If you are going to map out your family’s financial future, you need to consider the costs of nursing home care seriously. I know what a lot of Muslims think though, both parents and adult children: that would never happen. Children, children-in-law, everyone else, at least in the abstract might be adamant that this would never happen. Unfortunately, it is often unavoidable.
Here is a hypothetical that might help explain the problem:
Elyas is a 78-year-old widower in Santa Monica. His children, sons Salman, Younus and daughter Bilquis, are all adults, married and with children of their own ranging in age from 2 to 9 years old, though all of them have toddlers. Salman lives about 40 miles away, while the other children live outside California.
Salman has discovered, after visiting his father, that Elyas has dementia, and it is deteriorating rapidly. He knew that his father was behaving strangely, and wants to help. So Salman brought his father home to live with him in Orange County, California. However, he found this was a problem. His wife tended to toddlers all day; she was not able to meet Elyas’s needs. Elyas did not recognize his daughter in law or grandchildren. Often, when Elyas saw them, he thought they were intruders about to attack him. Salman was too dangerous to have at home. He had no choice but to send his father to a memory care facility.
Many ways to need long term healthcare
An elderly adult like Elyas can become too dangerous to keep at home, which is an obvious case for getting help. But often, people prefer to stay in a nursing home to not be a burden to the family. Having a child, a daughter in law or grandchild deal with the day to day drudgery and indignities can be a bit much. There may be a need to administer many medications; there may be incontinence or other issues. Maybe there is a need for in-home care, or outside the home care, but there may be no ready way to pay for that. This is not a remote issue. Someone turning 65 today has an almost 70% chance of needing some sort of long term care in the future.
Costs can be massive
Nursing homes can be costly. To those with experience, this is probably an understatement. Memory care, in particular, can be a six-figure annual outlay. Someone like Salman, or even all the siblings combined, may not have the financial capacity to cover these costs. Families are often looking for another option to pay for nursing home care.
Long term healthcare insurance is a good option, but it can be expensive or impossible to get. Regular health insurance would never pay for nursing homes or other sorts of long term healthcare. Most people do not have long term healthcare insurance or an easy way to pay for long term costs themselves. If they did, it may mean dipping into expenses like their own housing and education needs.
Medi-Cal (California only)- It’s for the middle class too
So this is something I don’t do a lot when I write here: I am limiting my discussion of this important topic that should be of interest to virtually every family in the United States to California law. The reason for this is that Medi-Cal (or Medicaid in most of the rest of the United States) is a state-specific program and if you are outside California, the information (as opposed to the issues) may not apply to your family at all.
We know of Medi-Cal as insurance for the poor. After Obamacare passed, there was a massive expansion in the program. The government, in general, does not look at assets, but income.
Medi-Cal is also not just ordinary insurance. It covers things virtually no other health insurance program, including Medicare (which is healthcare or seniors), does not include- long term care. It is common for seniors to have both Medi-Cal and Medicaid at the same time. So someone like Elyas, even if he owns a home, might be eligible for it. So long as Elyas qualifies for Medi-Cal, his children do not need to worry about paying for his nursing home. Elyas does not need to sell his house or get a home equity loan to pay for long term care.
Medi-Cal eligibility used to be a massive project for many. The elderly purposefully impoverished themselves to qualify for the program, leaving themselves in a state of poverty. They did this to be eligible for healthcare for the poor so they can get long-term healthcare.
In general, though, a lot of what people used to do to get qualified for Medi-Cal is no longer needed. You can get Medi-Cal if you at 138% of the federal poverty level or if you meet a variety of other situations. Being over 65 is one of them. It is very common for people with million dollar homes to get Medi-Cal. It is an essential social safety net that allows people to keep their homes while undergoing a massive necessary expense.
First comes Healthcare, then comes “Estate Recovery”
There is one massive caveat about Medi-Cal though: The government is obligated to recover what it spent on medical care from the assets of the deceased. So after Elyas dies, say he owned a home in Santa Monica, California, the government may be entitled to “recover” from what amounts to Elyas’s children’s inheritance.
While Elyas is alive, the government does not “take away” his home. They also don’t place a lien on the house. They do have a statutory right of recovery though. The family must notify the government when Elyas dies. However, the government’s power to recover comes with some significant limitations.
For those who die after January 1, 2017, the rules regarding Medi-Cal recovery have become much more favorable for families. The older rules are different and outside the scope of this article.
Medi-Cal does not try to recover for “ordinary” medical care anymore. So just because a loved one had Medi-Cal does not mean the government will start collections after death. The state will recover only for services that federal law requires be recovered (Medi-Cal is a joint Federal/State Program).
So nursing home care, intermediate care for the developmentally disabled, home and community-based services and a few other programs are subject to asset recovery (here is a complete list) is subject to asset recovery. So some of the most expensive items can subject a family to the loss of the family home. But California now makes this all avoidable. Unlike in the past, it does not require people to impoverish themselves and give everything away for the privilege of having the government pay for a nursing home.
We Need to Define the “Estate” in “Estate Recovery”
California defines the term “estate” narrowly, as essentially the probate estate. Probate is a court-supervised process for making distributions of a decedent’s estate. As a general rule, if you need a dead person’s signature to transfer something from one person to another, you have probate.
There are however ways of transferring property outside of probate. While some of them may be problematic for Muslims (and non-Muslims), having property in a living trust is likely the best way to do it. Assets that are in retirement plans, like 401(k)s, are not going to be subject to recovery assuming there was a beneficiary designation that avoided probate and did not give away everything to the government (some people do this).
How to handle this
If you are thinking about long term care and how it might impoverish your family’s wealth, you should consider revisiting estate planning. Of course, you need to plan for Islamic Inheritance. But for this to work, there needs to be something to inherit.
To set up an Islamic Estate Planning appointment with our office, you can click on this calendar link.
This post is not about getting a divorce, or the emotional, financial and social toll it takes. Instead, I want to discuss how Muslims should plan when they are already divorced. The divorce settlement is done, custody is sorted out, for the time being.