People occasionally ask me: What should we do now to protect ourselves against nursing home costs and other long term care costs?
My answer is, it depends entirely on your circumstances right now.
If your spouse had a stroke and is already in a nursing home, then you should strongly consider immediate Medicaid planning to protect assets against long term care costs.
If your mother is starting to show early signs of dementia and may need long term care in the future, it’s worth meeting with an elder law attorney to get information on paying for long term care, and it may make sense to do some Medicaid planning.
If you’re fairly healthy with no warning signs, and you may never need long term care, it may not make sense to do any kind of Medicaid planning now.
That’s because Medicaid planning usually involves giving up control of your assets in one form or another. It may involve transferring part of your assets, or converting your assets into income, or making purchases that wouldn’t normally be economical. These techniques are incredibly valuable if you’re going to have to spend your assets on long term care costs anyway, but if you don’t have that sword hanging over your head, most people would prefer to retain control over their own assets.
So I can’t say that everyone should do Medicaid planning now. And you should be skeptical towards anyone who tells you otherwise, regardless of what you hear from friends or read on the internet. One size does not fit all – each situation is different and calls for a different approach.
However, there is one thing I would recommend immediately to anyone thinking about long term care – to have in place a well-drafted estate plan.
Everyone should have a will, power of attorney and advance directive for healthcare, but especially older people or people with health concerns who may need long term care. That’s because you can only execute these documents while you have mental capacity to understand what you’re doing. Once you lose capacity (which often happens with progressive diseases like dementia and Alzheimer’s), it’s too late to do these documents, which can create problems.
For example, a healthcare directive and power of attorney allow you to appoint someone you trust to manage your healthcare and finances. If you haven’t appointed an agent under these documents, and you lose capacity, there may be no one who can pay your bills. It may be necessary for your family, or the government, to apply for court for guardianship over you, a process that’s more expensive and difficult than executing a document ahead of time.
In addition, if you’re concerned about long term care, it’s important to have estate documents drafted by a lawyer familiar with elder law. For example, Medicaid planning often involves making gifts, and if you’ve lost capacity, the gifts would have to be made by your power of attorney agent. However, in order for the agent to make gifts, the power of attorney document must explicitly authorize that. We often see power of attorney documents that do not include that crucial gift language.
Likewise, if one spouse is healthy and the other is ill, it may make sense for the healthy spouse to leave a minimal inheritance to the ill spouse. That is because if the ill spouse is likely to be on Medicaid in the future, leaving a large inheritance to the ill spouse may end up wasting the inheritance. It depends on the situation, but it may make sense to have a will that deviates very much from the typical will that leaves everything to the spouse.
In sum, there is no one-size-fits-all approach to Medicaid planning, but everyone should have an estate plan, and it’s smart for your estate plan to be prepared by attorneys familiar with elder law.
For more information on Medicaid, long term care, Medicaid planning, and crafting a custom estate plan, please call or email FriedmanLaw.