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How to Protect Your Assets from Rising Nursing Home Costs

By Kim Boyer
Senior Press April 2003

Ralph and Alice just celebrated their 51st wedding anniversary. Ralph, who has Alzheimer’s, wandered away from home. The police found him sitting on a street curb, talking incoherently. They took him to a hospital. Now the family doctor has told Alice that she needs to place Ralph in a nursing home.

If you or your spouse enter a nursing home, it will cost you $55,000 a year on average in Nevada to pay for that care. Many families cannot afford the cost of long-term care. With proper planning, you can provide security for you and your family.

Medicare Misconceptions

You may be asking, “won’t Medicare pay for nursing home care?” Medicare may pay for a maximum of 100 days of skilled nursing care. After the first 20 days, there is a deductible that is $105 per day. Some Medicare supplement insurance policies will pay the cost of that deductible. In order to qualify for this 100 days of coverage, however, the nursing home resident must be receiving daily “skilled care.” Once the nursing home resident requires only custodial care, Medicare will not pay.

Even if Medicare does cover the 100 day period, what then? At that point, you must pay the bills with your own assets, use your long-term care insurance, or qualify for Medicaid.

Long-Term Care Insurance

If you are fortunate enough to have this type of coverage, it may go a long way toward paying the cost of the nursing home. Unfortunately, long-term care insurance has only started to become popular in the last few years and most people facing a nursing home stay do not have this coverage.

If you do not have long-term care insurance and cannot afford to pay $5,000 per month, you will probably want to qualify for Medicaid.

Basics of Medicaid

Basically, Medicaid breaks your assets down into two separate categories. The first are those assets which are exempt and the second are those assets which are non-exempt or countable.

Exempt assets are those which Medicaid will not take into account. Generally, the following assets are exempt:

  • The home, no matter its value. The home must be the principal place of residence. The nursing home resident must indicate an “intent to return home,” even if this never actually takes place.
  • Household and personal belongings, such as furniture, appliances, jewelry and clothing
  • One vehicle.
  • Burial accounts of $1,500. Burial spaces, markers, and containers.
  • Cash value of life insurance policies, as long as the face value of all policies added together does not exceed $1,500. If it does exceed $1,500 in total face amount, then the cash value in these policies is countable. Also, term life insurance is exempt.
  • Cash not to exceed $2,000.

All other assets which are not exempt are countable. This includes checking accounts, savings accounts, certificates of deposit, money market accounts, stocks, mutual funds, bonds, IRAs, pensions, second cars and so on. While there are some exceptions to these rules, for the most part, all money and property, as well as any item that can be valued and turned into cash is a countable asset, unless it is one of those listed earlier as exempt.

Keep in mind that Medicaid may come back and attempt to recover from the estate of a Medicaid recipient after the death of the recipient and the recipient’s spouse

Medicaid Planning

Ralph and Alice have $85,000 in savings and checking, a car, and a home valued at $120,000 with no mortgage. Ralph gets a social security check for $1,325 each month; Alice’s check is $650. Her eyes fill with tears as she says, “Our entire life savings will be gone in less than two years.”

If Alice does not engage in Medicaid planning, she will only be able to keep half of the assets and only part of her husband’s income. But the results can be much better than that. Nevada law allows her to seek an increase in the amount of assets and income she can keep. She can do this by filing a Petition to Divide the Assets and Income. If granted, Alice may be entitled to keep their entire life savings, and Medicaid will pay for Ralph’s nursing home.

There are other Medicaid planning strategies to protect assets beyond these levels. Strategies include paying off debts, converting countable assets to exempt assets, or transfers of assets. Any transfers must be done carefully because it can create a disqualification period. There are certain exceptions to the disqualification period, such as gifts to a disabled child. For best results, you should contact an experienced elder law attorney.

For a free booklet on how to protect your assets if you are facing a nursing home stay, call (702) 255-2000.

Kim Boyer is certified as an elder law attorney by the National Elder Law Foundation. She practices in the areas of elder law, estate planning, guardianships and probates. Ms. Boyer publishes a monthly newsletter addressing issues facing seniors and their families, and is a frequent speaker on elder law issues.

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