Protecting Assets from Nursing Home Expenses
Some people will tell you that long term care insurance is a must. Others advise avoiding it altogether. The truth, naturally, is somewhere in the middle. The reality is that there are a number of factors to consider before deciding what is right for you.
At SecurEstate, our job is to help you think through all the options. We’ve found that once rational people are presented with unbiased facts and information, they will naturally gravitate toward a solution that’s a good fit for their unique needs.
Below, you’ll find answers to some of the most commonly asked questions regarding nursing home care, Medicaid, and asset protection.
How likely am I to go to a nursing home?
Insurance companies and their salespeople tell you that “you have a 60% chance of going to a nursing home.” While that number is technically accurate, it includes patients who are admitted for short stays (like rehabilitation after an illness or accident). And for most people, a one-month in a nursing home will not be an economically devastating event.
The real concern is a stay of five years or more. If you examine the number of people who fall into this category, the percentage drops to 12%. In fact, the average stay is just under two and a half years.* Of course, that doesn’t mean you should ignore the risk – simply factor it into your decision-making.
Should I buy insurance to help protect my assets from a nursing home?
A number of states have adopted long term care partnership plans. Indiana happens to be one of those states. The policies under these plans are one of the most comprehensive ways to help protect your assets from nursing home expenses.
The policies and the companies offering them are highly regulated and offer mandated policy benefits designed to protect consumers. The most significant feature of these policies is that once the benefits of the policy have been exhausted, your assets are protected. You are also exempt from the 5-year look-back periods for gifting.
A few words of caution regarding long term care partnership plans:
-In order to buy a policy, you have to be relatively healthy.
-These policies can be very expensive, even cost prohibitive.
-The peace of mind you are purchasing may only be temporary, since policy premiums are based on today’s experience and are not guaranteed for life.
-Because these types of policies are relatively new, there is a potential for future premium increases and/or company insolvency. In fact, there have already been a number of larger well-known insurance companies who have decided to no longer offer this type of policy.
Can I protect my assets without buying insurance?
If you don’t qualify for long term care insurance – or if it’s not cost effective based on your situation – there are other alternatives.
Much can be done to help protect assets through an elder law attorney – even if you or a loved has already been admitted to a nursing home. Elder law attorneys help maintain asset protection while ensuring legal compliance.
For many of our clients, it comes as a surprise to learn that a married person living at home may be able to protect most of their assets even if their spouse is in a nursing home. Single people (including a widow or widower) may also be able to protect up to 60 % of their assets from nursing home expenses.
Remember, don’t try this type of planning on your own or based on the advice of anyone other than an elder law attorney. It’s a complicated field with no margin for error, and the ramifications for errors can be financially devastating. Plus, the laws governing this type of planning are ever changing and the legislators continue to make it more difficult to protect assets using these strategies. So what is available today may not be in a few years.
Will Medicaid pay for a nursing home?
Generally, Medicaid will pay for a nursing home stay, but not until after you “spend down” your assets to the point where you qualify for Medicaid. The general rules governing this spend down were adopted in November 1, 2009. Here are some helpful things to keep in mind regarding the rules.
For single individuals (including widows and widowers):
-All income (pension, social security, etc) must go to pay the nursing home, except for $52 a month “personal needs allowance” for incidentals.
-Financial assets must be liquidated and spent on the cost of care until the patient reaches a total of $1,500 all accounts. (The patient’s personal residence and vehicles would also have been liquidated prior to this point.)
-After the first two criteria are met, the patient becomes eligible to file an application for Medicaid assistance. Upon approval, Medicaid would then be responsible for any costs not covered by the patient’s income.
For married couples, the spouse not in a nursing home can keep:
-100% of their personal income (Pension, Social Security, etc.).
-A personal monthly income of up to $1,939. (If the spouse at home has personal income less than $1,939 per month, they may also be able to keep joint income – or their spouse’s income – to get to $1,939.)
-A personal monthly income of up to $2,898, if household expenses are high and an appeal to retain a higher monthly income is approved.
-The personal residence and a vehicle
-50% of the financial assets, but no more than $115,920.
A very strong word of caution relative to this area of planning: it is very complex and the rules governing Medicaid eligibility change regularly. Clearly, this is not do-it-yourself material. If a mistake is made, you could be disqualified from Medicaid benefits for up to 5 years.
The information provided here is no substitute for professional advice, so please read the information thoroughly and contact us, we would love to discuss this with you to come up with the right approach together, whether it is no action, a referral to an Elder Law Attorney or a licensed Long Term Care professional. It will be what you conclude is the best plan for you.
*Source: Center for Disease Control and Prevention. 2004 National Nursing Home Survey, Residents Table 12.
*Source: Senior Law Project of Indiana Legal Services Prepared april 20, 2013.