Mom’s going Broke…
My mom took out a reverse mortgage in 2008.
After she got Alzheimer’s she entered a senior care facility. My sisters and I sold her house to pay off the reverse mortgage, leaving her with $360,000.
Luckily, mom was a planner. She purchased long term care insurance when she was in her 50’s.
Like many other insurance buyers, she bought a policy that paid out for 5 years.
Most people don’t really consider the chance they’ll be in senior care for more than 5 years. I know mom didn’t.
She thought she was fully covered.
5 years later, other than dementia, mom’s healthy as a horse. We have no idea how long she’ll require senior living.
However, we know that the cost of her care is now $9,000 per month. Her entire life savings will be wiped out within the next 40 months.
Now, my mom lived with pride, dignity and a sense of personal responsibility her whole life.
It is a travesty that she will end her life broke and penniless.
Would Having an Elder Care Attorney Have Helped?
We made the mistake of not consulting an elder care attorney when helping mom plan for life in her senior years.
If we had she might have sheltered her estate from being decimated by end of life medical expenses.
Here are a few facts:
American retirees expect to leave an average inheritance of almost $177,000 to their heirs, the sixth highest of any country, according to an HSBC survey.
However, anything can happen to change a retiree’s inheritance plans – like unexpected medical expenses.
A recent study from Ameriprise Financial found that retirees lose an average of $117,000 to unplanned events.
That leaves $60,000 in actual inheritance.
What happened to the other $117,000?
Usually medical expenses and senior care (before the senior had the good manners to finally die before it was all gone).
If everyone 65 and over has Medicare what were there additional expenses for?
…doesn’t Medicare cover everything?
Not even close…
It’s a common belief by many that Medicare covers all of their medical expense after an illness.
Did you know that Medicare is only for “rehabilitative care” and usually ends after 90 days?
If an illness is determined to be “palliative” or “chronic,” you’re on the hook for the rest…
…until you get down to your last $2,000.
Once you’re totally broke you can qualify for Medicaid.
There is literally no social safety net between when Medicare benefits run out and the long spiral down to Medicaid eligibility.
That one fact alone has caused seniors to desperately seek other solutions.
According to a 2010 report by University of Michigan Law School professor John Pottow, seniors are the fastest growing demographic of bankruptcy filers.
Medical expenses are the leading cause.
Consider a more desperate situation:
Say one spouse is healthy while the other spouse isn’t…
Imagine one partner requires full time care for reasons such as Alzheimer’s…
Couples who would never dream of ending their marital status are forced to suffer the indignity of seeking a divorce in order to protect the healthy spouse from losing everything.
It really, really happens.
Here’s what Craig Reaves, past president of the National Academy of Elder Law Attorneys, has to say about a scenario for a couple named Mr. and Mrs. Jones:
“Divorce happens more and more frequently. If the couple legally divorces, the spouse who’s not incapacitated has no duty to support the other and can keep whatever the court allocates. In the case of the Joneses, the money awarded to the former Mrs. Jones has to be spent for her care until she qualifies for Medicaid, but the court could allow an uneven division so that Mr. Jones gets more than she does.
These situations are heartbreakers; the sessions in my office when we talk about this possibility are often full of tears. But financially, divorce can be a real advantage. More assets can be set aside for the spouse at home, and there’s no estate recovery.”
Planning in advance can help avoid these extraordinary actions.
Not planning and refusing to seek advice for contingencies might look more like this:
For a 90-year-old WWII veteran, eviction from his lifelong Buffalo home Saga of bank foreclosure is marked by deep debt as caregiver for wife
Johnnie H. Hodges Sr. was evicted over the summer, carried out on a stretcher after an almost two-hour standoff, when he fell behind on mortgage payments and other bills during his wife’s long struggle with Alzheimer’s.
(Photo: Derek Gee, Buffalo News) Read the full story at: http://www.buffalonews.com/city-region/for-a-90-year-old-wwii-veteran-eviction-from-his-lifelong-buffalo-home-20150709
But I have long term care insurance so I’m covered right?
Don’t count on it…
Let me share another story that has impacted my family and made this subject very personal for me.
Here is a Catch 22 story about my deceased brother-in-law and my younger sister.
Kenny was 20 years older than my sister Bonnie but you’d never have known it.
At 72 Kenny looked 50.
He seemed to be the poster boy for what a healthy senior should look like.
As a retired police officer Kenny had a good pension while also generating a second income as a security consultant.
My sister was a practicing psychologist with a busy practice. Life was good and both planned to have many more active years together enjoying the fruits of what they had accomplished.
One day during a routine medical exam an abnormality was discovered and later it was confirmed that Kenny had cancer of the neck and spine.
He was on Medicare at the time so all surgeries and “rehabilitative” medical procedures were covered.
Unfortunately Kenny was terminal so further palliative care was not covered and they didn’t have the insurance to cover the cost of the extensive care Kenny would need after leaving the hospital.
Additionally – and here’s the catch 22 – as the wife of a retired police officer Bonnie was able to keep collecting his pension after his death as long as she was still his wife when he died.
That meant that the divorce relief received by Mr. and Mrs. Jones (that I outlined in the previous section) was not available to Bonnie unless she was willing to give up Kenny’s pension in order to save half of their assets for herself.
After much consideration Bonnie concluded that even if it whipped her out financially she would see to it that Kenny was taken care of and she would stay married to him.
(Now remember, she was in her 50’s at the time so she was faced with many more years of life with no money….)
Fortunately divine intervention spared her that fate as Kenny died before leaving the hospital.
In other words, Kenny had the “good manners” to die soon.
I’m convinced that he willed it for himself rather than allowing his illness to bankrupt my sister.
What the hell is wrong with us?
Above is a chart of the average inheritance left to heirs by country.
Notice that as the richest country in the world, the USA ranks 5th with Australia beating us by almost 3 to 1.
Why is it that France, the UK, Singapore, and Australia beat us when it comes to personal wealth?
Universal Health Care
These countries build into their social structure that seniors should not be robbed of all that they’ve gained in a life time just because the last two years of medical care before death are enormous.
These countries value their seniors and give them the respect that they deserve.
Until we change the thinking of our population as a whole we should use whatever legal means we can to gain access to social programs such as Medicaid and protect our remaining assets from being consumed, (embezzled) by the Health Care Industrial Complex.
That starts with consulting an Elder Care Attorney.
My siblings and I wish that in my mother’s case we would have done that sooner.