How to Protect Your Assets from Nursing Homes

Nursing homes are expensive with an average cost in the United States of $7,698 per month (2020 average). Most people cannot afford this expense, but they are in desperate need of the services provided by nursing homes (long-term care facilities).

When finances are not put into place for nursing home care, assets can be at risk. That’s why now is the best time to start planning for the expenses of senior living. The first step is to consider the role of Medicaid in paying for nursing home services. In this article, we’ll offer some insight into how you can protect your money.

Does Medicare Pay for Nursing Homes?

It’s easy to confuse nursing homes and skilled nursing facilities. Although Medicare does cover a stay in a skilled nursing facility for convalescence, it does not pay for full-time residence in a nursing home. For people who can’t afford to pay and don’t have long-term care insurance, there’s Medicaid.

How Medicaid Helps Pay for Nursing Homes

Medicaid is a government-run program that can cover nursing home costs for individuals with a low income. People who do not have the financial means to pay for nursing home care and are found to need that level of care may be able to use Medicaid to pay for services.

For those who do not qualify for Medicaid when they need nursing home care, they may become eligible as their money runs out. With less money in the bank and minimal income, Medicaid can pick up the costs of nursing home care.

When a Medicaid recipient dies, the government may recover the benefits provided to nursing home care from the estate, and it can garnish assets as far as five years back. Family members may find this to be devastating as it affects their inheritance.

To keep this from happening, there are ways to protect assets from nursing home expenses.

Assets as Gifts

Giving loved ones your assets as gifts can help prevent them from being taken away after you die. The only downside is there may be tax ramifications associated with it.

Using Irrevocable Trusts

Irrevocable trusts are an excellent alternative to giving assets as gifts. When assets are put into irrevocable trusts, they no longer belong to you because you name an independent trustee. While you may not own those assets, you can use them while you’re still alive. This way, if you need them, you can use them. When you die, the assets are safe from being taken away because you’re not the owner of them – the independent trustee is the owner.

The only way this may not work is that Medicaid can take assets that were yours five years before you died. This is why it’s important to set up an irrevocable trust as soon as you know you’re going into a nursing home because if you die after five years, those assets are safe.

Create a Life Estate

When you create a life estate, you keep the property until your death. Upon your death, it automatically transfers to someone you choose, so it can’t be taken unless it was done five years before you died.

The Importance of Acting Now

No one knows when anyone will pass, but there are ways to protect your assets if you die more than five years from now. The more time you wait, the less likely you’ll be able to protect them. That’s why you should consider the three options described above: give the gift of assets, use irrevocable trusts, or create a life estate. This way, no matter what happens with your finances when paying for nursing home care, you’ll be able to leave something behind to your loved ones.

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