Real Client Stories

A Case for Division of Assets: George and Ruthanne

The names have been altered for the sake of client confidentiality.

In early December of 2017, I met with the Adams family for an initial consultation while they were in the middle of a healthcare crises. Dad, George Adam, was in rehab at the time of our meeting and so I met with George's wife, Ruthanne, and their daughters, Sara and Amy. The Adams family shared with me that they were not sure if Dad would be able to come home. They felt that the reason they came to me was because they were lost in a sea of information given to them by various people, the internet, the nursing home, the rehab folks and their financial planner. They were not even sure what an elder law attorney was or what I could possibly do for them. They just knew they were struggling to work through information and needed a game plan.

The more the story progressed, the more certain I became that unfortunately Dad would definitely not be able to return home. Dad is in his late 70s and is physically weak. He has fallen on multiple occasions and most recently has broken one of his hips. Currently he is in his second week of rehab, but is about to be discharged.  He can not seem to regain strength enough to support his own weight. He can dress himself, but only with the help of an aide. He can roll himself to the toilet in his wheelchair, but he can't lift himself from the toilet to the stool and back again to his wheelchair. Dad also suffers from dementia. In his current condition, this means that Dad often forgets that his legs are not sufficiently strong enough to support his weight and, consequently, he falls when he attempts to stand, leading to further injury. He requires constant supervision. He and his wife, Ruthanne, live alone in their home of many years.

Ruthanne knows that she can't bring George home, but she is equally terrified that she can not afford to keep him at the nursing home. She would even be willing to bring George home to "give it a try," contrary to her doctor's advice, because of the fear she has of losing everything they have worked their lives to earn. The billing representative from the nursing home stopped in to visit with her and relayed that once the rehab days end, the base cost of the care required for George is $250 per day. $250 a day for the care is not all inclusive, but covers most things except for medications, incontinence supplies, haircuts, clothing, personal needs. The Adams have income from only three sources: his social security, her social security and a small pension that George receives from his former employer. They have never really looked at their income as "his income" or "her income," but I had to ask in order to help them.

The Adams family have approximately $200,000 in assets, in addition to their car and their home. They own their home outright. The value of the home is somewhere around $150,000. George has an IRA worth $50,000 and Ruthanne has an IRA worth $50,000. They have $100,000 in CDs. Someone told the Adams family to put everything into George's name, since George was going to need a nursing home.

My job was to provide the family with knowledge, resources and options. I offered the suggestion of the Division of Assets process and guided the Adams family step by step through the process. Ruthanne did not have to become impoverished in order to ensure that George gets the care that he needs. I helped Ruthanne to apply and qualify George for MEDICAID and keep significant amounts of their joint assets. In Kansas, the name for the Medicaid program is KANCARE. In Missouri, the name for the Medicaid program is MoHealthnet. Both programs share the same basic goal of preventing Ruthanne from becoming impoverished. It is not true that Ruthanne should have rushed out and changed the CDs into her name as soon as she felt that George was too weak to return home. It is irrelevant whose name is listed as the owner on the CDs; as a married couple, the assets of one are considered the assets of both. There is an exception for retirement assets in Kansas. In Kansas, the retirement assets of Ruthanne are not part of the equation. Ruthanne can keep her $50,000 IRA.

The process for protecting the Adams assets for the benefit of Ruthanne is called Division of Assets. It is extremely important to know that Ruthanne did not have to "spend-down" all of the Adams family assets before KANCARE will take over and help pay for George's nursing home care. The Division of Assets process will permit Ruthanne to keep the house. She was able to keep all of her $50,000 IRA, as she is a Kansas resident. The remaining assets, consisting of the $50,000 IRA belonging to George and the $100,000 in CDs are first divided, resulting in $75,000 in each. Then, the $75,000 in George's share can be used to buy exempt assets. For example, the funeral plans of both Ruthanne and George can be purchased with George's share. In addition, home repairs, furniture, electronics, hearing aids, a new car, a new wheelchair, can all be purchased from George's share. Lastly, once all desired purchases have been made, then Ruthanne can consider options to supplement her income. In other words, she can used any of George's remaining share to purchase a stream of income. Often this will take the form of either a promissory note or an annuity. Either method is approved by the state of Kansas.

The timing of the Division of Assets process is key. Ruthanne should not spend-down any money that she would otherwise not wish to spend before George enters into long term care. Spend-down for purposes of the Division of Assets does not occur until after George entered the hospital to seek care for his broken hip. After the process is initiated, then Ruthanne must remove George's name from the CDs and other assets. Ruthanne should absolutely not give Sara and Amy an annual gift of $10,000-$15,000 that her neighbor told her would save the money from the government.  Thankfully, the Adams family sought elder law advice before they started paying for the nursing home care for George. George was able to stay at the nursing home and KANCARE will take over paying for the care he receives. Ruthanne will get to keep the house and the vast majority of their assets.

Every story has twists and turns and gets tangled up here and there. This story is not intended to be legal advice, but is intended to demonstrate that there are unique solutions in every case to help Dad get the care he needs and to protect the remaining assets for Mom. Both Sara and Amy are "good" girls, not intending to take any money from George and Ruthanne. They gave back the gifts they had received in the last 5 years. George was never in the military. Neither of the children have a disability. The asset calculations are different in every case (there is a maximum that a well spouse can keep, for example).

I am grateful every day that my job is to help people.