It is a harrowing experience to become responsible for a parent or parents, whether suddenly or gradually. I found myself in this situation when my elderly parentsí health changed radically. My stepfather was diagnosed with lung cancer and it quickly got out of control. At the same time my motherís mild dementia became severe. Although they had maintained their own home and independence for years, it soon became apparent that my stepfather would not survive much longer and that my mother would be unable to care for herself alone.
Fortunately for all of us, they had prepared for this to some extent, by having drawn up the necessary legal documents beforehand. The documents named me as Power of Attorney, and thus, I was thrust into a responsibility I really did not want, but could not refuse. In addition to having to manage my motherís daily affairs, I was now responsible for their two homes. There were also securities, bank accounts, and other assets. It was no great fortune, but it was not insubstantial.
This paper will outline some of the issues relating to the care of elderly parents. There are organizations and eldercare attorneys who will assist you for a fee. I have found that an organization called ďThe Connecting HandĒ (Dir. Phyllis Greenstein 516 678-8665) has been very helpful in this regard. The information I am presenting here has been obtained by personal experience. Your own circumstances may be different than mine, and your results might also differ. I am not a lawyer, and in any event laws change and vary from state to state. I can guarantee nothing - I can just tell you what I have learned.
Fortunately for all of us, I was able to place my mother in a nursing home where they have facilities for those suffering from dementia and can properly care for her. After paying the bills from her own assets, I was able to obtain Medicaid assistance to pay for her continued residence. I was also able to legally preserve a good part of my parentsí estate for distribution to their intended heirs (including myself), and I wound up having to spend very little of my own money (although I spent a huge amount of time). I accomplished all this, acting on some very good advice. I am passing on that good advice here.
The good news about my mother is that, as of this writing, she has adjusted to life in the nursing home, and although her dementia will not improve, she is comfortable and at relative peace with her situation, due to the expert care she receives.
This paper is an overview. It is intended to present a strategy for preserving some assets, and to relate some of my experience. It does not substitute for an eldercare attorney, and it is not meant to be fully comprehensive. There are myriad details that you will have to attend to that are not mentioned here, to get your parent placed in a nursing home. On the other hand, take comfort in the fact that nursing homes are used to people in your situation. Itís happened countless times, to countless families before you. I know you donít want to put your parent in a home, but you are not the bad guy. Father Time takes no prisoners.
A word about the amounts and
figures were correct or approximately correct in
These must all be legally notarized. I canít overstress how important these are. The most important is the first item, Durable Power of Attorney. Without this, you will be unable to deal with institutions on your parentís behalf, and thus will be unable to implement the plan outlined in this paper. With the POA, you will be able to legally obtain whatever documents you need, and there are going to be countless ones.
∑ Durable Power of Attorney (POA) - gives designated agent all legal powers to act in name of signer. Make sure the POA is durable Ė that means it does not expire unless signer specifically withdraws it. In my case, my stepfather was my motherís primary POA and I was the contingent POA. I became the primary POA when my stepfather became too ill to act.
∑ Will - disposition of estate after death of signer
∑ Living Will (with ďDo Not ResuscitateĒ or DNR provision) - directs whether signer should be resuscitated, feeding tubes inserted, etc. should the signer become permanently vegetative
∑ Health Care Surrogate (Health Care Power of Atty) - agent makes health care decisions should signer become incapacitated or unable to direct own health care
Home Financial Considerations:
Nursing homes are very costly (10K per month or more). If your parent is not wealthy and needs to be a permanent resident in a nursing home, he or she will need Medicaid assistance. Medicaid will not consider your claim until your parentís assets go below about $3800 for an individual Ė twice that for a couple. The normal procedure is, after a residentís assets are exhausted, Medicaid takes over. There are specialty lawyers and organizations that can assist in the Medicaid application, for a fee. Again, I have been greatly assisted in this regard by an organization called ďThe Connecting HandĒ.
Medicaid is not Medicare. Medicare is government funded health insurance for the elderly. It may or may not cover nursing home residency for a period of time (not permanently) depending on certain circumstances. Medicaid is a program that provides health care for the ďimpoverishedĒ as noted above, those with less than approximately $3800 in total assets. It will cover nursing home residency, medication, and other health-related expenses. It will not cover clothing or personal expenses.
There is a 36 month look-back period when a Medicaid application is filed. This means that ALL transactions in this period are reviewed, including transfers of assets and any deposits and withdrawals.
All transfers of cash, real-estate, securities, assets, etc., incur an ineligibility period for Medicaid, totaling approximately one month of ineligibility for each $7800 transferred. It is up to the individual to pay for any uncovered expenses - including nursing home residency, medication, home health care, etc., during this period of ineligibility. The patient becomes eligible for assistance once this period has expired.
Some good news: You
are not financially responsible for your parents (in contrast to your
minor children). So unless you
choose to, you do not have to spend your own money as POA.
You are entitled to spend your parentís assets for their own care.
This means that any health care, food, clothing, insurance payments,
taxes, legal fees, etc. are allowable expenses, as long as itís for the
parent. Suppose you have to sell
your motherís home in
If you write a check to yourself or anyone else, and you canít justify it as an allowable expense (with a receipt), it is considered a gift transfer, subject to the ineligibility rules outlined above. Keep receipts for anything over a few hundred dollars. Also, you, as POA, are allowed to compensate yourself to some extent, but the guidelines for this are not clearly defined.
Your parentís assets
This section is the crux of this paper. Itís what I paid 2 different eldercare attorneys to hear. It might seem complicated at first. Itís worth the trouble to understand it. This strategy saved my family many thousands of dollars.
The person acting as Power of Attorney transfers half the assets from the future Medicaid applicant to their own accounts (for later distribution to the legal heirs), and uses the other half to pay for their parentís health care. If timed correctly, their money runs out just as the parent becomes eligible for Medicaid assistance.
The best way to guard against Nursing Home expenses (which can be in excess of $10K/month!) or other health care costs obliterating an estate, is to transfer the assets to a trusted person (child, relative, etc.) prior to the 36 month Medicaid look-back period. The difficulty here is that one must plan 3 years ahead, and few healthy people, regardless of their age, are willing to divest their assets, forego their independence, and accept they will be in a nursing home in 3 years. For most of us, the point at which that 3 year look-back arrives is too late to escape the scrutiny of Medicaid. The solution is the ďhalf-a-loafĒ strategy. Suppose there is a total of $100,000 in assets. Half of this, or $50,000, may be transferred to the intended heirs. Only the POA or the elderly person him/herself can accomplish this. It is advisable to transfer the assets in smaller amounts, rather than the whole $50k at once. If you can, transfer slightly under $7800/month, until half the money is transferred. Do not let a month go by without doing a transfer. If you feel you donít have enough months to do it like this, then you have to transfer larger amounts. It may not matter one way or another, because either way, it triggers the same Medicaid ineligibility period. The length of time of the ineligibility period is the amount transferred, divided by approximately $7800. The quotient is the number of months of ineligibility, starting from the date of the transfer. For example, say there are assets of $100K, and $50K is transferred to the heirs on Jan 1. After that, $50K remains in the Medicaid applicantís account. Divide 50,000 by 7,800 and that leaves 6.4. Round this number UP. So that means the applicant is ineligible for Medicaid for 7 months starting Jan 1. Use the remaining $50K in the applicantís own account to pay for their health care (and other costs) during this ineligibility period, and you can protect the other $50K that was transferred on Jan 1. If you do this right, the heirs get half the assets, and the Nursing Home (or other health care providers) gets the other half. Just as the period of ineligibility ends, the applicantís assets are exhausted (or down to less than $3800 for an individual) and they become eligible for Medicaid assistance. Itís hard to gage exactly, because their balance is changing daily (deposits from Social Security and pensions add to their balance, cash transfers and checks you have written for their care subtract from it). Err on the side of caution (meaning you should err on the side of protecting less rather than more). This ensures you wonít have to come up with a month or two of nursing home expenses, if the Medicaid ineligibility extends longer than you calculated.
Note: itís wise for the POA to retain a portion of the transferred assets, and not distribute it all to the heirs, until the death of the elderly parent. If your timing for the Medicaid pick-up date is off by even one month, you could have to come up with thousands for the nursing home. Also, there is a lot that Medicaid will not cover (clothing, personal expenses, etc.) It may be hard to get the money back from the heirs once it is distributed, if your parent needs it in the future.
Needed for a Medicaid Application - documents covering past 3 years:
Including (but not limited to)
∑ Proof of citizenship (social security card, passport, birth certificate)
∑ tax returns
∑ ALL financial statements (bank, brokerage, etc) for any and ALL accounts held jointly or individually by applicant
∑ copies of ALL checks written or deposited over $1000
∑ deposit tickets for all deposits over $1000
∑ all real-estate closing statements
∑ passbooks, cdís ANY financial instruments
∑ selective service discharge papers of applicant AND/OR spouse
∑ life insurance documents
∑ pension statements
∑ social security award letter
∑ pre-paid funeral and burial documents and receipts
∑ any supplemental health insurance information
∑ receipts for allowable expenses (over a few hundred dollars)
∑ anything else you can possibly think of, because Iím forgetting a lot!
MOST IMPORTANT Ė GET THAT DURABLE POA!
You must have the original and several copies. Put them away in a place where you can get to them when needed. Let someone you trust know you have the POA. The other documents are (or could be) very important also. DONíT WAIT! Be gentle but firm. It might not be easy to explain to your elderly parent why youíre asking for their POA, but itís far easier than explaining to a bank officer or title company why you DONíT have it, because they will throw you out of their office. They might still be hesitant even with the POA. Iíve had to deal with many such bureaucrats, who were probably worried about getting sued or making a mistake. These were people that stood in the way of my getting my mother on Medicaid. They wanted me to go away. But I had the POA, so I had the law on my side and thus accomplished what I had to do: to get my mother in a quality nursing home, on a Medicaid residency.
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