Have you talked to your parents about long-term care planning? Even when parents want to age in place as long as possible, there may still come a time when one or both of them requires a heightened level of care and attention, necessitating a move to a nursing home. Nursing home care, however, can be very expensive and, without proper planning, a person can quickly lose a lifetime of savings to the costs. Planning in advance can be particularly helpful for protecting your assets, but even when this is not possible, you may still be able to put plans in place to cover nursing home costs. Let us review a few actions your parents may be able to take to shelter their assets and qualify for Medicaid assistance to help with their nursing home bills.
1. Set up a Medicaid trust. A Medicaid trust is an irrevocable trust that limits the ability of the trustee to give assets to the beneficiary. Often, the trust simply holds the assets and provides the beneficiaries only with the income earned on their investment (such as interest). While the initial investment or principal is protected, earnings are often required to pay for medical expenses. The only drawback is that your parents will lose control over the trust asset, so it can be important that they pick a trustworthy individual to serve as trustee. You may want the assistance of a knowledgeable elder law attorney to help ensure that it is properly set up, and to review the trust documents periodically to ensure that it is still effective as laws change.
2. Gift money to their children. Properly structured gifts may be an option for removing assets from the Medicaid calculation. If these gifts are given during the Medicaid lookback period, however, it could result in a penalty. Furthermore, gifting money over $15,000 may impact their estate tax exemptions and have tax implications for their children. Before pursuing this strategy, consider consulting with an attorney.
3. Give a trusted individual durable power of attorney. A durable power of attorney gives a trusted friend or family member the power to handle affairs should your parent become incapacitated. This can be especially important if your parent is not married. If a parent becomes incapacitated, then he or she may no longer be able to transfer assets to shelter them. However, if your parent has a durable power of attorney, then the agent under the power of attorney may be able to take quick action on your parent’s behalf to shelter assets and reduce the financial burden on the estate.
4. Pay off your home mortgage and other secured debt. There is a look-back period for determining Medicaid eligibility, and any transfers of assets can be reviewed, but payment of debt during this period will not endanger eligibility. Thus, for married couples where only one spouse needs nursing care, paying off a home mortgage can reduce future monthly expenses for the spouse who stays at home Additionally, the home remains protected from Medicaid, so long as the stay-at-home spouse remains alive and living at home, thus effectively sheltering what is often the biggest marital asset. Similarly, large household items are also sheltered, so now is a good time to buy household goods that may need to be replaced soon.
Planning for the cost of nursing home care can be complex, but effective at shielding a person’s assets and life’s savings. For assistance putting a long-term care plan in place, please contact our office to arrange a meeting time.