The specter of Long Term Care costs haunts many otherwise happy, seemingly, financially secure, middle class families. It’s scary to contemplate the possibility that a medical event or end-of-life illness could undo literally decades of mindful saving.
What can these families do to anticipate this burden and protect loved ones? What tools are in reach?
This dilemma posed an existential crisis for the *King family (*not their real name) in North Carolina. Irene King had been diagnosed with dementia. Her husband, Roger, was dying of terminal cancer. The Kings faced tough questions: How should they pay for care, protect their well being, ensure their legacy, and minimize the burden on their children? [The case details have been altered for privacy and also reflect different aspects and compilations of real life families.]
Their solution will be illuminating to you. But before we discuss it, let’s first step back for some sobering statistical context. Genworth Financial experts estimated in 2016 that an in-home heath aide cost on average $3,861 per month in the United States. Monthly assisted living care stood at $3,628, while a private room in a nursing facility cost $7,698. Remember: those prices are averages. In certain regions, the price tag can be much higher.
Even middle class families who recognize what these daunting numbers imply often fail to take action. They consider themselves trapped. They’re not wealthy enough to countenance Long Term Care costs, but they have too many assets, or the wrong kind of assets, to qualify for public assistance programs, like Medicaid, without careful and knowledgeable planning. Many families know that simply making gifts for the purpose of divesting assets to qualify for assistance may be unwise and may cause huge penalties. But rather than seeking legal advice in a timely manner, they sweep the situation under the rug and hope that the worst case just doesn’t happen. That’s not ideal. Hope, as they say, is not a strategy.
Fortunately, all is not lost.
Legal techniques can allow families (like the Kings) to access Medicaid benefits and sometimes Veterans benefits to pay for long term nursing care. For instance, one provision in Medicaid law allows a married person to create something called a Testamentary Special Needs Trust. Upon the death of the first spouse, the surviving spouse can benefit from this trust, to pay for expenses not covered by government programs, but Medicaid will not count those assets when determining whether the survivor is eligible for public benefits.
When properly set up, this trust can allow the family to maintain the family home even if the surviving spouse needs to move out. It can pay for essentials–ranging from extra caregiver support, to dental work, clothing and basic necessities, to entertainment, or even reading materials, music, and even cable TV, that Medicaid will not cover.
The King family used this solution to great effect. Here’s how it happened and what happened as a result.
Based on his diagnosis, Roger King knew that he would pass away before his wife. So his daughter, Gina, assisted him in getting most of the couple’s assets, including the family home, moved over to his name before he died. After Roger’s death, those assets passed in to a Testamentary Special Needs Trust created through his Last Will. The assets in trust were available to supplement Irene’s Medicaid benefits, so the family was able to provide a higher level of assistance for their mother, and provide her with a higher quality of life than someone with no resources beyond the level of care and benefits provided by Medicaid. The family also had the flexibility to manage their parent’s home and resources without interfering with Mom’s continued Medicaid eligibility.
Also, when Irene died, the trust still held significant assets—and, because Medicaid couldn’t take them away under Medicaid Estate Recovery rules—those assets were passed on to Gina, who used the money to pay for the first two years of college for both of her children.
On the one hand, the Kings’ story is obviously a sad one. No one wants to lose two parents to diseases as awful as cancer and dementia. On the other hand, it’s a story of triumph. Irene enjoyed better care and more autonomy during her final years, and she and her husband managed to seed the education of the next generation.
So why don’t more families follow the Kings’ path? The answer is simple and shocking: most people have no idea they have this option.
For whatever reason, many estate planning attorneys are not educated in how to protect middle class families from the crushing expenses of long term care, and focus instead on helping very wealthy families reduce their estate taxes, and help with other issues such as Probate avoidance or problematic (or dysfunctional) family issues.
Elder Law Attorneys, by contrast, do understand the amazing solutions available to middle class families—for instance, how to prevent the state from taking assets via a process called Medicaid Estate Recovery. Elder Law attorneys work diligently to help families mitigate the extremely high costs of Long Term Care. They also assist families with the other issues that Estate Planning attorneys do address.
The law firm of Strauss Attorneys, PLLC is fortunate to have two Elder Law Attorneys available to serve western North Carolina families. Larry S. Hartley is board certified in Elder Law by the North Carolina State Bar Board of Legal Specialization, and is a Certified Elder Law Attorney (CELA) by the National Elder Law Foundation, which is nationally recognized by the American Bar Association. He works primarily out of the firm’s office in Asheville North Carolina. Erica Erickson also practices Elder Law, and she works primarily out of the firm’s Hendersonville office. She offers a comprehensive range of estate planning services, including Medicaid and nursing home planning; and she is the go-to attorney in the firm when guardianship issues arise. Erica also regularly provides seminars to community groups on topics like Medicaid and How to Avoid Common Pitfalls of Estate Planning.