Whether a family is rich, poor or somewhere in between, the cost of long-term care can devastate the family’s resources. 

When paying for in-home care, assisted living or nursing home care, many families are told they must pay out-of-pocket until they have liquidated all their assets to qualify for government assistance. Many are told if they have given away assets within the past five years, they cannot qualify.

Neither is true.  

You don’t have to go broke in a nursing home. Although it is best to plan your estate before you need care, it is never too late to preserve assets, even if your loved one is already in a nursing home.  

There are a number of strategies to help families avoid the liquidation of assets to pay the cost of long-term care.  The sooner you plan, the better.  

Insurance is the best form of asset protection which avoids government bureaucracy and allows for more flexibility in care options. The best strategy is to shift the risk of care expenses to a private insurance company while you can still qualify for life insurance, whose cost is based primarily on age, gender and whether you smoke tobacco. 

The most important factor is age. Most insurance companies will not insure people over the age of 80, and the younger you are, the less expensive the cost of insurance.  

The key feature to any policy is the right to accelerate the death benefit if the insured requires long-term care. To qualify, a claimant is required to need assistance in at least two activities of daily living which include eating, bathing, dressing, ambulation and toileting or incontinence.

If a person is cognitively impaired, benefits can also be activated. Once the person qualifies for long-term care, he or she can withdraw their death benefit while still living to help pay for their cost of care instead of spending their own money.

This type of life insurance requires a “long-term care rider,” sometimes referred to as an “acceleration of benefits rider” for withdrawal of death benefits during the life of the insured. If someone is no longer insurable, the second-best strategy is to establish a creditor protection trust to shield assets to qualify for government benefits. 

The most common benefits are Veterans Administration (VA) benefits for wartime veterans and their surviving spouses and Medicaid.

For VA benefits, a Veterans Asset Protection Trust should be established at least three years before benefits are needed. For Medicaid benefits, a Medicaid Asset Protection Trust should be established at least five years before benefits are needed.

Sometimes, a Veteran or surviving spouse can qualify for both VA and Medicaid. These trusts can shield assets from being counted as resources so that claimants can qualify for government benefits to pay for care expenses.

If it is too late to establish a protected trust, the third-best option is to consider repositioning assets at the time care is needed to minimize total liquidation of assets. For an individual, this usually includes a strategy of gifting 50% or more of a person’s liquid assets to the family for safekeeping.

In combination with the gift, the claimant can purchase a Medicaid compliant income annuity to pay for care while waiting on government benefits to begin. The result is that the amount of the gift is protected against spend down to help supplement the individual’s care in the future. If an individual is in a nursing home, he or she can still make a gift of usually 50% or more of their assets to family and still qualify for Medicaid.  

For married couples, a Medicaid compliant income annuity can be purchased to transfer 100% of the institutionalized spouse’s liquid assets to the non-institutionalized spouse. This strategy can protect all of a couple’s assets while still qualifying the ill spouse for Medicaid. The well spouse retains 100% control of their resources and, more importantly, Medicaid coverage can be established without any waiting period.  

Another little-known strategy is the ability to protect 100% of a married couple’s assets upon the death of the first spouse. If each spouse sets up a testamentary discretionary trust to be funded at the time of the first spouse’s death, 100% of the family assets can be protected immediately for the surviving spouse, without any waiting period, and qualify for government benefits immediately. The surviving spouse can qualify for full Medicaid while the survivor’s trust is fully protected from judgment creditors for the remainder of his or her life. 

Remember, the key to protecting assets is having a plan. 

Sponsored by Jurist Law Group, PLLC. The Jurist Law Group provides expertise in the field of elder law, specializing in helping seniors and their families find workable solutions for protecting family assets from the high costs of long-term care. Call or email the Jurist Law Group for more information or for a no-risk consultation.