Power Finance Q&A

View the Power Finance Q&A to read answers by Shannon Nash to other’s financial questions.

Question 1

Name: Shannon
City, State: Aurora, CO

Hi Shannon,
My name is Shannon as well. Nice to meet you. My situation is really complicated, my life is a reality, not a fairytale. I had a job as a Customer Service Representative, I was a role model, team leader, until my dreams were shattered. I had a stroke and now I am homeless. I’m fighting for full custody for my kids, but since I had a stroke, it’s been very difficult. Here are my questions:

    1. Is there any compensation in the form of money, government benefits, and/or housing grants for disabilities for a stroke?
    2. Do I need a will or a trust since I had an illness or brain injury?
    3. How much money do I need to reserve to plan for a major illness of myself, family, kids, friends?
    4. Are there any differences in insurance coverage for stroke rehabilitation such as speech therapy and occupational therapy if they are not covered by Medicaid?

Response

Hi Shannon. Nice to meet another Shannon. Yes, you have a pretty complicated situation. I will try and answer as much as I can and hopefully get you some helpful options.

1. Is there any compensation in the form of money, government benefits, and/or housing grants for disabilities for a stroke?

Yes, there are Social Security Disability benefits available for stroke victims. Generally you will be eligible for this if you worked long enough and paid Social Security Taxes. You may also be eligible for Social Security Income (SSI). SSI is payable to disabled adults who have limited income and resources.

For more information about applying for these benefits visit the Social Security Administration’s website at http://www.ssa.gov/d&s1.htm.

2. Do I need a will or a trust since I had an illness or brain injury?

A Will is a legal document that allows you to decide how your assets get distributed after you die (such as the family Bible, car, etc. ). You can also determine who will get custody of your children.

A Trust is a document that puts all of your assets in a vehicle for the benefit of your beneficiaries. Thus, a Trust establishes how your assets will be distributed immediately upon your death (without going through the state probate process). But, a Trust does not cover who will be the personal guardian of your children – that is done in a Will.

Thus, if you have children or assets that you care about (meaning they are valuable to you but not necessarily that they are worth a lot of money), you should at least set-up a Will because without one, these decisions will be left to the discretion of your state.

Generally, people set-up a Trust when there are assets that they wish to protect. In this case, it doesn’t sound like there are many assets that you are concerned about, but assuming that there are you could set up a trust known as a special needs trust – meant to cover those with a disability. There are many rules around setting up these types of trusts, including a Medicaid rule that would actually still consider any assets you put in this trust as part of your “assets” for purposes of qualifying for Medicaid for 5 years from the date that you transfer them to the trust (called the 5-year look back rule). Thus, to set something like this up you should work with an expert (financial expert and trust attorney).

3. How much money do I need to reserve to plan for a major illness of myself, family, kids, friends?

In this economy, experts are recommending at least 6 to 9 months as an emergency fund. But this amount could be much more depending on things like your lifestyle, family responsibilities, severity of the major illness etc. What is important here is that you get in the habit of setting aside funds (no matter how small) every month. This habit will get you will on your way to saving an emergency fund.

4. Are there any differences in insurance coverage for stroke rehabilitation such as speech therapy and occupational therapy if they are not covered by Medicaid?

A Medigap policy is health insurance sold by private insurance companies to fill in the gaps that Medicare doesn’t cover. Also, there are supplemental policies that cover critical illnesses, including stokes. Many of these policies can be used to help with living expenses while you are unable to work. They also can be used to cover costs related to rehabilitation and nursing home costs. For more information see https://www.medicare.gov/.

But your ability to actually get such a policy is in flux given the current state of the new healthcare legislation. Prior to 2010, it would’ve been very difficult to get this type of insurance given your pre-existing condition. However, the new healthcare law in 2010 (Health Care and Education Reconciliation Act of 2010) will likely change some of these rules over the next couple of years. However, although these pending changes may allow you to be covered under such policies, the associated costs with getting this coverage may be prohibitive. We will have to wait and see.

Question 2

Name: Debbie
City, State: Glendale, AZ
My mother had a debilitating stroke last year. She refuses to sign a Power of Attorney. I am on her checking account. If she sells me her house, will that protect it from liquidation in case a nursing home is needed? She is currently on Medicare with supplemental Blue Cross Health Insurance.

Response

Your concern about your mother’s house is one shared by many who are concerned about losing the family’s greatest asset to cover a loved ones medical expenses.

Unfortunately, without the Power of Attorney, you will have to go to court to force your mother to in essence allow you to make this decision. In most states this would be a competency hearing and yes, you would basically be declaring that your mother is incompetent to make this decision due to her current state. If awarded you would be give conservatorship (guardianship in some states) over your mothers assets – you could decide what to do with them. I suggest that you tread lightly here. In addition to the family drama this may cause for you, the expense (hiring an attorney) and time involved may take a toll on you.

In addition, even if you are successful in getting the power of attorney, if your mother is looking to Medicaid to cover her long-term care, the value of the house may still be looked at. That’s because there is a 5-year look-back rule under Medicaid that may include the value of the house in her total assets for purposes of calculating her Medicaid eligibility.

It may be too late for your situation but for others reading this, one way to avoid this scenario is to look into a qualified Long Term Care policy before your loved one suffers a stroke (or other major illness).

Question 3

Name: Margaret
City, State: New Orleans, LA

I am the caretaker for my fiancé who suffered a moderate stroke in August, 2009. He had been and still is under severe credit card debt and is constantly worrying about how he will pay off these bills along with mounting medical bills since the stroke. He’s considered bankruptcy but has been advised to only do that as a very last resort. He is not working for now and on long term disability and awaiting a decision on social security disability. He has a home but is not the full owner as his mother still has half ownership of the house. Are there any suggestions or ideas that you can pass along to us to relieve this debt and worry?

Response

Bankruptcy is definitely a last resort option for him. It’s generally used to help avoid foreclosures, garnishments, etc. and can stay on your credit report for up to 10 years. It will not get rid of taxes, student loans, child support, or alimony and is not a good way to try and clean up your credit report (i.e., getting rid of too many credit cards). This will have the most negative impact on his credit and life and it’s not clear that he has reached this point.

You fiancé should consider working with a credit counselor. Credit counseling is a repayment plan whereby the counselors help negotiate new terms with your creditors. You will create a debt management plan based on your individual needs and your creditors. The counselor then work out the details with your creditors. This will take you out of the communication loop, and alleviate those collection agency calls. In short, credit counseling will help you restructure your existing debts and hopefully allow you to sleep better at night.

This is different than some of the Debt Consolidation companies where you take all of your debts and try and consolidate them into one debt (or in some cases one payment to the debt consolidation agency). In essence, you are taking out a new loan. Many of these debt consolidations (sometime operated by non-profit organizations) can result in you paying higher interest rates for this single loan, paying on debts that had in effect been closed and even paying multiple fees. Also, unlike with credit cards, which are unsecured loans (i.e., you miss a payment and it’s a ding on your credit report but you don’t lose any property), many of these loans are secured, meaning that if you miss your consolidated loan payment, you risk actually losing everything, including your house. In short, make sure you understand what you are getting in to if you go the debt consolidation route.

For more on credit counseling, make sure your work with a professional someone who belongs to National Foundation For Credit Counseling (www.nfcc.org). Also, check to make sure that they are accredited by the Council on Accreditation (www.coanet.org). Finally, he can start the dialogue himself with his credit card companies by going to www.helpwithmycredit.org. This is a site that is sponsored by the credit card companies and provides information and phone numbers to reach debt management counselors with you specific credit card company.

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