Several years ago we met with “Anita,” a woman in her mid-sixties whose husband, Andy, a decade or so older than Anita, had been diagnosed with mid-stage dementia and, therefore, had recently retired as a cab driver. At the time, Anita was quite adamant that, although Andy was no longer able to live on his own, as long as she was around, she could shoulder many of the burdens to make sure that he continued to live comfortably and safely in the couple’s home. We wrote an analysis of their finances and estate planning documents which we discussed with her, page by page, considering how they would meet the costs of retirement, simplify probate, avoid unnecessary taxes, and focused on what we labeled a “contingency plan” in the event that Andy needed nursing home care. Anita, because she owned all the couple’s assets, we prepared new documents, replacing Andy as her fiduciary under a Durable Power of Attorney, Health Care Proxy, and her Will with a Testamentary Trust that would operate, if she passed before Andy, to distribute only as much money as he would need after he qualified for MassHealth almost immediately. Medicaid programs in Massachusetts and other states recognize that assets placed in a Testamentary Trust, which can provide discretionary benefits of income and principal are not “countable.”.
Recently, Anita called, nervously announcing that Andy had been hospitalized and was about to complete rehabilitation. We pointed out that the “contingency plan” we had developed should go into effect. Its key provision was to convert assets above the allowable $123,600 to purchase an annuity for her and that Andy would be eligible for Medicaid as soon as that were done.
Anita, however, complained that the fee we proposed for supervising the purchase of a Medicaid-compliant annuity, spend downs, and preparing and defending a formal application for Medicaid was “far too expensive.” Our explanation that 1) it represented the amount of time those tasks would take and 2) it was cost-effective, i.e. she would save far more money than it would cost.
She began to call our office, talking first with an associate she had met two months earlier, complaining that she had just received a bill from Andy’s nursing home for three times what we would have charged her to obtain Medicaid’s coverage of his bill and, of course, until she obtained Medicaid, she would be charged about $15,000 a month. When asked whether she had purchased the annuity and prepared a Medicaid application, Anita told us that the company that had advised her on the application hadn’t explained that she would remain “over-assets” but now emphasized that, until she converted about $100,000 to annuities, her application would be “premature.” I doubt that either of these statements are true, but Anita believes them to be true. I explained that we would still be willing to help her on the terms we had originally proposed, but unfortunately until she converted excess assets to an annuity, she couldn’t successfully apply for Medicaid to pay Andy’s bill. Second and third calls followed in which Anita contacted her broker who was eager to convert cash to an annuity but didn’t seem to understand what terms would comply with Medicaid. Also, it seemed, after talking with her broker she didn’t understand how an annuity worked. We explained, patiently at first, but Anita lost her composure, blurted out that she hadn’t purchased the annuity because she was quite certain that Andy would die, and all but blamed Andy’s hold on life for her predicament.
Our conversation turned from bad to worse. She wanted Medicaid to begin immediately, before she ran out of money. Explanations that she had to convert about half of her liquid assets to an annuity didn’t seem to penetrate. Discussing other legitimate “spend downs” she could make almost immediately only seemed to confuse her more. After wasting nearly an hour on two phone calls, I wrote her a simple email explaining what she had to do and wishing her luck in finding someone with whom she could work.
In such circumstances, we pride ourselves on presenting options, giving the client sufficient information to make decisions that are consistent with their interests and beliefs. But Anita reminds us that there are some clients who don’t fully trust us, go to someone else who gives either bad or incomplete advice, and then returns to us so embittered that she can no longer decide on a reasonable course of action. While I feel sorry for Anita, I grieve especially for Andy whose care is in the hands of someone who is a victim of her particular view of reality.