When One Partner Plans for LTC — and the Other Doesn’t

Devastating, unforeseen financial and emotional strains can result. All the more reason advisors should raise these issues with clients.

By Marguerita Cheng
Marguerita Cheng
Marguerita Cheng

As a CFP® professional, your clients typically come to you because they want to plan for their futures. But what happens if one partner wants to plan and the other doesn’t? What if a couple has different financial situations and one needs long-term care? Who will take care of them?

These are challenging scenarios to navigate, but here are a few guideposts to help you on the way.

Paying for the partner who didn’t plan

What happens if the partner who didn’t plan for long-term care winds up needing it? The partner who planned ends up burdened with the financial and physical needs of the partner who didn’t. This is a recipe for a relationship breakdown, among other things.

A married couple may need to spend down assets to qualify for Medicaid. Similarly, an unmarried, cohabitating couple may need to spend down one partner’s assets. In each case, what may conserve assets and solve some of these issues is if the healthy partner is willing to take on some of the caretaking cost and labor. On the other hand, the physical and financial strain could lead to the relationship ending.

Spouses and partners should address who will take responsibility for the “what if” scenarios when either needs long-term care. They might need to use legal documents like trusts, wills, or prenuptial agreements to proactively address these scenarios.

Who ends up paying for living expenses if the partner without long-term care insurance needs care? That person loses the ability to live independently. Consequently, someone else will have to foot the bill for their care — it might be the other partner, children, parents, or Medicaid.

Partners may or may not have the financial reserves to cover the costs, but that does not address the issue of whether they want to. Likewise, a lack of planning leads to placing undue financial burdens on children and robs them of their future planning ability.

If an individual needs care and is lucky enough to still have their parents living, they could consider asking them for help. While parents might feel obligated to help, they can put themselves in the position of depleting their own reserves to cover long-term care.

Medicaid may be an option, but people qualify only when they have less than $2,000 in assets ($3,000 for a couple). Among other things, assets include retirement accounts, annuities and life-insurance cash value. The person needing long-term care must become financially destitute. With a couple, the spouse not needing care becomes destitute by default. And the government might later charge the estate or earmark life insurance proceeds to reimburse itself.

Breaking up the relationship fraught with peril

Is it common for a couple to go their separate ways if one has long-term care insurance and one doesn’t? Couples separating over whether they have long-term care insurance is fraught with peril.

One of the first questions is whether the partner with long-term care insurance is willing or able to take on caregiver duties. If the burden is too significant, or the partner with insurance feels resentful, it can bring the relationship to a rapid end.

Second, if the couple is married, one partner may be trapped, guilted, or coerced into caring for the other, even if they have no desire to be a caretaker. Breaking up may be very complicated, particularly if they have been married for a long time and have no prenup.

Third, before either one needs long-term care, a married couple that wants to maintain an intimate relationship might find legally splitting up to be an advantage. If they divide the assets or ask the court for a qualified domestic relations order (QDRO) designating more assets to the spouse with LTC insurance, they may risk losing less if one of them must qualify for Medicaid. Of course, a financial advisor would need to refer them to an attorney to see if this is an option.

On the whole, it’s a delicate situation, and critical to discuss whether a couple should split up. Furthermore, it puts the financial advisor in the awkward position of being a relationship therapist. Therefore, if clients ask questions about whether their relationship should continue, consider referring them to a psychologist who addresses financial stress and an estate-planning attorney.

Strain on children who provide support

If a parent doesn’t plan for long-term care and becomes ill or disabled, many families move their loved ones into their homes or another family member’s home. This decision often puts a strain on the relationship between the parent and child because:

● The child may not want their parent living with them permanently.
● The child may feel guilty, overwhelmed, or resentful about taking on the care responsibility for their parent.
● The child may worry about losing their own savings or income if they are responsible for their parent’s care.

Unfortunately, it is common for parents to move in with their grown children because they didn’t plan for possible long-term care situations. Sometimes, the children are able to help, but often they aren’t.

Again, this emotional and financial conversation may require additional professional resources like a psychologist.

Prenups provide the best protection

Are there any documents that help ensure the partner who did plan and save doesn’t get taken advantage of?

Prenuptial agreements are valuable documents in these types of situations. An experienced divorce attorney can draft a prenup to address many potential scenarios affecting the relationship’s continuation, including a lack of planning on one partner’s part. In addition, every couple should have a prenup to set up the boundaries, expectations, and unacceptable scenarios within the marriage.

An estate attorney can set up a standard set of documents like a living will, healthcare and durable power of attorneys, and advance directives. However, a prenup is far more effective at protecting a partner from being financially exploited.

Better to be unmarried, or married?

Married couples have significantly more legal rights than unmarried couples, particularly for tax benefits, estate liability, making healthcare decisions, and determining what happens to property.

The government all but ignores unmarried couples. But when it comes to Medicaid, this could be an advantage. In all states, even if an unmarried couple lives together and shares expenses, Medicaid looks at their finances individually.

Suppose an unmarried partner with Alzheimer’s Disease must qualify for Medicaid to move into an assisted living facility or nursing home. However, their healthy partner owns a house. Since they are not legally married, Medicaid won’t consider the value of the house in determining whether the applicant qualifies.

This raises the question: Is it better not to get married if one partner hasn’t planned for long-term care and other expensive potential needs? It depends on the client’s situation whether the benefits of marriage outweigh the benefits of remaining single.

However, when dealing with long-term care needs and Medicaid, it’s often more advantageous to remain unmarried to protect the other partner.

Advisors should protect their practice by working closely with an estate attorney to resolve similar situations.

Adult children from previous marriages

How could a partner’s children from previous marriages come into play? If one or both partners have children from previous marriages, they should discuss how the children could be involved in their long-term care plan.

On the one hand, the children could be a source of support to their parent and stepparent. If the child is an adult or close to the parents, they may be willing to help with daily tasks like getting dressed or bathing.

Still, children from previous marriages may resent being asked by their newlywed mother or father for help with caregiving duties. In addition, children may have advised their parents to plan for long-term care so the children would not have that burden. At any rate, children are not as likely to help care for a stepparent as they would for their biological mother or father.

Alternatively, children may feel they’re being asked favors when they want time alone with their parents. This can lead some couples down a path towards conflict — which is something neither party wants under any circumstances!

Takeaways for your clients to consider

Help your clients picture what it would be like to live in a nursing home and how their lives might change. Then ask them to imagine the difference in care if their long-term care insurance paid for it versus Medicaid. Then, hopefully, they get the picture that Medicaid’s accommodations would be minimalist, depressing, and possibly inadequate.

Ask married and unmarried couples to think through the consequences of not planning for long-term care and whether marriage makes legal and financial sense now or in the future. Discuss what eventualities happen if either partner is not physically or financially capable of caring for the other. In addition, if they are considering marriage, a prenup is the best way to deal with these types of potential financial conflicts before they arise.

Finally, ask them to engage in these conversations with their children and other people in their lives who could become caretakers. Children should have an opportunity to discuss concerns about whether they would be capable of contributing to their care.

Marguerita (Rita) Cheng, CFP, is the chief executive officer of Blue Ocean Global Wealth. She is passionate about helping clients navigate some of life’s most difficult issues — divorce, death, career changes, caring for aging relatives — so they can feel confident and in control of their finances. Rita is a regular columnist for Kiplinger and MarketWatch, and a past spokesperson for the AARP Financial Freedom Campaign. Rita volunteers her time as a SoleMate, or charity runner for Girls on the Run, raising money to win scholarships for girls.

Latest news

Commonwealth Attracts Another Holistic Firm

An advisory firm with nearly $384 million in assets under management has left Lincoln Investment to join Commonwealth Financial Network.

Intermediaries Seek More Female Financial Professionals

More than 4 in 10 have or plan to establish programs to support and recruit more women, Limra research shows.

The SEC’s Problem with Crypto ETFs

Asset managers are lining up to list a second wave of crypto ETFs, but SEC Chair Gary Gensler remains a crypto critic.

More Retirees are ‘Unretiring,’ Survey Reveals

Advisors say near-retirees and retirees are much less prepared for retirement than they think they are, according to Allspring.

Advisors Dabbling in DC Market Seek Greater Support: Cerulli

Providing them with tools, education and guidance would help them grow their retirement-plan businesses, says Cerulli Associates.

Executives Traveling on Corporate Jets Face IRS Scrutiny

Do you have executive clients who might be using a corporate jet for personal use? Tell them the IRS has announced a crackdown.