How to protect your assets from nursing homes before it’s too late. Unfortunately, most seniors take on the nearly 100% of the cost of long-term care due to poor planning. As we said in other posts, Medicaid does not pay for these expenses unless you are income eligible. As a result, many seniors find themselves forced to sell their homes, cash in on investments, or borrow money from family members to pay for these expenses. These expenses create financial wounds for the next generation. In this article, we explain how to protect your assets from nursing homes.
Plan Ahead to Protect Your Assets and Avoid the Lookback Rule
Individuals who require long-term care from assisted living to living in a nursing home can be covered by Medicaid. However, they are required to use most of their assets before that help kicks in. So the solution seems easy enough, before you apply, transfer your assets and you are covered.
Unfortunately, it’s not that simple. A ‘look-back rule’ was put into place to prevent people from doing that exact thing. Any ‘gifts’ or transfers made within 60 days of the application are subject penalties. This is why planning to protect your money from nursing homes is crucial.
Protect Your Home
You can transfer home ownership into a ‘life estate.’ By using this method, you are the lifetime owner and you designate someone (typically a loved one) to retain ownership upon your death. Because of this immediate transfer, your home is not touchable by the state. Be sure to talk to your elder law specialist to ensure everything is set up properly.
Transfer Financial Products to Annuities
There are specific annuities which are Medicaid compliant. Even if you already own an annuity it’s possible it may not meet state guidelines. To be clear, preparing for Medicaid asset protections is not the same as speaking with a financial planner. Senior planning specialists have a unique understanding of using annuities specifically for asset preservation and estate planning.
Gifting to Loved Ones
Perhaps you planned to already give your money to family after your passing. Gifting cash to protect your assets from nursing homes allows you to still pass on a legacy and ensure the state doesn’t take it. Now there is an annual limit of $14,000 before you are issued gift tax so be sure to keep that in mind.
Shelter with a Trust
When set up properly, placing money in an irrevocable trust will make it exempt from seizure. You are not allowed to take principle payments, however, any dividends or interest you accrue are safe.
Move Income to Your Spouse
According to the Mediciad site, “under the Medicaid spousal impoverishment provisions, a certain amount of the couple's combined resources is protected for the spouse living in the community. Depending on how much of his or her own income the community spouse actually has, a certain amount of income belonging to the spouse in the institution can also be set aside for the community spouse's use.” If your spouse’s income is below your state’s allowance, you may give them more money to reach that number.
Those are just a few options available to you and it’s important to discuss a plan with a senior planning or elder law specialist. As we mentioned earlier, taking action sooner rather than later may leave you in a better financial position.
For more information: Contact Senior Care of Michigan below to speak with a Senior Planning Expert.