One question we often receive from clients and other attorneys is how to protect at least some of a person’s assets when the person must be admitted to a nursing home.
Since Medicare does not cover long-term nursing home expenses, many families are concerned about how to pay for those expenses. The average cost for nursing home care in Missouri is over $5,000 a month. Paying for those costs out of pocket can exhaust a person’s savings; assets intended to leave to a family member can go to paying nursing home costs.
There are ways to preserve at least some of a person’s assets if he or she must go into a nursing home or may need nursing home care in the future. This area of law is often called Medicaid planning.
Medicaid is a government program that will pay for nursing home expenses. Medicaid, however, is a needs-based program. To be eligible, a person must spend down his or her assets to a very low level. Medicaid planning typically involves transferring some assets to another person or to an irrevocable trust. Veterans can do similar planning to become eligible for VA benefits.
There are two types of Medicaid planning: advance planning and crisis planning. Both are highly particular to a person’s individual situation, family, assets and the state in which a person lives.
Advance Medicaid Planning
The sooner Medicaid planning begins, the more options will be available. Medicaid has a five-year lookback period, and any asset transferred, for less than fair market value, within five years of applying for Medicaid are subject to a penalty period of ineligibility. This rule prevents people from transferring all their assets when nursing home care is needed or anticipated.
If planning begins at least five years before nursing home care is necessary, assets can be preserved by legally transferring them to other people or by creating and funding a properly prepared irrevocable trust. This type of planning, however, should be done with legal advice.
Transferring assets to an irrevocable trust may not make sense for all situations, as a person gives up ownership and control over his or her assets. The goal of Medicaid planning is to preserve important assets for the spouse and other dependent family members.
It is possible for a parent of an adult disabled child to use Medicaid planning to preserve assets to care for that child. Without proper planning, any assets left to an adult disabled child may make him or her ineligible for Medicaid or other government benefits. By transferring assets to a special needs trust, those assets could benefit the child without making him or her ineligible for needs-based programs such as Medicaid and Supplemental Security Income. There is also an option to purchase long-term care insurance to help pay for nursing home expenses.
Crisis Medicaid Planning
Crisis planning is necessary when a family member requires nursing home care and the family has not done advance planning. A healthy community spouse may be concerned about how he or she can pay for nursing home expenses and still live independently. Family members may be concerned about a treasured family asset, such as a home. Depending on the circumstances, there may still be ways to preserve those assets.
In Missouri, certain transfers are exempt. Assets can be transferred to provide for a community spouse who is not in a nursing home. In specific situations, if an adult child moved into a person’s home and provided care for two years prior to the person needing nursing home care, the house may be transferred to the caretaker child. Specific state laws and guidelines govern this process.
Medicaid rules are state-specific, and only an elder law attorney who is well-versed in the laws of your state can advise you of your options.
The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.