People think that if you’re going into a nursing home, you’re just going to lose it all and there’s nothing you can do. That’s absolutely not true!
The truth is that for a married couple, when one spouse is going into long-term nursing home care while the other is staying home in the community, I can help you save almost everything that you have left (subject to just the cost of implementing the plan). For a single, unmarried person going into a nursing home, I can typically help you save about half of what you still have.
An elder law attorney is the only participant in the system who can help you with proactive, affirmative, creative planning strategies to protect your assets. Here are the details.
If you need expensive long-term care at any level, there are really only three ways to pay for it.
- Paying for yourself on a self-pay, private pay basis in the “spend down” mode;
- Private long-term care insurance, if you had the foresight and opportunity to buy it; or
- Public benefits, primarily Medicaid.
Long-term care happens in several different settings or levels of care. To start, you may need long-term care while still at home. The next level is “assisted living” or a personal care home facility, which offers assistance with activities of daily living. The highest level is (catastrophically expensive) long-term care in a nursing home. The statewide average cost is now $12,869.59 per month or almost $155,000 per year!
When do Medicare or Medicaid pay for your long-term care? Medicare, of course, pays for doctors and hospitals and drug plans, and short-term, temporary care when first admitted to a nursing home or long-term care facility. Neither pays for care in a personal care home nor “assisted living.”
Catastrophically expensive nursing home care can wipe away a lifetime’s worth of work and savings pretty quickly. Medicaid benefits can be a lifeline for other family members to survive. Without the right planning techniques, you have to spend almost all of your money before Medicaid starts to pay anything for you.
To be eligible for long-term care Medicaid in a nursing home, you have to apply and qualify several different ways: first as medically needy, or “nursing facility clinically eligible.” Next, you can’t have too much income (usually not a factor, except when we artificially temporarily elevate somebody’s income in a planning strategy). You can’t have excess assets (that’s usually both one of the big problems, but also a planning opportunity). And you can’t have made significant gifts in the five years before applying.
When one spouse of a married couple is going into a nursing home, we often protect as much money as possible by shifting value to the “community spouse,” the one staying at home and not going into the care facility. We first need to transform the nature and character of those assets, under Medicaid’s rules. We use something called a Medicaid Qualified Spousal Immediate Annuity to do so, by converting assets into income for the stay-at-home spouse (a little too complicated to explain in detail here), and by calculating the optimal amounts to incorporate into the planning transactions.
For a single, unmarried person needing costly long-term care in a nursing home, I can usually help you save about half of whatever is left at that time with the right planning strategies, using planned, strategic gifting, and a related kind of Medicaid Qualified Immediate Annuity. (Better to save half than having to spend almost all!)
Other strategic asset protection avenues are sometimes available in specific situations, such as: to benefit a disabled person; or a “Caregiver Child” who lived with and cared for an ill parent; or caregivers under a written compensation agreement; or siblings who own a home together.
Note that there’s a broad, ongoing shift toward care and benefits to pay for care at home instead of in an institution. However, some of the same strategies we use to protect assets for inpatient nursing home Medicaid benefits are not effective for asset protection for home care situations. Also, a common Revocable Trust or so-called “Living Trust” is not an effective asset protection planning strategy, but a more complex and sophisticated Irrevocable Asset Protection Trust can be appropriate.
Older partners who are not married often need to evaluate these factors and others in deciding if they will marry or not. There are both pros and cons of marriage related to the cost of care and estate planning. Also, Medicare-paid hospice care in any setting can be a viable end-of-life option.
One misconception is that you have to have your plans arranged and that you can’t ever make gifts within five years before needing Medicaid. The bottom line is that for anyone headed toward expensive long-term care, getting the right advice is crucial and it’s never too late – or too early – to plan.