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Nursing Home Care Could Be Your Biggest Creditor Attack

By John Dietz - Email Editor

Dear Valued Reader,

In many other parts of the world the elderly are taken care of by family members, but in the U.S. we do not seem to subscribe to that mantra. Millions of American seniors are left to fend for themselves, which can lead to financial catastrophe if not properly planned for.

It may surprise you to know that a majority of all seniors will go into an assisted living center or nursing home at some point in their lives. While planning for this kind of care can be difficult, it is necessary when you consider possible medical needs and the subsequent financial effect it could have on you and your family.

What do you think of when you hear the word Medicaid?

Many people think of "Medicaid Planning" as a "welfare" program for those less fortunate, however that is not necessarily the case. More often than not people who end up receiving financial assistance from Medicaid once had money. Due to the qualification rules to receive financial assistance, most people have to spend their countable assets down to as little as $2,000 before being eligible for aid.

When you look at the average cost of nursing home care ($79,980.00/year according to a 2009 Met Life Market Survey), it is not difficult to see how a lack of proper planning can destroy the value of your assets, as well as your ability to pass any assets to your children or grandchildren upon death.

Here are two questions to ask yourself:

1. Would you rather give your money to a nursing home, or give it to your heirs? It's a simple question to answer, but if you do not properly plan for long-term care expenses, all of your assets could be used to pay for your nursing home care leaving you nothing to pass on to your heirs in the end.

2. Would you be interested in learning more about fairly simple planning techniques that you could use to plan for your future nursing home expenses? I am talking about techniques which would both allow you to pass much or most of your assets to your loved ones while still qualifying for financial assistance through Medicaid.

I know the previous question is more of a rhetorical one, but the truth is that the vast majority of Americans have no idea that if they don't plan properly to qualify for Medicaid, they will have to spend most if not all of their assets before they are able to qualify for financial aid.

This will give you a better idea of how it works. On average, an Alzheimer's patient could stay in a nursing home for five years or more. At $6,665 a month, you are looking at well over $400,000. It's a number that rips at the very core of asset protection.

In the end, your health care bill may end up being the biggest creditor attack in your life, or the life of a family member.

To this day, there is still a lot of confusion that centers on nursing home care and who pays for it. In fact, I just had a discussion with a client who thought Medicare would cover the cost of a nursing home stay. What most people do not realize is that as a general rule the government will only pay the nursing home bill if the patient's liquid assets are below $2,000. If that's not troublesome enough, Medicare will only cover a patient for a maximum of 100 days, if they cover the patient at all.

The challenge of planning gets even more complicated as nursing home care costs continue to rise. Currently, "Medicaid planning" doesn't usually take place until after the first spouse has died.

You need to consider:

• Are your assets subject to Medicaid spend-down?
• How are you or your family members going to pay for nursing home care?

The reality of having only $2,000 to your name before getting aid is worth repeating. In most states single people cannot own more than $2,000 in countable assets and a short list of exempted assets. IRA and qualified plan money are NOT on the list. Finally, when it comes to married couples planning can get complicated, but opportunities exist to permit income from the infirm spouse to be shifted to the capable spouse.

Medicaid planning is not about hiding assets or cheating the government out of money.

The core planning is centered on getting a great result for a family member using current law. Unfortunately, most people do not seek legal advice or they seek it too late, and they are told they must spend down their assets until they have reduced their life savings, if they want to qualify for coverage. Ultimately, this leaves the person in the nursing home without cash to pay for anything else. There are always ancillary costs and things Medicaid does not pay for, plus there are plenty of specialized or alternative medical treatments not covered by Medicaid.

When it comes to disqualification because of income, in most states if you earn more than $2,022 a month, you will NOT qualify for financial assistance.

According to the various government charts, the average costs in the United States (in 2009) are:

• $198/day for a semi-private room in a nursing home
• $219/day for a private room in a nursing home
• $3,131/month for care in an Assisted Living Facility (for a one-bedroom unit)
• $21/hour for a Home Health Aide
• $19/hour for a Homemaker services
• $67/day for care in an Adult Day Health Care Center

To Plan or Not To Plan

Before a person can qualify for Medicaid, a full 5-year advanced plan is needed prior to entering a nursing home for gifting or moving assets out of a benefactor's estate. If you have not planned and do not have 5 years, there are legal crisis planning techniques, but as you would expect, the solutions are not as palatable as pre-crisis planning. Even if you have put together a solid estate plan, chances are your planning did not address the various nuances for Medicaid spend down provisions.

Most of you reading this newsletter have sufficient assets to handle one or two family financial setbacks, but unknown or unforeseen health related problems combined with long- term care could be a potential recipe for financial disaster.

Call 888.916.7070 or email info@trustmakers.com

Until next time,

John Dietz

John Dietz, CWPP, CAPP - Senior Advisor

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