President Harry S. Truman once famously demanded, “Give me a one-handed economist. All my economists say, ‘On the one hand…on the other…’” Unfortunately, legal advice is often delivered with the same two-handed approach.
When our clients meet with us after their loved ones have been admitted to a nursing home, one of their first questions is usually whether they will have to sell their family home. The short answer is, “No, the nursing home will not take your home or make you sell it.” But, on the other hand, the costs of long-term care are extraordinarily high, and some or all of your assets could still be lost to pay for this care.
For anyone reading this who sympathizes with President Truman, let me explain. The nursing home will not “go after” anything. The nursing home doesn’t “take” your house, your car, or your life savings. Nursing homes, like other for-profit businesses, provide a service to their residents, and in exchange they charge a fee. In Kentucky, this fee currently averages between $220 and $240 per day. Over the course of an average 835-day stay, the total bill can cost over $200,000, depleting the life savings of many families. So while the nursing home may not “take” your home, the question for many clients becomes, “How do we pay for long-term care without losing everything?”
The answer, of course, depends on the individual circumstances of every family. Usually, a person entering the nursing home is a Medicare recipient. However, Medicare only covers up to 100 days of skilled nursing care, and only applies when the applicant is admitted under certain stringent requirements. When this coverage ends, the nursing home resident will be transitioned to private pay status unless he or she has some other way to pay for long-term care.
For some nursing home residents, long-term care insurance is an option. One advantage to long-term care insurance is that most policies cover in-home and assisted living care in addition to nursing home care, providing flexibility to the insured and leading some advocates to call it, “avoid nursing home insurance.” Unfortunately, many of the largest insurers are ending their sales of these products, and those still writing long-term care policies are correspondingly raising premiums. And if a client is coming to us because they have already been admitted to the nursing home, they are likely uninsurable for the purposes of obtaining any new coverage.
The ultimate nursing home payment option is Medicaid, the joint federal and state program that pays for the long-term care expenses for the majority of nursing home residents. Medicaid is a means-based program, meaning that you are only allowed limited income and assets before you can qualify. Contrary to popular belief, you do not have to go broke to qualify for Medicaid.
Through specialized transfer techniques implemented within the framework of Medicaid laws, it is possible to access Medicaid while still leaving an inheritance for your loved ones. For married couples, when only one spouse requires nursing home care, the couple can typically save most if not all of their life savings while still qualifying the resident for Medicaid. In the case of a single individual, usually around half of his or her savings can be preserved while qualifying for Medicaid. In either situation, advanced planning, generally involving the creation of an Irrevocable Trust, has the potential to protect an even greater portion of your assets.
There are a number of pitfalls to these techniques that can be avoided by working with an elder law attorney to create a proactive asset-protection plan to preserve as many of your assets as possible for you and your loved ones.
This article first appeared in the February 7, 2018 edition of the LaRue County Herald News, and can also be viewed online at laruecountyherald.com.