Dear Jill: My aging parents moved to an assisted living facility in Naples two and a half years ago.
When they first entered the facility, both were very independent and the cost for the facility was approximately $3,500 per month for the two of them. At that time, they had about $600,000 in their brokerage account and paid for their care easily from their income. Since then, their portfolio has diminished to $325,000 and the cost of their care is now more than $5,000 per month.
My mother has now been diagnosed with early dementia and my father has rheumatoid arthritis. The facility has raised their care levels several times. We have looked at every way possible to minimize expenses including getting dad’s prescription drugs through the Veterans Affairs. Their income is only a little more than $2,000 per month so we are quickly depleting their now-shrunken portfolio.
Because of the economic downturn, I am forced to work additional hours because my husband lost his job. That means that I am less available to help my parents. I feel very guilty about the fact that I now sometimes only get to see them about once a week and am shocked by the changes in their health. I am no longer sure that the facility in which they currently live is providing what they need but I am overwhelmed with the idea of finding another more appropriate place.
As I watch my mother decline, I am concerned that the time will soon come that it will not be safe for my parents to live in the same place and I know that nursing homes cost nearly $9,000 per month. How will my parents be able to afford to keep my dad in the assisted living facility and also pay for my mother’s nursing home? My parents executed revocable living trusts and other estate planning documents about 10 years ago so at least I know that they will be able to avoid probate. Is there any way to get peace of mind about the long term care maze?
Dear Connie: You are facing what we refer to as the long-term care maze. We know that it can be overwhelming. Currently you are concerned about the cost of your parents’ assisted living care. With appropriate restructuring of their assets, they may become eligible for a benefit called “Aid and Attendance,” if your father served during a wartime. This benefit can provide married veterans up to $1,956 in income per month to offset un-reimbursed medical expenses. The planning rules for veterans benefits allow a number of possibilities to acquire the benefit so all options should be considered (not just annuities). If your parents were to obtain this benefit, they would substantially close the gap on the cost of their current care. However, it is critical that whatever option is considered that it properly segues with the Medicaid rules. Your parents can look to the Medicaid program to pay for the cost of nursing home care should your mother’s condition decline to the point that nursing home care is needed.
Having appropriate legal documents to utilize the tools that we are describing here is critical in the planning process. The revocable living trust that your parents currently have may not be the best planning vehicle for the problem that they now face. The cost of a probate administration may be negligible compared to the cost of long-term care. The revocable living trust needs to be reviewed to determine whether it provides adequate flexibility to do asset protection planning.
Typically, new documents may be necessary, including a flexible durable power of attorney and possibly a will with a qualified special needs trust for your father to properly plan for your mother’s potential nursing home care. You may have only a small window in which your mother may retain capacity to sign legal documents. As her dementia progresses that window of opportunity will close. Putting a plan together to finance your parents’ long-term care should go a long way to achieving some peace of mind.
You have also mentioned concerns involving the appropriateness of the care that they are currently receiving. We are lucky in Naples to have many choices when it comes to assisted living care. Each facility has its own strengths and individual character so it is important to have an advocate knowledgeable about the choices available when choosing a facility. Your parents’ long term situation needs to be analyzed in order to make the best possible placement. However this decision is probably just the beginning of a long series of health related decisions that your family faces. As their diseases progress it is likely that you and your family will face other decisions including contractual concerns at the facilities, health care advocacy and end of life decisions that will pose challenges. Getting appropriate help at the right time should alleviate your concerns and help you and your parents to make the best decisions.