Got an inheritance? Don't do THIS...

A friend revealed to me that her mother, age 62, is in dire financial shape two years after the death of her successful husband.   I'm shocked, I never thought it would happen.   The problem is that Mom didn't have a plan to manage her money and the kids didn't want to hurt her feelings and butt in when they realized she was depressed and spending too much.   The reality is hard to understand - Mom went through $600,000 in a little over two years.   More than a half a million dollars in 24 months.   It's a shame because, if managed well, Mom could have lived comfortably for the rest of her life.  Now Mom's renting an apartment and selling off her antiques.  Her large home is for sale.  She's living on a meager social security payment - her husband died before he began to collect social security so she's collecting earlier than she might if he'd lived.  It's nice that the funds are available but the payments would be more if she'd waited to collect later in life.

Here's WHAT to do if you get an inheritance:  I write this for people over 55-60 - those who are faced with living on a limited income.  The idea is to create stable living conditions, minimizing costs overall so that living on a limited income is manageable and doesn't cause hardship.

Seek advice from a banker or financial professional. There are plenty of funds where you can put money that will generate interest or receive dividends even if the annual payoff is low.  It might not be as much as riskier investments but it's steady and you won't risk the principle or bulk of your money.  Think if it as a source of long-term annual income:  Let it sit in a special fund and at the end of a year 1 , you could have 20-30-40,000 to spend during year 2 while your nest egg sits and grows money for year 3.  (I've discussed this scenario with representatives from Edward Jones Financial, but any reputable financial firm should be able to help.)
Seek to make the money LAST - don't go on spending sprees. Don't do a bunch of cosmetic work on your home to make it look prettier. 
Seek emotional counsel if you have the urge to buy and buy and buy - this is a sign of depression.  I believe we get a little spike in endorphines when we spend money - this feels good so we do it a lot when we're depressed.   This is RISKY - try to resist the urge to shop; if possible avoid the mall, don't watch shopping channels and don't splurge.
Consider setting up a trust or annuity for yourself - this will ensure that someone doles the money to you over time.
Invest in things that will make your life more stable:  Pay off credit cards then CUT THEM UP. Pay off your house and make repairs that will ensure it's in good shape for the long term. Note that I said REPAIRS not improvements  - only make improvements if it make it safer or will increase the selling price.
Buy or pay off a quality car that will last you a good long time - consider a brand that will require minimal repairs and will last miles and miles.  Be sure it's a size that you'll be SAFE driving - think automatic transmission, 4 door-sedan not oversized SUV with 4-on the floor!

What NOT to do:

Don't go on vacation after vacation without consulting a financial adviser. Understand if you can AFFORD a lot of travel.  Spend it on travel ONLY after you've made arrangements for the long term.
DO NOT LOAN money to kids, grand kids or friends. Often people have every intention of paying money back but when all you have is one big chuck of money, it's value is in the potential it has to earn more. Don't whittle it away a few thousand dollar loans at a time; before you know it, the funds are gone and collecting those loans is probably impossible.
Don't make a lot of cosmetic changes to your home - unless you'll sell soon and you are SURE it will pay off big!  Example:  if your living room is painted dark brown, it might be wise to paint the walls a neutral color before showing it for sale - the brown color will make the room look smaller and won't suit everyone's tastes.
 Don't buy a lot of flashy gifts.  you don't have to buy off family or friends, they should WANT your long term financial security not a bunch of "stuff". 

What should I do with dads life insurance? what should I do with my  inheritance?

Grandpa came through - sort of...

Update on my last post of March 30 - my friend grandfather WAS as sharp as we expected.   "G" went to his bank to advise them of this death and look for outstanding checks. She learned she was his one and only beneficiary on several accounts.  She has also been in touch with insurance carriers who advise her that she is the beneficiary of those accounts as well - it's enough to put her two youngest kids through college and start a nice retirement nest egg for herself.    

The two things Grandpa did not take care of - the title to his trailer home and brand new Lincoln  - will require that she go through probate in the state where he lived and died.   The attorney tells her that it will, by law, go to her father but she's okay with that.   She was so appreciative for the savings and insurance that she will not argue over these assets.   In the end, she almost feels sorry for her father because of what he missed not knowing his dad.  She's taking the high road and I'm proud of her.  I'm sure her Grandpa is too.

Veterans benefits may be available

I was surprised to learn that there are veterans benefits available to provide for disabled veterans OR their spouses.   Called the Aid and Attendance Pension, it's intended to help vets and their families when they are unable to care for themselves. 

Here's the text from the VA web site.  To see more follow this link: http://www.veteranaid.org/program.php

THE AID & ATTENDANCE PENSION

The Aid and Attendance (A&A) Pension provides benefits for veterans and surviving spouses who require the regular attendance of another person to assist in eating, bathing, dressing and undressing or taking care of the needs of nature. It also includes individuals who are blind or a patient in a nursing home because of mental or physical incapacity. Assisted care in an assisting living facility also qualifies.

To qualify for A&A it needs to be established by your physician that you require daily assistance by others to dress, undress, bathing, cooking, eating, taking on or off of prosthetics, leave home etc. You DO NOT have to require assistance with all of these. There simply needs to be adequate medical evidence that you cannot function completely on your own.

The A&A Pension can provide up to $1,632 per month to a veteran, $1,055 per month to a surviving spouse, or $1,949 per month to a couple*.

Eligibility must be proven by filing the proper Veterans Application for Pension or Compensation. (Form 21-534 surviving spouse) (Form 21-526 Veteran.) This application will require a copy of DD-214 (see below for more information) or separation papers, Medical Evaluation from a physician, current medical issues, net worth limitations, and net income, along with out-of-pocket Medical Expenses.

Can my Mom get veterans benefits for my dad's service?  How can we get veterans benefits for my dad?

Medicare versus Medicaide

In the past week I've had three calls from friends about the difference between Medicare and Medicaide.  Basically, one is a federal insurance program for the elderly and the other is a state program that helps indigent  - or poor - residents.

Disclaimer before you read further:   This information is based on my experience and knowledge of Medicaide in two separate states.  Each state is different; to find out the specifics of your state, do your research.  I suggest that you search "(name of your state) AND  medicaide" or contact the your state agency for health and welfare.   The Area Agency on Aging within your local area is also a good resource to help you begin to understand Medicare and Mediciade in your state.


The basics:   Medicare and Medicaid are BOTH paid for by tax dollars - and you didn't think the USA has socialized medicine....
Medicare is government supported health insurance for the elderly, it DOES NOT PAY for nursing home or long term care.   Citizens 65 years and older pay premiums directly from their social security. You may select any doctor who accepts this as payment.
Medicaide is government paid nursing home (long term) care.  It may also help pay for Medicare premiums and for prescriptions.  Most of the funds for medicaid come from the federal government but the programs are administered by each state.   Each state still has to contribute something toward Medicaide.





Medicare is a federal insurance program available to US citizens over 65.   To pay for this plan, the federal government takes premiums directly from social security payments.   Most of us will be covered by Medicare at some point.   Even if you have health coverage as a retiree, those programs usually defer to Medicare once you turn 65 and you're likely to need more medical attention, prescriptions or procedures.   In some cases, the primary insurance you had through a pension plan or employer becomes your supplemental plan, meaning that it pays some of what Medicare does no. Medicare does NOT pay for long term care in assisted living or nursing homes.  They will not pay for on-going home health care or aides for elderly either.   They will pay for up to 120 days in a nursing home provided the patient shows improvement and any therapies administered help the patient improve to return home or return to assisted living.   As a citizen, you automatically qualify for Medicare and, near your 65th birthday,  you will receive a letter advising you of your status.   As of this writing, June 23, 2010, there are many doctors across the country who refuse to accept Medicare payments so use caution when selecting a doctor.

Medicaide is a state program (it may be called something else in your state) generally administered by the State Department of Health and Welfare.  Medicaide is not limited to the elderly and may also cover children of poor families, people with physical or mental disabilities or the most poor citizens.   It generally does not include dental or vision but in some states eye exams and dentures are covered one time during a set period, like onc every 5 years.  Medicaide DOES pay for long term care in assisted living or nursing homes and there are certain criteria to meet before an elderly person may receive Medicaide.    Generally these are:

• Spend down to $2000 or $2500 in assets. This means that the elder MUST use all possible assets before they may receive medicaide.  They must consume all cash, CDs, stocks, bonds and savings. Note that if at anytime, an elders assets grow to MORE than $2000 or $2500, they may be disqualified from Medicaide until that money is spent.  If you know this will happen, you can plan for it and buy something that they need like depends, lap robes, eye glasses, dentures (medicaide will pay for eye glasses & dentures but only once every few years). Here's a link to an article about the Medicaide spend down on Agingcare.com.
• Look back periods:  These can get you in to a lot of trouble.  Each state has a defined period where they look back at expenditures to determine whether someone qualifies.   This is to prevent transfer of ownership of valueables, gifting of cash, stocks, bonds, etc or deeding of any property before an application for assistance.    The object is to ensure that assets are used to provide for someone, that they consume their resources before receiving public resources for their support.   Some states have a look back period as long as 7 years!!  so be sure to thoroughly understand this before accepting anything from your elders.
• Homes may be exempt: The elder may own a home and the state will not force the sale of it if a spouse, dependent child or other relative lives there.   The state may also permit the home to sit - without being sold - if the elder plans to return home.  
•  Financial recovery:  most states seek some kind of financial recovery from an elders estate.  First they will put a lien on a home or proprety so that when the elder passes, the state will expect to recoup funds spent on care.  If the home/property is occupied by a surviving spouse the state may not use liens.   The state may also try to recover funds by forcing the sale of cars or other valuable possessions such as art or antiques.   
• Pensions and social security must be spent toward care:  Any monthly income received by an elder must be spent on their care, this is often called a co-pay or care contribution.  In my mom's case, her social security and pension are deposited directly to her checking accounts and I write a check for her contribution each month.   The state pays the rest directly to the  nursing home,  I don't have anything to do with that.    
• Monthly personal allowance:  Most states permit each elder to keep between $30-50 a month for their personal use.   This isn't a lot at all so I supplement when necessary.   I do not give the money directly to her but do pay for her hair cuts, permanents and regular hair appointments.   

Some other things to consider about Medicare and Medicaide: 

• Medicare is your PRIMARY insurance after 65 but Medicaide helps: You'll still have to pay a monthly premium if you go on Medicaide but Medicaide will pay the premium for you.  So for doctor bills, procedures, tests, etc.   Medicare pays first, your supplemental plan (if you have one) pays second and Medicaide pays third.   Without a supplemental plan, Medicaide probably covers it all or the doctor may write off some of the charges.
• Medicaide can start and stop payment so WATCH THEIR BANK ACCOUNTS!!:  If an elder is hospitalized, their care may be paid my Medicare for that period and for a time (sometimes as long as 120 days, 3 months)  AFTER they return to a nursing home.   BE CAREFUL and watch their funds during this period.  If their monthly income is NOT used for a nursing home while Medicare is paying, it can build up over the $2000 or $2500 in maximum assets.  This nearly happened to my Mom so I bought some personal items for her to ensure that she did not accumulate more than $2500.   I also started a burial fund - allowed by her states' Medicaide program) and plan to contribute to it if/when she begins to accumulate more than $2000.   On a personal note:  I don't feel like I'm ripping off the state or being dishonest in this case,  she would have been only $250-300 over the $2500 but that relatively small amount would cause all kinds of headaches and I'd have to redo her medicaide application all over.  

What's what is the difference between medicare and medicaid medicaide? what is the medicaide medicaid spend down spenddown? can mom dad give me money and still get medicaide medicaid?  Will medicare pay for nursing home.

Financial assistance for caregivers hard to come by...

Caring for elderly parents often means financial hardships and sacrifices for the elders and their families.  In my own sphere of the world I've spent more money than I can count on travel to help my parents. My husband put a new roof on his mother's home and bought appliances as her old ones gave out.   Friends have taken their parents into their homes, paid supplemental insurance premiums and prescriptions.  Now some purchase clothing, shoes, personal care items and goodies once their parents go on medicaide.  Medicaide permits the elder to keep between $30-50 per month for personal expenses but often it's not enough even for a little splurge.

I  read articles and questions/answers on Agingcare.com and just noticed that they have a special section specifically for care givers and finances.  See it here:  Aging Care, financial articles. Remember that financial resources for care givers are FEW, someone might find some assistance so I feel it's important to share.

Can I get paid for taking care of mom dad? Can i get paid for staying home with husband wife? Can daughter get paid for taking care of grandma grandpa grandmother grandfather? Will medicaide medicaid pay me to stay home with mother? will medicare pay me to stay at home with parent spouse? 

Use caution when moving your parent to a new state

Moving your parent to an ALF or nursing home near you seems ideal but it could cause financial duress and mean your parent doesn't qualify for financial assistance.  Some states will not approve financial assistance (medicaide) until a person has established residency.  In my Mom's state, that's 30 days and proof that she intends to stay.  In another state it's six months!  At $3-5000 a month, that's a substantial amount to pay until they qualify.

The best practice - do research LONG before your parent or elder might move closer to you.   Contact your state medicaide office to understand VERY clearly the residency requirements, asset limits and application process.


How can I move my parent to a new state? moving my parent near me, state aid and moving my parent, 

Names on bank accounts - approach with care

A few years ago my Mom added my name to her bank accounts. I didn't give it a second thought until tax time when I got statements for earned interest. She didn't make enough to pay taxes but I did. I had to report it as income on my tax returns!

That impact on me is relatively minor but it made me think - the risk to my Mom is much greater. She ADDED me as a secondary owner of her checking and savings accounts. This means if I were to file bankruptcy, I'd probably have to list half of the value as MY asset. I wonder if creditors could go after half of HER money to pay my debts? What if I were elderly and needed to apply for medicaide - would they make her use half of her funds for my medical expenses?

I've not asked her attorney about it because it was a relatively small amount and it will be consumed for her rent at the ALF soon enough. However, if my financial situation were less stable I'd be quite concerned.