It's Never Too Late -- Top Ways to Protect Your Assets from Nursing Home Costs

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How to Protect Assets From Nursing Home Expenses

Three Parts:

The Department of Health and Human Services reported that by 2010 nearly 10 million Americans required long-term care. It is expected that 70% of people turning 65 will need long-term care at some point in their lives and that many of these people will require care from a long-term care facility or nursing home. It is never too early to begin planning for how you will pay for care, protect your assets and qualify for Medicaid.


Paying for Long-Term Care

  1. Use private wealth.If you have significant financial resources, you may be able to afford to pay for nursing home services or private in-home services out of pocket. It is unlikely that you would be able or desire to reduce your wealth to such a degree as to qualify for Medicaid. The average cost for long-term nursing home care is between ,000 and ,000 a month. It may be more cost effective for you to pay for in-home care which may cost approximately an hour.
  2. Rely on family.In 2015, 65 million people provided informal and family care giving to people who were ill, disabled or elderly.These services not only reduced the cost of care giving expenses but it also kept people in their homes longer and out of nursing homes. If you only need assistance with certain things, consider asking a family member to help you out during the week or pay someone to come into your home to help you. This will minimize the amount of money you need to spend on long-term care.
  3. Pay with private insurance or Medicare.You will need to look closely at your private insurance policy as most insurers do not cover long-term nursing home care. Most insurance policies, including Medicare, limit nursing home care to 100 days as part of rehabilitation after a hospital stay.
    • Policies typically only cover short term nursing home stays where you are required to receive skilled care.
    • Your insurance plan may help to offset the costs of copays or treatment for short term skilled care but it is unlikely that it will cover long-term care where you only need assistance with activities of daily living (ADL) such as bathing, dressing or eating.
  4. Acquire long-term health insurance.Individuals can purchase long-term health insurance, which reimburses up to a certain amount the cost for long-term health care including assistance with ADLs. You should note that your age and your health are factors in determining the cost of this insurance. Many elderly people may not qualify for this insurance or, if they do qualify, may not be able to afford this insurance if they wait too long to acquire it.In determining the cost of long-term health insurance policies, insurers examine:
    • Your age at the time you purchase the policy.
    • The maximum amount the policy will pay out on a daily basis.
    • The maximum number of days or years that the policy will pay out.
    • Whether you choose any add-ons to the policy such as increases for inflation.
  5. Qualify for Medicaid.Medicaid is a federal program that is administered by each state for its residents. In order to qualify for Medicaid, you have to meet certain income and assets requirements as the program was meant to protect low-income individuals.Medicaid offers most Americans the best potential support for long-term care costs.
    • In order to qualify for Medicaid, most states limit a person’s assets to ,000 for an individual and ,000 for a couple. If one spouse goes into a nursing care, for the purposes of Medicaid, the individual going into care can only have 00 in non-exempt assets and the spouse remaining at home can keep half of the overall assets. Anything over half the assets plus 00 must be reduced in order to qualify for Medicaid. This is called the spousal impoverishment rule.
    • Medicaid also has monthly income limits that are set on a state-by-state basis. In New York, this amount is 5 a month for an individual living alone and ,209 a month for a couple.

Paying Down Assets to Qualify for Medicaid

  1. Hire an attorney.The rules governing Medicaid are complex and by violating the rules, you can disqualify yourself from the program. It is very important that you hire an experienced elder law attorney. These attorneys understand all of the Medicaid rules, can help you protect your assets legally, and provide you important financial planning advice.
    • When looking for an attorney it is always best to start with a referral from a friend or family member that retained the attorney’s services. A trusted recommendation will put you at ease when meeting the attorney for the first time.
    • You can locate elder law attorneys through the National Association of Elder Law Attorneys. You can find information about attorneys in your area on their website at: or through the American Bar Association at .
    • When meeting your attorney for the first time, make sure that you explain all of your concerns, potential sources of income and the outcome that you would like to see. The attorney can then work with you to come up with a financial plan that best meets your needs and protects your assets should you or your spouse require nursing home care.
  2. Make sure your community property is below the limit.When you apply for medicaid, the assets of both you and your spouse (the community spouse) are added together to determine your total amount of assets (community property). There is a limit to the amount of these assets that, if you are over it, prevents you from receiving medicaid. This limit depends on your state, but can be as high as 9,200.
  3. Reduce your assets by paying off debts.If your assets are greater than the maximum set by Medicaid, you should try to pay down your assets in order to qualify for the program. While certain assets are not counted towards your Medicaid threshold, such as your family home or car, you may reduce the amount of assets so that one spouse can qualify for the program. You can reduce your assets and become eligible for Medicaid in the following ways:
    • Pay for medical care or in-home care.
    • Pay for household items or expenses, including prepaying real estate taxes.
    • Pre-pay for burial or funeral services.
    • Pay off debt, including the mortgage, credit cards or student loans.
  4. Reduce your assets by purchasing assets exempt under Medicaid.There are a number of items that Medicaid does not count towards your overall asset calculation and therefore, by purchasing these items you can reduce your assets to qualify for Medicaid. Some of the assets exempt under Medicaid include
    • Necessary household items such as furniture or appliances.
    • At least one motor vehicle.
    • The family home if at least one of the following people live there: the spouse of the person applying for Medicaid; a child under the age of 21; a disabled child of any age; a child who lived in the home for two years and provided the Medicaid applicant with in-home care; or a brother or sister who are partial owners of the house.
    • Term life insurance policies.

Transferring Assets to Qualify for Medicaid

  1. Transfer money into a Medicaid Asset Protection Trust.With a Medicaid Asset Protection Trust (MAPT), you transfer all of your assets to the trust and thereby give up the ability to control those funds. You can remain in your home and your income is outside of the trust but the principal of the trust is protected and does not count towards your Medicaid asset total.
    • It is very important that you use an attorney to set up this trust.
    • Assets placed in the trust are subject to the five year “look back” period discussed below.
    • You would have to assign someone other than you or your spouse to act as trustee for the trust.
  2. Beware of the five-year rule.Medicaid closely examines all transfers of assets in the five years prior to a person applying for Medicaid. This is referred to as Medicaid’s “lookback” provisions. If Medicaid determines that you conducted a non-exempt transfer, you can be penalized and not allowed to qualify for Medicaid for a certain number of years. It is very important that you speak with an elder law attorney before attempting to transfer funds to qualify for Medicaid.
    • Medicaid evaluates all transfers made in the five years before you apply for Medicaid to determine whether any of your transfers were made for “less than fair market value.” Medicaid is checking to see whether you gave your money away so as to avoid paying for your own care. States have differing rules on when to start the “lookback” time and some states even require children to pay for the care of their indigent parents.
    • Medicaid calculates the penalty period by dividing the amount of assets transferred by the average cost of a private nursing home in your area. You are then restricted by the number of days for which your asset transfer would have paid.
  3. Transfer exempt assets to avoid penalties.There are a number of exceptions to Medicaid’s lookback provision that would allow you to transfer certain assets and not be penalized when it comes to qualifying for Medicaid and having Medicaid pay for your nursing home care. These exceptions include:
  4. Create a life estate.A life estate, sometimes referred to as a “Lady Bird deed,” is a type of real estate transfer whereby a person gives or sells their home but retains the right to live in the home until they die or their spouse dies. People use this to protect the home as an asset from nursing homes and Medicaid, as well as a way to have the home skip the probate process.
    • While some states do not consider homes part of a person’s assets unless the home is worth a certain amount, other states would subject the home to a Medicaid “lookback.” This means that if you transferred your home under a life estate within 5 years and you do not meet any of the exceptions discussed above, you will be subject to a Medicaid penalty.

Community Q&A

  • Question
    I am 63 and own a home, but my daughter is a joint owner on the deed. To qualify for Medicare, would I need to sell my home? If so, will I have to divide the money from the sale with Medicare?
    wikiHow Contributor
    Community Answer
    Put your house in a trust to get it out of your name and leave it to you daughter if you own your home.
  • Question
    Can money that was willed to me be taken by Medicaid to pay for my spouse who may need to go into a nursing home?
    wikiHow Contributor
    Community Answer
    No. Medicaid does not take money, however, that money could make your spouse ineligible for Medicaid. Consult with a knowledgeable attorney for the best way to proceed in your situation.
  • Question
    Ia a cash gift to my child exempt from the five year rule?
    wikiHow Contributor
    Community Answer
    No. Any such gifts (generally over ,000 depending on the state) are considered to be disqualifying transfer (for Medicaid) and subject to the five year-look-back.
  • Question
    If I inherited some bonds from my mother, and they are in my name only, would that affect my husband going into a nursing home when we only have a joint income of about ,300 per month?
    wikiHow Contributor
    Community Answer
    Assets and income are not the same thing. All assets are considered joint property in a marriage regardless of which spouse's name is on the asset. The income of the spouse in the nursing home will have to be used as part of their cost of care. The community spouse keeps their own income, which is why setting up an annuity for income for them can be a way to protect assets and increase their standard of living.
  • Question
    If I own an LLC which employs my spouse and me, and my spouse needs to go into a skilled nursing facility, do I need to also liquidate our business?
    wikiHow Contributor
    Community Answer
    If you are able to file taxes and claim a profit on the business, the spouse's portion will be countable income. As to the business being a countable asset, this is more complicated. It would depend on the conditions of the ownership, how much equity there is, availability to sell... In short, yes, it could be a countable asset; as to whether you would have to sell it, maybe not. Have your local Medicaid office make a spousal asset determination, then you can better determine what action you want to take. Seek legal counsel if you feel you need guidance on this.
Unanswered Questions
  • How can I protect our house, annuities and savings if my wife has Alzheimers and I will probably need long term care in the future?
  • If a bank account has my name on it along with my parent's name, is it protected from being taken by their nursing home?
  • If I transfer all my assets to a child under an s corp, and I am the employee, are only my wages considered?
  • If I get divorced, will I be liable for nursing home costs for my ex-spouse?
  • Does the nursing home require all the money in her bank account?
Ask a Question
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  • Hire an experienced elder law attorney.
  • Begin planning for long-term care while you are still young and healthy.
  • Transfer your assets over time to reduce them below the minimum amount required to qualify for Medicaid.

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