Protect Your Estate from Nursing Home Costs

Nursing home care is expensive, costing between $12, 000 to $20, 000 per month, so most seniors should do all they can to prepare for this possibility. According to a recent article from the Times Herald-Record, “Elder Law Power of Attorney can save assets that would go to nursing home costs, ” this is something that can be done even when entering a nursing home is imminent.

A Durable Power of Attorney is used to name people, referred to as “agents” (in Massachusetts, the agent is called an “attorney-in-fact”) to conduct legal and financial affairs if we are incapacitated. Whatever you can do financially, such as open or close a bank account, manage investments and retirement accounts, sign a tax return, run an on-going business, sell a house, contract from in-home services or skilled care at a nursing home, can be done for you by the agent or agents named in this document. Having this document is an important part of an estate plan since it reduces or completely avoids the risk of your family having to go through guardianship proceedings, where a judge names a legal guardian to take over your affairs. Without a durable power of attorney and without family, a guardian may be someone you have never met that is appointed by the Probate Court. Planning ahead and thinking through the “what ifs” is advisable.

Depending upon your preference, your durable power of attorney can authorize your attorney-in-fact to do some long term care planning, such as create an irrevocable Medicaid trust that follows the outlines of your existing testamentary plan, include gifting powers to use a crisis strategy that involves a gift and loan/annuity to shorten the period to ineligibility, and provide other financial powers.

Here’s an example: Amy, who is single, can no longer live on her own and 24/7 home health aides cannot provide the skilled care necessary for her specific health requirements. Amy has a durable power of attorney that an elder law attorney drafted that includes the powers that her attorney-in-fact, that is, her daughter Ellen, will need to address the issues of an elderly parent facing a health crisis. Ellen can sign a contract with a nursing facility, can access bank accounts to pay for such care, and has additional powers to gift to use certain crisis strategies that shorten the period to Medicaid eligibility. Without a durable power of attorney and without some preplanning that may have included the creation of a Medicaid Asset Protection Trust or an irrevocable trust, the strategies that Ellen can utilize to qualify her mother are limited to those included in a durable power of attorney and may not protect as many assets that could have been protected with some planning and/or a more robust document.

The following example can illustrate this statement. If Amy had $500, 000 in liquid assets, under Massachusetts regulations, all of these assets are countable and would need to be depleted to $2, 000 to be “otherwise eligible” for Medicaid or MassHealth. If she enters the nursing home requiring skilled care with $500, 000 in assets, she would not be eligible and would have to use those resources to pay for her care. In Massachusetts, the average cost of care is $17, 000.00 per month, and her $498, 000 would be depleted in 29 months, or a little over 2 years. One option is for Amy to spend down all of her money on nursing home costs, until all she has is $2, 000. All of her savings will go to the nursing home, with very little left for her daughter, Ellen. Many people believe that this is their only option. However, if Ellen consulted an elder law attorney at the time Amy were entering the nursing home or, better yet, if Amy had engaged an elder law to help with planning for long term care, depleting all of the $498, 000 on care would likely be avoided.

An elder law attorney is the best resource for determining what the best tools are to protect a nest egg if and when a person needs the care of a nursing home. What is achievable for each applicant is dependent upon the types of assets that an individual has, the value of these assets, along with whether the applicant is single/widowed or married, and other variables.

Many people make the mistake of thinking that it “won’t happen to me.” However, injuries and illnesses often accompany aging, and it is far better to plan for this eventuality in advance than waiting and hoping for the best.

DISCLAIMER: Medicaid planning is complex and the case hypothetical above with “Amy and Ellen” is provided for purposes of illustration. What strategies would work for you or your loved ones depends on the laws of your state of residence and your unique circumstances. Consult with an experienced elder law attorney admitted to practice law in your state of residence before engaging in any Medicaid planning!

Reference: Times Herald-Record (Jan. 8, 2021) “Elder Law Power of Attorney can save assets that would go to nursing home costs”