Everyone has heard the adage “old age ain’t for sissies.” That is true on a legal level as well as a physical one. Most everyone with any assets worth noting makes a Last Will and Testament. They want to be sure that their favorite niece gets that ruby broach. Lots of people have a Power of Attorney or a Living Will, too. They want to know that they won’t be kept on a machine. But few prepare for the horror story I’ve recently been witness to as part of my practice.
Consider this: Husband and Wife have been married almost sixty years. Both are well into their 80s. They have worked hard during their lives and have accumulated around $250,000 in assets. Not a fortune, but not chump change either. Wife’s mental state has deteriorated and is so common in such situations, she is no longer herself and is even violent on occasion. Husband loves wife dearly. He remembers his promise that he would not put her in a nursing home. But his ability to care for her is compromised by his age and her condition. The government agency, out of necessity, steps in and takes custody of the wife. She is placed in a nursing facility over husband’s objection. Husband is ordered by the Court to pay for her care.
A number of issues arise in this situation. First, is Husband obligated to pay for the nursing home? He does not want it. He believes he can take care of her. But this is not realistic. The answer is yes, he is required to pay her bills under the Necessaries Doctrine.
So the next question becomes, to what extent is the Husband obligated to pay? At $4000 per month, that $250,000 will not last long. Is he obligated to spend all of his savings? The answer is no. The Medicaid regulations allow him to keep his home and $66,400.
The situation is sickening. Medicaid supports many, many people who have not saved and planned for their old age. Is Husband penalized for working and saving? The short answer is yes. This is another flagrant example of what I call the success tax. The success tax pops up in most aspects of our law abiding tax paying lives. If you go to school and earn a good income, success tax. If you save and buy a nice car or home, success tax. It goes on and on. If you are a parasite and have nothing, the government takes care of your bills. Husband and Wife would have been better off to blow their savings on vacations and whatever else they wanted to buy while they were younger and in better health. As it stands, the government will allow him to keep only a portion of the money he worked so hard to save. He wanted to have something to leave his children. That does not seem likely. Another couple, in an identical situation, but who had not saved anything, would already be eligible for the government to pay for the nursing care. How in the world is that the right result? I cannot fathom it.
This is not an isolated situation. I recently saw a dear friend withdraw her entire retirement savings so that her husband would qualify for medical treatment at a reduced rate. She had saved and was punished for it. Success tax.
So how could Husband avoid this? Well, at this point, all he could do would be to divorce Wife. He won’t do that. But for the sake of argument, let’s say he did. Wife would arguably be entitled to half of the estate. So she would get $125,000 and half of the value of the house. So he would still lose a substantial portion of the savings. But he will not divorce her. He cannot do that because of his love for her.
The only other option is Long Term Care insurance. But it is too late for this couple to buy that now.
So, in addition to knowing that “old age ain’t for sissies,” we can also be sure that the only certainties in life are death and taxes. The success tax is particularly troubling and will only continue to plague Americans if we keep on the course we are on now. We should be appalled at this situation. We should be appalled that our government, by its regulations and taxation laws, actually encourages people to be frivolous and not save money. It is not what our Founders intended.
**Disclaimer: M. J. Goodwin, Attorney at Law, LLC, is located at 113 North Main Street, Anderson, SC 29621. 864-375-0909. The information here is not intended as a substitute for specific legal advice for any given situation. Only clients who have hired M. J. Goodwin, Attorney at Law, LLC, are receiving actual legal advice that pertains to their particular situation. http://www.mjgoodwin.com/**