Monthly Archives: April 2017

Retirement Planning: It’s Not Just About the Money

A short note: I heard a program about retirement planning the other day.  I won’t identify the fellows since almost all retirement planning advice carries the same assumptions and the same blinders.

The authors had the usual advice about savings and investment strategies to make sure your money lasts through retirement.   The implied assumption is that you will live your golden years in security until suddenly “the Big One” takes you out.  Trouble with the assumption is that folks are living longer, and the longer they live the more expensive life gets. Consider how many people above age 90 live like 65 year olds?  How many drive, maintain their own home without help, make their appointments and pay their bills by themselves? Perhaps most live in apartments that are “independent” or assisted living.  The cost ranges from $2,500 to over $6,000 per month.  Kind of ruins the financial plans.

Let’s consider the foregoing, just pointless quibbling about the computations.  I agree that life does not go according to plan and yet it is better to have a plan that stretches one’s life savings to live in reasonable comfort and style.  After all what if a person does travel, buy new cars and clothes and then runs out of money at age 85?  It is better to prudently plan.

Let’s go to another part of my first point. Retirement is about aging and aging is about declining independence and health in many retirees.  How much decline a person experiences is often directly related to the quality of healthcare the person actually receives.  I did not say the quality that is available, but the quality received.  From my experience an elder needs a healthcare advocate, a “patient advocate” to get the best outcome.  Why? One reason is the complexity of healthcare and related to that is the incessant cost cutting the health insurers demand.

Yes, the quality of one’s life depends  having adequate finances,  but for many it depends more on the quality of the medical experience.  And that requires a patient advocate who is acting under the authority of a healthcare power of attorney.  But even more, the patient advocate must be informed about public and private benefits (Medicare and private health insurance for example).  For many elders across the country it has been a patient advocate who saved their lives.

And so, that is why this entry is a short note.  The subject of how to get quality outcome of your healthcare experience when your provider is trying to cut costs is not just a blog article.  It is more than one big chapter in the book on retirement planning.   I’m working on that one.

All the best,


Don’t do Medicaid Pre-planning
(till you read this)

I see many attorneys advocating Medicaid pre-planning and in many cases their advice will leave a client worse off than if he or she did nothing. Why? Because they focus on the nursing home, they do not plan for alternatives to the nursing home. Let’s use a story.

Doctor Says It’s Alzheimer’s Disease
Carol Smith is 75, her husband is John, age 78. After years of Carol’s suspicion his doctor finally confirmed it. John has Alzheimer’s Disease. She knows what that means. He will likely be in a nursing home some years from now. The thought still makes her shudder as she remembers how horrible it was to have her mother in a nursing home.

With the help of her oldest daughter Ruth she began researching what to do. They read articles on the internet and, by luck!, an attorney was holding a “long term care” seminar with the slogan “Don’t lose your assets to the nursing home!” Carol does not want to lose all the savings she and John worked so hard to accumulate. This program “rang her bell.”

They Go to the Lawyer’s Workshop
During the program the attorney laid out the cold hard facts: if you go to a nursing home you can expect to lose everything, even your house will go to the government! But he offered good news: he had a Medicaid Protection Trust. They could save everything if they act now because Medicaid has this “5 Year Rule.” As the program ended Carol and Ruth signed up for an appointment.

At the Lawyer’s Office
The lawyer reviewed her financial information. “You have $50,000 in your IRA and John has $150,000 in his. You have $300,000 in other investments, your home is worth $250,000. And you have about $50,000 in other assets including your checking and savings accounts, car and life insurance. You are worth $800,000 and you risk losing all of it.”

The lawyer continued. “When is the best time to start protecting your assets? Now. You need to have your protection plan in place at least five years before he goes into a nursing home. Now here’s what we need to do.”

The Medicaid Pre-plan
The lawyer recommended a full Medicaid Pre-plan. They needed to replace their “estate planning documents” with “Medicaid planning documents.” Carol would cash out her IRA and put the rest of their assets in the irrevocable Medicaid Protection Trust. John’s IRA would be placed into an immediate annuity that would pay out over 60 months. They would live off their social security, his IRA payout, and income from the investments in the Medicaid Protection Trust. That would give them an income of about $4,700 a month. After five years John could go into a nursing home and he would be Medicaid eligible from day one. All their assets would be saved.

Carol’s head was spinning. She heard Ruth ask how much would it cost. The lawyer said with a $10,000 investment in your Medicaid plan you will save you $800,000. $10,000 Ruth asked? That’s right the lawyer said.

Carol was reaching for her checkbook when Ruth said to the attorney “We’d like to think about this.” The attorney completely understood but cautioned them that “delay could prove extremely costly. The earlier you act, the more you can be assured of saving.”  He left the room to give them time to talk. Carol and Ruth talked.  Ruth was skeptical but Carol was adamant.  She did not want to lose everything they had worked so hard to gain.

Carol hired the lawyer. They did the Medicaid preplanning. They put their savings in the irrevocable trust.

The lawyer congratulated her. “You have protected your home and your life savings from the nursing home and the government.”  But, he sternly warned, she could not get anything out of the trust otherwise the whole effort could fail.

Five Years Later
John’s Alzheimer’s is much worse. For the past two years he has been in a dementia care assisted living facility. Ruth helped Carol find it. He is doing well there. He has his own room and seems to like it. The cost is $7,000 a month.

Carol had to place him there. He was 24 hour care. One night she woke up and smelled something burning. There was smoke everywhere. John was watching TV. In the kitchen Carol found the burner on and something burnt in the pan. Another night, at 2:00 a.m. she heard the front door slam. The police later found him wandering around, trying to “go home.” Carol hired an in-home care agency for help during the day, it was expensive but still she was not getting rest! Finally her doctor told her either she places him or she will have a heart attack!

Now, in less than one year John’s IRA will be gone. They will be out of money. She cannot get at her savings and investments, those are in the irrevocable Medicaid Protection Trust. She can’t get a home equity loan, their home is in the Medicaid Protection Trust.

The Medicaid preplan will force Carol to put John in a nursing home. She fears what will happen. He is an active dementia patient. They will put him in a wheelchair with an alarm so that he cannot get out of it. If he becomes agitated they will drug him until he is compliant.

What’s wrong with this picture? They planned for the nursing home.
Unless a person’s monthly income is less than $2,199 (2017) Medicaid will only pay for care in a nursing home. Pre-planning for Medicaid is planning to go in the nursing home as soon as possible.

Don’t plan for the nursing home. Plan for the alternatives to the nursing home. Don’t put your savings into an irrevocable asset protection trust unless you have enough to pay for alternatives to the nursing home. If after budgeting for the alternatives you have excess savings, then use an irrevocable asset protection trust. This is a “life-care plan.” I’ll post on that later.

Got questions? Give me a call at (248) 356-3500.
All the best,


And, how does it help you?

Many people, seniors, financial advisors, accountants and attorneys are confused about how the average middle class elder may have Medicaid pay for nursing home long term care while they don’t spend a dime of their life savings. What many don’t understand is that seniors have a right to get something out of all those taxes they paid these many years. The best way to explain it is by a hypothetical story about this all too common problem of nursing home impoverishment.

Levi, Carol’s husband of 52 years, fell and broke his hip. He went into a nursing home for rehab but was not doing well due to his overall poor health. His Medicare rehab coverage was ending. Carol hoped to bring him back home, but he just wasn’t ready. None of their three children could take him in either. She was approached by the social worker who told her she needed to talk to Tony, the lady in the business office, about how she intended to pay for her husband’s care. Tony informed her their charges were over $8,000.00 per month plus “incidentals.” She asked if Carol was going to apply for Medicaid. Otherwise she would need a check by Friday for $13,000. That would cover Levi till the end of the month and the month following.

Mary was confused and scared. Their life-savings would be gone! Betty, her friend from the old neighborhood, told her to see this one elder law attorney. “Don’t go to anybody else. They’ll tell you, you have to pay for months if not years!” Carol was elated and confused because she heard that Medicaid is a social program to pay for people with insufficient assets or income to pay for nursing home care. She and Levi had savings, she could pay for a while, but what about her needs? Tony at the nursing home warned her that she better have not given anything away in the past five years or Medicaid would not pay! She called the attorney Betty recommended.

Before the appointment Carol received a packet from the attorney’s office. The appointment letter was reassuring and advised her that the attorney needed complete information to give her the best advice. When she filled out the financial form, she was shocked, and depressed, about how much they were worth. Their house was worth $250,000. They had $350,000 in savings. They had a condo in Florida worth $175,000. And finally their almost new Lincoln sport utility vehicle was worth $40,000. Of course, not everything was paid for but they were worth over $800,000! It depressed her to think they would lose everything they worked all their lives to save.

Carol arrived at the appointment early. The attorney’s assistant was reassuring as she reviewed the information Carol brought. She asked about the mortgage on their home and the one on the Florida condo. Carol explained that they used some savings and took out a home equity loan to cover the down payment on the condo. Carol could not hold it back, “I will lose our condo and have to pay for years won’t I?” The assistant smiled reassuringly, “Don’t worry about it. You’re here now. It will be alright.”

Bill, the attorney, came in and put Carol at ease. After they talked a while he said, “You don’t have to give Tony that check for $13,000, unless you want to.” She was shocked. “What? Why? How?” He responded  “You can have Medicaid coverage next month if you wish. There were a number of strategies that could effect immediate Medicaid eligibility.”

Carol could not believe it. “I will not have to pay out our savings for years? Don’t I have to be poor?”

“Carol, you could have a home worth $560,000, have it nicely furnished, have a new luxury car, have put $200,000 into a retirement annuity that pays you monthly, have prepaid funerals, a family cemetery plot and $122,900 in the bank and you would be eligible for Medicaid. I don’t know if you would call that poor. If you choose to hire us, you will have choices of how long you want to pay. Different strategies produce different results.”

“Will I lose our beautiful Florida condo?” Bill said, “You have a mortgage on it. That’s good, because that makes it easier to save.” He explained that Medicaid allows a, very, certain amount of “countable assets.” Since the Florida condo was only half paid for it could be part of her allowed countable assets, called the “Community Spouse Resource Allowance.” Anything over that has to be “spent down.”

“Spend down” does not mean the money goes to the nursing home. She could use their money to pay off any bill she wanted. She might pay off the Lincoln, pay off the mortgage, and pre-pay funerals if she wished. In a case like Carol and Levi’s spend down should be part of a comprehensive Medicaid strategy.

Bill explained that strategies might use certain types of trusts, notes, or certain types of annuities to rearrange their assets so that they could be eligible the next month.

“Will I have to give anything away?” she asked. “No, that is completely unnecessary” he assured her.

Carol hired Bill’s firm and gave Tony a check to the end of the month. Carol told her that Medicaid would cover the bills thereafter. Tony knew it since the attorney’s office let her know they had been hired. Levi returned home months later and Carol had the money to pay for the help that Medicare and Medicaid did not cover in home.


The story is hypothetical, but based on real facts. There are strategies that could produce the result. All of them rest on the position that the home and car are exempt assets and any bills or loans can be paid off. The condo and the $350,000 savings are assets that would have to be configured to conform to Medicaid eligibility.

It can be done. Not many attorneys know how. Many would advise Carol to make gifts to divest herself of assets. The problem is that if she did so, Medicaid would not pay for many, many months. All of that is completely unnecessary. If an attorney tells you “You must make gifts to divest assets,” don’t do it. Get a second opinion.

The moral of the story is see a qualified, experienced, certified elder law attorney.

All the best,