll be going on Medicaid this spring, almost exactly one year from when she moved there. If she makes it that long, which isn't a given. My father will have something like $137K separate from her when she goes on Medicaid. If he goes first my understanding is that Medicaid will claw back money from his estate somehow. I'm not sure of the process but none of us are concerned with losing that money. We're very happy there's a place that is taking good care of her that will accept Medicaid. Over the years they gave all of us kids some money, well under the annual gift filing limit, but it's probably been at least 10 years since they've done that.

My brother has been handling all of this with the help of a county social worker. They are very rigorous with wanting to see all of their statements to prove that they have not drained off assets to meet the Medicaid mark.

 

[youbet]

Benevolence fund is a new one to me but it is not uncommon for nursing homes to have an entry reqirement that a resident can pay somewhere betwween 12-24 months of private pay and they will accept Medicaid nursing home coverage and a portion of the patient's SS after the patient's money has run out.

Benevolence funds come into play in situations where Medicaid is not accepted, typically Plan A CCRC's.

I'm certainly not inclined to offer the OP any advice on how to put the cost of their long-term care on me and my kids so their kids can get a larger inheritance. Sorry.

Tend to agree.

 

[athena53]

While I can understand the OP's frustration with the high cost, to characterize it as "business plan is to bankrupt their residents in exchange for care" isn't at all helpful without knowing what the cost is. It costs a lot of money to have a decent facility, staff, etc.

You worded it more strongly than I did but I feel the same way. I saw a lot of statements in FB posts about how "the government takes all your money" for LTC. Umm, no, the LTC facility takes it in exchange for doing a lot of hard work most ordinary people could not do day in and day out (and I include myself in that group). You don't get to hoard some to pass on to future generations while the state pays your bills.

And you can bet that partners in firms telling people how to shelter assets for Medicaid purposes aren't planning on Medicaid nursing homes for themselves.

 

[aja8888]

My ex-wife ended up in a Medicaid nursing home in 2014 when she ran out of money and had her leg cut off from advanced diabetes. She was paranoid/skitzo also. I signed the paperwork and got her in there as our daughter was not in the area at the time. I have never seen such horrible conditions in a care facility...filth everywhere, understaffed, etc. It was so bad, I can't even describe it.

That was the only place that had an open bed anywhere around here (Houston) at the time. Fortunately, she was in there only a short while before she passed.

I think before I would go in a place like that, I would manage something different.

Yep, America is great as long as you have the cash.

 

[Dtail]

Go see a lawyer, but you probably can set up an irrevocable trust for a portion of your assets, while keeping some of it in regular accounts. More likely to be accepted into LT care places and potentially less likely to kicked out when the non trust monies run out.

 

[pb4uski]

Go see a lawyer, but you probably can set up an irrevocable trust for a portion of your assets, while keeping some of it in regular accounts. More likely to be accepted into LT care places and potentially less likely to kicked out when the non trust monies run out.

That will work, but I do remember a poster from a few years ago whose parents had set up an irrevocable trust for Medicaid LTC planning and later wanted to access that money to buy into a CCRC or something like that and found that they couldn't access their own money and were trying to figure out how to unwind the whole thing.

So beware, karma is a bitch!

 

[braumeister]

That will work, but I do remember a poster from a few years ago whose parents had set up an irrevocable trust for Medicaid LTC planning and later wanted to access that money to buy into a CCRC or something like that and found that they couldn't access their own money and were trying to figure out how to unwind the whole thing.

So beware, karma is a bitch!

That was an interesting thread.

Raiding my retirement to help parent to CCRC?

 

[Walt34]

My pet peeve is medicaid long-term care planning where parents twist their financial affiairs into pretzels to put the cost of long-term care on us taxpayers when they have available assets rather than use those assets for their care.

While if structured correctly it medicare long-term care planning may be legal, IMO it is borderline fraudulent so I'm certainly not inclined to offer the OP any advice on how to put the cost of their long-term care on me and my kids so their kids can get a larger inheritance. Sorry.

This can be more complicated than it appears at first glance so hopefully you and others won't be so quick to judge in the future. We found ourselves (actually it was DW only, I was just a bystander) in that quandary with her father when he had to go into full time nursing care.

DW was POA on her father's finances and during the course of attending to those details we went to see an elder law attorney. He advised setting up his finances in such a way as to shield up to half of his assets by the time he went on Medicaid. This was the first we had ever heard that this was even possible (I think this may be unique to MD but I'm not sure). And like you and others we were uncomfortable with this for the very reasons you mention.

But DW was also the executor of his will. And one of the fiduciary obligations of both the person acting as POA and executor is to manage the assets as best to serve the intent and wishes of the person while alive and of the estate after the persons death. Now although at the time her father was not yet deceased it was very clear that his life expectancy could be measured in months. The will also specified that he wanted his remaining assets to be distributed equally among his four adult children. And he repeatedly had made this clear after the will was written so there was no doubt about his wishes and intentions.

So - what are we to do? Impose our our own moral values upon DW's handling of her father's assets, or follow the law as it is written and as advised by the attorney? It would have gone against every principle of a fiduciary duty for DW to not take every measure legally available to preserve as best she could the assets and to follow the advice of the attorney and "twist the fiances into pretzels" and thus meet her fiduciary duty to both her father, her father's future estate, and the soon-to-be heirs.

We concluded that not only was it the right and proper thing to do, she was legally required to do so.

So before you are so quick to condemn those who do their best to shield their assets there may well be other forces or principles at play in making the decisions that they do. It is not always mere greed.