How Can an Elderly Parent Protect Their Life Savings

from the High Costs of Nursing Home Care?

 

 

Problem

 

Ø      Elderly parents are concerned about nursing home expenses at $50,000-$70,000 per year or more per parent, depleting all their life savings.

 

Ø      If one surviving parent, all life savings must be spent down to $!500 before can qualify to have Medicaid pay for nursing home.

 

Ø      If both elderly parents are alive and one needs nursing home care, their combined assets must be spent down to $100,000 regardless of how assets are titled.

 

Ø      In February 2006, Congress changed the rules for determining what assets need to be used for nursing home care, resulting in closing some loopholes that were being used to qualify Mom and Dad for Medicaid coverage sooner.

 

 

Solution

 

 

Advance planning is now critical for elderly parents to transfer assets to their children/ heirs in order to protect those assets from being depleted for nursing home care.

 

Planning alternatives:

 

            1.         Transfer assets irrevocably in trust to children.  Such transfer is subject to five year look-back, meaning Mom and Dad will not qualify for Medicaid until all assets transferred within five years of Medicaid application are used for their care.  Recommended that elderly parents keep enough to provide for their needs for five years after transfer, but more aggressive approach may be needed for smaller estates.

 

            2.         Divide assets in half and change estate plan so that upon first death, half the assets go to the children/ heirs and not the surviving spouse.  This option is viable if one parent has a terminal health condition and the surviving parent is in good health, but may need long term care for Alzheimer’s.

 

            3.         Long term care insurance can be used to cover nursing home expenses and protect assets for heirs to inherit.

 

New Ohio law (effective September 2007) provides some protection for life savings.  If elder parent has long term care policy in place, then under Medicaid’s estate recovery program, the heirs can inherit money from parent to extent of long term nursing care coverage.

 

This is a new federal government provision to encourage elderly parents to obtain long term care insurance while they are insurable.  Ohio has recently adopted the federal provisions, but Kentucky has not yet acted.

 

                        Other strategies may be available for elderly parents to protect their life savings from being depleted by nursing home expenses. 

 

Examples include:

 

            A.        Transfer home to children and keep life estate.

 

            B.         Give assets to children and have children pay nursing home expenses and claim parent on income tax return as a medical dependent.

 

            C.        Large estates may have sufficient assets and income to pay nursing home expenses.  However, long term care insurance should be considered to protect the assets to be inherited.

 

 

The rules are very complicated and it is highly recommended that an attorney experienced in this Elder Law area be consulted to identify viable options to be considered.