07 Dec How to help Mom when Dad has Alzheimer’s

Q. My 82-year-old father was recently diagnosed with Alzheimer’s and my mother, 78, takes care of him. They have $1 million in retirement funds and they want to set up a trust fund for my siblings, who both have mental health problems and can’t work. If my father needs long-term care – they do have insurance for $200 a day of care – I worry my mother won’t have enough to care for herself or my siblings. I’ve asked my mother to speak to an attorney, but she doesn’t want to talk about it. What should I do?
— Want to help

A. This is a tough situation indeed, but it’s something you can work with your family to improve.

It seems that along with your parents, both your siblings could benefit from meeting with an attorney knowledgeable in the area of elder law, special needs trusts and other benefit planning, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

Perhaps presenting the meeting to your mother as beneficial to the entire family would make it more acceptable to her, she said.

Romania said the fact that long-term care insurance was put in place indicates your parents did some planning for their aging years.

In New Jersey the average daily cost of nursing home care is presently $423.95 — the Medicaid daily penalty divisor. The $200 a day provided by the policy will be helpful in stretching their other available resources to privately pay for long-term care if necessary, she said.

You should also understand how Medicaid might come into play.

“Medicaid is a needs-based program and as such there are income and asset limitations that apply before one can qualify for Medicaid assistance,” Romania said. “In order to prevent individuals from merely making gifts of their property in order to qualify for Medicaid, there is a penalty imposed on transfers made within five years of applying for Medicaid.”

That penalty is the number of months which a person will be ineligible for Medicaid, she said.

It’s determined by dividing the value of the assets transferred by the state’s Medicaid average monthly cost of a nursing home, Romania said.

In real terms, right now, for approximately every $13,000 gifted during the five-year period, approximately one month penalty will be imposed, Romania said.

“The penalty period begins to run only after an individual enters a nursing home and would otherwise be eligible for Medicaid and not at the time of the transfer,” she said. “During the penalty period, Medicaid will not pay for the nursing home and private funds must be utilized.”

Exceptions can be made for undue hardship, Romania said, but such exceptions are difficult to obtain.

She said gifts, as well as sales, to the extent they are less than for fair market value, within five years of applying for Medicaid are subject to a penalty.

For those reasons, it’s important that your mother and siblings understand the consequences of transfers made by your mother for the benefit of your siblings, for whom she has no obligation to support, within the five-year look back period and the potential imposition of a penalty period during which Medicaid funding will not be available after assets are spent.

“Moreover, if you believe that your parents could get beyond the five-year look back, the type of assets your parents possess needs to be examined in considering trust funding,” she said. “Specifically, the liquidation and transfer of traditional retirement funds — which you point out that they possess — during their lifetime could have significant income tax consequences that need to be considered.”

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This post was first published in December 2017.