Worried about a Spouse Needing Nursing Home Care? – Annapolis and Towson Estate Planning

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 the example above, Tom has had some major health issues in the past year and Louise is no longer able to care for him at home.

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.

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

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Make the Most of Beneficiary Designations – Annapolis and Towson Estate Planning

There’s an easy way for select assets to be passed to heirs, with no need for probate. It’s called the beneficiary designation.

Your will is a document that is used to pass property and assets to your heirs, but it’s not the only way.

Certain accounts or assets have beneficiary designations, where you provide instructions on who is to receive assets when you die. Most people don’t realize that the beneficiary designation is more powerful than the will, and directions in a will are overruled by the beneficiary designation.

Kiplinger’s recent article, “Beneficiary Designations: 5 Critical Mistakes to Avoid,” explains that assets including life insurance, annuities, and retirement accounts (think 401(k)s, IRAs, 403bs and similar accounts) all pass by beneficiary designation. Many financial companies also let you name beneficiaries on non-retirement accounts, known as TOD (transfer on death) or POD (pay on death) accounts.

Naming a beneficiary can be a good way to make certain your family will get assets directly. However, these beneficiary designations can also cause a host of problems. Make sure that your beneficiary designations are properly completed and given to the financial company, because mistakes can be costly. The article looks at five critical mistakes to avoid when dealing with your beneficiary designations:

  1. Failing to name a beneficiary. Many people never name a beneficiary for retirement accounts or life insurance. If you don’t name a beneficiary for life insurance or retirement accounts, the financial company has it owns rules about where the assets will go after you die. For life insurance, the proceeds will usually be paid to your estate. For retirement benefits, if you’re married, your spouse will most likely get the assets. If you’re single, the retirement account will likely be paid to your estate, which has negative tax ramifications. When an estate is the beneficiary of a retirement account, the assets must be paid out of the retirement account within five years of death. This means an acceleration of the deferred income tax—which must be paid earlier, than would have otherwise been necessary.
  2. Failing to consider special circumstances. Not every person should receive an asset directly. These are people like minors, those with specials needs, or people who can’t manage assets or who have creditor issues. Minor children aren’t legally competent, so they can’t claim the assets. A court-appointed conservator will claim and manage the money, until the minor turns 18. Those with special needs who get assets directly, will lose government benefits because once they receive the inheritance directly, they’ll own too many assets to qualify. People with financial issues or creditor problems can lose the asset through mismanagement or debts. Ask your attorney about creating a trust to be named as the beneficiary.
  3. Designating the wrong beneficiary. Sometimes a person will complete beneficiary designation forms incorrectly. For example, there can be multiple people in a family with similar names, and the beneficiary designation form may not be specific. People also change their names in marriage or divorce. Assets owners can also assume a person’s legal name that can later be incorrect. These mistakes can result in delays in payouts, and in a worst-case scenario of two people with similar names, can mean litigation.
  4. Failing to update your beneficiaries. Since there are life changes, make sure your beneficiary designations are updated on a regular basis.
  5. Failing to review beneficiary designations with your attorney. Beneficiary designations are part of your overall financial and estate plan. Speak with your estate planning attorney to determine the best approach for your specific situation.

Consider the beneficiary designation as part of your estate plan, and you’ll get the full picture of the power of a beneficiary designation. Just as you need to review and update your will to keep up with changes in your life and the law, you also need to update your beneficiary designations.

Reference: Kiplinger (April 5, 2019) “Beneficiary Designations: 5 Critical Mistakes to Avoid”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys