By Tim Barkley. March 2014.
Susan caught the lawyer by his elbow in the restaurant. “I thought that was you. Can I ask you a question?”
“Sure,” he replied, “what’s on your mind?”
“I was talking to a friend who told me that we should put Mom’s houses and money in a trust so that a nursing home won’t take everything.”
“Here’s the scoop,” the lawyer told her.
“If your mother need a nursing home to care for her, she has a large bill every month. It might be as high as ten thousand dollars a month if she lives in an expensive facility, or as low as six or seven thousand. It’s a big bill, and it has to be paid.
“If she stays there long enough, she’ll spend a lot of her money.”
“That’s what worries us,” Susan said. “My father didn’t work all his life to have all his money go to a nursing home!”
“It doesn’t have to,” the lawyer replied. “Nobody’s making you put your mother in a nursing home. But if you decide that’s best for her and for the family, that choice has a cost.
“But let’s think about it. If your mother has to go into a nursing home, because that’s the only place she can safely receive care …”
“But that’s it!” Susan exclaimed. “If we can’t take care of her ourselves, and we have to put her in a nursing home so she’ll be safe, it’s not fair that all her money should go to the nursing home!”
“I understand,” the lawyer replied. “It doesn’t feel fair, to not have a choice, and to have to spend that much money.
“The only other option is Medicaid. That’s what we’re really talking about – qualifying Mom for Medicaid by giving away her money.
“There are two ways to do that. One is to give her money to the kids right now. The problem with that approach is that she will be disqualified from Medicaid for five years after the gift, or maybe for much longer. The kids could give the money back and eliminate the disqualification, but that doesn’t work if they’ve spent the money.
“The second way is to put the money in a trust that Mom would set up. The problem with that approach is, first, that it would create the same disqualification as the gift to the kids. The second problem is that if Mom needed the money, for example due to the disqualification from Medicaid, it could be difficult to get it back to her. You could find yourself in a situation where you couldn’t get Medicaid or Mom’s money.
“And that’s the problem with the other approach. If one of the kids spends Mom’s money, the others could end up supporting her. And that’s not fair.
“Medicaid is set up for people who have no money. And it’s set up so that people can’t give away all their money to get the taxpayers to support their nursing home stay. Nobody wants to pay higher taxes so that somebody else can make their kids rich.
“When I give seminars on this, I usually tell people that my parents want to give their house to the kids, and qualify for Medicaid. Then I hold out my hat and ask who wants to contribute to the cost of my parents’ care so that we kids can keep the house.
“It’s funny, but nobody has ever given me money!”
“Well then, what do we do to protect her money,” asked Susan.
“Let’s meet at my office next week and go over her situation,” suggested the lawyer. “Sometimes people panic when there’s no real emergency.
“Can you get together what you know about your mother’s finances – bank account balances, values of the houses, any investments and retirement plans – and bring a list to the office. Then we can make a strategy to protect your inheritance.”
Susan bristled, then looked defensive. “This isn’t just about my inheritance! It’s about protecting what our parents worked for. It’s about …”
“I understand,” commiserated the lawyer, “and didn’t mean to be offensive. But we need to be sure we’re doing the best thing for your mother in all of this. Let’s meet next week and go over everything so we can create a plan that’s best for her.”
Attorney Tim Barkley
The Tim Barkley Law Offices
One Park Avenue
P.O. Box 1136
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