Home Ownership as Security

[Tom Young]

Am new here, and apologize if this has been discussed before.

No, not just a place to die, but a reason to own as security for the survivng spouse.
For the first 14 years of retirement, we owned two relatively inexpensive homes.
The best way to explain this, is an example.
My friend Bob moved into our Florida Mobile/MFG home community after selling his home in Maine for $280K. The Florida home was $39K, and the $280K was intended to be bob's nest egg.
After some happy retirement years, Bob's wife May, came down with Alzheimers, and after 5 trying years of keeping May at home, it became necessary for her to go into a nursing home Alzheimer unit. as she was physically healthy, she remained there for 5 years before passing.
Since Bob had that $280K in the bank, the state took all except his car, his $39K home, and (then) $40,000 in cash... in order to pay for the nursing home expenses (then) of $60K/yr.

Now... If bob had maintained his Maine home as his principal residence, when May went into the nursing home,he could have stayed in that home and Medicaid would have picked up the nursing home tab.

The same thing happened to my mom and stepfather, but before selling his home as he wanted to do to pay for the nursing home expense (Old Yankee Pay my own way mentality) He consulted an elderlaw lawyer... Important "Elderlaw". "Stay in your house." and he did, and the state Medicaid paid the nursing home expense. A good thing, too. the house he bought in 1930 for $3000 is in Barrington RI, on the water. Though he believed that the house was worth about $150,000... in fact, when he too passed away, it sold for over $700K... A good move that worked out for his family which was in poor health and difficult financial straits.

This is a legal situation that needs good counsel. Theoretically the state may place alien on the property, but thusfar, (and I'm familiar with this in several states), the charge backs haven't happened.

Part of this process is 5 year look back, so buying a house to protect assets has to be done within the guidelines.

We decided in 2004 to buy a home just for this protection... and were relived when we passed the 5 year lookback.

If you Google for "Elderlaw" in your own state, you will usually find the laws that pertain... ie.. amount allowed, and car, house rules. the protected home limit is something over $800K.

Something to consider when deciding whether to own or rent, and also the amount to be protected. In our case buying the home could be protecting about $160+K more in case either of us should need nursing home care.

Not a legal opinion, but what actually happened.

[Dragline]

This has not been discussed here much, but it is as important topic. Given the average age here is probably 30-something, it would not affect most directly for quite awhile. I've run into when helping the folks.

For those who want the short version -- to qualify for Medicaid, you need to be nearly destitute. However, there are some assets you can still hold on to or preserve for a spouse, such as a house. The rules are complicated, but you want to be aware of them if you are in this situation or advising someone. Large piles of liquid assets will all go to health care expenses if you are not careful -- the euphemism is "spend down".

This may have changed with the new eligibility rules in some states, but its still a quagmire that needs to be negotiated carefully.

This is also a reason that life annuities are attractive as you get older, as well as giving the money away or putting it in trusts before you get to the end stage.

[Ego]

This is also a reason that life annuities are attractive as you get older, as well as giving the money away or putting it in trusts before you get to the end stage.

Yup. There are ways to avoid these problems with proper planning.

Catch 22 is that a larger more expensive house provides more asset protection but requires more income and assets to maintain. Income and assets are capped under the medicaid spousal impoverishment laws which often cause house-rich healthy spouses to spend-down and become cash-destitute. For those living close to the earth (ERE style) that's not a big deal. For the average person it can be catastrophic.

http://www.medicaid.gov/Medicaid-CHIP-P ... -Page.html

[Andre900]

A better idea might be to buy Long Term Care insurance. I bought a LTC policy from State Farm for my mom in '00 when she turned 60. It covered 80% of the cost of a stay in a nursing home or an assisted living facility, with a max payout of $250K. By the time my Mom need to use the policy, seven years later, the annual premium was $1000. The policy paid with out fail, 80% of a $4000 bill every month for over two years until my mom passed.

A former employer sponsored (but did not subsidize) LTC insurance for employees through Unum Provident. I signed up at age 40 at a cost of $250 per year for a max payout of $180K plus a small benefit increase each year. When I left that job, I contacted the insurer and they let me keep the policy at the same rate. It's been over ten years and the policy now costs me $300 per year w/ $200K max pay out.

[Riggerjack]

A few issues with the OP examples. First, being child free, I don't care about leaving inheritances. Second, these are complex regulations, that change at the whims of regulators. Predicting the chnges in future entitlement regulation seems a unlikely skill to aquire.
My plan is to build a handicap friendly home, live there as close to the end as possible. Then hire in house nursing help, as needed, rather than going to a nursing home. That leaves the house to reverse mortgage or sell for additional funding when my wife, (7 years younger) needs it.
Alzheimer's is the nightmare scenario, but even then there are steps to be taken to partially mitigate that. Proper compound style fencing, medalert bracelets, tracking key fobs, liquidating dangerous tools, etc. When the brain starts to go, it's important to set up the home to accommodate that, as well as possible. The backhoe and woodshop get traded in for a PC/recliner combo.
Then I'll spend my declining years ranting on the internet, and see if anyone can tell the difference.

[Tom Young]

A better idea might be to buy Long Term Care insurance. I bought a LTC policy from State Farm for my mom in '00 when she turned 60. It covered 80% of the cost of a stay in a nursing home or an assisted living facility, with a max payout of $250K. By the time my Mom need to use the policy, seven years later, the annual premium was $1000. The policy paid with out fail, 80% of a $4000 bill every month for over two years until my mom passed.

A former employer sponsored (but did not subsidize) LTC insurance for employees through Unum Provident. I signed up at age 40 at a cost of $250 per year for a max payout of $180K plus a small benefit increase each year. When I left that job, I contacted the insurer and they let me keep the policy at the same rate. It's been over ten years and the policy now costs me $300 per year w/ $200K max pay out.

We too have LTC, and are invested over the years with about $48K in payments for DW and me. the policy is $100/ day and was bought when Nursing Home costs were about 60K/yr. While our payments have gone up very, very little over the past 20 years, equivalent Nusrisn Hok costs have gone to nearly $90K.

The "keep your home" insurance as I call it, looks to be good for us, as even with our LTC insurance, our retirement nest egg would be shattered in three or four years.

[Tom Young]

A few issues with the OP examples. First, being child free, I don't care about leaving inheritances. Second, these are complex regulations, that change at the whims of regulators. Predicting the chnges in future entitlement regulation seems a unlikely skill to aquire.
My plan is to build a handicap friendly home, live there as close to the end as possible. Then hire in house nursing help, as needed, rather than going to a nursing home. That leaves the house to reverse mortgage or sell for additional funding when my wife, (7 years younger) needs it.
Alzheimer's is the nightmare scenario, but even then there are steps to be taken to partially mitigate that. Proper compound style fencing, medalert bracelets, tracking key fobs, liquidating dangerous tools, etc. When the brain starts to go, it's important to set up the home to accommodate that, as well as possible. The backhoe and woodshop get traded in for a PC/recliner combo.
Then I'll spend my declining years ranting on the internet, and see if anyone can tell the difference.

Yes, I agree. We live in a Continuing Care Retirement Community.
65 single family homes... all designed for retirees.. of which more in another thread.
65 apartments healthy people, 2 meals/day all utilities, free tv and internet. free transportation
45 assisted living apartments
40 rehab (short term "bounce back"
50 Alzheimer units.

An all within the same complex. google libertyvillageofperu

I was a little put off by the reverse mortgage, when I got into the details, but certainly an option, and were we not in our current arrangement, would have been the way to go.

Then I'll spend my declining years ranting on the internet, and see if anyone can tell the difference.

They haven't caught me yet, and I'm nearing 80.
















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