Life planning for the elderly population is far different than it is for younger generations. Often times, one must plan for the possibility of needing long term health care assistance. Sometimes this may include an eventual stay in nursing care. Because Medicare has such limited benefits available to help with nursing care, families are most often forced to spend the assets of the patient on care and then apply for Medicaid benefits.
Several times each month, people come to me because it is time to place a parent in nursing care and ask what they can do short of impoverishing the parent by draining all assets to pay for care. Under Medicaid rules, a person may only have $2,000.00 in assets to be eligible for nursing care. This rule forces a patient to sell all of his assets, including his home, and spend all of his money down to $2,000.00 before applying for Medicaid assistance. While there are tools available to provide the patient with some added benefits while in nursing care, the best way to protect yourself or your parents from this situation is proper advanced planning.
The Medicaid “look back” period is 5 years, so the proper time to create a life plan, including a possible nursing home stay, is 5 years before the anticipated stay. Of course, none of us know when this will be. According to the American Health Care Association, 1.6 million people live in nursing homes. The average age of entry is 79, and women are three times more likely to live in nursing care as men (this statistic coincides with the likelihood that a woman will outlive her spouse and the longer lifespan of women).
Because we cannot predict when we will need nursing care, I recommend that all clients over the age of 70 have a life plan that includes a plan for possible nursing home care.
A person may transfer assets 5 years prior to a nursing home stay without penalty. However, this must be done with caution. If the person goes into nursing care during the 5 year period after the transfer, the property or asset may need to be transferred back, or the proceeds from the sale provided for the person’s nursing care. Further, the tax ramifications of such a transfer must be considered.
A person may transfer assets to another, who can use them to establish a trust for the person’s care. However, the same 5 year transfer rule applies and such trusts must be set up carefully so the assets are not available to the person for Medicaid purposes.
A married couple should have an estate plan that involves provisions for property to be held in trust for the institutionalized spouse and then pass to children without a Medicaid lien, should one spouse enter nursing care during the marriage.
Long term care planning should also consider all possible uses of assets, so the individual can stay in the home, or in the lowest level of care, as long as possible.
When creating a life plan to include a potential nursing home stay or other long term health care possibility, an individual’s situation must be very carefully reviewed by the professional helping with the plan. It is very important that all planning is done with the sole purpose of protecting the assets of the individual for his best possible care.