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How to Protect Assets from Nursing Homes

How to Protect Your Assets from Nursing Homes

One strategy for protecting assets from a nursing home is utilizing a trust to protect assets from a nursing home. Here’s how an irrevocable house trust works:

This is sometimes referred to as a Medi-Cal trust or Medicaid trust. This is the trust to protect assets from a nursing home. The home is placed into an irrevocable house trust. The future Medi-Cal recipient can use the house as before. Since the house is held by the trust instead of the recipient the government does not count it for qualification purposes.

So, the person can still live in the house, use the furniture and drive the car held by the trust. The person will not hear “your assets are too valuable to qualify for the program.” because the house will not be in the person’s name. In addition, there generally are provisions in the trust so that the children and grandchildren, etc. can receive the house after the person passes.

Use of Assets to Pay off Debts and Expenses

The “well” spouse can reduce demands on the assets he or she is allowed to keep under Medi-Cal spousal impoverishment rules. When applying for Medi-Cal, it is important to pay bills prior to receiving benefits so the well spouse can reduce demands on the assets he or she is allowed to keep. A couple can to pay off current debts, prepay real estate tax, insurance and some other large bills as well as prepay funeral expenses.

Example: Tom and Sally Smith have a house and $40,000 of savings in the bank when Tom enters a nursing home for a long term stay. The Medi-Cal spousal impoverishment rules let Sally keep $20,000 as her protected allowance and Tom is permitted to retain $2,000. They have $20,000 in excess resources that prevent Tom from being eligible for Medi-Cal.

After Tom’s admission to the nursing home, Sally spends the $20,000 excess by paying off the mortgage on the couple’s home, some credit card debt, and by making an advance payment of real estate taxes. Because Sally now has only $20,000 and Tom has only $2,000 left, Tom is eligible for Medi-Cal.

Excellent Answers for Protecting Assets From a Nursing Home

What is the Cost of a Nursing Home?

Protecting assets from nursing home costs is the goal for everyone.

The costs can easily be around $8000/month. Some elderly seniors pay $180,000 although many individuals stay much longer which can dramatically increase the cost.

Protecting assets from a nursing home may be accomplished with proper planning utilizing an elder law attorney. Many people wonder “can a nursing home take your house?”

Does Medicare pay for nursing home costs?

The answer is No. Medicare does pay for some limited benefits that are only for skilled nursing care. As the cost of long term care can be very high, it is vital to have an estate plan to protect assets from a nursing home.

I am concerned about protecting assets from nursing home costs and want to know if there is a government program that will pay for nursing home costs.

The government program that pays for most nursing home care is Medi-Cal in California (also known as Medicaid in other states.) Some veterans may qualify for veterans benefits to pay for nursing home care.

Applying for Medicaid or Medi-Cal will not necessarily protect assets from a nursing home. A Medicaid applicant has to declare all of their assets and Medicaid recipients in assisted living facilities cannot have assets beyond a certain dollar amount.

What Can I Do to prevent becoming poor due to the high cost of nursing home care?

Usually for a person who is not facing a long stay in a nursing home it is not advisable to give away assets.

How to protect assets if a spouse goes into a nursing home? Can they transfer all assets to me and qualify for Medi-Cal?

Typically, the answer is no. It is necessary to implement the proper plan when protecting assets from nursing home costs. When determining the eligibility of the spouse going into the nursing home who will be receiving Medi-Cal, all nonexempt assets owned by the husband or wife are added together and the total is equally divided between spouses. The half for the spouse entering the nursing home, that spouse may not receive Medi-Cal until his or her share of the assets is reduced to two thousand dollars.

The spouse that is not in the nursing home can keep half of the otherwise non-excludible assets, up to a maximum amount of approximately $100,000 plus the home including personal property, auto, burial and other miscellaneous assets.

When protecting assets from nursing home costs how much income can I make and still qualify for Medi-Cal?

An individual over sixty-four with a net income of less than about $2200 per month can qualify. One with over $2000 may also qualify depending on their nursing home costs. Income must be paid to the nursing home.

A spouse of a person who is eligible for Medi-Cal is entitled to a monthly income not to exceed approximately $2960 per month.

How to Protect Parents’ Assets from Nursing Homes

Protecting your parents’ assets from nursing home costs is a concern many families face. With proper planning and a clear understanding of the rules and regulations, families can ensure their parents’ financial legacy remains intact. Here’s a step-by-step guide to help safeguard your parents’ assets:

  1. Understand the “Look-Back” Period: Medicaid has a five-year look-back period. It reviews any assets transferred or sold below market value during this period to determine eligibility. Transferring assets right before entering a nursing home might lead to penalties or disqualification from Medicaid benefits for a certain duration.
  2. Irrevocable Trusts: By placing assets into an irrevocable trust, your parents can ensure that these assets are not counted as part of their net worth when determining Medicaid eligibility. It’s crucial to set this trust up well before considering nursing home care because of the aforementioned look-back period.
  3. Gifts and Asset Transfers: Begin transferring assets early. Gifting money or assets to grandchildren or other family members for education or buying a home can reduce your parents’ net worth. However, remember the look-back rule, so plan accordingly.
  4. Purchasing Annuities: Some annuities can turn countable assets into a stream of income, which might help in meeting Medicaid’s asset limit.
  5. Long-Term Care Insurance: Encourage your parents to purchase long-term care insurance, which can cover a significant portion of their nursing home costs, preserving their assets.
  6. Protecting the Primary Residence: Medicaid often exempts the primary residence up to a certain value. It’s possible to protect a home by transferring its title to a child who has lived in the house for at least two years and provided care, preventing the parent from going to a nursing home.
  7. Spend-Down Strategies: If your parents have too many assets to qualify for Medicaid, consider a spend-down strategy. This can include spending money on necessary and permissible items like home modifications, medical equipment, and prepaid funeral expenses.
  8. Legal Marriage Arrangements: Spousal refusal or annulment can be an extreme step, but it can separate a couple’s financial assets, potentially allowing one spouse to qualify for Medicaid without depleting all their shared resources.
  9. Consult an Elder Law Attorney: Regulations and rules differ from state to state, and the complexities of Medicaid can be challenging to navigate. An elder law attorney can guide you through the process, ensuring all steps taken are legal and beneficial.
  10. Stay Informed: Laws, regulations, and policies change. Stay updated with the latest in elder care law and Medicaid rules to ensure your parents’ assets are always protected.

Remember, early planning is the key. It’s easier to protect your parents’ assets with foresight than to make last-minute decisions, which may not offer the same level of protection.

Additional Facts about Protecting Assets from Nursing Home Costs.

Nursing homes offer a solution for seniors including those who are disabled and cannot sufficiently care for themselves. This type of care can be expensive. A typical cost range for a nursing home stay is about $60,000 to 80,000 per year. A lot of people mistakenly think Medicare will pay for their nursing home costs.

Unfortunately, Medicare does not pay for this type of long-term care. Medi-Cal, may cover nursing home care, however you must meet the strict qualifications requirements and not all individuals can qualify. Protecting assets from nursing home Medi-Cal recovery may be possible by utilizing an elder law attorney to properly prepare a strategy and implement necessary documents or court procedures.

Do you need a trust to protect assets from a nursing home? Each case is unique however a trust is a popular document that many times is part of the elder law attorney strategy.

Does an irrevocable trust protect assets from a nursing home?

Families have been using a trust to protect assets from a nursing home. The Asset Protection Trust, an irrevocable trust also called a house trust can protect their home and savings from being consumed by the cost of nursing home care. It is different than a revocable living trust.

Three notes of interest:

  1. One spouse has the legal responsibility for the other spouse’s nursing home costs which means the income of both spouses are considered when the spouse in the nursing home applies for Medi-Cal nursing home benefits.
  2. When a married couple has over $20,000 in countable assets, a portion of those assets are at risk from the nursing home spouse’s nursing home expenses.
  3. Having a prenuptial agreement mentioning the well spouse does not have to pay for the nursing home care of the sick spouse is not enforceable when submitting a Medi-Cal application.

Can a Nursing Home Take Your House?

The goal is to legally shelter assets and avoid using them to pay for the high cost of the nursing home. Here’s how to avoid a nursing home taking your house:

A person’s home for many is the most valuable possession. People have heard if you need nursing home care and run out of money, the nursing home will take your house away.

When a person enters a nursing home they must have the means to pay for the cost of their care. Most seniors have Medicare which provides limited nursing home benefits and only for those who need skilled care. Most other health insurance policies, except for specific long-term care insurance, do not have coverage for nursing home care.

When entering a nursing home, you will need to find a way to pay for all costs of your care. The cost is much more than most individuals can afford for long.

The majority of people in nursing homes qualify for assistance from the government Medi-Cal program for payment of care. Medi-Cal will cover a long term stay in a skilled nursing facility. The Medi-Cal requirement states that a person have limited income and assets before it will begin to pay for care. So, a nursing home resident must spend down their income and assets for Medi-Cal to help pay for the nursing home costs.

Some assets, which Medi-Cal calls resources, are excluded from spend down under Medi-Cal rules. One asset is a home of modest value. Med-Cal will disregard the nursing home resident’s primary residence as long as the home owner or their agent says that they intend to return home if that situation ever arises.

It does not matter if there is no realistic chance the resident will ever be able to return home. It is the intent, not reality that protects the home.

In most cases, the nursing home resident may keep their residence and qualify for Medi-Cal to pay their nursing home expenses. So, to address the question “Can a nursing home take your house?”, the nursing home does not take the house however, without proper planning the equity of the home could be jeopardized, and funds lost. In some cases, the house would have to be sold and the proceeds used to pay back Medi-Cal.

It’s important to understand many times Medi-Cal will pay for nursing home care even for individuals who have assets that could be used to pay for their care. After the person dies, Medi-Cal can try to collect medical costs from the deceased person’s estate. This is known as estate recovery.

A note about protecting assets from a nursing home cost. Unfortunately, there is a program called Medi-Cal Estate Recovery that could put your home in jeopardy after you pass away. This program applies to the homes of seniors who received Medi-Cal long term care benefits while living.

It is possible to avoid Medi-Cal estate recovery and protect assets from a nursing home. Do not just put your children’s name on the deed which could be disastrous. Make sure to consult a qualified elder law attorney. Plan in advance of a nursing home admission if possible to maximize benefits.

Even after the person is admitted consult with an elder law attorney immediately. The longer one waits the fewer planning options available which can increase financial losses.

If you are concerned about protecting assets from nursing home costs, would like a further understanding about “Can a nursing home take your house?”, or require additional information for a trust to protect assets from nursing home liens then please give us a call.

Alice Salvo is a Woodland Hills, CA elder law attorney who specializes in Medi-Cal planning. Over the years she has saved elder law clients hundreds of thousands of dollars for a very reasonable fee. Remember, don’t be penny-wise and pound-foolish! Contact a lawyer to do this correctly the first time.