On July 15th, I met with Jack and Kerri who had an interesting, but common problem. Their Uncle Joe is 78 years old. He is suffering from Alzheimer’s Disease but otherwise is remarkably physically fit. Jack, Kerri, and their children have been trying to provide care for Uncle Joe but he now requires round-the-clock care and the family cannot maintain a workable schedule.

Uncle Joe was never married and had no children of his own. He had one sister, Helen (Jack and Kerri’s mother) and no other immediate family. Uncle Joe named Kerri his Power of Attorney in 2013 and, fortunately, the POA document contained a statutory gift rider which allows the Agent to do long-term care planning if the need arises. Under the terms of his Will, also executed in 2013, Joe named Jack and Kerri as equal beneficiaries of his estate. Joe was a very frugal man and had amassed a substantial amount of assets totaling $750,000.

Residence at 1234 Way Street$150,000
Key Bank – Checking – POD Jack and Kerri$ 65,000
Key Bank – Savings– ITF Jack and Kerri$ 75,000
Key Bank – CDs – 5 at $25,000 @ joint with Kerri$125,000
National Fuel Stock – TOD Jack and Kerri$335,000

The nursing home is going to cost $13,500 per month and Uncle Joe’s income with Social Security and his General Motors pension is $3,000 a month. By Jack and Kerri’s computation, Uncle Joe will need to pay $126,000 per year from his savings. At that rate, Joe will have spent all his resources in 6 years. Given his excellent physical health, he may very well live six years or more.

Jack and Kerri were upset that Uncle Joe did not complete more planning in 2013. I pointed out to them that Uncle Joe did do some planning by naming them beneficiaries on all his accounts, thereby avoiding probate at the time of his death for everything except his house. They asked me if there was anything that could be done at this late date to protect assets from nursing home care costs.

I told them about the home health care program which can provide up to 24 hour-a-day care in the home of a person who is suffering from a cognitive disorder (like Alzheimer’s Disease) and that family members can get paid to provide the services that they were providing to Uncle Joe. While they liked the idea, they felt that in-home long-term care would not be feasible for Uncle Joe.

I then explained other planning options available to Uncle Joe — even at this late date. Assuming the house can be sold in 3 months, he will have to pay the nursing home a total $40,500 for August, September, and October, he can pre-pay his funeral for $8,500 and retain $15,000 as his personal resource allowance. That will leave a balance of $686,000 in resources.

Based on his income and the cost of the nursing home, Uncle Joe can transfer all his National Fuel Stock into a Medicaid Asset Protection Trust and lend the rest of his excess resources to Jack and Kerri. There will be a 31.73 months penalty for transferring the stock, but Jack and Kerri will pay Uncle Joe $10,500 a month from the money he lent to them and he will get limited Medicaid Coverage as of November 1st and full Medicaid coverage 31 months later. The family will save the full value of the National Fuel stock plus any appreciation in value and they will get a stepped-up cost basis when they sell the stock after Uncle Joe dies so they will not have to pay a capital gains tax.

Jack and Kerri were very relieved knowing that Uncle Joe will be well taken care of for the rest of his life and his wish to leave them a legacy will be fulfilled.

If you have any questions about the above material or wish to speak to an attorney, please contact us at (716) 204-1055.

Assets, estate planning, power of attorney, probate, trusts, Will