How To Protect Your Home and Life Savings From Nursing Home Expenses

It is common for people to have to sell their homes and deplete their life savings to pay for nursing home care. When you develop an estate planning strategy that meets your needs, you can protect your assets without compromising the quality of your care. 

When you need long-term skilled care in a nursing home, you are often responsible for paying out-of-pocket for your care. 

Below, we will discuss various strategies for covering nursing home costs: 

Purchase Long-term Care Insurance

The purchase of long-term care insurance helps provide a source of income that can be used to help pay for nursing home care, thus eliminating the need to dip into your savings. You may be able to go without care insurance if you spend less than 4 percent of your savings on living expenses each year. There is a wide range of long-term care insurance policies available. Still, most cover nursing home care, assisted living, adult daycare, and home care for people with chronic illnesses who cannot perform certain activities of daily living, such as feeding, dressing, and bathing.

Things to look for when comparing long-term care policies:

• If you need long-term care in the future, you want to compare how much the policy will pay out. It is essential to review your policy to ensure that the benefit amount will cover expenses in your area. Care costs can vary greatly depending on your location, so it is essential to ensure the benefit amount is sufficient.

• A provision for inflation protection is essential since nursing home care costs increase more rapidly than average. The compound inflation riders provide excellent protection but cost more than the simple inflation riders. Inflation riders are better than none at all, so you should select the option that is within your budget.

• A long-term care policy should cover your expenses for a specific time. Long-term care insurance does not cover your care costs indefinitely – unless you purchase a policy that provides lifetime benefits. You can expect to pay a higher premium if the benefit period is extended.

• It is imperative to note that long-term care insurance policies have a waiting period, which is the period before benefits begin to be paid out. Savings are imperative during the 30-90 day waiting period to cover out-of-pocket expenses until your insurance begins to pay.

Establish a Gifting Strategy

Medicaid may require you to reduce your available assets with a gifting strategy. In most states, Medicaid eligibility is determined by assessing your financial transactions over five years to determine if you qualify. Even though many popular gifting strategies involve giving to charities, it is also possible to give gifts to family members. To provide you with a list of the most effective gifting strategies, here are a few suggestions: 

• Meet with your professional team: Consider gift and income tax charitable deduction limits when determining your charitable and personal gifting budgets. By setting a gifting goal, you and your team can minimize your tax burden and maximize your gifts.
  
• Organize a family gathering: Following the analysis of the numbers and possibilities, gather the entire family together to ensure that everyone is on the same page when it comes to items such as educational or internship expenses, as well as events such as weddings, graduations, and other significant milestones.
• Identify a charity you wish to support and develop a budget for it: What charity would you like to support? A particular area of the world you want to focus on? The next step after identifying where you will be philanthropically focused is determining how much money you wish to give away.

To increase your chances of being accepted into a nursing home in the future, you should use a proactive gifting strategy. It can increase your chances of being accepted for Medicaid. However, You should note that this is not necessary but a precaution.

Establish an Irrevocable Trust

In addition to transferring assets, an irrevocable trust may be used as a vehicle to protect your assets. You cannot change your assets once they have been transferred into a trust. 

The term irrevocable trust refers to a type of trust where You cannot modify its terms, amend, or terminate without the permission of the grantor’s beneficiary or beneficiaries or by court order. The exact rules can vary by state. Trusts are set to minimize estate taxes, access government benefits, and protect assets. 

Trusts are fiduciary relationships in which one party, known as the trustor, gives another party, the trustee, the right to hold a title to property or assets for the benefit of a third party. In other words, you will lose control over your assets as soon as you make this decision. Due to their exclusion from Medicaid eligibility, these assets are no longer counted against your eligibility. 

Does Medicaid Cover Nursing Home Care Services?

Sometimes, people find themselves unable to pay for nursing home care themselves, and they wonder if Medicaid will cover the cost of the care. 

In theory, a countable resource is an asset or property that You can sell to pay for the cost of your care. This is if you need to sell it. As a result, these factors will be considered when determining your eligibility for Medicaid. To qualify for Medicaid, you must have a certain amount of countable resources. In terms of countable resources, there are several types to choose from, including:

• Cash
• Bank accounts
• Certificates of deposit
• Investments (stocks, bonds, mutual funds, etc.)
• Rental Properties

A few assets, known as “non-countable resources,” are exceptions to this rule. These assets include your primary residence and your vehicle.

You may be forced to sell your home after your death to reimburse Medicaid for any nursing home expenses incurred even though your home is not considered a countable resource under Medicaid.

If Your Assets Exceed the Medicaid Asset Limit, How Do You Qualify?

It may be possible to avoid the 5-year lookback period if your assets exceed the limit to be eligible for Medicaid by removing assets from your name at least five years before you enter a nursing home. 

In addition, it is recommended that you do not apply for Medicaid unless you are confident you are eligible. Applicants who apply for Medicaid and are deemed ineligible due to transfers within the last five years are subject to a penalty. 

It may be challenging to figure out how to pay for a nursing home. As long-term care costs rise nationwide, it is crucial to be proactive about protecting your life savings. Donating some of your wealth, setting up trusts, and purchasing long-term care insurance are all strategies to consider today. 

Warren & Migliaccio, L.L.P. Offer Online Estate Planning Services

Your retirement years have been dedicated to accumulating wealth that allows you to enjoy your golden years and leave a meaningful legacy. With Warren & Migliaccio, L.L.P., you can protect your legacy by creating an estate plan. In addition to wills, trusts, and other essential estate planning products, we offer good estate planning products in Texas.