Having to make decisions that involve putting your loved ones in a nursing home is difficult enough, it is even worse when you consider the cost and have not prepared a strategy that protects assets that you do not have to spend on quality nursing home care. Like all families around the country, those of you here in Dayton, Ohio struggle with the same concerns, including how to cover nursing home costs that average $5,000 per month or even more. You may not be aware of the laws regarding assets, insurance, Medicaid, and strategies for long-term care planning so that you do not have to have a lifetime of savings wiped out just because extra care is needed for a loved one.
The Concerns with Nursing Homes and Assets
In thinking ahead about potential concerns that arise with nursing home care and the costs associated with it, there are a number of questions to consider:
- What happens to the spouse remaining at home?
- What assets can be kept?
- Who can be involved in the planning and who cannot participate?
- What documents should we have?
- When it is appropriate to make gifts?
- What are the tax consequences to making gifts?
- How much can I give away in a gift?
- Who should make the gifts? Who cannot make gifts?
- How should all members of the family be treated?
- Can a trust be useful?
With so much to think about and the fact that not many have the insurance plans in place to cover nursing home costs, you can see why it makes sense to start planning in advance, especially when you do not know when you may need the assistance of a nursing home. None of us want to think about not being able to care for ourselves or loved ones, but the more you plan, the better it is for your assets and the loved ones that should get those assets.
The Role of Medicaid
Medicaid does cover nursing home costs and, with careful planning, you can leverage these benefits while keeping your precious assets. Medicaid is a federal-state program that was designed to provide health insurance coverage and nursing home care to those who cannot afford to pay for it. Many in the middle class bracket end up paying out of pocket until they cannot afford long-term care anymore and then qualify for Medicaid to pick up the rest. That typically means having no more than $2,000 in assets. Assets considered noncountable and not subject to Medicaid restrictions include personal possessions, one vehicle, prepaid funeral arrangements, and a small amount of life insurance.
Medicaid does provide some protection for spouses to ensure that they have enough assets to constitute some support while their spouse receives long-term benefits in a nursing home. Known as the community spouse resource allowance (CSRA), the community spouse can keep approximately one-half of the total countable assets, which generally is adjusted each year by the federal government. The figures for 2015 are a minimum community allowance of $23,844 and a maximum of $119,220. For example, if a couple has $100,000 in countable assets and one spouse has to go into nursing home care, they will only be eligible for Medicaid once the assets have been reduced to $52,000, which takes into account $2,000 for the Medicaid applicant and $50,000 for the community spouse.
One way around having to spend half the assets is to transfer assets to your children or some other beneficiary, such as your house. However, this action could result in a Medicaid penalty period. The exception is if the house is transferred to a caretaker child who has lived in the house for at least two years and provided care that would postpone the need for a nursing home. The house also may be transferred without penalty to a spouse, a child under the age of 21 who is blind or disabled, into a trust for the sole benefit of a disabled individual, or a sibling who has lived in the home for a year prior to nursing home admission.
Planning in advance is required because the federal government does not want you recently transferring assets simply to qualify for Medicaid. The penalty period is calculated by dividing the amount of assets that you may have transferred by what Medicaid determines is the average cost of nursing home in your state. If the monthly cost is $5,000 and you decided to give away $100,000 in assets, then you cannot receive Medicaid benefits for 20 months. The larger the amount of assets you try to transfer, the longer the period of ineligibility for Medicaid. You will be asked to disclose all financial transactions you have made during a “look-back period” as part of applying for Medicaid, which is typically 60 months. Five years is a long time and difficult to know when you or a loved one may require nursing care assistance, especially when health can deteriorate very quickly.
Other Planning Strategies to Protect Assets from Nursing Home Costs
There are ways to preserve your assets within your estate for your heirs while still complying with all Medicaid asset limitations plus not risk transferring assets to others that may lose those assets. The safest planning strategy is an irrevocable trust, which puts the control over assets in the hands of a trustee and one that cannot be changed after it was created.
While the trust income will have to go to a nursing home should you require that level of care, the trust does protect a certain amount of principal so that it will be there for your heirs rather than to be used up to fund the long-term care. For Medicaid purposes, the principal is not counted as an asset against you in order to receive those benefits.
Testamentary trusts come with a special safe harbor that provides a benefit for a surviving spouse from a deceased spouse. If the trust comes with the caveat that any payments from the trust can only be made by the trustee’s discretion, then the assets are considered unavailable and cannot be counted against the Medicaid applicant as available assets. This is a good strategy to use to leave funds for a surviving spouse that may need to be put in a nursing home in order to cover any services not allowed by Medicaid, such as therapy, equipment, legal fees, family member visits, and specialist evaluations. During the lifetime of the community spouse, these assets in a trust are considered as available assets.
Legal Assistance for Medicaid and Nursing Home Care
George Lovett has spoken and written about numerous issues associated with Medicaid and nursing home planning issues. The attorneys at Lovett & House Co., LPA have the experience to address the broad range of concerns explained within this article many of which you may be facing here in Dayton, Ohio.
If you or a loved one may need the care of a nursing home or an assisted living facility in Dayton, Ohio, our legal team can help you plan effectively to ensure you retain your assets for your family rather than handing it all over to the care facility. For more information about Medicaid and Nursing Home Planning, read the other articles that have been written by our nursing home planning attorneys. Contact us for an initial free consultation so we can learn more about your individual situation and determine the best approach for your needs.