Mom Has $1,000,000. She’ll Never Run Out of Money (Part 1)

Paul called concerning his 88 year old mother who needs nursing home care.  “She doesn’t have a power of attorney.  I think she needs one”, he said.  I concurred but our conversation didn’t stop there.  As we always do, I asked him about Mom’s finances.  “Her income consists of Social Security of $1000 per month and what she generates in income from investments”, Paul told me.  “But I’m not worried because she has $1,000,000 in assets.  I don’t think she’ll ever run out of money so Medicaid isn’t possible or necessary.”  “Maybe  – maybe not”, I replied.

 Why did I say that?  Doing some quick math, spending approximately $100,000 a year of her assets on nursing care, it will take 10 years before Paul’s mom spends it all.  A 10 year stay isn’t all that likely, is it?  After all, she would be 98 at that point.  Not likely, but it is certainly possible. But let’s say she doesn’t outlive her money.  What if, instead, she lives in a facility for 6 years or 8 years and spends $600,000 or $800,000?  

 I told Paul that whatever is left will be passed on to her heirs in her will.  The exact amount will depend on how long she lives and how much she uses for her care.  I then asked if she had a will.  That’s when he told me that Mom has 3 children, but Paul’s brother Bill has “issues”.  “He hasn’t been deemed disabled or even diagnosed with anything”, Paul told me, “but Bill never married, has never held a job for very long and is just ‘off’.”

 Paul told me that Mom’s will leaves 2/3 of her estate to him to look after his brother.   I then asked about Bill’s situation, his financial needs.  Not surprisingly, he has nothing to his name.  As we were talking, Paul had an “aha” moment.  He realized that there just might not be all that much left for Bill and that the financial burden would fall to him.   Suddenly, Medicaid seemed to be more relevant.  Paul grew concerned and asked, “Is there anything you can do to help me?”  “Actually, there just might be”, I told him.

Next week I’ll share with you what I told Paul.