How to Safeguard Your Assets from a Nursing Home

by Dan A. Baron, Baron Law LLC

Almost everyone has heard horror stories from friends or family about someone they know who needed to move into a nursing home and subsequently saw all of their assets depleted. Many times, this leaves no safety net for loved ones, and sometimes it even results in additional debt for the family to bear. How can this be legal? How can you avoid it? Let’s cover these questions and more as we discuss how to protect your assets from a nursing home.

How Much Do Nursing Homes Cost?

First, let’s address why someone would need a nursing home, and there are good reasons. According to the U.S. Department of Health and Human Services, 69% of people age 65 and older will need some type of long-term care services, and 37% will require a stay of at least one year in a long-term care facility, while 20% will require a stay of  at least five years. Additionally, with a longer life expectancy, women stay an average of 18 months longer than men in nursing homes, which leads to additional costs.

In Ohio, the average cost for a year in a nursing home is $95,724 for a semi-private room and $107,700 for a private room. For the 20% of adults over 65 requiring a five-year stay, that easily adds up to over half a million dollars. So how in the world is anyone expected to pay for this when the average American has just $86,000 in retirement savings? Well, the answer is a little complicated, but this is where an elder law attorney can help.

Creating an Irrevocable Trust

Elder law is a practice area that specializes in providing legal advice for seniors, including long-term care planning and asset protection. How exactly does an elder law attorney help you protect your assets? The most common and efficient way is with an Irrevocable Trust. This type of estate planning document takes your asset(s) (usually your personal residence) and places it in trust where you are no longer the trustee. Thus, on paper, the asset legally no longer belongs to you and Medicaid cannot take it to pay for your care.  Although you are no longer trustee, there are protection provisions allowing you to forever live in your home, with no obligation to pay rent, and you still maintain the authority to remove a trustee and replace them with someone else. This type of trust is very similar to how professional athletes protect themselves in an asset protection trust.

The Five-Year Lookback

While no one can predict the future and you may need to move into a nursing home tomorrow, it is the best practice to establish your irrevocable trust long before you start needing daily care or supervision. This is because Medicaid employs a five-year look-back period. The look-back means that if you try to shift around your assets right before you start needing care, they can still claw back anything you dispersed as a gift to loved ones or even retrieve your home from the trust if it hasn’t seasoned for five years. Also, if you pass away after receiving Medicaid benefits, they can make a claim against your estate and potentially take funds and or property that you intended to be passed on to your beneficiaries.

Long-Term Care Insurance

Another way to protect your assets is through long-term care insurance. Traditional long-term care policies act similarly to other types of insurance coverage you are already familiar with, like home and auto, including paying a monthly premium for the duration of your coverage. You can often find a bundled policy for you and your spouse or group policy options through an employer. Some life insurance providers also offer a hybrid plan where you pay into your life and long-term policies simultaneously so you can use one or the other depending on what you need first, whether you end up needing long-term care for several years or if you pass away without ever needing long-term care the life policy still goes to your beneficiaries.

Medicaid-Compliant Annuities

One other option for protecting your assets from Medicaid is to convert lump sums of cash into Medicaid-compliant annuities, which are paid back in smaller monthly payments. With this method, on paper you no longer have a large liquid asset sitting in an account that you have to spend through before you can get coverage from Medicaid. Instead, the annuity provider will pay you back in monthly increments that keep your monthly income and fixed assets below Medicaid’s set limits. However, this type of planning is only used if you are currently in a nursing home, in a crisis spend-down and are working with an attorney.

VA Benefits

Lastly, if you are a veteran there are a variety of special VA programs available to you for long-term care. The core requirements to use these services are that you are signed up for VA Healthcare, the VA has assessed that you have a need for these services and that the service is locally available to you. Coverage and costs vary from program to program but you can explore options on the VA Health Benefits website in the long-term care section.

If you feel overwhelmed about the possibility of needing long-term care in the near or distant future, we are here to help. Don’t hesitate to schedule a free consultation with Baron Law LLC to see which of the above options is right for you and how we can assist you with your long-term care needs. Contact us at 216-573-3723.

Article co-authored by Dan Baron Esq. and Emily Smith.

Dan A. Baron, Baron Law LLC

Sponsored By

Baron Law LLC
Crowne Centre, Suite #600
5005 Rockside Road
Independence, Ohio 44131

Opinions and claims expressed above are those of the author and do not necessarily reflect those of ScripType Publishing.