Recently I worked with two sisters who were worried that a considerable amount of their mother’s assets would have to be spent on a skilled nursing facility and wanted to know if there were any possibility of protecting the assets.
Eighty-eight year old Helen had established an irrevocable trust in 1996 when her husband died and funded it with investments totaling $350,000. Helen had hoped that she would be able to shelter these assets in the event that she ever needed skilled nursing care. Since that time, the investments have grown to $500,000. Because, under the terms of the trust, Helen was only allowed to take the income from the trust and none of the principal, all of the investments are completely sheltered and will be passed on to her heirs.
She now has dementia and has been moved from a memory care unit in an assisted living facility to a dementia unit in a skilled nursing facility. Her daughters were concerned, however, about unprotected assets outside of the trust including cash, proceeds from the sale of Helen’s house and income realized from the trust that now total $250,000 after payment for assisted living. They wanted to know if that amount would be lost to payment for skilled nursing or if we could help devise strategies to protect some or all of the assets.
I was able to tell them that, because Helen had executed a durable power of attorney with statutory gift rider while she was in good mental health, Helen could preserve an additional $150,000 by purchasing burial accounts for herself, her two daughters, son-in-law and Helen’s two brothers and their spouses. Each of those accounts will be funded with $7,500 for a total of $60,000 in burial accounts. They could have chosen any amount, but this was an amount the family was comfortable with spending.
In addition, Helen could loan $90,000 to Sue and gift $50,000 to Sue and $50,000 to Mary. The gifts would create a 10-month period of ineligibility for Medicaid for Helen, but the loan, which will be repaid at $9,000 a month will cover the difference between the monthly cost of the nursing home and Helen’s income during the ineligibility period.
The family left my office with greater peace of mind. They came in believing that they would have to spend $250,000 on Helen’s care. They left knowing that they would only spend $90,000 and would be able to preserve an additional $160,000 in assets over and above the $500,000 in the irrevocable trust. They were very satisfied.