5 Ways to Safeguard Your Assets from Nursing Home Costs

Entering a nursing home can quickly drain your life savings. The average national cost for a private room in a nursing home is over $100,000 per year. With prices that high, most people can’t afford extended long-term care without spending down their assets.

But you don’t have to impoverish yourself to get the care you need. With the proper planning, you can protect your hard-earned assets and still qualify for assistance programs like Medicaid

Here are 5 strategies you can use to safeguard your home and nest eggs.

  • Purchase Long-Term Care Insurance

One of the best ways to avoid spending your assets on nursing home care is to purchase long-term care (LTC) insurance. A good LTC policy will cover the cost of care in a nursing home, assisted living facility, or even your own home. This allows you to preserve your savings and assets.

There are many options when shopping for LTC coverage. Policies can reimburse expenses ranging from $100 to $450 per day. You can choose lifetime benefits or shorter benefit periods like 2 or 3 years. The younger you are when you enroll, the lower your premiums will be. Some policies are tax-qualified, making premiums and benefits tax deductible.

When considering LTC insurance, think about how much coverage you need. Aim to cover at least half of projected future costs. Also, evaluate your health, family history, and budget. An experienced insurance agent can help you find the right policy for your situation.

Tax Benefits of Long-Term Care Insurance

LTC premiums and benefits can be tax deductible as medical expenses if appropriately structured. Policies must meet federal requirements, including caps on daily benefits. Consult a tax professional about how to maximize deductions.

  • Transfer Assets to Family Members

Gifting assets to your children or other relatives can be an effective strategy. However, you must be careful to avoid running afoul of Medicaid look-back periods and disqualification rules.

Medicaid has a 5-year look-back that checks for improper asset transfers. You may face penalties if you gift or sell assets below fair market value within 5 years before applying. Any gifts should be made at least 5 years and a day before needing Medicaid. Consult an elder law attorney before gifting property or valuables.

Use Trusts to Protect Assets

Irrevocable trusts can legally shield assets from Medicaid claims. Property and funds placed in an irrevocable trust are no longer counted as part of the Medicaid applicant’s estate. Payments can be structured to supplement the beneficiary’s income.

Our attorneys frequently establish irrevocable trusts to help clients protect assets like real estate, cash accounts, and investments. The trust owns the assets, so they are not vulnerable to Medicaid recovery. This can save hundreds of thousands in nursing home costs.

  • Sell Your Home and Downsize

Selling your home and downsizing is often wise if nursing home care is likely needed soon. This frees up home equity while eliminating expenses like property taxes, insurance, utilities, and maintenance. The cash from a sale can help pay for care costs.

If your spouse still lives at home, special rules apply for married couples. A spouse retaining the homestead can preserve his or her half of the equity. Consult an elder law attorney before selling jointly owned property.

Renting an apartment or moving in with family may make sense if you can no longer live independently. Relocating before you need a nursing home lets you avoid being forced to sell later at a loss.

  • Pay Privately for Nursing Home Care

If you have ample income and countable assets, you may choose to pay privately for nursing home care. This avoids the need to qualify for Medicaid. Private payment gives you more control over choosing facilities and care options.

You can use income sources like Social Security, pensions, annuities, and IRA withdrawals to cover costs. Countable assets like cash savings and non-exempt property can also be spent down. An elder law attorney can advise strategies to cover expenses while preserving as much wealth as possible.

VA and State Benefits for Veterans

Veterans and surviving spouses may qualify for financial assistance through VA Aid & Attendance or state benefits. These programs can help pay for long-term care.

  • Apply for Medicaid

If your assets are modest, applying for Medicaid is likely your best option for paying nursing home bills. Medicaid eligibility and asset protection rules can be complex, so seek assistance from an elder law attorney.

Each state has its own financial criteria for Medicaid long-term care coverage. In North Carolina, you can retain only $2,000 in countable assets. Your home may be partly or fully exempt, depending on circumstances. Special rules also protect a portion of a couple’s assets for the spouse living at home.

With the proper planning, you can qualify for Medicaid without spending down all your savings. Options like asset repositioning into non-countable forms can lawfully shelter a portion of resources. However, it is crucial to act well in advance of needing care.

Medicaid Estate Recovery

After receiving Medicaid benefits, federal law requires states to recover costs from the recipient’s estate after death. This is achieved via liens placed on property. Proper planning can limit exposure to estate recovery.

Start Planning Now to Protect Your Assets

This overview gives you a good sense of the strategies available to help preserve your assets from the costs of nursing home care. The key is being proactive with your planning. An experienced elder law attorney can customize a solution to safeguard your wealth and quality of life.

The attorneys at Cary Estate Planning have helped hundreds of North Carolina families protect their assets from long-term care expenses. They offer consultations to review your situation and discuss options. 

Don’t hesitate to get in touch today to schedule a meeting with one of their attorneys. Proper planning can help ensure your nest egg and legacy are preserved.