“Planning is bringing the future into the present so that you can do something about it now.” – Alan Lakein, American Author and Time Management Expert

While we often plan vacations or social gatherings, many avoid planning for aging and long-term care, hoping it will work out. Unfortunately, failing to plan can result in significant financial and emotional challenges when care is needed.

Let’s explore two different outcomes: planning early versus taking a “wait and see” approach to long-term care.

The Facts

Hank, 72, and Ellen, 69, are retired and enjoy traveling to visit family. During a recent trip, their eldest child asked if they had made any plans in case one of them got seriously ill. Despite their good health, Hank and Ellen realized they hadn’t given it much thought, so they decided to seek advice after returning home.

They own a home they’ve lived in for 45 years and have savings totaling $325,000. Throughout their lives, they’ve been careful with their money, avoiding unnecessary spending.

Scenario #1: Planning Ahead

Hank and Ellen consulted with an elder law attorney to update their will and powers of attorney. During the conversation, they discovered they could plan for future long-term care needs. They placed $200,000 and their home into an irrevocable trust, naming their children as beneficiaries. This trust would allow their children to support them financially without using their own money if needed.

The remaining $125,000 was placed in a revocable trust for their living expenses. Ellen also applied for long-term care insurance for extra security (Hank had been previously denied). After five years, the $200,000 in the irrevocable trust wouldn’t be counted against them for state aid if they required long-term care.

Six years later, Hank suffered a stroke and had to move into a nursing home. Ellen couldn’t care for him at home, so she returned to the attorney for guidance. Since they had planned ahead, Hank qualified for Medicaid without them losing assets. Ellen could keep all the money in their revocable trust, and the irrevocable trust, which had grown to $215,000, remained intact. Ellen found comfort knowing she didn’t have to worry about paying for Hank’s care, and their children were ready to help if needed.

Scenario #2: No Early Planning

In this case, Hank and Ellen didn’t plan ahead. When Hank had his stroke at 78, they had $300,000 in assets. According to Medicaid rules, Ellen was allowed to keep $110,000, but most of the remaining funds had to go toward Hank’s care, leaving only $90,000 to be protected in a trust. Although their home was safe while Ellen lived there, it could be at risk if she became ill.

It took nearly two years for Hank to qualify for Medicaid, causing immense stress for Ellen and her family. Worse, nothing had been done to protect Ellen’s future care needs, leaving their remaining assets vulnerable.

What If Hank Was Single?

If Hank were single but had the same assets, early planning could protect all his assets in an irrevocable trust, including his home. Any remaining assets could be converted into an income stream to pay for his care, allowing for a smooth Medicaid application process. A power of attorney would also prevent the need for guardianship if Hank couldn’t manage his affairs.

Without planning, Hank might have had to use more than half his assets to protect his home. This would leave only $50,000 for his children or to be placed in a trust. Additionally, if Hank couldn’t make the necessary financial decisions, a guardianship would be required to manage his assets, with court approval needed for any transfers.

Conclusion

These scenarios highlight the importance of planning early for long-term care. Not only are there financial benefits, but early planning also reduces stress and provides peace of mind for families, knowing that their needs will be met in any health crisis.

Our firm is here to help families with long-term care planning, whether years in advance or after a crisis. We would be honored to assist you or your loved ones.