How Getting the Right Advice Can Save You $500,000

A recent client of ours presented the following very common fact pattern.  Jack and Diane are in their early 60’s.  Diane was diagnosed in her 50’s with early onset Alzheimer’s Disease and now needs nursing home care.  The couple have a primary home, a small vacation home at the Jersey shore and several hundred thousand dollars of other investments.  A classic crisis case, as we call it.  We are helping Jack with the immediate task at hand, getting Diane quality care and protecting as much as possible for Jack who is in good health.  Jack could have been in a much better place, however, had he talked to us several years ago.

 That’s when he went to see an estate planning attorney.  As I often explain to people, estate planning focuses on “what happens if you die”.  Jack and Diane executed  a plan that will help eliminate estate taxes through the use of trusts, and will leave their assets to each other and alternatively to, or for the benefit of, their children, one of whom is disabled and is incapable of managing money.   They missed a really big opportunity, however, one that could end up costing them as much as a half a million dollars or more.  The estate attorney didn’t raise the question of “what happens if they don’t die”, meaning they live and get sick and have $120,000 a year in long term care expenses or more, a very real possibility at that time, because Diane had already been diagnosed before they visited that attorney.  They didn’t realize that long term care costs could “solve” their estate tax problem.

 Had Jack and Diane come to us then, we would have started them on the very same plan we are putting in place now.  But, since we know that the government won’t help out until 5 years (because we are transferring assets into trusts and there is a 5 year Medicaid waiting period) Jack must pay for Diane’s care during that time.  Diane’s care now costs $120,000 per year and will only continue to rise.  5 years ago, however, Diane’s care costs were minimal because she was still in the early stages of Alzheimers’, a progressive disease.

 That’s the mistake Jack and Diane made.  Diane’s care costs over the next 5 years will be hundreds of thousand of dollars more than they were in the last 5 years.  You want the 5 year look back to run when your costs are less.  Certainly when Diane received her diagnosis that should have been the alarm sounding that they should work with an elder law attorney to protect what they have, especially when you consider that Jack could live another 30 years and will need to support his special needs child.