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Nursing home planning can preserve estate assets, P.1

Asset protection planning is an important adjunct to estate planning, for the simple fact that you cannot pass on what you don’t have. If your assets are wiped out because of a lawsuit or nursing home costs, you may have little left to give to your heirs.

Nursing home costs, in particular, are notorious for eating away estates. While nursing home costs vary based on quality and location, the average cost for care is $73,000 per year and rising. At that rate, it doesn’t take long before there’s nothing left to pass on.

Unfortunately, most health insurance plans do not cover nursing home costs. Those interested in such coverage have to purchase long-term care policies. More often than not, retirees turn to Medicaid for help. But because Medicaid is strict in who can qualify for support, planning may be necessary in order to preserve eligibility.

Medicaid rules are set up to prevent elderly people from giving away all their money less than five years before entering a nursing home and relying on the government to pick up the costs. Nursing home planning can allow one to remove assets from one’s estate in order to prevent nursing home costs from devouring them.

The important thing with nursing home planning is to begin making gifts at least five years before the need for nursing home care arises. In some situations, parents are able to make a major gift to their children at least five years in advance, and then the children set up a special needs trust for the benefit of their parents.

In our next post, we’ll continue looking at the topic of nursing home planning.

Source: USA Today, “Ask Matt: How to protect assets from nursing home costs,” Matt Krantz, September 17, 2012