An older woman and her daughter came into my office the other day. She was worried about having enough to support herself if her ailing husband ended up in a nursing home on Medicaid. It was a typical concern from a typical client—the kind of thing I deal with every day.
But this woman was not typical in one important way: I was able to tell her not to worry. She was already in good financial shape. She wouldn’t have to give up much before her husband qualified for Medicaid financially, and she would be able to enjoy nearly the same lifestyle while her husband received benefits.
When most people seek my advice as a Medicaid lawyer, I have to tell them that tens or hundreds of thousands of their hard-earned dollars are at risk. Not only that, but after spending down their savings and qualifying for Medicaid they will face a dramatic reduction in lifestyle, since the spouse at home will have to live on about $3,000 of monthly income (though in some cases I can get that number higher by lawyering).
What was so special about this woman? Why didn’t she need to hire an expensive lawyer to prepare for the dramatic financial changes that Medicaid brings?
It had nothing to do with estate planning or legal advice.
It was that this woman already had a low-cost lifestyle. She already lived on about $3,000 per month. She and her husband didn’t have many large assets (thanks in part to the fact that her husband had a pension for his retirement instead of a large IRA).
Most of this couple’s net worth was in their house and the wife’s IRA—both of which are exempt for Medicaid purposes if her husband needs long-term care. So I was able to tell her she’d still have her IRA, her house, some savings, and about $3,000 per month of income. And that was enough for her, because that wouldn’t be a dramatic change from how she was already living.
Of course, there were still things she needed to be aware of. What if she needed long-term care herself? Then her IRA would not be exempt, and she would have to spend all of it before qualifying for Medicaid. I also told her that even though she could exempt her house to qualify for Medicaid now, the house might still be subject to estate recovery after she dies—meaning the state could force her estate to sell the house and take the proceeds. And she needed to know about divestment and how to avoid it so she wouldn’t unknowingly create problems down the road.
I told her there are things I can do as a lawyer to protect her home and IRA from the risks of her own health and estate recovery. This woman understood and was okay with those risks, though, so she decided not to hire me. I’m okay with that, because my first job as a lawyer is to help clients understand the Medicaid system so that they can make informed decisions about long-term care planning and what’s worth it to them.
The moral of this story is that sometimes, the best Medicaid planning doesn’t have to involve a lawyer. If you’re worried about Medicaid, you can’t go wrong by reducing your expenses and getting used to a more frugal lifestyle. That will make the financial transition much easier, and you’ll be better able to deal with your loved one’s healthcare without that added stress.