“How do I protect my assets so that the state doesn’t get everything if I have to go into a nursing home?” This is, by far, the most common question that I answer.

I prepare many living trusts for clients, so this question comes up almost every time I meet with a client. It’s really hard to answer, and every time I hear it, I kind of cringe. The answer will not be what people want to hear. As I explain, clients stare at me with a glazed over look like, does this guy know what he’s talking about?

Here is what people are afraid of: The average cost of a nursing home is $219.00/day and rising. That’s almost $80,000.00 per year. The average nursing home stay is 2.5 years.

No one’s fondest dream is to see their assets depleted by a nursing home. But, in this Tea Party age with constant calls for limited government spending, I am always surprised that so many people think that long-term nursing home care is something that they should not have to pay for, or that they can easily qualify for by a simple legal maneuver.  I think a person’s money should be used to make them comfortable in the best environment that is affordable. In reality, medicaid is a safety net program for the truly indigent.

On the other hand, health insurance covers you when you are sick… why should long-term nursing care be any different from  having your gall bladder removed or any other illness? I don’t know the answer to these tricky questions.

But here are some of the answers to why it is now hard to qualify for medicaid:

Does my living trust “protect” my assets so that I can get medicaid if I need it?

No, a living trust will not help qualify you for medicaid.

Is there a type of trust that I can use to qualify for medicaid?

Yes, there is an irrevocable, medicaid income-only trust. You cannot be trustee. You can’t change the trust. You can only get the income from your assets. I rarely use these because they are very restrictive.

What assets can I keep and still qualify for medicaid?

You can keep $2000.00 in assets and a prepaid funeral. A house is exempt too, but only temporarily. After 6 months in a nursing home, it is presumed you will not return to the home and then a lien can be placed on the house. (There are other rules for married couples.)

Can I give away my assets and qualify for medicaid?

If  you have ESP and know when you will need medicaid and don’t mind parting with all of your assets then, yes, if you gift away all of your funds 5 years or more before you need a nursing home, you will get the free medicaid nursing care. Other than that, it is very hard to protect your assets in such a way that you will qualify for medicaid.

Does medicaid keep my pensions and social security if I qualify?

Medicaid will take all social security income, pensions and other income except for $30.00/per month.

Why is it harder now to gift assets and qualify for medicaid?

This has to do with the so called “penalty period.”  When someone applied for medicaid under the old law, your checking accounts and other bank statements were checked for the last 36 months for gifts or transfers to family members or others. This is called the “look back” period. Medicaid did not care about gifts made more than 36 months prior to the medicaid application. So if a gift of $50,000 was made more than 36 months before the medicaid application, the applicant would qualify for medicaid. If they found gifts within the 36 months then there was a “penalty period.” Under the old law, the penalty period started when the gift was made. In Illinois, the penalty amount was about $5000.00 per month, so if you gifted $50,000.00 within the 36 month look back period, you were penalized for 10 months from the date that you made the gift and after that you would qualify for medicaid. Confused yet? If not, you are a savant…It was easy under the old law to made gifts over time and still qualify for medicaid.

Now, the look-back period is 60 months. Worse yet, when a gift is made, the penalty period now starts when the client enters the nursing home. So, if a client gifts $50,000.00, the penalty period of $5000.00 per month will make the client ineligible for medicaid for 10 months from the date they enter the nursing home. This makes gifting away assets an almost unusable strategy.  The current laws encourage people to buy long-term care insurance and make it hard for those with substantial assets to gift the assets and still qualify for medicaid.

So how am I supposed to pay for a nursing home if I need it?

There are only three ways to pay for long-term nursing care:

1. Use your own funds to pay for care, or self-insure.

2. Buy long-term care insurance to cover some, or all, of the charges. Some clients buy long term care insurance to cover their expense for 3 to 5 years, which carries lower premiums than a lifetime benefit.

3. Have medicaid pay for your care.

Should I buy long-term care insurance?

If you can self-insure, then you won’t need long-term care insurance.

Anyone with assets of $1 million or more can probably safely self-insure.

Those with assets of $1 million or less, should consider some sort of long-term care insurance.