How to Protect Assets from Nursing Home Costs

March 7, 2018


Nursing home costs can quickly destroy a lifetime of savings. Attorney Jeff Molever pioneered a trail in Minnesota when he developed the “Family Pot Trust.” The Family Pot Trust is one of a number of tools and techniques to protect assets from long-term care costs.

New Solutions for New Problems

Estate planning has changed significantly to respond to today’s changes in the law, health care, nursing home costs, technology, and society.

For example, in the 1950s, households usually had one person earning an income and another person building a home. That meant someone was available to check in on the elderly members of the family and help with care. These days, nursing homes are big business. People are living longer, and costs are going up.

Increasing Long-Term Care Costs

Long-term care costs continue to increase. The median price for a private room in a nursing home each year has continued to increase: $96,021 in 2015$97,032 in 2016, and $107,854 in 2017. Other types of care, like assisted living and in-home care, show similar trends.

Industry experts agree that these costs will continue to increase as the Baby Boomer generation puts greater demands on long-term care institutions.

Why Medicaid Laws are Confusing

Medicaid is a joint federal and state program. The Medicaid program in Minnesota is called “Medical Assistance.” Laws confusing for many reasons:

First, federal Medicaid law continues to evolve. Second, Medicaid law has exemptions, exceptions, and even exceptions to the exceptions. Third, federal rules and regulations continue to change. Fourth, every state has their own laws regarding their state Medicaid programs. For example, nursing home asset protection techniques that are legal in other states are prohibited in Minnesota—and vice versa.

It’s no wonder people find Medicaid law so confusing.

Asset Limitations

In Minnesota, a single person can only qualify for medical assistance if their total non-exempt countable assets are under $3000. For a couple, this limit is $6000. Without separate planning, applicants for Medical Assistance will typically have to spend down their entire estate prior to qualifying.

Tools and Techniques

While every client’s circumstances are different, my experience has been that most clients can protect at least half of their assets from nursing home costs. This is typically done through a variety of planning techniques. The techniques include the Family Pot Trust, Medicaid protection trusts, Medicaid compliant annuities, maximizing Medicaid exemptions, gifts to family members, and more.

Time is of the essence

When attempting to become eligible for Medical Assistance, the MA Office has a look-back period of 60 months, where most gifts will still be viewed as part of your countable assets. Some exceptions apply, and it is important to speak to an elder law attorney to explore all your options.

Exemptions

In Minnesota, an elder law attorney can assist in maximizing exemptions. Minnesota exempts the following assets:

  • Home (up to $572,000 in equity as of January 1, 2018), but the State of Minnesota will put a lien on your home equity in the amount of the services used
  • A motor vehicle (regardless of value) if it is used for transportation of the recipient or a member of the recipient’s household
  • Household goods and inexpensive personal belongings
  • Prepaid burial spaces and burial space items
  • Burial funds (up to $1,500 each for the recipient and the recipient’s spouse), prepaid funeral trusts ($2,000), and life insurance or annuity-funded burial arrangements under contract
  • Capital and operating assets of a business necessary to earn an income
  • If married and only one spouse requires Medical Assistance, the other spouse (Community Spouse) can keep assets up to ~$123,400, as of January 1, 2018.

Unlike some other states, Minnesota does not exempt retirement accounts like an IRA or 401(k).

Exceptions

It often seems like every Medicaid rule has at least one exception. This article provides general guidance, but this is not an area that can be handled without an elder law attorney. In fact, many estate planning attorneys avoid nursing home asset protection because of the complexity learning about Medicaid laws and staying current on all the changes.

What can you protect?

If you know someone in a nursing home, who has not met with an elder law attorney, there is often still time to protect assets. My firm provides complimentary consultations for a person in a nursing home or their lawfully authorized representative/agent.

The sooner you plan ahead, the more you can protect. The costs for nursing home asset protection plans depend on the circumstances. Asset protection isn’t cheap, so as a general rule, it only makes sense when you are protecting at least $50,000 in assets. This legal work is complex and time-consuming.

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