Despite all the eating healthily, getting enough sleep, and working out advice, there are high chances that you or a member of your family may require nursing home services sooner or later. Senior citizens are most affected, with those over 65 years having a 70% chance of needing some form of long-term care. An additional 20% may reside in a nursing home for more than half a decade.
With such high numbers needing these essential homes, it shouldn’t surprise you they cost an arm and a leg. A semi-private room goes for an average price of $255, but if you can’t stand your room mates’ chatter and snore, you can part with an additional $35 to make it $290 per day or $8,821 per month.
Many residents pay directly out of pocket until they exhaust their entire life savings and have nothing more to offer, forcing the nursing home to go after their assets to continue funding their stay. The federal government has the Medicare program for those from lower economic backgrounds, but not everybody qualifies for the program.
So, what are your option to prevent a nursing home from taking your house?
1. Spend your assets
If you don’t want to lose your house, which is an asset, spend it. This may sound counterproductive but works if done properly through a well-thought-out plan. When you apply for Medicaid, the government looks at the look-back period, your spending for the last five years. This includes any assets you have transferred during that five years, and if they see a house transfer, they will assume that you have the financial ability to fund your stay.
This action plan requires forethought and a little ability to foretell the future. Start spending your assets like money and selling or gifting of houses to family members well before you need the Medicaid. Do it in a planned and calculated manner instead of frivolous splurging during the look-back period.
You can sell the house and put the money to some other use or gift it to family members. Note that a gift shouldn’t exceed the annual tax-free limit of 2018, which is $15,000, or you must pay the government the full tax amount.
The five-year look-back period is a Medicaid strategy to determine whether the applicants transferred or sold their property for less than it’s worth to qualify for the program. If found guilty, they arrive at the penalty by dividing the total assets transferred by the price of a private nursing home around your residence. The result is the period in which Medicare will decline to fund your nursing homestay.
2. Medicaid Asset Protection Trust
You can refer to this method as losing control to gain control. When signing for Medicaid, be sure to transfer your funds and other assets, including the house, to a Medicaid Asset Protection Trust. The trust will have custody of the home while you have some form of control over the property. For example, the income from the house will go to you, but the principal belongs to the trust and won’t be factored into your asset total.
Note that trusts are not failproof and are subject to seizure in some states, such as Missouri. You should, therefore, hire a competent elder law attorney while setting up the trust. Remember that this solution is still subject to the five-year look-back period. Be sure to assign the house a trustee that is not you or your spouse.
3. Form a Life Estate
According to common law and statutory law, a life estate or life tenancy is owning immovable property as long as one lives. When the life tenant passes on, the property may revert to the original owner or pass on to the next person listed on the deed as the heir. Until the death of the life tenant, the heir has no business interfering with the property. A life estate ensures that the life tenant keeps their house even if they die in a nursing home.
Again, you have to consider the rules and regulations of Medicaid that the home shouldn’t have changed ownership at least five years prior to your application. The state may ban you from accessing Medicaid services for up to 10 years. This should be done before becoming a resident of a nursing home.
4. Transferring the house to your children
The argument here is very simple. Parents spend a significant portion of life and resources raising the kids and its therefore expected for the children (who are no longer children) to return the favor when the parents need it. Most parents are usually confident that the children will take care of them and inherit their property after they pass on.
While the plan may work in some cases, it flops in others depending on several factors, including whether the caretaker knows their roles. Some have taken care of their parents using their resources for even fifteen years only to lose the house because they didn’t properly document the process.
Note that financial capability is a key factor when choosing a child to take care of you. The child should have a strong financial base for the plan to succeed. However, if, for instance, a son takes the responsibility only to lose their job later, the plan is doomed to fail miserably.
There are several ways in which you can transfer your house to your children, but trouble arises if, by any chance, they aren’t able to keep up and you land in a nursing home. There have been instances where some have looked after their parents for some time, thinking they will inherit the property only for the nursing home to lay a lien over the house.
To avoid this loophole, the parent and the intended caretaker child should hire an elder law attorney from the start to learn the available legal options and ensure that the process is documented from the word go. Timing and proper legal advice are vital for success since the Mainecare rules are very complicated and keep changing.
5. Stay at home
Statistics have proven that the more time people spend at home, the shorter the time they will stay at a nursing home before being discharged or passing on. Many children desire to look after their parents in old age but can’t fulfill that duty due to other factors. Remember, they have jobs and kids to look after, and sometimes the burden is too heavy to bear.
So, they should try to attend to the parent at home for the longest time possible before giving in to pressure. This way, the senior citizens will spend a shorter duration in nursing homes, which means less accumulation of bills. You can settle lighter bills without warranting the selling of the house.
6. Long-Term Care Insurance
Much like life insurance, long-term care insurance pays for adult daycares, nursing homes, and home health care for patients diagnosed with chronic conditions and illnesses that prevent them from performing basic self-care activities such as bathing and dressing.
However, such insurance policies are expensive because the common citizens don’t see sense in purchasing a product that will only become available when they need it but has no cash value if they don’t need to be booked into a nursing home. But the main question to ask here is, what if you don’t purchase the insurance cover but need to go into a nursing home?
7. Transferring certain assets
You could transfer certain assets under special circumstances before joining Medicaid and save your home from nursing home recovery costs. You will not be penalized if you transfer your assets to the following persons;
- Give the house to your spouse in certain clear circumstances that it is for their benefit and not yours.
- Or give the house to a child with a disability.
- Give the house to a trust established for the blind or disabled child
- Establishing a trust for your blind or disabled child
Other exempt persons you can transfer the house to include children below 21 years and Medicaid beneficiary spouses who own part of the home shares. You can also transfer to any dependent child who has resided in the house for more than two years and can therefore legally call the house home.
Bottom Line
The cost of caring for a loved one has risen exorbitantly in recent years with increased demand for nursing homes. Some may afford the services for some time before letting go, while some rely on government projects like Medicare from the start. The costs accumulate for years, and before you know it, the nursing home has laid a lien on your house. Ways on how to avoid nursing home taking your house;
- Spending your assets
- Creating a Medicaid Asset Protection Trust
- Forming a life estate
- Staying at home for as long as possible
- Purchasing a long-term care insurance cover
- Transferring specific exempt assets to approved people
- Transferring the house to your children
Remember to hire an experienced elderly law attorney because real estate rules and deed legislation can be complex and dynamic. Legal counsel will help you avoid nursing homes taking over your house.