2004-12-09 / Business & Finance

Elder Care And Elder Law

A few months ago I attended an Estate Planning Council meeting re-garding elder law planning. At these meetings we discuss issues related to trusts and estates, which brings to mind the funniest estate story I’ve ever heard.

In 1979 as a branch manger of the Garden State National Bank, I routinely attended executive board meetings. At these meetings the senior officers of the bank would bring the trust-ees up-to-date on the goings on within the bank. At one meeting I saw the head of the bank’s trust department stand up and announce that one of the now business trust officers was leaving the bank.

He began, “John (not his real name) has informed me that he is leaving the bank. He is leaving so that he can take over his father-in-law’s landscaping business. I guess you can say that John will no longer be selling plots (a derisive description of a new business trust officer’s modus operandi). Instead; he’ll be maintaining them.”

Well, while this anecdote was funny, the Estate Planning Council meeting was not. In fact, it was disheartening. Elder care or elder law planning is a euphemism for “cheating the government.” It is about arranging for “people of means” to become eligible for Medicaid so that Medicaid will pay for their long-term care costs.

Medicaid is a Federal program that was created by LBJ’s “Great Society” agenda in the 1960s to pay medical costs for the “poor.” Over the years the program has morphed to cover more and more services. Today it covers long-term care costs for those who are “poor.” Anyone who has less than $2,000 in assets and less than $1,300 in monthly income is considered “poor” by Medicaid.

So how does “one of means” wind up qualifying for home relief (the term for Government welfare during the Great Depression)? Easy. You give your money (and property) away, wait three years, and presto, you are eligible for Medicaid. There is a three-year look back period for gifts made.

This means that if you give something away, you must wait three years before you are eligible for Medicaid. While this sounds pretty simple, it is not. That’s why you need lawyers to get the job done right.

The elder care lawyer finished her spiel on how best to make yourself eligible for Medicaid. And, like Daniel in the lion’s den, the first question I asked was, “Do you have any idea how much the activities you just outlined will cost the Government?”

It’s unusual to find a lawyer at a loss for words. But, after a pregnant pause and a look around the room for help she stammered, “No, I don’t know.” Then, like a fighter who’d been knocked down she offered, “But I don’t think it’s my job to know.”

Ever the heretic, I continued, “Has the government made any provisions in the budget to pay for these activities?”

She countered crisply, “I wouldn’t know that,” and looked to the other side of the room for the next question.

But let’s forget about the immorality of elder care planning for a mo-ment and look at the mechanics. To whom are you going to give your wealth? Strangers? I don’t think so! You’re going to give it to your adult children or, if you’re single, your nieces or nephews.

Although you’ve raised your children yourself or have known your nieces and nephews all of their lives, there are still a few questions you may want to consider:

1. Are they immortal? What if you give your money to them and they die before you do? Have they named you in their will? Even if they have, that won’t solve anything because you would just get the money back and be back to square one. They could also change their will, leaving you out in the cold.

2. Are they above the law? This question has to do with debtors and creditors. If your donee gets into trouble with creditors, your money could go to their creditors.

3. Would you give your money to their spouses today? Based on divorce settlements, your money could easily “leave the family.” So what’s the ans-wer? The best solution to elder care planning is not to give your money away and become beholden to someone. You and your family are much better off if you keep your money and buy a long-term insurance policy that will pay the costs of a long-term care stay.

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