A resident in a skilled nursing facility (“nursing home” or “rest home”) is responsible to pay for his or her care. Thus, like any other bill or financial obligation, a nursing home resident will have a responsibility to pay the entire monthly bill (sometimes up to $8,000) each month for as long as the resident is at the facility.
The most common methods of asset protection from potentially enormous nursing home bills are insurance and Medicaid eligibility.
Long-term care insurance is a great tool if an applicant can get approved and as long as the premiums are affordable. More affordable long-term care insurance can sometimes be secured by buying life insurance that allows the insured person to draw from the death benefit (which is bigger than the cash value) to pay for long-term care.
For those of us facing potential nursing home needs who do not have long-term care insurance (and for people with long-term care insurance whose insurance may not pay the whole nursing home bill for the entire time possibly needed), becoming eligible for Medicaid is usually the primary goal.
Simply stated, Medicaid is for “poor people.” The type of Medicaid that covers nursing home care is called “institutional Medicaid.” Among numerous requirements, eligibility for institutional Medicaid requires that the applicant have less than $2,000 in total assets and not have given anything away in the immediately preceding five years to become that poor.
When people ask attorneys, “What (assets) can the nursing home get to?” that question is usually more properly phrased as “What assets will I be allowed to keep upon receiving institutional Medicaid?”
In simplest terms, Medicaid eligibility considers literally every asset that a person owns that can be turned into money. The value of the asset in this context is the amount of money that can be received in exchange for the sale of that asset.
The cash value of life insurance is almost always considered as “available” to a Medicaid applicant, regardless of the size of the policy death benefit.
Like life insurance, retirement accounts that can be cashed out (even if cashing out incurs huge penalties/fees) are considered to be available resources in the amount of the net proceeds after cashing out that account.
In general, Medicaid will not consider the value of the following items as counting toward the $2,000 total that a person can own:
• Household goods and personal effects
• One automobile as long as it is used for the applicant’s transportation
• A primary residence if the resident intends to return home
• Burial plots and prepaid funerals, and
• Retirement accounts that absolutely cannot be cashed in.
Of course, when someone on institutional Medicaid dies, everything other than the clothes on the deceased person’s back will likely, eventually be required to be liquidated or sold to reimburse Medicaid.
All is not lost, though. With proper planning, much more than the items above can be protected and passed on to loved ones, sometimes even when the planning occurs after someone enters 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.