Elder law attorneys pay close attention to the current state of long-term care costs, because this is one of the core issues that we address for our clients. There are two misconceptions about the subject that can enter the picture, so education is key.
One of them is the idea that most people can get any help that they may need from family members and friends. Without question, many elders can get by with this type of assistance. However, at some point, nursing home care is the only solution.
LongTermCare.gov is a very useful website that is maintained by the United States Department of Health and Human Services. According to their site, 35 percent of seniors will live in nursing homes at some point in time.
Long-Term Care Costs
Medicare covers medical and convalescent care, but it will not pay for the custodial care that nursing homes provide. These facilities are very expensive, so the costs can consume a significant portion of the legacy that you would like to pass along to your loved ones.
Genworth Financial compiles in-depth long-term care cost statistics on an annual basis. Since last year is in the rearview mirror, they have released their 2020 cost of care statistics.
The median annual charge for a private room in a Cincinnati nursing home was $114,245, which is a reduction of 2.64 percent over the 2019 figure. For a semi-private room, there was a 1.32 percent increase to $97,820.
A one-bedroom unit in an assisted living community came with a median annual price tag of $57,000, and this is an increase of 11.9 percent. The median charge for a home health aide skyrocketed 54.55 percent to $58,344.
The aforementioned Department of Health and Human Resources found that 48 percent of people in nursing homes reside in the facilities for less than one year. About 20 percent require one to two years of nursing home care, and 21 percent need the care for two to five years. The remaining 12 percent receive the care for more than five years.
Nursing Home Asset Protection
Fortunately, there is a solution if you devise a plan in advance. Medicaid will pay for long-term care, but since it is a need-based program, there is a low $2000 asset limit.
Some types of property do not count, and there are allowances for a healthy spouse when their spouse is applying for Medicaid to pay for nursing home care. We will not cover the specifics here, but we will look at the 2021 parameters in an upcoming blog posts.
You can divest yourself of countable assets to qualify for Medicaid, and this can be done through the utilization of an irrevocable trust.
When you establish this type of trust, you would not be able to act as the trustee or access the principal. However, you would be able to receive distributions of the trust’s earnings until you actually apply for Medicaid to pay for nursing home care.
Timing is the key to the successful execution of this strategy, because there is a five-year look-back period. You have to fund the trust at least five years before you apply for coverage.
A penalty is imposed if you violate this look-back rule. You would be ineligible for a period of time that is based on the amount of the divestiture. For example, if you gave away enough to pay for 18 months of nursing home care, your eligibility would be delayed by 18 months.
Attend a Free Webinar!
As we stated in the opening, education is key, because you can’t take the right steps if you do not know all the facts. With this in mind, we conduct webinars on an ongoing basis to share important information about nursing home care and estate planning.
The sessions are free, and they couldn’t be any more convenient, so this is a great way to invest a little bit of spare time. You can see the schedule if you visit our webinar page, and when you identify the date that works for you, follow the simple instructions to reserve your spot.