As our loved ones age, we always want to ensure their well-being and security. Part of this assurance involves protecting their assets from being seized by nursing homes in the event they require long-term care. With the cost of long-term care facilities skyrocketing, many families find themselves struggling to find a way to finance their loved one’s care. Fortunately, there are several ways to safeguard your loved ones’ assets from nursing homes. Ready to explore how to protect your loved ones’ assets from nursing homes?

How do you protect assets from nursing home costs?

Nursing Home Costs

The challenge of rising nursing home costs has become a pressing issue for many individuals and families. For those who require constant medical attention and assistance, nursing homes provide a necessary level of care that is often difficult to replicate elsewhere. However, the increasing prices associated with nursing home care can often place a significant financial burden on families who may already be struggling to afford the costs of healthcare and daily living.

For example, in 2023, the average nursing home care costs exceed $100,000 per year depending on a variety of factors, from a private room to the local cost of living. And while the quality of care at many nursing homes has come under scrutiny in recent years, it is more important than ever for families to find high-quality care that won’t break the bank.

Don’t Put Your Assets at Risk

There are two risks associated with the rising cost of nursing home care: Payment and Asset Seizure.

Payment

With the costs of nursing home care skyrocketing, paying for it can quickly eat away at the savings of any family member. Even with insurance coverage and government assistance, families may end up spending a large chunk of money on their loved one’s long-term care.

Asset Seizure

For those who are unable to pay for nursing home care out of pocket, creditors can seize assets to cover the costs. This can spell disastrous consequences for seniors and their families, particularly those who have built a significant amount of wealth throughout their lives. That’s why it is important to remember there are ways to protect assets and plan for potential long-term care needs in advance.

Medicaid benefits some, but the program can have its limitations

Medicaid Catch-22

Medicaid is a government program that provides financial assistance to eligible individuals for long-term care and is often the go-to source for funding for families. However, relying solely on Medicaid assistance to pay for nursing home care can lead to several disadvantages. One of the biggest issues is the limited facilities that accept Medicaid, which can greatly limit a person’s options for where they can receive care.

Additionally, Medicaid reimbursements are often lower than what private pay patients receive, meaning nursing homes may provide a lower quality of care to those on Medicaid. And finally, the Medicaid spend-down requirement can leave families financially vulnerable, as they are required to use nearly all of their assets before being eligible for Medicaid coverage. While Medicaid can be a lifesaver for some, it’s important to weigh the potential disadvantages before relying on it as the sole source of funding for long-term care.

Steps You Can Take When Protecting Assets

All of this may sound grim. However, there are steps you can take to protect your assets and your loved ones.

Long-Term Care Insurance

Long-term care insurance can be a valuable tool for those looking to provide for their care needs in advance. Specifically, nursing home care is one of the most commonly needed forms of long-term care. While not inexpensive, having a policy that covers this type of care can ease the burden of long-term care costs on both the individual in need of care and their loved ones.

Create an Irrevocable Trust

Some choose to protect their life savings by creating a trust. When you transfer assets to an irrevocable trust, such as a Medicaid asset protection trust, you relinquish ownership. A third-party trustee governs them according to your rules. While you cannot modify the trust or retrieve assets, they also don’t count as personal property for Medicaid eligibility.

Choosing to Establish a Life Estate

Establishing a life estate can achieve similar goals to those of an irrevocable trust. A life estate functions as a legal holding for your property, including your home. You can continue to inhabit the property but without the absolute right of ownership. Instead, you hold the “right of possession.” Once you pass, the estate passes to the “remainderman” you have named. Life estates, similar to irrevocable trusts, prevent the Medicaid program from counting your home as an asset and prohibit the state from placing a lien on it.

Taking Advantage of Gift Taxes

Some individuals may choose to take advantage of gifting assets to their loved ones. The maximum limit for gift tax is quite generous. For example, in 2023 you can give away assets worth up to $12.92 million without any tax implications throughout your life. Moreover, you can offer another $17,000 in assets per receiver per annum. This cap increases every year and serves as a boon for potential Medicaid eligibility and shielding assets from creditors.

Asset Separation Between a Married Couple

Individuals who are married may consider separate tax filing. This may help reduce assets for Medicaid qualification and protect whomever the healthy spouse may be at the time of need from creditors. This may mean establishing legally separate finances and checking your local state tax and property laws before beginning the process of filing separate tax returns.

Asset protection and understanding medicaird eligibility requirements can plan an important role helping your loved ones

Conclusion

For those looking to protect assets or protect loved ones’ assets from nursing home expenses, it is critical to ensure financial security. Plan ahead by exploring various estate planning tools, working with elder law attorneys, and purchasing long-term care insurance. These are all great ways to protect assets from being seized by nursing homes. By taking the necessary measures, you can secure your loved one’s financial future and provide them with the care they need without worrying about nursing homes taking their assets.

Looking for more information about estate planning, how an experienced elder law attorney can help you, or ways to protect financial assets? Consider working with a Planning Made Simple Coach who can help answer your questions and retain control of your financial assets.

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