I have been diagnosed with brain damage and dementia. Word to the younger folks: I woke up last year and suddenly could not spell or write legibly. No warning. No symptoms. I am getting worse, so I want to protect my wife of 24 years, and our finances. She will get half my pension and she has an even better pension than I do.
We have two long-term care policies — one is paid off and the other is 5% inflation-adjusted with lots of positive riders etc. If I end up living a long time and use up my long-term care policies — currently valued at $600,000 — and have to go on Medicaid, will we have to sell our house to pay Medicaid?
I don’t want my wife to lose everything. Will an elder-law attorney really help? I have heard mixed reviews, and that they come at a huge cost. Thanks for reading and a note to your readers from someone who knows: Do your bucket list traveling as soon as you can because you may not have the time left you think you do.
Love & Peace
“You will need financial, legal, medical, social and emotional support. That will involve enlisting the help of loved ones.”
MarketWatch illustration
Dear Love & Peace,
Keep all your options open, and don’t embark on this journey alone.
You will need financial, legal, medical, social and emotional support. That will involve enlisting the help of loved ones and, yes, relying on a network of professional support. You will need to reassess your financial goals, debts, savings, insurance, income and expenses. Take it one day, one step at a time. There are government programs that could provide help, and you may be able to withdraw money from your IRA even if you are not 59½ without incurring a penalty.
Dementia is a symptom rather than a disease itself. In fact, there are over 100 diseases that could cause symptoms consistent with dementia. Alzheimer’s disease is the most common type of dementia, according to the Centers for Disease Control and Prevention. Approximately 5.8 million people in the U.S. have Alzheimer’s disease and related dementias, which includes 5.6 million people aged 65 and older and 200,000 under 65, the CDC says.
There are other forms, including frontotemporal degeneration (FTD), which have received greater public awareness since the FTD diagnoses of former talk-show host Wendy Williams and actor Bruce Willis were made public. That is a common cause of dementia, and characterized as a group of disorders that occur with the loss of nerve cells in the frontal and temporal lobes. Aphasia, the inability to process words and communicate properly, can be one symptom.
Power of attorney and healthcare directive
There are several things you can do to smooth the path ahead. Update your will, and create a financial power of attorney. Don’t do a DIY version. As my colleague, MarketWatch reporter Beth Pinkser pointed out, it is complicated. You can read “The Power of Attorney’s Notebook.” You may also wish to reassess your investment portfolio, based on your new financial plan and risk tolerance. (I assume you are not yet 65, and as such do not qualify for Medicare.)
An advanced healthcare directive informs your doctors what action you want them to take if or when you are unable to make those decisions yourself. You may wish to list your wife as your healthcare proxy to carry out those decisions. You are a team, but serious medical issues can put pressure on a marriage, as this couple discovered, so she will need emotional support, too. Also, ensure you have a successor to your wife on both your POA and healthcare directive.
“It can be very scary when health issues arise and create uncertainty for your personal health as well as the future stability of your spouse and family,” says Michele Martin, president at Prosperity, a wealth-management firm in Minneapolis. She advises you to review your pension survivorship benefits, your expected Social Security to maximize cash flow and the survivorship income to your spouse, and examine the schedule of daily and monthly benefits in your long-term care policies, in addition to definitions for home care and assisted living care.
Your wife will have a lot of responsibilities: paying utility bills, paying your mortgage, keeping up to date with your medical care and finances, and managing her own life at the same time. Share your story with trusted family and friends and create a team — a community of people who can provide support, the latter of which should include updating your beneficiaries. You could also write instructions for easy access to your devices, documents and even your daily habits.
Long-term care insurance helps with expenses
You have done one key thing, something that should be a power of example for others reading your letter. You invested early in long-term care (LTC) insurance and have policies worth $600,000. (You do not specify if you took out shared policies.) But having a LTC policy, more than anything, will help alleviate the financial burden that lies ahead. Nursing-home care costs can vary dramatically depending on the type of care, state and institution (up to $125,000 a year).
Crystal West Edwards, a principal in the wealth preservation group at Porzio, Bromberg & Newman, P.C. in Morristown, N.J., strongly advises you to hire an attorney, given the importance of the tasks ahead. Paying for professional help now could save you a lot more down the road. “An elder-law attorney can recommend asset protection techniques that will allow you to protect assets (including your home).” You can contact the National Elder Law Foundation.
An elder-law attorney could cost you anywhere from $100 to $600 an hour, depending on the kind of services you need. An attorney and financial adviser will help you take an accounting of your assets, income, expenses and projected long-term care costs, and help you plan accordingly. Financial planners often have a professional network that includes attorneys and accountants, who can collaborate on your case, and share valuable information.
“It is difficult for many people to decide whether and when to put your long-term care policies in payout status, and that is very understandable as the policy has a limited term or cash cap and may run out if you put it into effect too early,” says Elizabeth Forspan, an attorney with Forspan Klear LLP. “However, if you mix this with a Medicaid plan, then it can be extremely effective. You should look at the specific Medicaid rules in your state and jurisdiction.”
Creating a trust to protect your assets
“Perhaps you can create a trust and divest yourselves of some of your assets now in order to make it through the five-year Medicaid look-back and during that time use your long-term care policy,” she adds. “You will not be able to determine this on your own, most likely.” An attorney and financial planner can help you weigh up the pros and cons. It may be that you decide to keep your home. Selling any valuable asset, particularly a home, should be a last resort.
There are exceptions to the five-year look-back rule for Medical eligibility: They include paying off debts, buying medical devices or home improvements to improve accessibility, according to the American Council on Aging, a Medicaid resource funded by planning firm Eldercare Resource Planning. But your income and other assets may also disqualify you from Medicaid eligibility. You can read more on Medicaid rules here.
Some states, including Florida and New York, have rules that exempt homes from assets calculated by Medicaid, under certain circumstances. In New York, you need to live in the home while receiving care or plan to return to the home after your care. California eliminated their asset limit this year, making a person’s home automatically safe from Medicaid while they are living; however, that does not mean it’s safe from Medicaid’s Estate Recovery Program.
I wish you and your wife the best of everything on this journey.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
