A huge concern for Americans in our contemporary society is the cost of long-term care (such as nursing home care) if long-term care ultimately proves to be necessary. With monthly costs of more than $7,000 in many cases, nursing home expenses over the course of years or even decades can wipe out a couple’s lifetime of sacrifice and savings.
This column has previously explained some of the tools used to preserve assets to provide a financial legacy for children and grandchildren despite needing expensive healthcare in our elder years. Those tools often include specific life estates, irrevocable “Medicaid” trusts and some gifting. The specific tools and how they are used change almost daily. In fact, in a couple weeks, I will be conferencing with several dozen colleagues from across the state to allow all of us to update our shared knowledge of how to best preserve and pass on family wealth in the face of potentially financially devastating healthcare needs in our clients’ later years.
Determining “what” to do to plan for long-term medical or nursing home care is only a part of the analysis though. Just as important to long-term care planning to determine is “when” to take certain steps.
People are usually familiar with what is commonly called the Medicaid “five-year lookback”. Therefore, people often think that the sooner they use tools to transfer or relinquish control of assets, the better. However, that is not always the best route.
Essentially, Medicaid eligibility is considered a linchpin of asset protection from long-term care expenses. If Medicaid pays the financial tab for long-term care, the patient is not on the hook for those expenses, and the money otherwise used for long-term care can be passed on to kids and grandkids.
Institutional Medicaid (that pays for assisted living or nursing home care) eligibility has many requirements, but usually the most significant requirements are that the Medicaid recipient must not own and control assets of more than $2,000 total and must not have given anything away in the last five years to become that financially poor.
I advise many clients on wealth preservation in the context of long-term care. In this context, I typically analyze clients’ assets, health conditions and goals. These factors help me advise clients as to whether it makes sense to keep using assets to make more money or to relinquish some control or ownership immediately.
Giving up control or ownership of assets to family members as soon as possible can seem very responsible. However, that is usually something that is almost impossible to undo later, even with very responsible and caring kids. And, people’s self-esteem can be devastated when all control/ownership is removed from their lives.
For long-term care planning, it is always advisable to conference with an attorney sooner rather than later. However, it is not always best to implement the resulting plan prematurely. To paraphrase local attorney Clyde Schroeder (not related to me), you may not want to put on your pajamas much earlier than when you are ready to go to bed.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.