For millions of elder Americans, a temporary or permanent stay in a nursing home is a real possibility. The expenses associated with receiving care in a nursing home, however, can prove financially disastrous for the patient's family. For example, Medicaid programs seek to recoup the amount the program spent on nursing home care from the patient or -- if the patient dies -- from her estate. Spousal impoverishment laws prevent seizure of all liquid assets, and the patient's home remains exempt from seizure if a spouse or dependent still lives there. You can take steps to protect your assets from this outcome.
Qualifying for Medicaid, a necessity for most people facing a stay in a nursing home, requires falling below a certain financial threshold set by the individual state. The program determines eligibility by dividing your assets into exempt and countable categories. Personal property and furnishings typically fall into the exempt category, while cash, retirement accounts and stocks fall into the countable category. By converting countable assets into exempt assets -- for example, by selling off stocks and upgrading all the appliances in your home or purchasing jewelry for your spouse -- you benefit from the assets and come closer to meeting requirements.
Pay Down Debt
Paying down debt lets you reduce your countable assets and helps protect your spouse. For example, you might cash in bonds to pay off a mortgage early and pay off all your credit card debt or prepay high-cost expenses ahead of time, such as taxes. This strategy gets countable assets off the books and lets you position your family to have fewer concerns.
An irrevocable trust places assets under the control of a third party, other than your spouse. As you no longer control the assets, they no longer fall into the countable assets category, but complex rules govern the relationship between assets held in a revocable trust and Medicaid's assessment of them. Transfer of assets can lead to Medicaid disqualification periods, and assets over which the trustee maintains discretion often become countable assets. Given the complexities, you should minimally seek professional legal and financial advice before transferring any asset into an irrevocable trust.
Invest in Long-Term Care Insurance
Another option that helps you avoid the qualification and asset issues of dealing with Medicaid is purchasing your own long-term care insurance. Individual insurance companies offer policies that strictly cover nursing home costs, and some cover medical equipment and assisted living as well. The costs of long-term care policies are rising, though, and insurance companies intend to continue that premium hike through at least 2017, according to a March 2014 article in "The New York Times."
- AgingCare: Can Medicaid Take Mom’s House to Pay the Nursing Home?
- Medicare.gov: How Can I Pay for Nursing Home Care?
- Durham, Jones & Pinegar: How to Protect Your Assets From Rising Nursing Home Costs
- Marshall, Parker & Weber, LLC: Three Ways to Protect Your Assets from Nursing Home Costs
- The Karp Law Firm: Medicaid Planning -– Irrevocable Trust for Asset Protection
- Nolo: Are Revocable or Irrevocable Living Trusts Useful in Qualifying for Medicaid
- The New York Times: Premiums Rise for Long-Term Care Insurance -- Keep It or Drop It?