Under a Personal Services Contract, payment can be to your children at a later date.

Attorney Tom Olsen: When you do a personal service contract under normal circumstances, what you're paying your child to take care of you going forward in the future, you pay them at that moment in time that you sign this personal services contract. Here was a client that, they didn't know any better, that a year ago, they gave away $100,000, which would disqualify them from Medicaid and nursing homes and yes, you can go back and undo their mistake within personal services contract at this moment in time.

Attorney Robert Hidock: We can. Most people don't know that but yes, there's not a situation that we really can't work around to get somebody qualified for Medicaid.

Attorney Tom Olsen: All right, that's one situation of using a personal services contract in and hindsight. Then the other one that we want to make people aware of is that when you are doing a personal services contract, and this is a Medicaid compliant tool, how much you can pay the children to for future care of Mom or Dad has something to do with how old Mom or Dad is, there's an actuarial table that the Medicaid would use to tell us how long we might expect Mom or Dad to live. It might be seven years, it might be 20 years.

Attorney Robert Hidock: Correct. Medicaid, it's a different life expectancy table than let's say the IRS, but it's Medicaid, its own life expectancy table. We really are working with making everything actuarially sound. if somebody is 90 years old, or 92 years old, they don't have as many years to live, they can't, in theory, pass as much money. Which brings us up to a personal services contract that I was just working on today, As matter of fact, where the client, the woman is a little bit over 90, and she's got about $400,000 and her husband died, and she wants to make sure that her children are taken care of but she knows he doesn't want to go to a nursing home.

We're going to execute a personal services contract divided in two. Both of her sons will get an equal share. However, we're going to sign the contract, lock in life expectancy but the money doesn't actually have to be transferred until she's getting ready to go into a nursing home but everything will be done. It's about the most advanced pre-planning that you can do. We don't always recommend a personal services contract with someone to do it in advance, but when you're dealing with someone at that age and life expectancy is low, and there's a large sum of money, the sooner we can act on it, the more assets we can protect.

Attorney Tom Olsen: The key about doing a personal services contract is that there's a payment to the children to take care of Mom or Dad. Normally that payment is made at the time the personal services contract is signed but if Mom or Dad mistakenly or inadvertently or didn't know any better gave money to a child a year ago, we can undo that problem by doing a personal services contract today. What you're specifically speaking of is that Mom can do a personal services contract today at 90 where she agrees to pay the kids $400,000 for her care but that money doesn't have to be paid until if and when the time comes she goes into a nursing home.

Attorney Robert Hidock: Correct. She could give them the money now but it doesn't have to be paid until the Medicaid application goes in.

Attorney Tom Olsen: The reason to do it now is that right now under the actuarial tables, the Medicaid would say she's going to live long enough that a $400,000 payment is reasonable. If she waited till she was 95, at that moment in time, she might only be able to pass 150,000.

Attorney Robert Hidock: Exactly, and the rest of the money is exposed and then she would have to private pay and spend that all the way down.

Attorney Tom Olsen: Get you. The point about doing a personal services contract is the younger you are when you sign the thing, the more of your wealth you can protect from Medicaid and nursing home, and it doesn't necessarily mean that you have to pay that money right now. It just means you've locked in the amount.

Attorney Robert Hidock: Precisely.

Attorney Tom Olsen: Exactly and by the way, are you locking it in using a promissory note? Is that how you do that?

Attorney Robert Hidock: It's all incorporated into a personal services contract.

Tom: Well, I find that quite brilliant, folks. A lot of people, again, Robert, we know this, they know that a nursing home is expensive, $8,000 to $10,000 a month. They know that Medicaid has got a five-year look back period where you just can't give your money away and qualify for Medicaid and they just say, "Oh, well, nothing I can do," throw up our hands, and yet we know that there's Medicaid compliant tools that are available to us for almost all situations.