Since Medicaid planning moved from legal services to the private practice of law approximately four decades ago, some individuals and commentators have questioned the ethics of taking steps to protect assets so they don’t have to be spent down on long-term care costs.
Kwame Anthony Appiah, the New York University philosophy professor who writes the Ethicist column in The New York Times recently addressed this issue. He responded to the following question from a woman who said she and her husband have no children:
Between property we own and our retirement savings, our net worth is over $1 million. We are debating estate planning, especially creating a trust to ensure Medicaid eligibility in the event we need long-term care. This is very common where we live. I feel, however, that this is morally wrong, placing the burden of my care on taxpayers to save my assets. My husband feels if it can be done legally, he would be remiss in not ensuring our future. What do you think?
In his response, Professor Appiah explains the five-year penalty period for transferring assets to a Medicaid asset protection trust and the fact that the trust has to be irrevocable and unavailable to couple. He points out that “[t]hese are specific policy decisions that legislators make; the point is that the estate planning your husband is contemplating is commonplace and accounted for in the way the system is funding.”
In fact, he comments, the ethical failure here is not seniors engaging in Medicaid planning but the failure of our government to provide long-term care for Americans without their first having to spend down to poverty levels:
The real scandal here is that you evidently have reason to worry about not being able to afford health care in old age, long-term care being a notable gap in Medicare coverage. In a decent society, preparing for the routine infirmities of age shouldn’t require extraordinary measures.
I agree with Professor Appiah (or else I would not have been practicing elder law for close to 40 years), but I would add a few comments.
Practical Considerations As Well As Ethics
First, while I don’t think the fact that the woman who wrote in and her husband have no children changes the ethics of long-term care planning, it does affect the practical considerations. Given that as Professor Appiah explains that the standard method of planning is to set funds or property aside in a trust to which the grantor or grantors have no access, this makes less sense if they have no children. They likely have less interest in saving their estate for the next generation and have more need for access to the resources since they will not be able to rely on their children.
Second, even those seniors with children and grandchildren rarely protect all their assets in Medicaid asset protection trusts. Most if not all of our clients seek a middle ground, not that Medicaid (MassHealth in Massachusetts) cover all their health and long-term care costs, but that they preserve some of their savings and investments and their homes to be able to pass on to their children and grandchildren. This is both because they do want to pay their “fair share” and due to the Medicaid rules. To transfer all of their assets could leave them high and dry when they need funds to pay for anything, whether for their care, vacations, house repairs or a new car. Our clients often take steps to protect their homes, which are not so liquid in any case, and assume they will use their savings and investments for their care if need be.
Third, the Medicaid rules provide significant protections to spouses of nursing home residents or of individuals who need extensive care at home. They often can take steps to protect their assets when and if a need for long-term care arises and do not need to take steps in advance. As Professor Appiah states, the policies that provide for this have been thought through by Congress and the state legislatures and regulators.
Fourth, while it’s more risky for “solo agers,” those with no family members to rely on, to protect assets in irrevocable trusts, doing so involves some risk for anyone. Having to rely on Medicaid to pay for care can limit one’s options. In fact, some seniors are forced to move into nursing homes because they cannot afford to pay for home care for which Medicaid coverage can be limited. Most would prefer to have funds available to pay for care at home.
Finally, many commentators have compared Medicaid planning to tax planning. While it’s unethical to cheat the tax authorities, few question the ethics of taking standard measures to reduce income or estate taxes. Those at the other end of the income and wealth spectrum should also be able to take legal measures to protect their assets.
What do you think?