If you want to experience the journey from the beginning, you may read the first three parts of the story here: https://keystoneelderlaw.com/elder-care-journey/ . Part three concluded last week with Bill feeling lonely and depressed because he missed the cheerful presence of his wife, Sue, in the home they had shared until an unexpected stroke caused her to become bedridden a year before, just as they were beginning to enjoy their retirement.

Not quite four years after Bill’s wife, Sue, had been admitted to the Regal nursing facility, Bill also began to receive skilled nursing care. After implementing a life estate plan created by Keystone Elder Law, Bill had been sharing his home with his son, Joe, Joe’s wife Gail, and his grandson, Mark. Because Bill and Sue had enrolled to be clients in Keystone’s Life Care Planning program, it was easy for Joe to turn to Keystone for help with the latest change in their situation.

The primary goal of Joe and Gail, and Joe’s sister, Mary, was to make sure that Bill and Sue would continue to receive the skilled nursing care they needed without endangering the family home, in which Joe and Gail had purchased a remainder interest and invested money in necessary improvements.

Because of the asset preservation work that the Keystone lawyer had done four years before in relation to Sue receiving Medicaid for her care in a nursing home, all of Bill and Sue’s resources been placed in only Bill’s name. At the time Bill was admitted to a nursing home, the amount of remaining resources totaled around $170,000, which included a mortgage note of about $100,000 that was still payable to Bill by Joe and Gail towards the balance due for the remainder interest in the family home.

Since mortgage rates were at historic lows, and the mortgage note held by Bill was for less than 50% of the market value of the home, the Keystone attorney advised Joe and Gail to refinance the mortgage note with a conventional mortgage from their local credit union. That way, all of Bill’s financial resources would be in cash, and the future need to probate a mortgage note after Bill’s death could be avoided, saving around $5,000 to $10,000 in future estate administration expenses.

The total of Bill’s remaining cash put him well over the limits of the maximum resources that a Medicaid applicant may have. If Bill would die within two years, he would never need Medicaid. But if Bill were to out-live his liquid resources, his POA agent, Joe, would need to apply to DHS for MA.

As an alternative, Keystone’s attorney explained how it would be possible for Bill to make a substantial gift of cash to be held in a special account by Joe and Mary. By coupling this final gift with a Medicaid-compliant annuity, any future financial hardship for Joe and Mary would be avoided. The attorney called this a “gift with an annuity strategy.”

This strategy would solve another issue which was caused by Bill giving around $40,000 to his daughter, Mary, against the recommendation of the Keystone attorney. The gifts to Mary did not create an issue regarding Sue’s eligibility, but with respect to an application for MA for Bill, the gifts to Mary would result in a penalty of about four months.

Pennsylvania’s relatively new filial support law would hold both Joe and Mary to be financially responsible to pay the shortfall of $5,000 per month for the cost of Bill’s care during the four month penalty period. That was a risk that Joe asked Keystone to help them avoid.

The attorney explained that Keystone uses a proprietary computer program to compute how much additional money Bill could give to Joe and Mary, and offset the penalty of all gifted funds with use of a short-term, Medicaid-compliant annuity. The calculation would factor in the amount of all gifts Bill and Sue had made to their children, the daily cost of Bill’s care, Bill’s gross monthly income, and the cost of his supplemental Medicare insurance. The attorney estimated that Bill could give his children approximately $110,000 more as an “advance inheritance,” and purchase a Medicaid-compliant annuity to enable the family to pay through an anticipated fifteen month penalty period.

The plan would “cure the gifting problem” of the money given to Mary, as well as set aside a little more than $100,000 for Joe and Mary to pay for extra things which are not provided by Medicaid during the rest of Bill and Sue’s lifetimes. Extra things might include an expanded cable TV package, clothing, digital hearing aids that exceed a Medicaid allowance, or gifts to their only grandchild, Mark.

If Bill would die after the annuity plan was set up, but before all of the fifteen monthly payments were made, the annuity payments of about $4,000 per month would be split between Joe and Mary. The total “inheritance” left for Joe and Mary would be in an amount of $90,000 to $200,000, depending upon when Bill died. If Bill would live at least one year after completion of the spend-down with the final gift, there would be no Pennsylvania Inheritance Tax due.

By involving Keystone Elder Law, Bill managed to get the best possible care for Sue and himself. Bill reduced his stress caused by Sue’s unexpected crisis. Bill equipped Joe to help him manage his own gradual need for increasing care and ultimate nursing care crisis.

Financially, Bill and Sue managed to give $175,000 in equity value from the family home to their son, a car to their grandchild, cash to Mary, and finally a guarantee that Bill and Sue would leave a residual bequest of between $90,000 and $150,000 for Joe and Mary. Those amounts represent more than 50% of the total wealth that Bill and Sue had at the time that Sue needed nursing care, four years before Bill needed it as well.

Reducing a four year elder care journey of one family into five segments was challenging. Every elder care journey is unique; and it is almost never too late for Keystone Elder Law to provide helpful guidance. It is less stressful for everyone at a time of crisis if appropriate foundational documents are prepared and executed in advance for whatever journey a person might encounter.

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