A 71 year-old man and his wife come to see an elder-law attorney. The client was recently diagnosed with Parkinson's disease. As a result, he is retiring at the end of this year. His wife is 13 years younger and still working. They have a house and modest savings.
Fortunately, he has a long-term care insurance policy, but it is limited to five years of coverage. As of now, the husband needs no assistance. He and his wife are considering selling their house and moving to a condominium more suited to him once the Parkinson’s becomes more disabling.
The attorney advises him to transfer the house and all of their savings (other than the husband's IRA) into his wife's name. She will revise her estate plan, which currently gives everything to her husband, to leave their assets in trust for him in the event she dies first.
The trust will be under her will, which is a safe harbor in the Medicaid rules. He can qualify for Medicaid once his insurance runs out and be a beneficiary of the trust, but the trust funds would not have to be spent down. The lawyer also advises the clients to execute durable powers of attorney and health care proxies.
This slightly edited case study comes from Harry Margolis, one of the premier attorneys specializing in elder-law. Recently I visited his Copley Square offices in order to discover new developments in the practice of law on behalf of older people.
Margolis is one of some 5,000 attorneys across the United States who specialize in elder-law. Massachusetts alone has 600 of them.
Not every elder-law attorney can offer the view from Margolis’ office. As we talked about his work, I looked out on the beautiful cityscape below. Trinity Church, the Boston Public Library, the Sheraton Hotel, all shone in the afternoon sun, some of the scene mirrored in the soaring John Hancock Building.
The brief case study of the man with Parkinson’s and his much younger wife calls attention to the complexities of health-care planning. The advice given by this lawyer takes into special account an important change in federal law that took effect last year. As of 2006, it has become harder to qualify for Medicaid.
Previously, if you had children you were allowed to give them half of your assets and then spend down the other half by paying for care. Now, however, you can’t give anything away until five years after applying for Medicaid.
The effect of this law is to encourage people to give away their assets earlier. These days, Margolis encourages parents to give their children money well before the time when the older generation might need nursing home care. That, he observes, is contrary to the advice that he used to give
Nowadays he also frequently advises people to buy long-term care insurance. This he does with greater confidence than formerly, for two reasons. First, the policies are better than they used to be and, second, as noted, it is more difficult to qualify for Medicaid.
Fortunately for planners, there is now a greater variety of ways to pay for care. For those with low incomes, the adult foster care program may prove a valuable resource. In one model, if you are eligible for Medicaid, you can move into someone’s house and the state will pay your caretaker.
In other instances, family members can be paid to take care of you. If an adult child, for instance, were to care for both parents, he or she would receive two levels of tax-free pay.
How best to benefit from home ownership is another area for legal counsel. Reverse mortgages, says Margolis, are sometimes appropriate. However, compared to some other possibilities, “it’s an expensive way to borrow money.”
Frequently, a home equity loan makes more sense. This lawyer judges it a good idea at least to open up a line of credit, even if you don’t actually draw on it.
One variety of the latter approach is a home equity loan that remains private, perhaps among family members. In this arrangement, an affluent grandson, for example, might lend the money. With careful documentation, this choice might prove beneficial for both parties.
A new instrument favored by Margolis is the family protection trust. Rather than giving money outright to your children, you put it in a trust for their benefit. This device can protect them from their creditors. It can also guard the money if they get divorced and, if the child dies, the funds stay in trust for the grandchildren rather than a spouse.
For those older people who worry about adult children or grandchildren with disabilities, family protection trusts can prove especially helpful.
If you seek more information about elder-law, I recommend the electronic newsletter that Harry Margolis sends out. One can sign up for it without charge at Margolis.com. You can also find a nation-wide list of elder-law lawyers by consulting NAELA.com.
Richard Griffin