Medicaid Pre-Planning: Protecting a Loved One Before They Need a Nursing Home

Posted By: Ken Russell | July 25th, 2019

In medicine, the saying goes, “an ounce of prevention is worth a pound of cure.”  The same holds true for Medicaid Pre-Planning in order to protect your or a loved one’s assets from the devastating costs of nursing home care.  As stated earlier in our Medicaid 101 series, the annual cost of a private room in a nursing home in Pennsylvania is approximately $121,000*.  The sooner your estate plan incorporates the necessary elements of Medicaid Pre-Planning, the more effective the asset protection for you and your family.

When confronted with the thought of paying for a nursing home, care which can cost more than $10,000* a month, a person may look at their assets and ask the following questions:

  1.   How do I pay for this expensive care?
  2.   Does the anyone help with the cost of this care?
  3.   How do I pay for this care while still preserving my assets for my spouse and family?

At Baratta, Russell & Baratta (BRB), we have already asked those questions, provided our clients answers and their estate plans incorporate and reflect the best planning tools available – this is called, “Medicaid Pre-Planning.”  It is the most effective way to plan, preserve and protect a client’s assets.

Medicaid pays 100% of the room, board and medical care for an individual in a nursing home.  However, it is a “poverty program”, meaning that the institutionalized person must have no assets (we will review the Medicaid eligibility rules later in the series for includable assets, exempt assets and spendable assets which form the basis of much of the Medicaid planning).

We have seen families confronted with the prospect of paying for nursing home panic and simply transfer all of their assets out of their name, apply for Medicaid, and expect to be Medicaid eligible. This panicked transfer of assets can have disastrous results.

The U.S. government anticipated that people may “self-impoverish” themselves by transferring assets to family or others, and have imposed a five-year look back period to examine asset transfers prior to the Medicaid application.  In short, the government requires disclosure of such transfers and then deems an individual ineligible for Medicaid if those transfers violate Medicaid transfer rules.

Here is an example of the problem:

  • Mom is in relatively good health, but has an Alzheimer’s diagnosis and her family knows that she will need nursing home care at some point.  She gifts her house to her children for $1. The asset is protected, right?  Wrong.  Two years later when she is admitted and applies for Medicaid, the house transfer is disclosed.  The $300,000 house is treated as an “available asset” and the following calculation ensues:
  • $300,000 house transfer divided by the monthly average cost of a Pennsylvania Nursing home, $10,114* equals 29.
  • Mom is ineligible to receive Medicaid for 29 months!

The earlier our clients seek advice on this matter, the better positioned we will be to help you with asset preservation.  While the example above discusses someone with a hint of a nursing home need, even clients without such a hint require Medicaid optionality in all their estate documents.

The function of a comprehensive estate plan anticipates all possibilities and maximizes the options for the family when, and if the need for nursing home care arises for a loved one.

We can ensure that most, if not all, of the family assets are preserved. Asset preservation is not simply about having money for medical care, it is also about making sure your spouse is taken care of, and you have an inheritance to pass onto your family and loved ones.

At Baratta, Russell & Baratta, we are highly experienced in helping our clients navigate these treacherous waters. Do not leave this to chance! Call us today – (215) 914-2222.

*Source: www.seniorliving.org/nursing-homes/costs/

 

 

About the Author

Ken Russell is the principal attorney in Baratta, Russell & Baratta Trusts & Estates department. Ken has been providing estate planning and administration legal advice for over 20 years. Ken understands the importance of your legacy and ensuring your loved-ones receive the fruits of your lifetime of effort.

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