Episode #12 of Intentional Wealth: Elder Care and Nursing Home Costs with Lanny Sodini
February 13, 2023
In Episode #12 of Intentional Wealth, host Amy Braun-Bostich is joined by Lanny Sodini of SutterWilliams Law to discuss practical steps to consider when trying to protect your assets from nursing home care costs.
Not realizing just how much nursing home care and elder care can threaten your finances until faced with admitting a loved one to a nursing home after a hospitalization can be eyeopening, to say the least.
Listen as Lanny shares his legal insights in this informative exchange between financial advisor and estate attorney.
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Welcome to Intentional Wealth, a monthly podcast where, alongside notable financial professional guests, Private Wealth Advisor and Founder of Braun-Bostich & Associates, Amy Braun-Bostich, delivers useful insights and strategies that help YOU live your best financial life! Remember, when your goals are meaningful and your wealth has purpose, you can truly live with intention.
Now here's the host of Intentional Wealth, Amy Braun-Bostich.
Amy Braun-Bostich: Good morning listeners and welcome back to another episode of Intentional Wealth. My guest today is Lanny Sodini, an attorney with Sutter Williams Law here in Pittsburgh, who's been a trusted go-to legal source for many of our clients' needs over the years
Sutter Williams is a boutique law firm focusing on workers' compensation defense, federal black lung and estate planning and administration, which is the firm's area of expertise that our clients have relied on for sound legal guidance.
With that brief introduction, I welcome Lanny Sodini back to Intentional Wealth to join me in discussing ways to protect your assets from nursing home costs.
So, so happy to have you here, Lanny, and thanks for joining me today.
Lanny Sodini: I appreciate the opportunity, Amy. And we’ll start on a topic that I think is very important for almost everybody.
Amy Braun-Bostich: Oh, definitely. Before we get started though, how about sharing a few highlights on your background for our listeners?
Lanny Sodini: Well, I've been practicing law for, for a number of years graduated law school from Duquesne University. My area of expertise in the last probably 20-25 years has been in the area of estate administration, estate planning, asset preservation, and some real estate. And I enjoy the work because I enjoy meeting with the people and helping them out and solving some of their problems in terms of estate planning and also resolving issues when someone passes and we have to administer an estate and pay taxes, whether they be inheritance taxes, federal state taxes, income taxes for the estates and trusts and so forth of that nature.
I also taught for a number of years at the Paralegal Institute at Duquesne and the topics of will's, trust and estates elder law and inheritance tax returns.
Amy Braun-Bostich: Thanks, Lanny. So let's just jump in right now and talk about asset protection measures to consider. So the first thing that I always get is, what about monetary gifts to loved ones before you get sick?
And I'm not talking about small monetary gifts, I'm talking about larger gifts.
Lanny Sodini: Well of course we're concerned here about issues with an individual maybe ending up going into a skilled nursing facility or some kind of an assisted living or personal care home. There's a number of issues with making gifts of large amounts to outside of your control in that if you end up having to go into a skilled nursing facility and apply for Medicaid. There is a five year lookback period in which the gift would make you ineligible for Medicaid payments after you've consumed all your resources. In addition, even if you don't go into a skilled nursing facility, but to a personal care home or assisted living facility, or even have in-home care, understand that Medicaid does not pick up the cost of care for personal care homes or assisted living facilities.
So you have to pay out of pocket until you run out of money, and then it becomes an issue of where you're gonna be able to continue to receive such care that you need, albeit not skilled nursing care. So a lot of times people think that, okay, well if I need the money my kids will keep it in a separate account and give it back to me if I need it.
That doesn't always work out. If a child should die or if a child gets sued, that money becomes subject to claims of creditors or passes through that child's own estate. And that money may never be able to be returned to you. So gifting money outright to a family member with the hopes that if needed, it'll come back or that I won't need it, is a risky proposition.
Amy Braun-Bostich: Yeah. We've seen a few clients do that and it's not worked out well.
Lanny Sodini: A lot of the time it's done with the house. Why don't I convey the house to my child. But the problem with that again is the five year lookback period - you're living in the house; the child owns the house. If the child goes through a divorce, does the in-law have a claim against the house?
If the child gets into an accident, can that asset of the child now be used to pay for his or her care? A lot of risks involved in giving money with the hopes that it'll be there or to avoid either taxes or so it doesn't have to be spent down if one goes into a, a skilled facility.
Amy Braun-Bostich: Now what about if you keep both names on the house? I get that question a lot.
Lanny Sodini: Do you mean the parent and the child? Well, that becomes a… there is some advantage to that in the sense that, again, looking at it from a Medicaid point of view, you always have to remember you have to beat what I call beat the five year clock. If anyone was old enough to remember, there was a
Game show called Beat the Clock… and if that happens then the house can remain as an exempt asset. And it's not subject to a state recovery because it's a non-probate asset. But again, you have the issue of what happens if the child dies first, mom's gonna pay inheritance tax on her own house.
Again, that subjects the one half of the value of the house to potential claims of creditors of the child who ends up in a bad accident and doesn't have sufficient insurance to cover the costs of any judgment against the child. A creditor could then sue for a partition and require the property be sold, or mom pays out the creditor.
There's hundreds of risks involved, of which I can't even think of all of them, but anytime… let me say this, many years ago when I started in this practice of law and before Medicaid really became an issue in spend down the senior partner of a law firm told me, he said, never mess with mom's house.
It's the roof over her and I take that philosophy even to the presence sometimes, although there are things we can do that are more protective of the house for Medicaid spend down purposes. But you have to be careful. It's mom's house, she's living in it, and she may need it too for other things. So I always remember that you're talking a lot of years ago that that was told to me.
Amy Braun-Bostich: That's good advice. What about a life estate though? Will that work?
Lanny Sodini: Well again, a life estate and/or some kind of placing the house into some kind of an irrevocable trust does provide protection in other words, whether it be a life estate or irrevocable trust, again, you have the five year beat the clock issued to do.
But by putting it a life estate or a trust, you ensure that mom has the absolute right to continue to live in that house free of any claims of creditors of the child, or any claims of creditors of the beneficiary of the trust, and that if you beat the five year clock, if mom needs to go into a skilled nursing facility, it becomes a question as to what the life estate may be worth or what needs to be done.
But that's usually not a big issue if it's in a trust situation. And again, if you beat the clock, you've preserved the house. That's one of the ways of preserving the house, is to put it into an irrevocable trust or create a life estate remainder so that mom has the absolute right to continue to live in the house.
She's responsible for payment of all the bills, but if it goes to the remaindermen under the life estate or it goes to the beneficiaries under the trust. And at that point, you know there's still inheritance taxes to pay because mom was living in the house even though it may not have been in her name, but it does provide some protection.
There's some issue of whether or not it's better to do a life estate remainder or place the assets into an irrevocable trust. When you sit down and talk to the clients about the pros and cons of both, then they ultimately will make the decision.
Amy Braun-Bostich: in Florida, they have something called a Lady Bird Trust or a lady something…
Lanny Sodini: Yes, Pennsylvania does not accept lady bird deeds at this time. That's where you have a situation where you can direct where the property would go at your death. Pennsylvania does not acknowledge the legitimacy of a lady bird deed.
Amy Braun-Bostich: Now in Florida, I have clients in Florida, I'm wondering, does that give you some protection though? Those Lady Bird deeds?
Lanny Sodini: I'm gonna have to plead a little ignorance because we don't allow it In Pennsylvania, I don't have a lot of you know, I've never dealt with it. I just know it's not permitted. So it's hard for me to say. It does provide, as I understand it, some protection because it directs where the property goes upon the death, and it creates a kind of like a way of avoiding it going through the probate process.
Amy Braun-Bostich: Yeah. There's like a remainder, right, which is usually the children. Okay.
Lanny Sodini: But you have to understand anytime you have the right to change anything, then it becomes an issue, as again, if you're looking at it from the beat, the clock, Medicaid point of view, you have to determine whether or not mom has control over assets that would end up throwing it back into her own estate in which would require spend down.
Amy Braun-Bostich: Yeah, right. Okay. Hey just outta curiosity, are there certain states that are more egregious with trying to claw back money than others?
Lanny Sodini: Well, Pennsylvania is right now a pretty good state… well, let me say this… with regard to Medicaid assets that are protected. You know, Pennsylvania has a, what I consider to be a very good exception to the Medicaid spend down rules, and that's where you have a husband and wife situation with the spouse living at home, we call that spouse the community spouse, that community spouse's, IRAs are not subject to spend down. One of the few states that say, okay, if you are living at home and you have your own IRA monies, we won't require you to spend that down. In addition, Pennsylvania has a state recovery so that when an individual dies, they have the right, if they have assets that they haven't liquidated because they've been exempt…
Pennsylvania exempts the house both for a joint husband and wife situation. But even if we have one spouse that goes into a nursing home the house remains exempt. There becomes an issue because, or a savings, because even though mom is in the nursing home and the house is exempt, there will be a state recovery against the value of the house when mom dies.
But understand the estate recovery is only gonna be for what they paid the nursing home and nursing homes under Medicaid and receive payments that are less than private pay. For example, let's assume that the private pay rate is $10,000 a month, and Medicaid only pays $7,000 a month, so there's a $3,000 spread there.
Well, if mom goes into a nursing home and we've exempted the asset out and mom receives Medicaid payments for 10 months, that means she's only paid $70,000 for the Medicaid payments and if the house is then sold after her death, she only has to pay the 70,000. The state only has to pay the $70,000 back.
If the house were sold, it doesn't have to be because it could be an exempt asset. If the house is sold, then it turns into cash and the children would have to be paying $10,000 a month for 10 months to pay for mom's care. So there is a savings there, Also, the other big savings is if you can beat the five year clock and make that house a non-probate asset.
For example, let's say you put it in joint names with the mom and the one child or two children, that's a non-probate asset. It will pass automatically at death to the children upon mom's death. Well, if during a state recovery, right now the Commonwealth only recovers assets from probate assets, that is, assets passing under the will because it's a non-probate asset. The mom dies, it goes to the two children automatically. It's a non-probate asset, so there's no estate recovery. Again, mom goes into the nursing home, you claim the house as exempt, even and it's in joint names. Mom dies and the Commonwealth wants to have a claim against the house, but because the house was in joint names, there's no estate recovery against a non-probate house asset.
So do they claw back? Yes, they do. They claw back what they're entitled to claw back. But there are certain exemptions and exceptions that Pennsylvania has. The biggest one is the sub community spouse's IRA accounts. They're not subject to spend down.
Amy Braun-Bostich: So in the, in the example that the community spouse has large IRAs, the house is in joint ownership, they go through the rest of their money. The, let's say the, the other spouse is in a nursing home and she goes through all of her money. And then the house is protected until the community spouse dies?
Lanny Sodini: Well, no. In a situation like that where it's in joint names and if the institutionalized spouse dies first there's no claim against the house because it it's owned by the husband, the community spouse. The problem is, if the community spouse dies first, then the house would go to the institutionalized spouse.
And then there would be a state recovery. That's one of the reasons why when a spouse is gonna be going into a nursing home, the first thing I like to do is transfer the title of the house into just the community spouse's name only.
And then I'm going to change the community spouse's will to essentially, to the extent possible, disinherit the institutionalized spouse and have the assets that are in the community spouse's name only go to the children. That way the house is protected. Now understand there are certain rules In Pennsylvania you cannot fully disinherit a spouse, but that becomes an issue of what assets can be preserved for the children and what assets have to be paid to the spouse if the institutionalized spouse and those assets then have to be spent down to continue to receive Medicaid payments.
Amy Braun-Bostich: Sounds a little complicated.
Lanny Sodini: It becomes… I don't wanna say complicated area, but it's an area that requires sitting down and going through all the assets, is there community, spouse, what's the income of the community spouse?
What are the assets that we can preserve for the community spouse, how can we preserve them and so forth of that in that nature.
Amy Braun-Bostich: Now, there's been times when I've seen you talk about 50% spend down right? There's some kind of strategy where you spend down half the assets?
Lanny Sodini: Well, this is where you can buy what is called an annuity that's a Medicaid qualified annuity. And that permits you to, and only certain companies sell these type of annuities, and what that does is it permits you to give away assets, purchase an annuity that will pay for what we call the ineligibility period of the gift, and therefore the gift would not bar the individual from Medicaid payments.
Again, you have to go through the numbers and see if it's credible to do it in a situation like that. The other thing where you're talking about half, maybe you're talking about a situation where when one spouse goes into a nursing home the unprotected assets, the non-exempt assets have to be spent down.
Let's, maybe go through exactly what exempt assets are and not and non-exempt assets. Exempt assets. That is, I always try to explain to people when there's a husband and wife situation or spouse situation, now you throw all the assets on the table… everything. I don't care if it’s in one name or joint names with the spouses, you throw all the assets on the table and now you're gonna take off the table, exempt assets. Assets that do not have to be spent down. Your primary exempt assets are your principal residence and only one principal residence. So if you have a vacation home, that is not going to be an exempt asset. Your household goods and personal effects, one automobile, life insurance policies to a certain extent that have limited cash value, your irrevocable burial reserves or your burial spaces, your funeral that you've prepaid for the funeral. And again the biggest one is the community spouses IRAs.
Let's throw that all off the table. Now, everything else that's on the table, whether it be in joint names or either party's names, are assets that have to be spent out. Now, to what level do those assets have to be spent down? It depends upon the total value of those non-exempt assets.
These numbers are adjusted every year for inflation, but in this particular case, The community spouse is entitled to what is called a minimum or maximum community spouse resource allowance. The maximum the community spouse of the non-exempt assets that he or she can keep is approximately $137,000.
Okay. However, to keep $137,000, you have to have twice that amount. So when you apply for Medicaid, the non-exempt resources that are on the table have to total $274,000, and the community spouse can keep half of that. . If the non-exempt resources only total $200,000, the community spouse can only keep a hundred thousand dollars.
You can only keep one half of the non-exempt resources up to a maximum of $137,000. So one of the things you may want to do is to make sure that when one's applying for Medicaid, that somehow you’re able to increase the non-exempt resources maybe by taking a loan from one of your children. If, say you only have $200,000 of non-exempt resource and you want to get up to $274,000 so that you can keep half of that amount, you take a loan from your children.
Now that loan is gonna be paid back, but at least you're able to keep half of $274,000 rather than half of $200,000. There's also other things that could be done to increase those non-exempt resources. So again, there's a lot of things that can be done pre planning, pre-admission to a nursing home to preserve assets for the community spouse, and if there's only one spouse still alive, and for the children or for the next generation, whoever your heirs may be.
It depends upon how comfortable people are in having their assets rearranged and restructured to preserve assets.
Amy Braun-Bostich: Gotcha, ok. What, so the other question that comes up periodically is transferring monthly income to your spouse as an option. What do you think about that?
Lanny Sodini: Well, again, the income of the community spouse is not considered in Medicaid applications. Whatever income the community spouse receives is not part of the private paid portion. Only the income of the institutionalized spouse is considered what must be used for the private paid portion so that if you're able to transfer assets that produce income. But don't forget now, if the asset itself is a non-exempt asset, it doesn't matter. It's going to have to be spent down. So it's… what normally happens is that, in terms of gifting monies is that with respect to non-spouse gifting is to the children, you can gift, and it's not looked at from the five year clock point of view to give $500 a month or less will not be considered a gift that would disqualify you for Medicaid, but it's only $500, not $500 per person. But you can gift $500 to child A in January, child B in February and so forth. The only problem is if you made a gift in excess of that $500 within the five year lookback period, then they're gonna count all those $500 gifts as part of determining your Ineligibility period for Medicaid. Maybe I could explain what I mean by ineligibility period. Again, if you make a gift within the five year lookback period and you make application for Medicaid, they're gonna ask, have you given anything away in the last five years? And believe me, not only will they ask, but they’ll also ask for every bank statement, every financial statement for the last five years, they're gonna wanna see. If the answer to that question is yes, then they will total up the total amount of gifts made within the last five years. Let's assume within the last five years you have made gifts totaling $100,000. Let's assume that the average cost of care in Pennsylvania is $10,000. Actually, the current cost is… I'm trying to look on my notes here, what the current cost is…
It's actually $482 a day, so times that by 30 days. But let's make the numbers easy. You've given away a hundred thousand dollars. The average cost of care is $10,000 a month. That makes you ineligible for Medicaid for 10 months. You run out of money in February, you make application, it's denied.
That means you'll be responsible for private pay even though you don't have the money for 10 months. Now, who pays for that? This becomes a good question here because it goes to your claw back issue. If the period of ineligibility was created because of gifting. What happens is you apply for Medicaid in February…
It takes a couple months for the application to be reviewed, and it comes back denied because of the gifting. Now you've been in the nursing home for.. you now have a 10 month ineligibility period. You've been in there for five months before it's been finally denied, the nursing home, expecting that Medicaid would pay for those five months is now not going to receive payment.
Where do they receive payment for those five months that they've been taking care of someone, but they’ll not get payment from the government? Well, they're gonna look under what we call the filial support laws, and that means that the nursing home can bring an action against adult children for the care of their parent while in a nursing home that hasn't been covered by Medicaid.
It's the Filial support law. That's a very draconian law in the sense that adult children are responsible for the care of their parent if they're indigent. And the fact that they are in a nursing home and they've been denying Medicaid because of actions taken by the mother in making gifts. The nursing home will sue the adult children.
Now what children will they sue? They can sue any of the children. If there's one in Pennsylvania, they're probably gonna sue that one because it's gonna be easier to collect. So you have to be careful about making gifts and transferring assets that makes you ineligible for Medicaid because of the Filial support laws.
A note: adult parents are responsible for the care of their indigent children, adult children. I haven't seen any cases where that has come up. I have read cases where nursing homes have gone after adult children for the care of their mother because they were ineligible for Medicaid for reasons that were… I say they were doing something funny with mom's money.
That's how I characterize it.
Amy Braun-Bostich: But you've not seen it when it's been up and up, and she's just run out of money and she didn't do any gifting. They don't go after them for that.
Lanny Sodini: Then she should be eligible for Medicaid. Where the problem arises is that Medicaid, you make application in February, the Medicaid application can go back three months and pay for three months of nursing home care.
The problem becomes that sometimes the children who are responsible for filling out these applications don't do it timely. Maybe they take six months to file the application. Okay, the application is approved, but it only goes back three months. Who pays for those three months prior to when the application should have been made?
Again, under the Filial support laws, they can go after the children for the care. So not only is it important not to do something funny with mom's money, but it's also important that when mom is running out of money, that you take the appropriate action in a timely manner to work the Medicaid process.
Again, they go back three months and understand it does take a while for Medicaid to go through these processes, but it's from the application point that they go back three months. If Medicaid takes five months to approve the application, well the nursing home will get that five months of pay because that was the application process.
But also they'll go back three months if you took two months to file the application. So it's a question of timeliness of the application. It can be devastating on the family if they don't act properly.
Amy Braun-Bostich: It sounds like it. What about them using an irrevocable trust to shelter money?
Lanny Sodini: Well, again, that is used quite a bit. Not only for the house, but for assets. But again, you have to go back, you have to beat the five year clock. So you put money in an irrevocable, what we call an irrevocable income only trust. You take all of the investment assets and you put them into a trust.
The children are the trustees or maybe you have some also an independent trustee involved in this. What that means is mom is entitled to the income from the trust, dividends and interest, and probably short-term capital gains, depending upon how the trust is written, but she's not entitled to the principle of the money.
That means she can't ask for money. Now, mom's not in a nursing home. She's living at home and she's probably healthy because we have a five year lookback period. But she's concerned that hey, maybe, you know, three or four or five years from now I may end up in a nursing home. How do I preserve my wealth?
You can put it in an income only trust. Pay the income to yourself and up at your death, the principal will go to your children. ,You're not entitled to any of the principle, only the income. If you beat the five year clock and you apply for Medicaid, you spend down your assets, the income from the trust will pay for your private pay portion of the nursing home, but they cannot force you to liquidate the assets in the trust to pay for the nursing home care.
So that's a viable option too. The problem with that is that a lot of people are reluctant to give up control of their funds and not have access to the principle, and that takes courage on the part. Now you don't have to do it all. You can do that in conjunction with potential long-term care insurance other assets that aren't in the trust that you're prepared to spend down, or even that Medicaid qualified annuity can be used again to help defray or protect these assets. It's a combination of pretty much everything in terms of protecting assets. I do like the income only trust, but mom has to be willing to, again, if you have long-term care insurance that is going to pay for maybe three years of your stay in a nursing home.
Then you only have to spend down your assets to cover for two years of nursing home care and repositioning your assets to provide for more income, could pay for it without having to spend down assets, placing them in an income only trust. That means you really only have a two year look back period because you're gonna be privately paying for three years from the long-term care insurance, and then you only have to pay privately for two years.
So again, it's a combination of your assets, what kind of income it produces, long-term care insurance and other issues that come into play.
Amy Braun-Bostich: Yeah, I find most clients are really loathe to give up control of assets when they're well.
Lanny Sodini: Absolutely. Yeah.
Amy Braun-Bostich: They're like, oh, no, we don't think so…
Lanny Sodini: Yeah, they're not an easy asset, but again, I go back to what that attorney told me, I'll say, a hundred years ago… don't mess with mom's house.
The roof over her head, placing the house into an irrevocable trust has advantages, and mom's not really giving up control of money. She's giving up the remainder of her house when she dies. However, if the house is sold, it's now in a trust. It's gonna stay in an irrevocable trust. And what's that mean?
That means mom is only gonna be entitled to the income from the proceeds from the sale of the house and not the house itself. Although you can go buy another house with it. So you know, there's pros and cons, and when I meet with a client, I express to them the concerns that I have about dealing with the house, dealing with your assets, and giving up control.
And if they're willing to do it, then I'm prepared to do whatever is necessary to preserve assets. One of the things I did for a client one time, the husband was going into the nursing home, she had some resources, she was living in an apartment building an apartment. What did we do? We took that money and bought a house.
We had it in her name only and it was an exempt asset, and her will says, I give my house to my children. So if she died first, the children get the house. If the husband died, it was an asset that did not have to be spent down because it was an exempt asset. In other words, convert non-exempt assets into exempt assets.
Amy Braun-Bostich: And you can do that even without the five year rule.
Lanny Sodini: Oh yes. Any conveyance to the spouse is not subject to the five year lookback period. So that's not a problem. The other thing we'll tell the spouse to do is, okay, we'll put the house in your name only, but you know, we have some assets we have to spend down.
Do you need new windows? Would you like to remodel your kitchen? As long as you're not giving stuff away, it's not a penalty. Buying a new, remodeling your kitchen, you are giving $15,000 to somebody that's giving you $15,000 of product back. So it's not a gift… I wish it was only 15. Yeah, I know exactly. Or do you have an old automobile?
Let's buy a new automobile. Mom, you're still driving, you're healthy, you're gonna be driving for a number of years. Why drive the old automobile? Let's take some of the money that has to be spent down and buy a new automobile. So again, not every situation is conducive to every action that can be taken.
It depends upon the situation and what action should be taken to preserve assets, whether it be buying exempt assets, buying an annuity, putting it into a trust, or buying even long-term care. Although when… one person is about ready, as you well know, Amy, I'm sure that long-term care is expensive, and it's also subject to underwriting.
And most people that are elderly or looking towards maybe a nursing home within two to five years probably are not gonna be.
Amy Braun-Bostich: Even some of our younger clients are starting to have trouble getting it for, you know, what seems like sort of innocuous health issues that normally, you know, when this first came to market, that wasn't a problem, but now there's a lot of things that will keep you from getting long-term care insurance. But having said that, if somebody's pretty healthy and they're in their fifties, I think I'd rather see them spend the money on long-term care than have to go through all these machinations later to preserve assets and try to qualify for Medicaid. I mean, it's…
Lanny Sodini: Absolutely, I think one of the best ways to preserve assets, not only for the community spouse, but also for the heirs is to have a good long-term care policy and then the flexibility to invest assets so that it produces more income than growth because you need the income to pay for the care so that you're not dipping into principle assets.
The principle part of the individual's estate.
Amy Braun-Bostich: Yeah, I think the American Association of Long-Term Care Insurance is saying about 30% are institutionalized from one to three years, and then 12% for three to five and another 12 for five or more. So although it's not likely, we have seen clients be in nursing homes for extremely long periods of time. Eight to 10 years we've seen.
Lanny Sodini: Yeah, and that brings up the issue of what I think you mentioned prior to this, the partnership policies, long-term care policies. If we could touch on that briefly.
What that is, Pennsylvania is one of the states, although there's a lot of states now that have what we call long-term care partnership policies, and they have to be recognized by the state as being a proper policy and so forth of that nature.
But what that is, is that if you buy a long-term care policy, and let's use a simple example, say of $100,000 and you have your exempt assets and you have your non-exempt assets, and you expended let's say $100,000 of… you used up the policy of $100,000 to pay for your long-term care, then $100,000 of your non-exempt will not have to be spent down. So that the greater the policy limits, the more assets you're protecting. So it becomes a question of do you have sufficient resources to pay for the policy? Are you healthy enough to purchase the policy? And is it a qualified long-term care policy? But it's something that people are looking at, but like you said, obtaining long-term care is not an easy thing and the older you are, the less lucky you will be able to obtain it.
And to buy to the young age, you can buy life insurance at a young age because you're protecting the family, but to buy long-term care policy at age 50, you're saying, why do I really need it?
You know? Because they're not thinking 20, 25 years ahead.
Amy Braun-Bostich: Yeah. And it's sort of like disability. I find that people really, although they're willing to spend money on life insurance, you know, premature death. They really can't perceive themself disabled and in conjunction with that being in a nursing home, you know, because it is, you know, sort of a form of disability to have to be there.
It's really hard for people to fathom that. And so it's, it. . Most people think they won't need it.
Lanny Sodini: But the thing about long-term care policies though, is understand that just doesn't cover nursing home… skilled nursing facilities and Medicaid, and let's make this clear again, Medicaid only picks up the cost of care when you are in a skilled nursing facility.
When you're in a personal care home or assisted living facility, Medicaid will not pick up the cost of care. And many people end up in a, you know a personal care home because they don't, they're not medically qualified to reach the level of skilled care, and that's not cheap either, although it depends upon your level of care you need.
But I've seen ranges anywhere from $3000 to $8000 or $9,000, depending upon the facility and the level of care you need. And that is pay as you go until you run out of money and then they're gonna ask you to probably find a place that could accept you for your income only.
They may keep you based upon their business plan after you've been there in a number of years just based on your income, but you're basically spending down your resources to stay in this facility.
Long-term care policies pay for that, and they pay for in-home care, although Medicaid does provide for in-home care also. But again, you have. medically certified for skilled nursing facility.
Amy Braun-Bostich: I think I read that home care precedes, obviously like skilled nursing care, by about 4.8 years. So people are staying in their homes, so almost five years before they're forced for one reason or another to go into a facility.
Lanny Sodini: That is correct, and many times too, for example, you know, you're in an accident and you have to go to rehab. Well, if you're on Medicare, you know they'll pay up to a maximum of a hundred days subject to deductions. After a hundred days, you are private pay, and you cannot go home because you haven't fully rehabbed yet.
It could be a because of a bad accident. There again, the long-term care insurance provides extra protection. That's why most of the time, long-term care insurance only kicks in after 90 days because you have rehab coverage under Medicare for an individual over 65.
Amy Braun-Bostich: Yeah. Okay. Well, when thinking about everything that we've talked about today and we've really talked about a lot here. Is there anything in particular, some tips that you'd like to leave the listeners with?
Lanny Sodini: Well, I think one should consult with their financial advisor in terms of what their financial state looks like in terms of this, if long-term care does come into my future, whether it be in a personal care, home assisted living, or skilled nursing facility.
And then also if they're interested in an asset preservation, that they do contact competent counsel so that they're not doing things wrong, that could end up jeopardizing by giving things away and doing things that are just absolutely wrong. Where it ends up providing or costing you an eligibility period and potentially having someone else have to pay for your care because you've done things incorrectly.
Amy Braun-Bostich: Mm-hmm, Yeah and as I think everybody could see from our discussion today, this is really some complicated issues… There's a lot of…
Lanny Sodini: Oh yeah, there is a lot involved in preserving assets and working closely with the financial advisor as to what should be done, what can be done.
Amy Braun-Bostich: Okay.
And then the other thing that I find particularly hard to stay up on is that we have clients in 22 states, right. And so, each state has a different sort of… a different process that they go through for this.
Lanny Sodini: Fortunately, Amy, I'm only authorized to practice law in one . I wish I knew all the laws of Pennsylvania….I don't.
And to know the laws of any other state, I have no desire to learn anymore. So yeah, that becomes a real issue if you're involved in other states because I don't know how many states, but very few states exempt the community spouse's, IRAs. Understand, there's certain minimum requirements each state must comply with in order to qualify for Medicaid payments.
Now they can make it less… they can't make it any more stringent, but they can make it more liberal and by exempting community spouses, IRAs, we are in a liberal state in that area, although that could change because the state is broke… every state is broke, you know, are they tightening the noose? Yes, and could Pennsylvania change the law on that? Sure.
Hopefully, they won't because that is a big savings for the community spouse. Unfortunately, from a practical point of view, at least with the generation that we're dealing with in terms of those entering skilled nursing facilities, it's usually the husband that has a significant IRAs and he's usually the one that ends up going first into the nursing home and his IRAs are not exempt.
But, the reverse, you know, there are, as our population is getting older from the younger generation up, more and more women have significant IRAs. And still, if you've ever been to a skilled nursing facility or find out that most of them are made up of women, but men usually go, usually go in first, but don't last quite as long.
Amy Braun-Bostich: You know what else is kind of interesting is that we've had several cases now where the one spouse is institutionalized but then the community spouse ends up dying first in, which is like, you know, when you're looking at probabilities, you're saying, this is probably not gonna happen, but yet we've seen that a number of times.
Lanny Sodini: That is one of the reasons why… well, the problem is the one in the nursing home is getting their meals, getting their medication, and the one at home, again, typically the wife is worried sick, visiting them every day, driving herself crazy and worried about finances. And so they do sometimes die first.
That's why the first thing I do, assuming I haven't done any Medicaid planning at all, and someone says, my husband is going into a nursing home, what should I do? The first thing I do is make sure they have an adequate, a complete financial power of attorney. I want to transfer as many assets as I can into the community spouse's name. The house, all investment assets that are in joint names. I'm gonna put 'em in her name only. I may even cash in… well, you can't cash in an IRA because it's gonna be subject income tax, but I'm gonna put as many assets as I can in her name only and possibly even an IRA if the tax consequences aren't gonna be that significant.
Although it's not an exempt asset because it's not her IRA, it's just now cash. And then I'm gonna rewrite the community spouses will and leave everything to the children because if the community spouse dies first, I don't want a hundred percent of the assets going to the husband.
And then a hundred percent of those assets have to be spent down. I'm gonna have at least two thirds of the assets passing to the children. And that way, if she dies first, the only thing that has to be spent down is one third of the community spouse's estate to pay for his care. And then he goes back onto Medicaid.
So you cannot, and it's happened at least three or four times in the last, I'd say five years, where the community spouse has died first, and we were able to move the assets into the community spouse's name only, and the children inherited money.
Amy Braun-Bostich: Now, do you use two thirds and one third because of the intestate laws and….
Lanny Sodini: No under… and then I won't get into the formula for this because it's a very complex formula, but you cannot disinherit a spouse in Pennsylvania. The spouse is entitled to at least one third of the estate. Now don't ask me what that one third is. It's a comp complicated formula to determine what that one third is worth.
In fact, probably everybody that deals with that ends up in court fighting over how do you determine what the one-third is equal. But basically it's one-third to the spouse and two-thirds to anyone else.
Amy Braun-Bostich: Gotcha. Well, Lanny, I wanna thank you so much. This has been incredibly informative, not just for me, but for our listeners as well.
And so we've learned a lot about protecting assets from nursing home costs today. So your insight is really sincerely appreciated. Thank you so much.
Lanny Sodini: I appreciate being here, Amy, and thank you for your time and hopefully something came across one, one morsel came across to somebody out there.
Amy Braun-Bostich: Yeah, I'm sure many did. Thank you.