These kinds of conversations always remind me of this post from a very kind person who is gone to soon.
Perhaps the most important part of this thread on retirement, is the matter of protecting one's assets... and even more important, thinking ahead to protect the assets of a spouse, when health requires extraordinary expenses.
Since we, and our spouses will always be healthy, we don't think about what could happen. We just assume we'll both die at the same time.
Statistically that ain't gonna happen. If you already have a net worth of 2 Million dollars, don't read the rest... It doesn't apply to you.
Current medicaid law allows for payment of nursing home expenses under certain conditions. If you understand those conditions, you could save hundreds of thousands of dollars for yourself, your spouse, or your estate... (your kids).
Here are the things you should know about
Current nursing home costs average from $75,000 to $90,000/yr. A friend on Long Island is currently paying over $135,000/yr. for just basic care.
The state (medicaid) does not automatically pay for this.
You should understand "exclusions".
Know that the "look back period" is now 5 years.
As long as a married couple have assets, if one spouse should have to go into a nursing home, the couple's assets will be used to pay for the medical care until the assets go below a certain level, at which time, the state medicaid program will pay for the nursing home care. The asset level varies by state.
Here's an example that happened to friend, that points up the importance of planning ahead. Bob retired with his wife May, to Florida from Maine. He sold his Maine house for $280,000 and planned to use this as his nest egg during his retirement. He bought a mobile home..(downsized)for $35,000. Shortly after retiring, May began a long slide into Alzheimers, and after three years has to go into a nursing home. (at the time $65,000/yr.) She lived there for 5 years before passing away. Because Bob and May had assets from the sale of their house, medicaid would not pay, and The nest egg was gone.
Now, here's what happens....
1. In counting assets, Bob is allowed certain exclusions. In General, the exclusions in his case, were... His house @ $35,000, His car $20,000, Cash (then, $40,000) and some smaller amounts like burial plot and non cash life insurance.
2. The logical thing to have done would be to give away the money in the nest egg, so the state wouldn't take it. That's where the lookback comes in. If he had given away the money to his kids, the state would not have taken the money... but... to prevent this from happening, the state will "look back" five years and deny medicaid payment,if this 'gift" transaction had taken place.
As it happened, May died, an Bob had nothing but his Social Security left to live on.
Here's what I took from this...
Nine years ago, we owned a*mobile home, and a park model trailer in a campground. Understanding Bob's situation, we took some of our savings, and purchased a home outright. This took the money out of our assets and put it into the house "exclusion". Now, if one of us shold have to go into a nursing home, the state may take from our savings account, but they will not take the house... Essentially this means that one of us will still be able to keep some substantial assets, hopefully enough to stay above the poverty level.
This is just one of many, many reasons to look ahead to the future.
See the link to Elder Law on Exclusions. (website)
This is not a pleasant, nor a fun post. Most of you probably have some understanding of the laws, but the matter of elderlaw is extremely complex.
IMHO, when a case involving medical expense, or the legal position of any older relative, the very first thing to do is to contact an geriatric or eldercare lawyer. Not just any lawyer, but one who is deeply involved in elderlaw.
Bookmark the site on Elderlaw. There is a series of Q and A's bout real life situations, that should shed much light on a difficult subject. I thought I was relatively knowledgeable but found that in more cases than not, I had no idea of how the law treats estates and legal matters involving older people.
I have more nighmare stories about friends or neighbors who lost literal fortunes because of small errors in handling legal matters, either because of mistake in timing, or failure to obtain proper legal permissions. Anyone who has dealt with estate administration will understand what I'm talking about.
FWIW, I don't pretend to be a legal reference, and so some of the above may be wrong. Feel free to correct errors.
Just to point up the dangers involved in ignorance of the law. Back to the long Island situation, which involved a very good friend who has since passed away.
When Jim's wife showed early signs of Alzheimers, he sought advice from his children, who were lawyers, but not versed in elderlaw. They suggested that he "gift" to his 8 grandchildren to lower his liquid assets by $200,000, which might later be required to pay for his wife's coming nursing home costs. The gifting was legal. Two years later his wife went into a nursing home. When he declared his assets, he made no mention of the "gifts". After paying for two years of care, he had depleted what was left in his bank account, and the transfer of costs for the nursing home care went to the state. His wife lived in the nursing home for three more years.
As the state went over the accounting, they reviewed the "lookback" period, and found that the "gifting" had been omitted from the application. My friend was charged with medicaid fraud, and found guilty, and sentenced to a jail term. His children hired a criminal lawyer, who, for a considerable payment $150,000, managed to get the sentence revoked. Unfortunately, the interim years of stress took its' toll, and led to his early death... aged 78, but probably unnecessary.
A lesson in crime and punishment, but my point is that the law is involved, and has to be respected. Ignorance of the law is no excuse. Thus the suggestion for the Elderlaw Lawyer.