QUESTION: My husband has dementia, and I am his full time caregiver. I know he will need a nursing home in the future. I hear nursing home care is very expensive. I’m hearing conflicting information, and want to avoid mistakes. Can you give me some guidance?
ANSWER: You are right. Relying on incorrect information can have devastating effects. This area is very complex, with no room for error when planning for long-term care and asset protection. I have listed some common mistakes to help you, and others in your position.
Mistake #1: Believing your family will “do the right thing” if you become ill or incapacitated. Your family may WANT to do the right thing, but your family may not have the legal authority to help you. Banks, hospitals, doctors, and pension administrators will not speak with family members unless legal documents provide proper permission. At a minimum, EVERY PERSON over 18 should have a robust Durable Power of Attorney, a HIPAA release for medical information, and an Advance Healthcare Directive.
Mistake #2: Believing Medicare is Medi-Cal. Medicare is health insurance that most people age 65 and over obtain through the federal government. Medicare does not pay for long-term skilled nursing care. Medi-Cal, although it sounds similar, is very different from Medicare. Medi-Cal is a needs-based government program. If eligible, it will pay some, most, or all of the cost of long- term care in a skilled nursing facility. Since nursing homes usually cost over $8,000.00 per month, Medi-Cal benefits can be critical to the financial well-being of the sick individual, or a well spouse.
Mistake #3: Believing your Will or Trust is all you need. Legal documents such as a Will or Trust do not protect your assets. A Will is simply a “letter” to the judge stating what you want done with your money and belongings after you die. It does not handle any matters while you are living. The judge must process the Will, which takes about a year, and is called “probate.” A Living Trust (if correctly done) avoids probate upon your death. But, a Trust has limited value if you are sick, and need others to manage your affairs. Neither a Will nor a Living Trust protect your assets or qualify you for Medi-Cal benefits for long-term care.
Mistake #4: Believing health insurance will pay for a nursing home or other care facility. Neither Medicare nor health insurance will pay for the cost of long-term care in a nursing home. Without an asset protection plan, most people will quickly run out of money as they try to pay the monthly bill from their savings. Seniors can, however, protect their assets, protect their home, and get financial assistance to pay for the high cost of care.
Mistake #5: Giving your money away to the children to qualify for assistance (Medi-Cal or VA benefits). Adult children sometimes face lawsuits, bankruptcies, illness, and a variety of other issues, making the gifted money suddenly disappear. In addition, the tax issues can be significant. There are a variety of successful methods for protecting assets without giving the money away and putting it at risk.
Mistake #6: Selling the home to pay for nursing home care. The home is an “exempt asset”, meaning it is not counted when applying for Medi-Cal. However, the State of California seeks “reimbursement” after a Medi-Cal recipient dies, putting the house at risk. It is much better to keep the exempt asset and protect it from Medi-Cal recovery, rather than selling the home to pay for the care.
Mistake #7: Not understanding Medi-Cal recovery. The State of California DOES go after the Medi-Cal recipient’s assets after their death. It is critically important to understand what is at risk, and engage in effective and legal asset protection.
Mistake #8: Waiting too long. A person must have mental capacity (and valid identification) in order to sign legal documents, and engage in legal asset protection measures. Alzheimer’s disease, dementia, and stroke often rob people of their capacity. They are then unable to legally sign documents, putting their assets at risk. While there is capacity, it is better to plan before the disease progresses or the stroke occurs. Waiting too long can be devastating and very costly.
Jane M. McNamara is the principal attorney of the McNamara Law Firm, PC located in Valencia, California. The Law Firm handles Elder Law issues, including Medi-Cal for long-term care, VA benefit planning, asset protection, and incapacity issues. (661) 287-3260; www.theMcNamaraLawFirm.com.