Can I Protect My Assets in a Nursing Home?

The cost of nursing home care has escalated sharply in recent years; and the growing population of seniors requiring long-term care will soon place additional economic burdens on families and spouses.  Few people realize that Medicare covers only short-term stays at nursing facilities, and that Medicaid provides the lion’s share of government money for residential treatment.  Medicaid enforces strict eligibility guidelines, and individuals receiving this assistance must have very limited assets to qualify.  How, then, can you prevent nursing home costs from depleting your financial resources? Are there ways to structure your assets in order to prevent Medicaid from including them in your eligibility determination?elderly

To qualify for Medicaid coverage for long-term residential care, an individual can possess no more than $2,500 in allowable assets.  Medicaid excludes certain personal possessions from this calculation, such as a car, jewelry, and furniture.  Married couples have more flexibility.  The spouse of a nursing home resident can keep their income, and one half of their joint assets.  Everything else, however, must go to the nursing home before Medicaid will take over payments, and state and federal laws have made it increasingly difficult for people to get around the strict minimum asset requirement.

If your estate plan envisions the possibility of nursing home care, you should protect your assets early.  Federal law imposes a penalty for the transference of assets to family members or a trust within the five-year period before applying for Medicaid.  The punishment for dumping assets within this time frame consists of having a longer wait-period for Medicaid eligibility, usually about one month per about every $5,000 that was transferred.  The drawback to entrusting assets to family members before the five-year waiting period, of course, is that they may not hold the money for your benefit but spend it themselves! You may want to consider placing funds in an irrevocable trust.  While you won’t have access to the principal, you can at least draw the interest payments. You will have to set up the trust at least five years before you think you might be applying for Medicaid; otherwise, your eligibility will be put on hold.

You might also consider paying into a long-term care insurance plan.  While the premiums can be high, the amount of annual coverage can reach up to $200,000.  Different policies might cover at-home care, nursing home residency, a 24-hour nurse, etc.  Some insurance companies impose heavy restrictions on what they consider legitimate causes of coverage.  Dementia may not qualify you for coverage under some plans.  Be sure to read the fine print before signing.

Your estate planning attorney will have up-to-date information about the best ways to structure assets to avoid overpaying for nursing home costs.  Medicaid law is complex and constantly changing.    

Attorney Maureen Higham’s primary areas of practice are bankruptcy, probate, wills and trusts, family law, real estate and corporate formations. Attorney Higham has more than 20 years of experience in the legal field.

Articles contained here are not intended to provide legal advice, only providing general information. We encourage individuals to consult with an attorney regarding individual circumstances.