Will my husband’s poor health choices drain my life’s savings?

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    Dear Penny,

    My wife had a stroke three years ago. He is unable to work, is on social security and is very unhappy with his health. I am currently and have been the breadwinner of this family.

    My concern is that whatever I have saved and worked hard he will financially take with his ongoing medical expenses. I’m afraid he might end up in a nursing home.

    I’ve been considering a divorce but I know he would take half of my pension. I am 62 years old and I hope to retire at 65. How can I protect my retirement from possible care and medical costs?

    -T.

    Dear T.,

    Watching your spouse endanger their health and your future in the process must be excruciating. Unfortunately, medical bills are far too common, as Medicare only covers the first 100 days of qualified nursing.

    Paying for a nursing home can quickly wipe out a lifetime’s savings. The average cost of a semi-private room in a qualified care facility is over $ 7,700 per month, according to Genworth’s 2020 Cost of Care survey. At some point, Medicaid will kick in – but not until someone has used up almost all of what is known as countable assets, including things like retirement accounts and other investments, cash, bank accounts, and homes that are not used as primary residence.


    Typically, if one spouse requires Medicaid but the other does not, the non-applying spouse cannot keep more than $ 137,400 in countable assets. That’s not a lot when you’re expecting a long retirement.

    But you have ways of getting around the money you have worked hard for over the years. It is important that you consult an elderly care attorney. Medicaid planning is extremely complex and laws vary widely from state to state. You can use the National Academy of Elder Law Attorneys database to locate an attorney in your area.

    You are right that if you get divorced, your husband would likely be entitled to part of your pension. However, most lawyers don’t recommend getting divorced just to qualify a spouse for Medicaid for a variety of reasons that are too complicated here.

    One option that you should discuss with an attorney is a Medicaid Compliant pension. In short, Medicaid takes into account the income of the spouse applying for coverage, but the income of the other spouse is taboo. A Medicaid-compliant annuity takes a portion of your wealth and converts it into a steady stream of income. The payments are based on your life expectancy, which is calculated using the social insurance life expectancy table.

    For simplicity, let’s say you have $ 257,400 in countable assets, which would be $ 120,000 above Medicaid’s threshold. They use that $ 120,000 to buy an annuity. If your life expectancy is 10 years, you will receive immediate payments of $ 1,000 per month or $ 12,000 annually for the next 10 years.

    The insurance company makes its money by investing your capital. It’s a good tool for married couples when only one spouse needs care, as the other spouse’s income is not used towards Medicaid eligibility.

    There are many rules a pension must follow to be considered Medicaid Compliant. For example, it has to be an immediate annuity with a single premium, which means you buy it in a lump sum and the payments start immediately. If you choose to go down this route, it is important to look specifically for a Medicaid Compliant pension. Pensions advertised as “drug-friendly” often do not meet all the rules.

    If you are in debt, some of your assets can also be used to pay off your retirement expenses. Withdrawing a mortgage balance, a personal auto loan, or a credit card balance is generally not a violation of Medicaid’s rules. If you both own your own home, there is no limit to your home equity as long as you continue to live there.

    Depending on your state, you may have other options. For example, if you live in Florida or New York, you might be able to employ a spouse denial strategy that essentially involves signing a written statement refusing to share in the cost of caring for your husband.

    These are just some of the strategies you can use in the event your husband needs long-term care. However, I cannot emphasize the importance of consulting with an experienced lawyer in order to protect your assets. You may not need to take action right away. But just knowing what your options are will put your mind at ease.

    Robin Hartill is a certified financial planner and senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].


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