I Did NOT Tell You This

Family Update

The dogs and cats were just thrilled we were home, especially Stinky, who followed me around for days afterward and made a habit of lying on top of me anytime I sat down. The orchids didn't even notice we were gone, since it rained enough to keep them watered without me.

This week, it was Senay's 20th birthday, which I still can't quite believe. Chris is gearing up for college, and Senay leaves for UF on August 7th, so we're about to go from a full house to just two kids at home, ages 13 and 15. When I started writing these newsletters, Senay was nine. At this rate, I'll be telling grandkid family updates before long, which would make her roll her eyes so hard she'd need a chiropractor.

We also spent an afternoon at Phipps Conservatory in Pittsburgh, a big fancy greenhouse with an Alice in Wonderland theme. I figured I'd enjoy it since I like plants. What nobody mentioned until we arrived was that the theme was sub-tropical plants, so I spent the afternoon wandering a humid greenhouse surrounded by the same plants I already grow in my landscaping, orchid room included. It gave me a pretty clear picture of just how far my orchid addiction has come. I was embarrassed by their display. I am an orchid snob now.

I'm not sure if Pop ever made the picture before, but he turned 80 this week. He has eaten well and exercised his whole life, and it makes such an enormous difference at his stage of life. He's an inspiration!

A quick disclaimer before we dive in. I'm a financial planner, not an attorney. Nothing here is legal advice, and elder law is one of those areas where the details really do matter and vary by state.

With that out of the way, let's talk about some strategies that I’ve seen clients use after meeting with elder law attorneys.

1. Timing Matters More Than People Realize
Medicaid has what's called a look-back period, typically 5 years, during which they review any gifts or transfers you've made before you apply for Medicaid benefits. The idea is to prevent people from giving away assets right before they need care, just to qualify for government help.

2. The Trust You Already Have Probably Won't Help
Most people who have a trust have a revocable living trust, the kind set up mainly to avoid probate. Here's the part that catches people off guard. For Medicaid purposes, a revocable trust doesn't protect anything. Since you can change or dissolve them whenever you want, the state treats those assets as still yours.

3. Spending Down the Right Way (this is my favorite)
If a Medicaid application is on the horizon, there's a legitimate way to convert countable assets into exempt ones before that happens (i.e., if you don’t have the money, the government can’t take it).

Some common examples:
•Paying down or paying off the mortgage on the primary residence
•Home repairs, renovations, or accessibility modifications like a new roof, HVAC system, ramps, or a walk-in tub
•Prepaying funeral and burial expenses
•Replacing an older vehicle
•Paying off other debt, credit cards, personal loans, and medical bills
•Prepaying property taxes and homeowners' insurance for the year
•Necessary home furnishings or appliances
•Unreimbursed medical or dental expenses, hearing aids, glasses, and dental work not covered by insurance

Here's one I've seen a couple of times, and it's clever if it's done right. By the way, I did NOT tell you this. Say you've got $500,000 in cash and a $300,000 house. You sell the house and buy an $800,000 one. Now most of that cash is tucked inside your primary residence, which the government generally can't touch. Pretty smart, and technically legal too, since buying a bigger house isn't the same as giving your money away. Of course, the government still has ways of getting some of it back down the road, so don't go house hunting without a lawyer who knows the fine print.

4. The Best Time to Sign These Documents Is Before You Need Them
Durable power of attorney and healthcare proxy paperwork should ideally be signed while everyone involved is healthy and of sound mind. Once a diagnosis like dementia enters the picture, it may be too late to sign these documents, and the family could end up needing court involvement instead.

What If You Have a Million Dollars or More?
A fair question, since some of you reading this are in that position. If your nest egg is comfortably into seven figures, Medicaid planning usually isn't the strategy that matters most to you. At that level of assets, most people can privately pay for long-term care for a meaningful stretch of time. The concepts above tend to matter more for households where a long nursing home stay could realistically drain the accounts meant to last a lifetime.

The Bigger Picture
None of these strategies are do it yourself projects. They require careful drafting, state-specific knowledge, and often coordination between your attorney and your financial plan. But knowing these concepts exist means you can bring them up with the right professional before a crisis forces the conversation.

Be Blessed,

Dave