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Bob, 75 years old, and Jane, 72 years old, were married 45 years ago. Although, like any marriage, some years were better than others, for the most part they have been inseparable since they said "I do." Three years ago, Bob started getting forgetful. Shortly thereafter, he was diagnosed with Alzheimer's disease. Jane has been his constant companion and caregiver during that time, with their three children helping as needed.
Recently, Bob fell and fractured his hip. He was admitted to the hospital and was later discharged to a nursing home for rehabilitation. The doctors have suggested that it is time to consider whether Bob needs to stay in the nursing home because he may need more care than Jane can provide at home.
Jane and her children want to speak with us about their long-term care options (from a legal and financial perspective) and about any benefits that may be available to help. They are concerned that if they try to keep Bob at home, they may need assistance paying for home health care. If he stays in the nursing home, they know nursing home care is expensive (about $5,000 per month when the cost of medication is included) and are concerned about what help is available for Jane since she remains healthy.
Bob's monthly income is $1,100. Jane's monthly income is $800. Bob and Jane own their home (valued at $90,000). They have modest IRAs (about $25,000 each) and have cash assets (e.g., checking, savings, money markets, CDs) that total $150,000. According to the life expectancy table, Jane is expected to live almost 14 more years.
If ALL of the couple's assets were liquidated and spent on Bob, they would be consumed paying for nursing home care within 5 years. That would leave Jane with nothing for herself and impoverished. On the other hand, if all of the assets were preserved for Jane's well-being, then on the average, she would have approximately $2,500 per month (including her monthly income) to fund her retirement over the next 14 years. She would probably use some of that money to enhance Bob's quality of life.
In point of fact, 42 USC 1396r-5 provides limited protection for Jane and she can accept the so-called "cookie-cutter" defaults. However, those defaults assume Jane will rely on receipt of a share of Bob's Social Security income and that she will spend (using 2005 figures) approximately $80,000 private paying for Bob's care. If Bob dies before Jane, then Bob's income will disappear. Jane will be left with one Social Security check and a substantially smaller reserve to fund her retirement. Since we can expect inflation to occur, over time, Jane would be impoverished. Further, because there is no assistance paying for assisted living care, Jane's own long-term care options would be seriously compromised if she needs help. A primary planning goal is to preserve assets so Jane can supplement Bob's care and finance her own home health or assisted living needs.
Note: Medicare will not cover the cost of nursing home (custodial) care. See 42 USC 1395y(a)(9).
© 2004, Law Office of David L. McGuffey, LLC
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