Last Updated on December 6, 2022 by ashley.davis
Your financial security could be in jeopardy if your family does not have an asset protection plan before sending the parents to nursing homes. One thing you do not want to do is put up your family’s entire life savings and hard work up for grabs against a nursing home.
Here is how to protect your parent’s assets before going to a nursing home and why it is so essential for their future.
Reasons to protect your parent’s nursing home assets
There are more than enough reasons to protect your family’s assets. But let’s narrow down the most important ones concerning nursing homes.
They are your parents
At a certain age, when our parents start to age, they may only sometimes be able to make sound decisions as they were used to in their youth. So when they are shifting to a nursing home (which can be slightly costly), by helping to protect their assets, you are ensuring they do not deal with the burden of added cost if things go south and they cannot cope with the nursing home expense.
A safety net
Whatever medical insurance you do have, know that when push comes to shove, everything that seems right will go wrong. Your parent’s asset is their safety net. But, by leveraging it against meeting nursing home costs, they are giving up their best haven of financial security.
Parent’s asset protection from nursing home costs
Make a plan now!
A Medicaid plan best guards your parent’s assets against nursing home costs. It would help if you structured the ownership of your parent’s wealth so that it does not qualify as a financial resource for means-tested Medicaid coverage. This is a good approach, as Medicaid covers the nursing home care costs, but Medicare does not cover it. However, Medicaid will not pay for your care if you have limited financial resources.
Without a Medicaid plan, you will fall below the Medicaid asset limits, and it will start to look into your parent’s assets to fund the care. If your parents are getting older, you can encourage them and help them make a plan. This can eventually help them to be safe and keep their wealth.
Better to use an Asset Protection Trust
Using an asset protection trust, you can protect your parent’s assets from a nursing home. If you put your property into a Medicaid asset protection trust, you do not have to lose control over your assets. But you have to give up something. It is challenging to change irrevocable asset protection trusts once it.
However, you can keep it, enjoy the income or stay in your residence. If you want to learn more about the different kinds of trusts in financial planning for seniors, read here.
It is expected that almost 70% of people who will turn 65 may require long-term care at some point in their lives, either in a long-term care facility or at a nursing home.
Get an annuity
By annuity, it means a contract with an insurance company. You give them money, and in return, they make payments to you, and you indicate another person agreed over a term of years. You do not have to spend your assets to get qualified for Medicaid-covered nursing home care if you put your assets into an annuity, but only if your state considers annuity payouts for Medicaid eligibility.
Handover a portion of your regular income to your spouse
You can give a portion of your income to your spouse. Income amount is less than the amount your state excuses. Your directed spouse’s income will be protected when paying for your nursing home care.
Purchase long-term care insurance
Long-term care insurance usually covers adult day care, nursing homes, assisted living, or home health care for people who cannot carry out daily activities or have a chronic disease. There has been an increase in the cost of long-term care, which makes it difficult for many people to get available products despite their needs. However, long-term life insurance might not have any cash value if they do not go to a nursing home. Before purchasing this protection, you have to remember that most nursing home residents live there for a few years, not for long.
Hire an attorney for your real estate
With the help of an attorney, you can be named as the life tenant and make a person you trust the most the remainderman. You will have the right to live in your home until your last breath as a tenant. Ownership of your parents’ property will be transferred to your loved one after your death and will prevent the state from taking over it.
You might not face a financial penalty if you share your property for at least five years before entering a nursing home. Otherwise, you will have to face the penalty.
Prevention tips for protecting nursing home assets
We have already discussed how to protect parents’ assets from nursing homes. There are other ways you can also prevent getting into the hassle whatsoever. They might seem a bit unconventional, but hear us out.
Transferring a home to a sibling
You can always protect your parent’s assets by transferring them to a sibling. It is the next best thing for a spouse. If the sibling has lived in the home during the preceding year, the applicant legally holds an equity interest in the property.
Your parent’s assets are their most excellent safety net and should be rightly protected. However, it is best to consult a professional or hire a lawyer to protect parents’ assets from the nursing home. There are many ways to go on about protecting your parent’s assets, and it requires a lot of pre-planning.
If you are well informed and rightly aware of the legal loopholes that allow you to safeguard these assets, then you and your parents can rest assured that their home is safe, and so are they.
For more detailed information regarding asset protection in nursing homes,get a free consultation with BoomersHub today!
Why shouldn’t you give assets away to become eligible for Medicaid?
One of the main issues of giving away assets to become eligible for Medicaid is that it will fall under the government’s radar. Therefore, it might also affect Medicaid eligibility. Furthermore, by giving away assets, you have to show many financial documents regarding how you spend the money if it is against market value and more.
Does Medicare pay for nursing home costs?
It depends on the nursing home and the eligibility of the senior. Not all nursing homes accept Medicare. But in general, Medicare does not cover the long-term costs of services in a nursing home or other related facility. Only if it is a fully certified Medicaid facility does Medicare cover the costs of a nursing home.
What can I do to prevent becoming poor due to the high cost of nursing home care?
Asset protection planning is the best way to match the high costs of nursing home care. One of the best ways to ensure financial security is by calculating Your 401k when applying for Medicaid. You can also create special trust funds for specific purposes and keep your Medicare insurance.
My spouse is going into a nursing home; can they transfer all assets to me and qualify for Medi-Cal?
There are exemptions on whether assets can be transferred to a spouse without penalty. Assets held in the name of either wife or husband can be included when determining an applicant’s eligibility.
When protecting assets from nursing home costs, how much income can I make and still qualify for Medi-Cal?
Once you qualify for Medi-Cal, you must enter a long-term experienced nursing facility. For example, a person over 64+ has a net income under USD. Two thousand two hundred per month can qualify. Depending on the nursing home expense, the portion with a net income of less than $2,200 per month can qualify. Depending on their nursing home costs, one with over $2,000 may also qualify. Income must be paid to the nursing home.
Can a nursing home take your house?
A nursing home cannot take your home. As long as a senior is alive, their personal property or home cannot be taken to be sold to pay for nursing home costs. However, if the house is for a mortgage, it can be used to pay for nursing home costs if they are not in the long run.
What assets are exempt from Medicare?
Asset exemption can be varied from state to state when it comes to Medicare. However, the most common exemptions are Your principal house/property, your vehicle, household and personal items, and burial spaces, including burial funds up to USD. One thousand five hundred per person, and life insurance with a liquid value of less than USD 1,500.