The Morality of Benefits Planning

Every now and then, we run across people who doubt or question the “morality” of engaging in legal and financial planning directed toward establishing eligibility for Medicaid or VA pension benefits to help pay for long-term care costs. Maybe you’ve heard that, too, or maybe you’ve even felt that way yourself.

We think the discussion should properly begin with a consideration of the circumstances that might cause someone to consider engaging in such planning. In that regard, it’s instructive to make a couple of comparisons.

First, consider two individuals, both in their early 80s, who up until then have led very similar lives. Both have worked hard, paid their taxes, and managed, through good habits of thrift, to accumulate a reasonable life savings of around $300,000. Both are devoted parents and grandparents, who would rather do without things themselves so that they will always have money to help their children and grandchildren when they may need it. Both have a strong desire to leave an inheritance for those children and grandchildren.

Then one of those individuals gets cancer or has heart problems, and will need to spend a lot of time in hospitals and doctor’s offices. As a result, she will need $600,000 worth of medical care. The other individual develops Alzheimer’s disease. Not much is available to her by way of medical treatment, but she will need nursing home care that will come at a $400,000 lifetime cost. Our laws say to the first person, “No problem, you certainly should not lose your life savings as a result of having suffered that type of medical misfortune. That’s what Medicare is there for.” But they say to the second person, “Unfortunately, your body chose the wrong disease. Sorry, but Medicare does not pay for the nursing home care you need. You’re on your own. Come back when you run out of money, and then Medicaid will help.”

It seems to us that, when it comes to paying for the care they need, the distinction between those two people is entirely legal. No rational moral distinction can be made between them. It’s just that the second one has been called upon to confront a situation that, unless she does something to keep it from happening, will mean that her lifetime of hard work and savings will have gone for naught when it comes to being able to leave an inheritance for her loved ones, not to mention that, after her life savings have been exhausted, she will be forced to live on a grossly inadequate monthly income allowance and end up having to be partly subsidized by them.

Now let’s compare that second individual to a third one who, while also in his early 80s, has led a very different life up until then. He did his best, throughout his adult life, to avoid hard work. He was fired from several jobs because, frankly, he was lazy and didn’t do a good job. As a result, he didn’t save up a lot of money, and whatever money he did have from time to time he spent right away, because he was just the sort of guy who liked to live for the moment.

And now, like the second individual, he develops Alzheimer’s disease and needs nursing home care. Our laws say to him, “No problem, good buddy. Since you’re already broke, Medicaid will immediately pay for all of the nursing home care you need.”

Again, when it comes to paying for the care they need, the distinction between the second and third individuals is strictly legal, not moral. If the distinction were drawn on a moral basis, can we really say that the third individual is somehow more deserving of help?

Once we accept and understand that the distinctions among those three individuals, when it comes to paying for the care they need, are legal and not moral, the question of the second one engaging in planning directed toward protecting some of her life savings is much differently framed. If she is burdened by laws that will force her to exhaust her life savings to pay for the care she will need, should she not be morally entitled to take advantage of whatever opportunities exist, within those laws, to try to protect some of her hard-earned life savings from being lost?

When we file our income tax returns each year and claim the deductions and credits that the tax laws entitle us to claim, it is very unlikely that we or others will question the morality of our doing so. Yes, we certainly have a responsibility to our governments and fellow citizens, as good citizens and taxpayers, to discharge our responsibilities within the law. If we cheat on our taxes, we deserve to face legal consequences and moral blame. That’s certainly also true of someone who tries to illegally “hide assets” to qualify for benefits. But as long as we act within the law, we have lived up to our responsibilities, both legal and moral.

Whatever moral responsibility we may have as citizens and taxpayers, we have a stronger and greater one that long predates any tax laws or government benefits programs. Our most fundamental moral responsibility is to protect and provide for our families, as well as we can and the best we know how. Any senior faced with astronomical long-term care costs who engages in planning, within the laws, to protect part of his or her life savings from financial devastation is simply choosing to live up to that greater moral responsibility. For that, he or she should be commended and admired, not criticized or morally condemned. And so we take pride, not shame, in helping people with that planning.

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Dent-Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Dent-Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (877)995-6876 or Contact Us and we will get in touch as soon as possible.