Preferences, needs determine amount to save for care

Dear Bruce: You recently wrote: “Nursing home and home health care insurance is best suited for people of middle means. As I have stated, the poor cannot afford and don’t need it because the government will take care of them. The reasonably well-to-do can handle their own affairs. If a retired couple has a combined income of somewhere between $80,000 and $100,000 a year, they can afford to handle their own expenses.” My question is, besides income as a measurement, how much should people of middle means have in savings or rainy day accounts? Are there statistics that indicate what the norm would be for the need for nursing home care? Number of days on average? I think I am in the category of middle means and so have some savings for emergencies only. The cost at our age (67 and 66) would really be a drain on our income. – Reader, via e-mail

Dear Reader: You’re asking a question similar to “How high is up?” “How rich is rich?” “How much is enough?” No one can really answer that question definitively. There are people who have very little put away and are quite comfortable; others who are by most standards comfortable in terms of numbers still feel they need more. The current costs for nursing homes can easily run $50,000 to $75,000 a year, and there’s nothing to persuade me that these costs are going to ameliorate. How much money it will take to make you feel comfortable is a very personal thing. Whether you’re prepared to scale down your standard of living upon retirement is another. Many people don’t wish to, but many are obliged to. My statement still stands: If you have an income between $80,000 and $100,000 a year and savings, you might be able to handle things yourself or augment with a small policy. It is a sorry situation when the wealth accumulated over a lifetime can be used for just a short nursing home stay at the end of life.

Dear Bruce: My mother, 80, applied for an in-home care program about a year ago. To qualify for this program, she and my father (who has since passed away) needed to qualify for Medicaid. They did as requested and thought they were approved, but one year later it turns out she was not. Now, the program is sending her a bill for $42,000. The program wants her to try to get enrolled again and be “backdated” so the bill will get paid. Can she be held liable? In order for her to qualify, it seems she needs to set up a special trust for her assets above and beyond the monthly maximum, which will go to Medicaid upon her death. She does not want to do this. I agree. She has enough income to be comfortably placed in a nursing home or assisted living when the time comes. I don’t know how she got talked into trying this home care program in the first place. Your thoughts? – B.B., Nashville, Tenn.

Dear B.B.: Your letter raises several interesting points. As soon as somebody wants me to reapply so they can “pre-date” an application, I’m surely going to wonder if this doesn’t border on fraud. Before I did such a thing, I would want my attorney to give it his or her blessing. As to the qualifications for Medicaid now, those vary from state to state. You must understand Medicaid is charity, and there are strict maximums of what you are allowed to have. If she collects any money from Medicaid the state will very likely wish to collect that money upon her demise. You ask how she got talked into the program? Many older people get talked into things they really don’t understand. This is why if there are other members of the family, it’s important that they discourage their older relatives from signing anything until someone else has had a chance to review the document. You’ve indicated that your mother has enough money to pay for a nursing home or an assisted-living facility, whose costs could very easily approach the $42,000 that she currently owes. Why, then, is it not possible for her to pay that bill herself? Not a conclusion you want to come to, but I think it’s a question that should be legitimately asked.

Dear Bruce: My mother and father are moving into an assisted-living facility soon. Key to this is they have limited assets. Mother has Alzheimer’s and is totally dependent upon others to care for her. Dad has about $160,000 in stocks and not much more. Assets will be transferred to me to support them. I am worried about increased tax liability to my personal taxes and how I would indicate these expenses to family. The intent is to disburse any remaining funds upon their death per the requirements of their will. I am their executor and also have power of attorney for both of them should I need it. At this time Dad is still able to do most things, but seems to be a sucker for phone solicitors and donations, so I intend to limit his bank account funding per month to assure he does not overspend his personal money. A lawyer is doing the funds transfer in a few weeks. Thanks for any advice you may provide. – J.C., Homosassa, Fla.

Dear J.C.: You are way outside the “look back” period, so any money that is transferred around still will be vulnerable should your parents need any public assistance. I am confident that your attorney has apprised you of that. As to the income on this money, it would seem to me that since you have power of attorney, why not open an account if you are planning to invest the money in your parents’ names with you as the power of attorney? That way you will have access to it, but any income would be charged against their income and very possibly no income tax filing would be necessary. The problem with your father is not unique. For many older people, solicitors are very happy to stroke them for cash. Consult with your attorney, but it would seem to me that an account in their names would be a way to go.

Bruce Williams is a national radio talk show host and syndicated columnist.

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