How to protect assets from nursing home expenses

It is important to protect money from nursing home costs because if you do not take steps to ensure assets are safe, a nursing home can result in crippling financial loss. A nursing home costs thousands of dollars every single month and it is not covered by Medicare or by most private insurance providers except in very limited circumstances such as when skilled nursing care is required. In the vast majority of cases where custodial care is needed — which means help is needed for routine activities of daily living — Medicare and private insurance policies provide no coverage at all. How to protect assets from nursing home expenses

You should be aware of the limitations of Medicare coverage if your parents are getting older. If your parents do not have an asset protection plan in place, they could end up in a situation where they end up spending their entire life savings on the costs of a nursing home. This could jeopardize their financial security and any legacy that they want to leave behind. Mark S. Eghrari & Associates, PLLC can provide assistance in making certain that your parents have taken steps to protect money from nursing home costs and can work with your family to develop a comprehensive plan in case nursing home care becomes necessary. To find out more about how our firm can help, give us a call today.

How to Protect Money from Nursing Home Costs

The best way to protect money from nursing home costs is to make a Medicaid plan. This involves structuring the ownership of your wealth so it does not count as financial resources for purposes of qualifying for means-tested Medicaid coverage. The reason this approach is a good one is because Medicaid covers the costs of nursing home care but Medicare does not provide this type of coverage. Medicaid, however, will not pay for you to get care unless you have limited financial resources because Medicaid benefits are available only to people with demonstrated financial need.

If you don’t make a Medicaid plan, you may have to impoverish yourself before you fall below Medicaid asset limits and Medicaid starts to pick up the tab for your nursing care. If you do make a Medicaid plan, then you can get Medicaid to cover you right away because the assets that you have protected won’t count when your eligibility for Medicaid is determined. Mark S. Eghrari & Associates, PLLC can assist with creating a customized asset protection plan by working with you to create and fund an asset protection trust.

If your parents are starting to get older, you should talk with them about whether they have this type of trust in place. If they have not made a plan to cover nursing home care, you should encourage them to. By working with your parents to put a plan in place, you can help them to keep their wealth safe and you can avoid having to make difficult decisions about what nursing home is right for them if the time comes when they need care.

Getting Help from a Nursing Home Planning Attorney

Mark S. Eghrari & Associates, PLLC will work with your family at any stage in the nursing home planning process. We can help if you and your parents are making advanced plans to get your care in a nursing home covered and we can provide assistance with crisis planning if your parents require nursing home care imminently and you do not already have plans in place to protect wealth. The sooner you take action, the more assets you can protect — but we can assist even in situations where you need care now and want to preserve as much of your parent’s wealth as possible.

To find out more about how our legal team can assist you with all of the legal issues related to nursing home planning and nursing home care, join us for a free seminar. You can also give us a call at (631) 265-0599 or contact us online to get personalized advice specific to your situation.

Helping seniors preserve health and financial security for themselves and their loved ones.

Saturday, September 25, 2010

Can the Nursing Home Take my Mother’s Home

A nursing home can’t “go after” a person’s home or other assets. The way it works is that when a person goes into a nursing home they have to pay for the cost of their care. Most private insurance (except special long term care insurance) have limited or no nursing home benefits. Medicare has very limited nursing home benefits.

So, your mother would need to find some way to pay for the cost of her care. Most people in nursing homes eventually qualify for assistance from the Government Medicaid program to help pay for the care they need. But Medicaid requires that a person only have limited assets before it will pay for care. This means that a nursing home resident has to “spend down” their available income and assets before Medicaid will pay for their nursing home costs.

However, there are a number of assets that are excluded from spend down under Medicaid rules. One of them is a home of modest value. Medicaid will disregard the nursing home resident’s primary residence as long as the home owner (or someone acting on their behalf) says that they intend to return home if that ever becomes possible. This means that, in most cases, a nursing home resident can keep their residence and still qualify for Medicaid to pay the nursing home expenses. The nursing home doesn’t (and cannot) take the home.

Note that special rules apply if the Medicaid applicant owns a home that is worth more than $500,000.

So, Medicaid would pay for your mother’s nursing home care even though she owns the home, as long as the home isn’t worth more than $500,000. It is protected during her lifetime. This likely means that your sister could continue to reside in the home during your mother’s lifetime. However, there is a program called Medicaid Estate Recovery that could put the home in jeopardy after your mother’s death, to the extent she received Medicaid benefits during life.

Your mother and sister may be able to avoid Medicaid Estate recovery in several ways. For example, since your sister has been caring for your mother, she may qualify as a “caregiver child.” If she does, your mother could transfer an interest in the home to your sister that would protect the home no matter what happens to your mother.

Are You Ready for
retirement’s biggest risk?

Your home isn’t just the biggest thing you own. It’s where love grows and memories live. But nursing home costs, which can be your biggest post-retirement risk, are often more than $10,000 a month. That expense can put your home and other assets in jeopardy. Asset Protection Planning integrates customized tools that can keep you from losing what you’ve worked so hard to build. Let AlerStallings help you plan for tomorrow, today. Schedule a free consultation.

Years of Experience.
Thousands Served.

A lot of firms like to sell wills and fill in boilerplate forms. But that’s not enough to protect your assets. We know because estate planning and elder law is all we do, and we do it with heart.

For more than 10 years, we’ve helped thousands of Ohio families like yours protect their future by considering any and all implications. And we’ve helped ensure they stay protected with lifetime support, on us. Rely on AlerStallings to do the same for you.

How to protect assets from nursing home expenses

Focus on Living, not on Worrying.

Life can get complicated. Having the right plan means that if a difficult situation occurs, you can focus on your family, not your finances.

Asset Protection Planning from AlerStallings offers:

Relief

that a Nursing Home or long-term care stay won’t break the bank

Confidence

that you’ll get more in IRA distributions and pay less in taxes

Comfort

that comes with knowing your estate won’t end up in Probate

Knowledge

that if you need a Trust, you’ll have one that meets your needs

Pride

that you’ve protected the Farm your family worked so hard to build

Certainty

that if someone needs to speak for you, the right person has the Power

Assurance

that your Retirement plan secures your, and your family’s, future

Committed to You
Today and Tomorrow

When you build a plan with AlerStallings, we don’t shove it in a dusty safe when you leave.

We plan yearly, complimentary meetings to review where you are, what you have, and what you may need. Our Asset Protection Planning services include:

IRA Protection

Be ready to put more money in your pocket and pay less toward taxes

Nursing Home Protection

Keep your assets from being wiped out by the high costs of long-term care

Powers of Attorney

Give a trusted person the ability to make decisions for you if you can’t

Probate Protection

Help your family avoid the probate process, saving them time, stress, and money

Trust Planning

Decide if you need a tool to hold and distribute certain assets

Farm Protection

Make plans now to protect your family farm for future generations

Retirement Planning

Update plans to keep assets safe from the costs of long-term care, probate, and taxes

Find Out What Others Think

It always helps to hear from people walking in similar shoes. Here are a few comments from Ohioans who have worked with AlerStallings.

“The Elder Law attorneys at AlerStallings made a scary process easy to understand. Our wishes were respected throughout the entire process.”

-Robert and Deborah Schmidt, Tiffin OH

” We would challenge anyone to find a more comprehensive firm in the practice of Elder Law. ”

-Emerson and Joanne Lake, Middlesburg Heights OH

” With AlerStallings you’re getting top-notch attorneys that are there for your family’s best interest, not theirs.”

-Don Brown, Piqua OH

” There was none of the arrogance you get with a lot of law firms. It was just a great experience.”

-Hal Ackley, West Liberty OH

“The Elder Law attorneys at AlerStallings made a scary process easy to understand. Our wishes were respected throughout the entire process.”

-Robert and Deborah Schmidt, Tiffin OH

” We would challenge anyone to find a more comprehensive firm in the practice of Elder Law. ”

-Emerson and Joanne Lake, Middlesburg Heights OH

” With AlerStallings you’re getting top-notch attorneys that are there for your family’s best interest, not theirs.”

-Don Brown, Piqua OH

” There was none of the arrogance you get with a lot of law firms. It was just a great experience.”

-Hal Ackley, West Liberty OH

Start with Heart

We put you and your family first. That means we listen and get to know you. We tell you what everything will cost up front. And we won’t charge you every time we talk on the phone. Plus, we’ll give you lifetime support, on us. So you get planning and protection for life

Still Have Questions?

It’s not uncommon to have questions or want to know more.

Here are a few of the questions your family, friends and neighbors may have asked us.

What assets are subject to probate costs? +

Any assets owned and titled in the name of the decedent at death will probably need to be probated. So be careful and plan ahead because that includes all assets passing via your Will too.

What happens if you die with no planning? +

Ohio intestacy laws dictate where your assets go. Not you, not your spouse and not your heirs. Don’t leave it up to Ohio, make sure you have a plan.

What is the difference between revocable and irrevocable trusts? +

A revocable trust can be revoked as long as those who granted the trust are of sound mind. Revocable trusts allow your assets to avoid the probate process, which is often a big financial burden on your estate. A Revocable trust provides more control over how distributions are made

An irrevocable trust cannot be revoked, so the document will continue to exist for as long as the terms of the trust dictate. This trust cannot be terminated prematurely. With careful drafting, an irrevocable trust can meet your goal (asset protection, tax planning) and allow flexibility in customization. When used properly, irrevocable trusts can be used to protect your assets from Long-Term Care.

I do not want to impoverish my spouse in the event that I need long-term care. Can I protect my assets for my spouse? +

Yes, there are several ways to protect your assets from rising long-term care costs. However, protecting your assets for your spouse or otherwise, requires a thorough analysis and a customized, strategic plan based on goals and current circumstances.

This article was co-authored by Jonathan DeYoe, CPWA®, AIF®. Jonathan DeYoe is a Financial Advisor and the CEO of Mindful Money, a comprehensive financial planning and retirement income planning service based in Berkeley, California. With over 25 years of financial advising experience, Jonathan is a speaker and the best-selling author of “Mindful Money: Simple Practices for Reaching Your Financial Goals and Increasing Your Happiness Dividend.” Jonathan holds a BA in Philosophy and Religious Studies from Montana State University-Bozeman. He studied Financial Analysis at the CFA Institute and earned his Certified Private Wealth Advisor (CPWA®) designation from The Investments & Wealth Institute. He also earned his Accredited Investment Fiduciary (AIF®) credential from Fi360. Jonathan has been featured in the New York Times, the Wall Street Journal, Money Tips, Mindful Magazine, and Business Insider among others.

There are 9 references cited in this article, which can be found at the bottom of the page.

This article has been viewed 200,464 times.

The Department of Health and Human Services reported that by 2010 nearly 10 million Americans required long-term care. It is expected that 70% of people turning 65 will need long-term care at some point in their lives and that many of these people will require care from a long-term care facility or nursing home. It is never too early to begin planning for how you will pay for care, protect your assets and qualify for Medicaid.

Long-term care can quickly eat up a lifetime’s worth of savings, but there are ways to minimize the impact.

by Michelle Kaminsky, Esq.
updated April 06, 2021 · 4 min read

About 1.4 million Americans reside in nursing homes, and the Center for Disease Control and Prevention projects that the number of people using various long-term care services will increase from 15 million in 2000 to 27 million in 2050. The costs for a private room in a nursing care facility average $7,698 per month—over $92,000 a year—and that’s a lot of money changing hands for nursing home care.

If you don’t have your finances set up properly ahead of time, you could see your financial resources dwindle quickly. Since no one knows when they might suddenly require long-term care, the best time to start preparing for the possibility is now.

When considering how best to protect your assets from nursing home costs, you must think about how Medicaid eligibility could affect your plans.

How to protect assets from nursing home expenses

The Role of Medicaid

The government-run Medicaid program steps in to cover nursing home costs for low-income individuals, but it is the “payer of last resort.” Eligibility is income-based and, by the time your income qualifies you for these benefits, your assets could be depleted. When you’ve reached that point, you may realize that you’ve used up your loved ones’ inheritances or even be without financial security for yourself if you end up moving out of the nursing home or other facility.

After a Medicaid recipient dies, in a process called “estate recovery,” the government attempts to recover the benefits it had paid out for nursing home care from the decedent’s estate. Through proper estate planning, you can minimize the effects of this process on your loved one’s inheritances.

When considering how best to protect your assets from Medicaid costs, you must understand its “look-back” provisions, which allow the government to examine asset transfers for a period of five years before the Medicaid application. If a transfer was not exempt, you may become ineligible for Medicaid for a penalty period.

Still, there are some ways you may be able to protect your assets from nursing home costs. That said, here are some of the most common methods:

Gift Money Away

Some assets are exempt, which means you can transfer them to others as gifts for little or no compensation without penalty—namely, household goods, personal effects, certain prepaid funeral expenses, and income-producing property, and in some cases, your home and retirement accounts.

Note that, with gifts, there may be gift tax ramifications.

Establish Irrevocable Trusts

An irrevocable trust allows you to avoid giving away or spending your assets in order to qualify for Medicaid. Assets placed in an irrevocable trust are no longer legally yours, and you must name an independent trustee. You may choose to designate that the trust assets to pass to your spouse and/or other loved ones after your death. You cannot control the trust’s principal, although you may use the assets in the trust during your lifetime.

If the family home is an asset in the irrevocable trust and is sold while the Medicaid recipient is alive and in a nursing home, the proceeds will not count as a resource toward Medicaid eligibility.

When created for the purpose of protecting assets from being used for nursing home or other long-term care costs, the term “Medicaid trust” may be used to describe this type of irrevocable trust.

Compare this with a revocable (or living) trust, which offers no asset protection for Medicaid purposes, because the government considers the assets in a revocable trust to still be your property.

A big caveat here is that even an irrevocable trust is subject to the Medicaid five-year look-back period.

Form a Life Estate

With your family home, you may choose to create a life estate so that you keep the right to live in the home until your death as a “life tenant.” At your death, the property transfers to your chosen loved one. Through a life estate, you remain in control of the property until your death, at which point the person or people with the “remainder interest” take possession.

Again, however, this type of transfer is subject to the Medicaid five-year look-back period, and often even more concerning is that if the property is sold while the Medicaid recipient is still alive, the proceeds of the sale count toward Medicaid eligibility requirements.

An overall reminder: With all property transfers, you should also keep an eye on any and all potential tax consequences, including those related to gift, estate, and capital gains taxes.

While shielding all your assets from paying for nursing home costs probably won’t be possible, you can protect at least some of your property through smart estate planning now. One of the biggest challenges related to long-term care needs is that you rarely get to know in advance what services you—or a loved one—will require, or for how long you’ll need to fund them. Because the Medicaid five-year look-back period can put a rather large kink in your plans, the sooner you start planning, the better.

How to protect assets from nursing home expenses

This is an actual question I encountered. To protect privacy I’ll omit any names and change the facts just slightly. The questioner was 67 years old and in fairly good health. Their Florida home was worth $500,000, with approximately $200,000 owed on the mortgage.

I’ll start by mentioning that this is likely the number one concern of all people who consult with me about an elder law or Medicaid planning issue. В People come to me concerned about their parent or spouse, who has recently hadВ stroke or other health malady that now requires them to be in a skilled nursing facility. When they realize that Medicare does not have a significant long-term care benefit, it is daunting to find out that long-term care can costs six figures a year. Many people then naturally ask: how am I going to be able to afford this nursing home?

Should I just give the house to my children?

No! This will do much more harm than good.

After some internet google research, some folks realize that they need Medicaid assistance to afford the nursing home and think that the best course of action is just to start giving assets away to qualify for Medicaid. Medicaid understands that people will try to make themselves look poorer than they really are by giving their house away or gifting large amounts of cash to their loved ones. To combat this, Medicaid instituted a five-year look back period.If they find gifts (transfers of value for less than fair-market value), they will impose a penalty period.

Should I sell the house to my children?

In some circumstances this will be an option. Although its unnecessary in this fact pattern. In Florida, houses valued at $560,000 (as of January, 2017) can be exempt from being counted as a resource in the eyes of Medicaid if the applicant has an “intent to return home”. So, here, since the house is only worth $500,000, the Medicaid applicant will not need to sell their house in order to qualify for Medicaid. In fact, Medicaid only looks at the equity in the home – since the house has a$200,000 mortgage on it, Medicaid essentially only looks at the house as a$300,000 asset (still below the $560,000 limit).

In fact, paying off a mortgage is a very productive and valuable spend down strategy. If someone has $300,000 of equity in a house worth $500,000, they can then take $200,000 worth of cash and pay off their mortgage!

But if the house was over the $560K limit, an option would be to sell the house to the children (remember, if an asset is sold for fair-market value, it is not a Medicaid “gift” subject to the Medicaid penalty period) and then shelter the money using a number of Medicaid-planning strategies (personal services contract, special needs trust, spend down, etc..). Another option would be for the homeowner to obtain a reverse mortgage (essentially pulling equity out of the home) and then sheltering the excess cash.

Too many non-lawyers attempt amateur Medicaid planning – and they often get themselves or a loved one in trouble because they do not understand the Medicaid laws – sometimes unintentionally engaging in Medicaid fraud. This can cost significant amounts of money. Elder law attorneys who engage in Medicaid planning can save their elder law clients hundreds of thousands of dollars fora very reasonable fee. Don’t be, as they say, “penny-wise and pound-foolish.”Pay a lawyer to do this correctly the first time.

How to Shelter Assets from Nursing Home Care Costs

As a society, we live longer than we did in the recent past, and living longer can result in increased costs as we age. In 2018, average annual costs for a private room in a nursing home exceeded $100,000. Although this number varies geographically, it’s a substantial amount.

How to protect assets from nursing home expenses

If you want to avoid being surprised by rising nursing home care costs and have the ability to pay for your care, you can take action today.

1. Plan ahead.

As with most things in life, planning is crucial. You may not want to think about having to live in a nursing home, but if you tackle these hard decisions now, you can plan for it and make yourself more comfortable later in life. Planning now can also help reduce the financial and emotional burden on your loved ones.

Medicaid covers nursing home care for people with low incomes. Even if you wouldn’t normally fall into the low-income category, there are ways to shelter your assets and increase your chances of eligibility for nursing home care coverage.

2. Set up a trust.

A key component to proper planning is setting up a trust; in the case of nursing home costs, you want to set up a living trust. It is illegal to hide money from the government, but a living trust helps you shelter your money and assets so you don’t have to spend as much, or any, out of pocket.

A living trust provides the security you need: you can maintain control over your finances but remove your assets from your name. When the government looks at your ability to pay for nursing home costs, they’ll find little or none because everything resides in the living trust.

3. Consider an annuity.

Some states do not consider annuity payments when looking at eligibility. By transferring some of your assets into an annuity, you can increase your chances of qualifying for Medicaid without having to take the next step of spending down your assets.

4. Spend your money.

A final option for sheltering money is to spend it. That might sound counter-intuitive, but it’s actually a solution that requires forethought and planning.

When the government looks at your ability to pay for nursing home costs, any assets you transfer during the five years before going to a nursing home count toward your ability to pay. Medicaid refers to this as the look-back period.

It’s important to start your spending early enough. Spending your assets in a calculated, planned manner is preferable to spending frivolously. Gifting money and assets to your family members throughout your life helps you spend down your financial holdings in preparation for the Medicaid look-back period.

When gifting money, it’s important that you do not gift more than the tax-free annual limit, which, for 2018, is $15,000 to each individual. If you gift more than $15,000 to any individual, you owe taxes on the full amount.

These are just a few of the ways you can prepare for increasingly high nursing home costs. Whatever path you choose, start planning today. By being proactive, you can ensure your loved ones don’t bear the burden.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

Nursing home costs can quickly destroy a lifetime of savings. Attorney Jeff Molever pioneered a trail in Minnesota when he developed the “Family Pot Trust.” The Family Pot Trust is one of a number of t ools and techniques to protect assets from long-term care costs.

Table of Contents

New Solutions for New Problems

Estate planning has changed significantly to respond to today’s changes in the law, health care, nursing home costs, technology, and society.

For example, in the 1950s, households usually had one person earning an income and another person building a home. That meant someone was available to check in on the elderly members of the family and help with care. These days, nursing homes are big business. People are living longer, and costs are going up.

Increasing Long-Term Care Costs

Long-term care costs continue to increase. The median price for a private room in a nursing home each year has continued to increase: $96,021 in 2015, $97,032 in 2016, and $107,854 in 2017. Other types of care, like assisted living and in-home care, show similar trends.

Industry experts agree that these costs will continue to increase as the Baby Boomer generation puts greater demands on long-term care institutions.

Why Medicaid Laws are Confusing

Medicaid is a joint federal and state program. The Medicaid program in Minnesota is called “Medical Assistance.” Laws confusing for many reasons:

First, federal Medicaid law continues to evolve. Second, Medicaid law has exemptions, exceptions, and even exceptions to the exceptions. Third, federal rules and regulations continue to change. Fourth, every state has their own laws regarding their state Medicaid programs. For example, nursing home asset protection techniques that are legal in other states are prohibited in Minnesota—and vice versa.

It’s no wonder people find Medicaid law so confusing.

Asset Limitations

In Minnesota, a single person can only qualify for medical assistance if their total non-exempt countable assets are under $3000. For a couple, this limit is $6000. Without separate planning, applicants for Medical Assistance will typically have to spend down their entire estate prior to qualifying.

Tools and Techniques

While every client’s circumstances are different, my experience has been that most clients can protect at least half of their assets from nursing home costs. This is typically done through a variety of planning techniques. The techniques include the Family Pot Trust, Medicaid protection trusts, Medicaid compliant annuities, maximizing Medicaid exemptions, gifts to family members, and more.

Time is of the essence

When attempting to become eligible for Medical Assistance, the MA Office has a look-back period of 60 months, where most gifts will still be viewed as part of your countable assets. Some exceptions apply, and it is important to speak to an elder law attorney to explore all your options.

Exemptions

In Minnesota, an elder law attorney can assist in maximizing exemptions. Minnesota exempts the following assets:

  • Home (up to $572,000 in equity as of January 1, 2018), but the State of Minnesota will put a lien on your home equity in the amount of the services used
  • A motor vehicle (regardless of value) if it is used for transportation of the recipient or a member of the recipient’s household
  • Household goods and inexpensive personal belongings
  • Prepaid burial spaces and burial space items
  • Burial funds (up to $1,500 each for the recipient and the recipient’s spouse), prepaid funeral trusts ($2,000), and life insurance or annuity-funded burial arrangements under contract
  • Capital and operating assets of a business necessary to earn an income
  • If married and only one spouse requires Medical Assistance, the other spouse (Community Spouse) can keep assets up to

$123,400, as of January 1, 2018.

Unlike some other states, Minnesota does not exempt retirement accounts like an IRA or 401(k).

Exceptions

It often seems like every Medicaid rule has at least one exception. This article provides general guidance, but this is not an area that can be handled without an elder law attorney. In fact, many estate planning attorneys avoid nursing home asset protection because of the complexity learning about Medicaid laws and staying current on all the changes.

What can you protect?

If you know someone in a nursing home, who has not met with an elder law attorney, there is often still time to protect assets. My firm provides complimentary consultations for a person in a nursing home or their lawfully authorized representative/agent.

The sooner you plan ahead, the more you can protect. The costs for nursing home asset protection plans depend on the circumstances. Asset protection isn’t cheap, so as a general rule, it only makes sense when you are protecting at least $50,000 in assets. This legal work is complex and time-consuming.

How to protect assets from nursing home expenses

Aaron Hall
Business Attorney
Minneapolis, Minnesota
[email protected]