Long Term Care Planning – Should I Wait and See? Part 2

Kelly had originally called us 7 years ago.  Her dad had recently fallen in his home and Kelly recognized the need for someone to come into his home to help him.  At that time she felt that only a few hours a day was all that was necessary and once he recovered from the injuries he would be able to resume independent living.  Kelly did tell me that Dad was starting to act confused but she insisted it was all related to the trauma from the fall and she was confident that he would rebound.

Kelly estimated the value of her dad’s home at approximately $250,000 and told me he had investments totaling approximately $300,000.  I explained to her that it was very likely that her dad would need increased care over the coming years.  Since he did not have long term care insurance, he would have to spend his assets first and then he could qualify for New Jersey Medicaid.

I explained to her that Medicaid isn’t one “monolithic” program, but rather there are several different programs that cover alternate types of care.  “If the goal is to keep Dad at home”, I told Kelly, “then New Jersey’s home based Medicaid program will cover care after he spends down his countable assets (everything except his home) down to $2000.  The problem, however, is that if he needs 24/7 care, Medicaid won’t cover it all.  Maybe 40 or 50 hours a week is all.”

I told Kelly that we could move some of her dad’s asset to a trust that would allow him to qualify for Medicaid without spending all of those assets first.  This would allow her to stretch out his money because if Medicaid could cover some of her dad’s care, that would mean spending his assets at a slower rate, making them last longer.   But the key is that we’d need to get through the next 5 years – the Medicaid look back – first.

Ultimately, Kelly declined to go with my plan.  As I recall, my sense at the time was that she didn’t think her dad would ever need long term care and she just didn’t see paying me to guide her through a scenario she didn’t think would happen.  Boy, did she ever miscalculate.

Kelly called me a few weeks ago.  I didn’t immediately remember her situation until I went back and looked through my notes of her original call.  Over the last 3 years, she told me that Dad had depleted most of his liquid assets.  His health had deteriorated as I had suggested to her it might.  Kelly had round the clock care in his home for some time.

But, now she was faced with a dilemma.  All Dad has left is his home and about $50,000.  She can take a reverse mortgage and free up perhaps another $100,000 for his care but after that she must make a difficult decision.  She must move him to a nursing home, sell the home and qualify for Medicaid or she and her siblings must pay for his care from their own funds.  Maybe they’ll recoup that money when they eventually sell the home, but it’s possible that they may not be able to get back all of it.  That will depend on how long Dad lives.

I didn’t have a solution for Kelly now.  I did 7 years ago but she chose not to do anything.  Had she worked with us, we would have put much of Dad’s assets in trust.  She would have spent those assets on his care, but – and here is the key – there would have been approximately $200,000 left 2 years ago, by my estimations.  We could then have qualified him for Medicaid.  That’s because for 4 years after she called us, Dad needed some care but it was really in the last 3 years that he was really spending money.  Had we set up the trust, then 2 years ago we could have qualified for Medicaid.  With the state covering 40 to 50 hours a week of care, that means Kelly would have been spending his funds at a much slower rate, enabling her to push back the painful decision to move him from his home.

So, going back to Lisa’s story detailed in my post last week, Lisa is right now in exactly the situation Kelly was 7 years ago.  A before and after picture that I shared with Lisa and one she took to heart.  She saw that taking a “wait and see” approach can be disastrous.  Instead, she chose to begin working immediately with us to put a plan in place similar to the one I recommended to Kelly years earlier.