My dad was diagnosed with Alzheimer's approx. 9 years ago, and ~1 year ago, co-diagnosed with "Lewy Body" dementia and possibly Parkinsons, as he exhibits quite a few parkinsons-like symptoms. In the last month he has significantly deteriorated, to the point that my mother is no longer able to keep him at home and care for him full time. He has been in the VA hospital for almost 3 weeks now while they tinker with his medication in an attempt to get him to a position where we can safely move him to a care facility for the rest of his life. My parents are still married and have been for 39 years. Dad was always the breadwinner. Mom "retired" end of 2016 to provide full time care. Not sure how to list everything that could be required...
State of residence: WA
Mom: 61, in good physical health
Dad: 67, in great physical health, Vietnam vet
No LTCI for either
Minimal life insurance for both
Unsure of dad's VA benefits qualifications (we have been told that with his serving in Vietnam, Parkinson's is a presumptive disease that may entitle him to additional VA benefits / payments) - this is being worked on by my mom
Dad income: SS, ~$2400 / month
Mom income: $0
Investments @ Vanguard in low cost index funds, approx. 50/50 AA
Dad tIRA: ~900k
Dad rIRA: ~50k
Mom tIRA: ~15k
Mom rIRA: ~35k
Joint savings: ~50k
House: 250k, no mortgage
Car: 10k, no loan
So, mom and I have met with 3 different lawyers over the past two weeks to try and determine our next moves. Unfortunately, we have been given 3 options! Obviously, we want to shelter as much money as possible to ensure that my mom is able to live the rest of her life without worry. We have been told by an independent placement company that we will need to pay for a home for 2-3 years before medicaid would be allowed (these are the local home rules, apparently). We have received the following options.
#1: Take money from retirement accounts (maybe $150k a year) over the next 3-4 tax years to pay for dad's care. At the end of this period, right before the application for Medicaid, take all of his funds as a lump sum (I estimate this would be around $450k remaining), pay a huge tax hit, and transfer the assets into my moms name via a 5 year SPIA. The elder law / estate planning attorney says that this would ensure that my dad would qualify for Medicaid while preserving money for my mom's future. Our CPA is running numbers to see what would be possible within the 15% and 25% tax brackets, what we would end up paying for the lump sum removal of tIRA money, etc.
I do not like this option just because it seems like a lot of moving parts, a lot of taxes paid, etc.
#2: Divorce. My folks get a divorce immediately. This would split the marital assets, and given the length of their marriage, I have to assume that most of the assets would go to my mother. We would leave ~3 years of medical care ($300k, give or take) for my dad in the tIRA; everything else would be transferred to my mom. There are some unknowns here, too. One lawyer told us that my fathers Medicaid eligibility would be counted as an asset in his side of the divorce asset division. Another one told us that is highly unlikely. None of the lawyers were willing to give any suggestions as to what we could expect as far as asset division, but one told us "I would be as aggressive as possible." My mom is acceptable to this option and had discussed it with my dad years ago before his memory really went bad - he was also okay with the idea. We were told that due to conflict of interest, my mom could no longer retain the power of attorney for my dad - that would fall to me as #2 listed on the document. We're all okay with this.
edit: we are aware that my mom would lose her medical insurance coverage, currently through the company that my dad retired with, with this option.
To me, this seems like the most straightforward option. Very little "excess" tax hit imho.
#3: Legal Separation. This was the last option presented to us. Lawyer #3 does this a lot and considers himself a pioneer in this area (my speculation). He repeatedly mentioned his past cases and success with this option. The idea is that my parents file for legal separation. This would include a court ordered transfer of assets, similar to a divorce. This would move almost everything to my mom's name with no tax hit, similar to a divorce. They would stay married but have completely separate finances. My mom could retain power of attorney.
I have no idea how this would be allowed, and am very skeptical. Lawyer didn't appreciate my stream of questions about his successes with this while retaining Medicaid eligibility for the disabled party
I lean towards option #2 because it seems much simpler and cleaner. There is no major tax hit - we would only take out the funds required for my dad's care, and given his low income, the tax bracket would likely be only 15%. As I mentioned earlier, the CPA is aware of the options and is doing these calculations for us - we expect to hear from her next week.
There are some additional bits of information we would appreciate information on.
- My mom's dad (my gpa) just died last month. He had a small life insurance policy; my mom is set to receive ~15k. What should we do with this money given the above situation? Can we refuse to take it until a later date? Is it outside of the marital assets and not subject to any divorce or separation agreements?
- It is my (very limited) understanding that at the age of 62, my mom would be eligible to take half of my dad's SS benefit, or approx. $1200 a month. Am I about on track here? One of the divorce lawyers I mentioned this to was completely oblivious to this information - she kept thinking that my mention of "half of his SS" meant that we would get it in the divorce proceedings; I eventually told her to please forget I ever mentioned it.
- My mom plans to return to work as soon as my dad is settled somewhere (she's currently spending 6-14 hours a day with him at the VA hospital because she feels guilty).
I know this is a lot of information. We're looking for any advise or resources (elder / divorce lawyers in the PDX area? ), advise on which of the 3 options would seem best, both for preserving money for dad and mom as well as the highest chance of retaining medicaid eligibility, advise on the last couple of extra points I mentioned.
If any clarification is necessary, please let me know!