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January 6, 2005
BILL TO RESTORE FINANCIAL SECURITY OF ELDERS
Representative Doug Peterson (House Bill HD3687) and Senator Mark Montigny (Senate Bill SD1148) have filed bills that will restore the financial security of many families who need to place a spouse in a nursing home. Women, in particular, will benefit from these law changes that will allow a spouse at home, who has low income, to keep additional assets to allow them to stay in the community. My experience has shown that many women who have placed their spouse in a nursing home have a very low monthly income. They were home-makers and child-raisers and now receive only a modest amount of social security as their income. If these Bills are passed, these Moms will be entitled to keep more than the minimum allowance under MassHealth (Medicaid) if their spouse needs nursing home care.
Why is it important to allow these women to keep some extra assets? Well if you’ve looked at your water bill, heating bill, or tax bill lately, you’ll know that it costs more and more to afford to live in your house. And when you need help cutting the grass, raking the leaves and shoveling the snow it seems like the expenses never stop. Add to that, the confusion of having your husband in the nursing home and all of the financial decision making in your hands, it can be overwhelming! What this bill is asking, is that we go back to the system that we had in place prior to September 1, 2003 that allowed these women enough of an asset allowance so that they can afford to remain in their home for as long as they can.
Prior to September 1, 2003, Massachusetts was an “Asset First” state and after that time, we became an “Income First” state. “Asset First” means that if one spouse had to go to a nursing home and the spouse at home had a low income, then that spouse at home could keep additional assets because her income was so low. Under the “Income First” rule, the income of the spouse at home would be supplemented by the income of the spouse in the nursing home. This means that the spouse at home would not be entitled to keep any additional assets and would have to rely on the income of the sick nursing home spouse. The problem then arises when the sick nursing home spouse dies. The spouse at home has spent all of her excess assets and upon her husband’s death, there is the risk that his income that had been allocated to her will stop.
“Income First” means that when one spouse goes into a nursing home they will allocate some of the sick spouse’s income to the spouse at home. This sounds like a good deal since you get to keep extra income, but this is one of the largest steps backwards this state has taken in many years.
Prior to September 1, 2003, if one spouse had to go to a nursing home, we would look at the income of the spouse at home. Frequently, the remaining spouse at home was the wife who spent her life raising a family and had around $500/month of social security for income. Since her income was less than the Minimum Monthly Maintenance Needs Allowance (MMMNA) of $1,515, we could give her a choice. The excess assets could be kept by the spouse at home and we would calculate what the monthly income from those excess assets would amount to. If the interest earned from the excess assets plus her social security still had her below the MMMNA amount she could keep the excess assets. In order to keep the excess assets, a hearing was necessary.
The alternative was that she could elect to spend all of the excess assets and simply keep a larger portion of her spouse’s income. We always advise against that because often when the spouse dies, the income dies with him. Then she would be left with less assets and insufficient income to be able to maintain a home and live independently.
For example, let’s say that “Anna” has $500 per month social security and that “Paul”, her husband, has $1,100 social security and $900 from a GE pension. Together over their lives they have been able to save $100,000 in the bank and $80,000 of GE stock. Paul has to go to a nursing home.
Under the old rules, we would tell Anna that her house is safe because as long as one spouse lives there it is a non-countable asset. In addition we would tell Anna that she can keep all of her savings and all of the GE stock. She will even be able to keep a portion of her husband’s income ! As we tell Anna this story we can see the tension and nervousness ease. She will be able to sleep again and not worry that she will lose everything.
Governor Romney has changed this. Under the Governor’s changes, first we have to determine how much Anna can keep. Since Anna is living in the house we do not count the residence. Out of her $180,000 in countable assets she can keep $90,000. She can keep her social security of $500 plus about $1,000 of Paul’s income. She must spend $90,000 on Paul’s nursing home care or other allowable expenses such as prepaid funerals and health care. She must also liquidate much of the GE stock and pay whatever taxes may be due on those capital gains. Based upon current nursing home costs of about $300 per day, it will take less than 10 months to spend-down the $90,000. Usually the next thing to take place is Paul’s death. On his death his social security stops and unless Paul elected a survivor benefit for his GE pension, that income will stop too. Anna is left with $500 per month that will increase slightly after Paul’s death, but not nearly enough to cover her living expenses. If she is healthy enough she will eventually have to sell her home because she will not be able to afford to live there.
Please call your Senator and Representative and ask them to support Senate Bill SD1148 and House Bill HD3687 to allow seniors to afford to remain in their home.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds a masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org