POVERTY: A $930,000 State of Mind?
Poverty is a state of mind; particularly when "The most he ever made was $8.25 an hour," said a senior legal helpline caller whose husband is residing in a nursing home costing $6,200 a month.
"We always considered ourselves to be poor," she said. "We lived frugally; paid cash for everything and each month put something into savings." Now in their mid-80s they have investments totaling $930,000, built in part from a $16,000 inheritance and those 18 to 20 percent interest yields of the Carter years.
"We don't want everything to go to the nursing home. Is there anything we can do to make sure some of our hard work and money benefits our two daughters and three grandchildren?" she asked. There is. The law permits generosity, charity, and the conveyance of assets to loved ones, as long as the transfer of wealth occurs more than five years prior to seeking government assistance in the form of Medicaid.
In this case, the couple could set aside some $375,000—the projected cost for another five years of nursing home care—and gift the balance to their daughters and grandchildren, either through an irrevocable trust or outright transfer. Upon his eligibility for Medicaid she would be allowed to retain between $21,912 and $109,560, plus their house, in assets (called the "protected resource amount"), plus a monthly needs allowance up to $2,739 per month.
Also, the law permits a loving couple to obtain a "Medicaid Divorce." They may reach a one-sided, mutually-agreed-upon divorce settlement; a settlement that would be unthinkable in the absence of a nursing home dimension. "Do you mean," she asked, "that our divorce decree could be such as to leave him so poor that he would be eligible for Medicaid?"
The answer is yes, subject to a potential challenge by the state. Thus far such challenges have been unsuccessful in the absence of a record of outright fraudulent intent. "But would it be ethical?" she asked. This is an "elderlaw" helpline, not an "ethics" helpline, I noted.
She is not prepared to act upon either alternative. "Honestly," she said, "I don't believe he will live another five years. And I don't believe I will either." If she is correct, Medicaid's five-year lookback rule will be irrelevant.
"We have lived a good life," she said. They weren't poor after all.
(Pro bono legal information and advice is available to persons 55 and older through the USD Senior Legal Helpline, 1-800-747-1895; mmyers@usd. edu. Opinions are those of the author and not the University of South Dakota).