One of the most important strategies: Medicaid planning

Medicaid is a federal-state program that can ease much of the cost burden of a nursing home, but getting onto it requires careful planning. There are caps on income and assets that determine eligibility. Strategic Medicaid planning involves ensuring your assets are set out in such a way that you can still qualify for benefits without losing all of your savings. For example, it could be transferring assets to a spouse; it can also mean establishing irrevocable trusts; or spend down the assets on qualifying purchases2.

The Importance of Long-Term Care Insurance

Lastly, you can think about long-term care insurance. This insurance may pay for care provided in a nursing home, home care, and personal or adult day care for individuals over age 65 or for disabled individuals. Polices, however, differ widely in coverage limits, exceptions, and premiums. You should be extra cautious when assessing policies and also purchase the coverage long prior to it becomes necessary; usually this is another self-facing factor, as the costs spikes considerably with age and life complications3.

Creating Trusts for Asset Protection

Trusts can serve as a strong shield against nursing home costs. A living trust, whether revocable or not, does allow you to move assets out of your estate, decreasing the number of countable assets that would root out your Medicaid eligibility. As a rule of thumb, once assets are placed in a trust that cannot be changed, they are shielded from nursing home bills as long as the transfer occurred outside of the Medicaid preceding five- year period4.

Life Estates and the Transfer of Property

A life estate may also be used to save your home from nursing home costs. One method may involve executing a deed that transfers the remainder interest (ownership after your death) in your home to your children, but allows you to retain a right to live there for the rest of your life; if done correctly, this could result in the home not being included in consideration for Medicaid. Such a strategy does take careful planning and legal advice to align with Medicaid regimens and to avoid unintended tax consequences 5.

Gifting as a Strategy

Giving away assets to family members is a simple strategy, but it needs to be done carefully because of Medicaid's five-year look-back period. Gifts made in this window will trigger a penalty and a hold-up of your Medicaid application. Avoid negative effects6 by timing properly try to get an understanding of how the rules are work.

Final Thoughts

Planning ahead is the key to dealing with the complexities of nursing home costs. Through legal approaches like medicaid planning, long-term care insurance, trusts, life estates and careful gifting you can protect your assets and obtain care. You can work with an elder law attorney to customize these strategies to your particular situation, while making sure you follow the laws that apply in your state to maximize your protection of your assets.

References

• Genworth Cost of Care Survey
• Elder Law Answers - Protecting Assets from Nursing Home Costs
• Consumer Reports - Affording Long-Term Care Without Insurance
• The Balance - Irrevocable Trusts and Medicaid Planning
• Nolo - Life Estate Deeds
• Elder Law Answers - How Gifts Affect Medicaid Eligibility