Worried about a Spouse Needing Nursing Home Care?

The six-figure cost of nursing home care is worrisome for those who are married, when a spouse has to go to a nursing home. In this example, Tom has had some major health issues in the past year and Louise is no longer able to care for him at home. Good planning in advance can help a couple preserve assets in the event one of them needs nursing home care.

In this case, the couple live in Pennsylvania, where nursing home care statewide is $126,420 a year ($342.58 per day). The state has a Medical Assistance program that is a joint state-federal program that will pay for nursing facility care, if a person meets both the medical and financial criteria.

Tom has met one of the major Medical Assistance threshold requirements, because he is “nursing home facility clinically eligible,” which means that a doctor has certified that due to illness, injury or disability, Tom requires the level of care and services that can only be provided in a nursing home.

What will happen to their assets?

In 1988, Congress passed the Medicare Catastrophic Coverage Act, which created a process of allocating income and resources between a spouse who needs to live in an institutional setting and the spouse who can continue to remain in a community setting.

Tom and Louise’s resources are divided into two buckets: one that is exempt and the second that is non-exempt.

The family home, care, and cost of a pre-paid funeral, if that has been done, are exempt or non-countable assets.

Everything else, whether they own it together or individually, is considered non-exempt. In Pennsylvania, Louise’s IRA is the exception. However, that is not the same in every state.

Louise is entitled to keep one half of what they own, with a maximum of $126,420, as of January 1, 2019. This is her “community spouse resource allowance.”

Anything else they own, is used to pay for Tom’s nursing facility care or purchase a very select group of “exempt” assets, like a replacement car or the cost of a prepaid burial.

They would have needed to give away their resources, at least five years preceding an application for Medical Assistance. If they have given money away in an attempt to preserve some of their assets, that would have changed the timeline for Tom’s being eligible for care.

Louise needs income to live on, so that she is not impoverished. She is entitled to a monthly minimum maintenance needs allowance of $2,058 and a maximum needs allowance of $3,150.50. These numbers are federally adjusted and based on inflation.

The numbers that must be examined for Louise’s income are her Social Security benefits, Tom’s Social Security benefits, any pension either of the two may have and any other income sources. She can keep her income, as long as she does not go over a certain level.

Sounds scary? It is. This is why it is so important to do advance planning and have an ongoing working relationship with an attorney with experience in estate planning and elder law. There are changes over time to address the changing circumstances that life and aging presents.

Learn how Medicaid planning can help with nursing home care costs.

Reference: Pittsburgh Post-Gazette (April 29, 2019) “Married and concerned about one of you going to a nursing home?”

Now You Are Executor of your Spouse’s Estate, What Happens Next?
Frustrated widow as exector

Now You Are Executor of your Spouse’s Estate, What Happens Next?

The loss of a spouse after decades of marriage is crushing enough, but then you are thrust into the role of executor. There comes a tsunami of decisions about your deceased spouse’s estate. What does an executor do? There are decisions about finances and tasks that demand attention, when you are least able to manage it. Even highly successful business owners can find themselves overwhelmed, says The New York Times in the article “You’re a Widow, Now What?”

Most couples tend to divide up tasks, where one handles investments and the other pays the bills.  However, moving from a team effort to a solo one is not easy. For one widow, the task was made even harder by the fact that her husband opted to keep his portfolio in paper certificates, which he kept in his desk. His widow had to hire a financial advisor and a bookkeeper, and it took nearly a year to determine the value of nearly 120 certificates. That was just one of many issues.

She had to settle the affairs of the estate as executor, deal with insurance companies, banks and credit cards that had to be cancelled. Her husband was also a partner in a business, which added another layer of complexity.

She decided to approach the chaos of being executor as if it were a business. She worked on it six to eight hours a day for many months, starting with organizing all the paperwork. That meant a filing system. A grief therapist advised her to get up, get dressed as if she was going to work and to make sure she ate regular meals. This often falls by the wayside, when the structure of a life is gone.

This widow opened a consulting business to advise other widows on handling the practical aspects of settling an estate and also wrote a book about it.

A spouse’s death is one of the most emotionally wrenching events in a person’s life. Women live longer statistically, so they are more likely than men to lose a spouse and have to get their financial lives organized. The loss of a key breadwinner’s income can be a big blow for those who have never lived on their own. The tasks come fast and furious, in a terribly emotional time.

Widows may not realize how vulnerable they are, after the death of their long-time spouses. They need to hold off on any big decisions and attack their to-do list in stages. The first task is to contact the Social Security administration, call the life insurance company and pay important bills, like utilities and property insurance premiums. If your husband was working, contact his employer for any unpaid salary, accrued vacation days and retirement plan benefits.

Next, name your adult children, trusted family members, or friends as agents for your financial and health care power of attorney.

How to take the proceeds from any life insurance policies, depends upon your immediate cash needs and whether you can earn more from the payout by investing the lump sum. Make this decision part of your overall financial strategy, ideally with a trusted financial advisor.

Determining a Social Security claiming strategy comes next. Depending on your age and income level, you may be able to increase your benefit. If you wait until your full retirement, you can claim the full survivor benefit, which is 100% of the spouse’s benefit. You could claim a survivor benefit at age 60, but it will be reduced for each month you claim before your full retirement age. If both spouses are at least 70 when the husband dies, a widow should switch to a survivor benefit, if her benefit is smaller than his.

Expect it to be a while, until you feel like you are on solid ground. If you were working when your spouse passed, consider continuing to work to keep yourself out and about in a familiar world. Anything that you can do to maintain your old life, like staying in the family home, if finances permit, will help as you go through the grief process.

Learn how a revocable living trust can avoid thrusting your widowed spouse into the role of executor.

Reference: The New York Times (April 11, 2019) “You’re a Widow, Now What?”

Surviving Spouse Needs An Estate Plan

When one spouse dies after meticulously titling assets to pass through joint tenancy to the surviving spouse, estate planning attorneys flinch. There are occasions when everything works smoothly, but they are the exception. As this article from the Santa Cruz Sentinel warns “After husband’s death, wife needs to create revocable trust.” Actually, she needs more than a revocable trust: she needs an estate plan.

Most of the assets in the plan created by her husband, in this case, did pass to the wife outside of probate. However, there are a number of details that remain. She needs to obtain date-of-death values for any non-IRA securities the couple owned, and she should also have their home’s value determined, so that a new cost basis for the house will be established. She also needs an appointment with an estate planning attorney to create a will and an estate plan.

If she dies without a will, her children will inherit the estate in equal shares by intestate succession. However, if any of her children pass before she does, the estate could be distributed to her grandchildren. If they are of legal age, there is no control over how the assets will be managed.  Making matters worse, if a child or grandchild is disabled and receiving government benefits, an inheritance could make them ineligible for Social Security and Medicaid benefits, unless the inheritance is held within a Special Needs Trust.

Another reason for an estate plan: a will details exactly how assets are distributed, from the set of pearls that great aunt Sarah has kept in the family for decades to the family home. A durable power of attorney is also part of an estate plan, which lets a named family member or trusted friend make financial decisions on your behalf, if you become incapacitated. An estate plan also includes an advance health care directive, so a loved one can make medical decisions on your behalf if you are not able.

These are the basics of an estate plan. They protect loved ones from having to go to court to obtain the power to make decisions on your behalf, as well as protect your family from outsiders making claims on your estate.

A revocable trust is one way to avoid probate. An estate planning attorney will be able to evaluate your own unique situation and determine what the best type of trust would be for your situation, or if you even need a trust.

You may be thinking of putting your home, most families’ biggest asset, into joint tenancy with your children. What if one or more of your children have a divorce, lawsuit or bankruptcy? This will jeopardize your control of your home. A revocable trust will allow your assets to remain in your control.

The last piece in this estate is the IRA. If you are the surviving spouse, you’ll want to roll over your spouse’s IRA into your own. Make sure to update the beneficiary designation. If you neglect this step and the IRA pays into your estate when you pass, then the IRA has to be cashed in within five years of your death. Your children will lose the opportunity to stretch IRA distributions over their lifetimes.

An estate planning attorney can help guide you through this entire process, working through all the details. If your goal is to avoid probate, they can make that happen, while protecting you and your loved ones at the same time.

Reference: Santa Cruz Sentinel (March 24, 2019) “After husband’s death, wife needs to create revocable trust”