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Saving the Graces
By Karen Hube, September-October 2004
Her husband drained their finances. How can she best protect what’s left of their nest egg?
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Marianne Grace, 59, of Monroe, Connecticut, got the shock of her
life this past May. First, her husband Simon, 67, a retired car
salesman, was partially paralyzed by a stroke. As if that
weren't bad enough, when she took over the management of
their finances—which had been strictly Simon's
domain—she learned that the $175,000 in Simon's IRA was
gone and the $115,000 in their investment accounts had dwindled
to just $60,000. Turns out he'd responded to get-rich-quick
schemes on the Internet and left a ruinous financial trail,
including $10,000 of credit card debt. Simon will need full-time
care for life. Medicare will cover him for up to 100 days, and
then the Graces are counting on Medicaid to start paying his
nursing home costs.
The Problem
Marianne, just like so many people who are caring for a parent or
a spouse, isn't prepared for Medicaid's limitation: it
kicks in only after a patient's savings are nearly gone. At
the average nursing home cost in Connecticut of $7,417 a month,
their funds would barely last eight months. After that, Marianne
would have little money.
The Plan
Marianne must do two things immediately: help Simon qualify for
Medicaid and find all possible ways to protect—or best
utilize—their savings. She can't do this alone, so her
first step is to find an attorney experienced in long- term care
issues (through her local bar association; the National
Academy of Elder Law Attorneys or AARP's Legal
Services Network at 888-687-2277.
When she applies for Simon's Medicaid, the system will record
that they have $60,000 and a second car worth $4,000.
Connecticut's Medicaid rules (which are similar to those of
about half of U.S. states) say they'd have to spend about
half ($32,000, for them) on his care. Marianne can keep their
house, the remainder of their savings, and Simon's Social
Security check of $1,000. She could also keep any income she
earns; Medicaid will begin taking a cut of Simon's check if
her monthly cash flow exceeds $1,515, so she can earn an extra
$500 a month without affecting his benefit. However, Marianne was
a full-time mom and has never worked.
Before applying, she and her attorney need to devise a strategy.
She could avoid losing so much of their savings to nursing home
costs by spending it now in ways that will give her long-term
benefits, says Henry Weatherby, an elder-law attorney in
Bloomfield, Connecticut. First, she could pay off the $10,000
debt. Then she could replace her roof, pay down her mortgage, or
even buy two prepaid funeral plans. This isn't cheating;
while you can be penalized for, say, giving money to relatives to
qualify for Medicaid, it's perfectly okay to use it for
debts, home repairs, and other necessary expenses.
Next, while Simon's monthly check covers her basic needs,
Marianne will really need a job to afford any extras—at
least until she's 66 and can collect $500 a month in Social
Security of her own (at 62, she'd get only $337). If
she's short then, her lawyer can help her refinance her
mortgage or get a home equity loan.
Finally, she must start healing emotionally. On top of worrying
about Simon, she feels betrayed and frightened. Counseling might
help, and she can also lean on her friends and family for
support—so long as she listens only to professionals for
financial advice.
Karen Hube, our new money columnist, has written for The
Wall Street Journal.
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