By Timothy S. Barkley, Sr. May 2015.
“But I heard that the nursing home took everything when you went in. That’s what happened to my grandmother – she went in and they told her she had to sell everything and give it to them.”
The attorney nodded. “That was one arrangement. You gave everything to the nursing home and they agreed to take care of you for the rest of your life.”
The husband chimed in, “and I heard that the state took everything!”
“That’s a common misconception. Let’s clear the air.
“A nursing home that takes care of you sends you a bill, just like any other creditor. If your care needs work, the mechanic takes care of your car, and sends you a bill. You pay the bill when you pick up the car. Nothing spooky there.
“When you live in a nursing home, the bill has to be paid by somebody. That’s just like your mechanic.
“But where it’s different is that, first, the bill from the nursing home is enormous. In Maryland it averages about $8,000 per month, or about $100,000 per year. Second, you can’t decide not to have the work done. With your mechanic, you can decide not to replace the transmission or whatever – you can decide to get a new car, or just do without. You can’t decide just to stop living.”
“I can!” declared one of the clients. “I think I’ll just keep some sleeping pills beside the bed. This is just too much.”
“That’s an increasingly common sentiment,” replied the lawyer. “But, while it’s not my job to comment on your morals, I certainly don’t share that opinion.
“Prescinding from that issue, which is a personal choice and certainly not a legal strategy, I don’t think the news is as bad as it might appear.
“Statistically, four in ten Americans aged 65 will need long-term care for more than two years. That’s a scary statistic. But it also means that six in ten won’t. In fact, three in ten won’t need any long-term care at all.”
“So I have a 40% chance of needing long-term care,” the husband mused.
“Actually not,” responded the lawyer. “First, you’re in your fifties, and the odds are much lower for younger people. Cheer up – you might die of any number of things before you even reach age 65!”
“Thanks,” he grumbled. “That’s refreshing.”
The lawyer grinned wryly. “My job is to talk about incompetence, incontinence and death. An odd sense of humor keeps this place from becoming totally morose.
“Seriously, though, the fact that four in ten Americans aged 65 will need long-term care for two years or more at some point in their lives doesn’t say anything about any individual. Nobody knows what your chances are, just what the chances are across the whole population.
“Also, a 65-year-old has a life expectancy between 19 and 20 years. That means that sometime in the next 20 years, four out of ten will need long-term care for more than two years. But only 3.5% of the population at any time is living in a nursing home. So the chances of you needing long-term care in the near future is very small.
“But that really doesn’t mean anything. I’m always mindful of Mark Twain’s three kinds of lies: Lies, Unprintable Lies and Statistics. His point is that statistics can be made to say anything.”
“That’s all good and theoretical,” muttered the husband, “but what does that mean for our trusts?”
“Good question,” responded the lawyer. “You have three options.
“First, you can ignore the issue and assume that you’ll be able to weather the storm somehow. That’s what most people do, either due to paralysis or helplessness.
“Second, you can purchase long-term care insurance. That’s not an inexpensive option, but it can shift the risk of long-term care costs to an insurance company at a fraction of the cost of paying out-of-pocket.
“Third, you can use trust planning. For some folks, this might involve transferring assets to a trust designed to allow you to qualify for Medicaid, the government system for paying for long-term care. You have to do this more than five years before applying for Medicaid.
“The problem with this option is that you lose control of your assets. The most common trust is a ‘discretionary trust,’ that holds your assets and pays your expenses at the discretion of a trustee, who can’t have any obligation to make those payments. You’re at the mercy of your child or someone else. While that might not be a problem, most of my clients are just not willing to lose that autonomy.”
“Dern right,” interjected the wife. “We didn’t work all these years to have to ask the kids for money. That’s backwards – they’re supposed to ask us for money!”
“Yeah, and they do it too much, too!” exclaimed the husband.
“So while that’s a neat theory,” concluded the lawyer, “it doesn’t make a lot of sense for folks in your age bracket. For a couple of ninety-year-olds that might work, but not for folks who haven’t even retired yet.”
The couple nodded. “Maybe I’ll have you talk to my parents,” the husband mused. “Maybe this would work for them.”
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Attorney Tim Barkley
The Tim Barkley Law Offices
One Park Avenue
P.O. Box 1136
Mount Airy
Maryland 21771
(301) 829-3778
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