I am asked daily for advice on how to protect assets in the event of needing long-term healthcare at home, in a nursing home or in an assisted living facility.
Even though answering that question and undertaking actions to implement that advice is a passion of mine, it is not simple. This is an introduction to the response I provide to the question of what can be done to protect a lifetime of earned and saved financial sacrifices if and when someone faces the prospect of needing long-term healthcare at home or in a residential healthcare facility.
There is insurance for long-term healthcare, and Ohio law provides a process to essentially almost double the value of long-term care insurance if that insurance policy satisfies some requirements. However, this insurance can be expensive, and some people are not insurable.
Certain life insurance can also be a tool for paying for nursing home care. Life insurance policies with cash values (not term insurance) may include provisions that allow people to withdraw money from the policy’s death benefit for long-term healthcare. So, instead of having to cash out a life insurance policy or borrow against/from the policy’s cash value, some policies allow use of the death benefit — before death. Policies that do not have this feature can often be swapped out tax-free for a different life insurance policy that does have the “long-term care/death benefit advance” feature.
Nonetheless, most planning for long-term healthcare needs includes some planning to become eligible for “institutional Medicaid.” Medicaid eligibility in this context includes many requirements, but the two most recognized requirements are that the applicant not own and control assets worth more than $2,000 total and not have given away anything over the last five years to become that poor.
Attorneys typically sort Medicaid planning situations into two categories based upon an estimate of when long-term healthcare may be needed.
The first category includes people who attempt to protect assets without already being in a long-term care facility and not expecting to imminently need long-term healthcare. In these situations, the appropriate asset protection tools usually include some combination of gifting, irrevocable “Medicaid” trusts and retained life estates with restrictions on transferability.
The second category includes people who either already need long-term healthcare (at home or at a separate facility) or reasonably expect to need long-term care within the next five years. Some attorneys call asset protection in the second category “crisis planning.”
In these situations, the appropriate asset protection tools usually include some combination of gifting, sales of assets to family members, irrevocable “Medicaid” trusts and the purchase of certain “Medicaid-compliant” annuities. Asset protection in the second category can be very complex, because, among many reasons, this work can often include intentionally triggering a “penalty” period under Medicaid to participate in Medicaid’s more favorable payment rates and for other reasons.
Infrequently, there is no way to protect any assets. However, experienced attorneys in this field can often help protect something, even after someone is already in a nursing home.
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.