Now in their 80s, Jasmine and Jim considered themselves lucky. Jasmine had been a homemaker and Jim had provided for her and their son as a housepainter, working until he was well into his 70s. Aside from Jasmine’s arthritis and Jim’s high blood pressure, they were in reasonably good health. They lived comfortably in the house they had inherited from her parents, and had accumulated some savings to supplement their social security. Their son, Jamie, stopped in regularly to help with chores and maintenance of their home.

Then, at age 85, Jim had a stroke. He recovered only partly during rehabilitation and, afterward, needed a wheelchair. Jasmine, who was healthy at 83, was not strong enough to get him in and out of bed without help. She could feed Jim, but had difficulty dressing him and getting him into the diapers he now needed. Their son suggested they apply for Medicaid to get additional care for Jim in the house.

In applying, they discovered that the balance in the their savings account exceeded the Medicaid asset limit. The house they owned and lived in did not count as an asset for Medicaid purposes, so the savings were their only asset. The couple considered whether to pay privately for home care until their savings reached the Medicaid asset limit, or to give the excess money to Jamie. Medicaid would ask them to explain the transfer of assets, but Jim could still get Medicaid to pay for home care if he stayed in his own house or someone else’s home in the community.

The transfer of the savings would, however, be a problem if either Jasmine or Jim needed nursing home placement in the next five years. A nursing home would require a separate Nursing Home Medicaid application with 5-years of financial documentation, and the penalty for having transferred the asset would be that Medicaid would not pay for the nursing home care for a certain period, depending on the amount of money transferred.

To avoid the problem that the nursing home transfer penalty might create for Jasmine, Jasmine and Jim briefly considered putting all their money in Jasmine’s name and having her sign a Statement of Spousal Refusal. With this, Jasmine would state, in writing, that she refused to pay toward the cost of Jim’s care. That strategy would have made Jim eligible for home care, while keeping the couple’s assets still under Jasmine’s control so it would be available for her care down the road. Jasmine could not bring herself to sign such a statement.

Jim and Jasmine never wanted to go to a nursing home if any other solution was possible. So they transferred their excess savings to Jamie and his wife. The younger family promised that they would do everything possible to keep them both out of a nursing home, and would figure out some solution to pay for 24-hour care if this became necessary.

POSTSCRIPT – THREE YEARS LATER: Jim died from a second, massive stroke only a couple of months after the Medicaid was approved. Jasmine is still living in their home. She is becoming more frail and showing signs of dementia. So far, she is managing on her own with her son and daughter-in-law and their children looking in on her a few times a week. Sometimes she wishes she had opted to pay for the care privately and kept her savings, so she would still have some money and could do a little extra something for herself or her grandkids occasionally. But she knows she took a gamble at the time, and is grateful for what she has.

Jamie worries that his mother is declining faster than she, herself, can see. He thinks she will soon need regular care. He and his wife spent the savings they received on the down-payment of their own home, and could not afford to pay for additional care for his mother at this point. He is thinking about speaking to the bank about possible financial options, including a reverse mortgage ¹ on his mother’s home to free up regular cash for her, including what is needed for these options (e.g., Durable Power of Attorney ² ).

¹ Reverse Mortgage:

A reverse mortgage is a special kind of home equity loan that allows you to receive cash payments against the value of your home.

² Durable Power of Attorney:  

Before Jamie can make financial transactions on his mother’s behalf,  Jasmine needs to complete and sign a durable power of attorney while she still has capacity to understand what she is doing.