When it comes to golden years planning, or even planning for unforeseen events like injury or illness, it may be necessary for you to think more about long-term care in a nursing facility. Or, as many people have started doing in recent years, it is also possible to receive skilled nursing care in your home. Whatever the situation is that you are facing understand that there are parts of this process that you can become involved in that require you to think about spending large amounts of money. When you find yourself in a position where you need skilled nursing care understand that this is not an inexpensive process and is something that you need to plan for from a financial perspective as best you can.
Unfortunately, most of us do not have the financial ability to save for multiple years of nursing care. The simple reality is that the costs involved in this are too great. You can reach out to a financial planner, nursing home, or an experienced attorney with the Law Office of Bryan Fagan to learn more about the likely costs that you would incur as a result of receiving nursing care. I can tell you that the average monthly cost of nursing home care approaches $5000. When you consider that the average length of time that a person spends in a nursing home is two to three years the costs associated with this can quickly become untenable for most of us.
On top of that, while you are in nursing care you may not have the ability to continue to manage your investments or savings like you have previously. All the successes that you have had from a financial perspective may be thrown out the window because you are not doing well physically or are otherwise unable to manage your affairs for some time. This means that you will be losing out on income growth, compound interest, and all the other great attributes associated with saving and investing. Your trip to the nursing home could end up being something that cost you in more ways than one.
What you need to ask yourself, then, is how can you receive the nursing home care that you may need without hindering yourself from a financial perspective. We have all heard the saying: cutting off your nose to spite your face. The meaning of this saying is that you and I will oftentimes do things to serve a certain purpose that will end up hurting us in other ways. In this context, to qualify for Medicaid, many people go to extreme lengths to reduce their incomes and divest themselves of assets. Whether or not it is worth it from your perspective to do this is up to you. However, what you need to consider is that there are multiple ways to plan for your financial future when it comes to receiving nursing care.
In this blog post from the Law Office of Bryan Fagan, we are going to talk about five reasons why you should not hide your assets from the nursing home. There is a significant part of financial planning that involves hiding your assets to qualify for Medicaid in a nursing home setting. Again, whether this is a good idea or not depends upon your specific circumstances and whether you are prepared to live with the changes that will be coming into your life because of your planning. Before you jump into a major financial change it is best to consider your options and move forward under a plan that serves you now and in the future.
If you have any questions about the material contained in today's blog post please do not hesitate to contact the Law Office of Bryan Fagan. We walk with people in a variety of circumstances involving the world of estate planning. Our attorneys and staff listen to our clients, provide information that is geared towards helping them learn about what they are going through, and then make decisions about how best to move forward. Let’s begin our discussion now.
Why an irrevocable trust may not be for you
As we have written about here at the Law Office of Bryan Fagan recently, one of the ways that many people begin to plan for a nursing home stay would be to create an irrevocable trust. An irrevocable trust is one that you would create and then would remain in place for the foreseeable future until you pass away. An irrevocable trust cannot be done away with or changed in any way. What this ends up doing is putting the grantor of a trust like yourself and the trustee of that trust at odds if the two of you do not agree on how to utilize the property contained in the trust.
Keep in mind that once you decide to create the trust you would transfer ownership of the property to that trust. Therefore, even if you were technically in possession of the property you would not be the legal owner of the property. For some people, this is an OK arrangement but for others, it does not work very well especially if you find yourself having appointed a trustee to the trust who you no longer share your views with. You may find that the property that you worked very hard to accumulate over the years no longer is in your control.
Another reason why you may not want to try and divest yourself of assets so that you can become eligible for Medicaid in a nursing home setting is due to you having significant real estate holdings. I can't be the only one who goes online and sees a seemingly never-ending supply of entrepreneurs and other people who are focusing their investments on real estate. For some people, the stock market is something that is intimidating to become a part of and is not something that they want to become fixated on as far as the planning Is involved.
Rather, real estate investing is a way to see the growth of your income and utilize the resources available to you in a way that takes advantage of multiple different factors. Being able to depreciate real estate assets on your taxes, charge rent, and see the increase in value of the property on a year-to-year basis are just a few of the reasons why real estate is a popular investment choice.
If you are one of the people who has real estate as part of your investment portfolio, then hiding your assets from Medicaid to get into a nursing home may not make a lot of sense. First, the real estate that you have built up over the years probably figures to be better off in your control than another person’s. The reason I say this is that you were the one to build up the income in the first place and therefore you have the experience needed to see to it that the decisions made with your real estate are in line with those that you made to build your wealth.
The rule with Medicaid is that you are ineligible to receive benefits if you have more than $2000 in assets. This is not a very large number and requires most people with any amount of wealth to slowly begin to divest themselves of that property. This could mean selling the property that you own and then not keeping the assets. Of course, selling the assets and then keeping the money and using that money to pay for nursing home care in cash would be another option that you may choose to pursue. There are options for you to consider and the best ones may not be the most obvious or the easiest ones. Working with an experienced estate planning attorney may turn out to be a good decision in that you can learn different options for yourself moving forward in ones that are to the advantage of you and your family.
Issues regarding income
Having a stable job in your golden years is a blessing. Many people disregard the importance of remaining employed into your later years. Work can provide structure to your life, purpose, and financial stability. It can also help maintain your health in ways that you may not fully appreciate. It does not take much effort to perform some online research to see that in many cases people begin to suffer physically and mentally after they retire from work. You can assess the situation based on your circumstances to see what makes sense for you.
One of the great benefits of working is that you give yourself the ability to save money even in the later stages of your life. While many people stop working and then live off their savings or the interest earned on investments you allow yourself to remain in the job market and earn an income that can be used to pay for essential items, plan for the future, and even make plans for a rainy day. I think we would all agree that the need to move into a nursing home is more a rainy day than anything else.
However, if you plan to qualify for Medicaid because of the need to move into nursing care then your income may hinder you from doing so. Medicaid is a means-based program where you need to have a relatively low level of income to qualify. While the number can change from year to year that figure is usually set somewhere around $2500 per month as far as the income that you can earn and still be eligible for Medicaid. For some of you, this $2500 a month figure may be substantially less than you earn monthly.
I can almost hear people questioning out loud why a person would give up a job that pays “$5000 or $6000 per month to try and qualify for Medicaid. The reason is that some people try to do this to make up for lost time. Even if you have earned a nice salary for yourself over the years that does not mean that you have been able or willing to set aside money and savings for emergencies like an unforeseen visit to a nursing home. You may truly be between a rock and a hard place when it comes to the care that you require if you do not have savings in the bank and you also earn too much money to qualify for Medicaid. In that case, you may not have time to invest your money to have enough in a short period for nursing home care. The more sensible option may truly be to work less or stop working to meet the income test for Medicaid.
This is not a good financial planning or mathematical arrangement. Taking less money and income to qualify for a government benefit usually does not make a lot of sense. Your specific circumstances should be considered before you move forward and decide to leave a good-paying job in favor of receiving Medicaid benefits.
Cash is king, as the old saying goes. However, this may not be entirely accurate if you need nursing care and have too much cash on hand to qualify for it. Consider a situation where you have a fair amount of money saved but not nearly enough to afford to pay for a nursing home stay. You may have enough money saved for a rainy day if you need a new roof on your home but to afford to pay for two to three years of nursing home care may be something out of your price range. This puts you in a tricky position where you have enough money to get by if things are going well but not enough money to pay for nursing home care if it becomes necessary.
What people will end up doing is either gifting money to loved ones, friends, or charities to get that money off their ledger and to allow them to qualify for Medicaid moving forward. For some people, this is a sensible decision to make especially if you have a doctor telling you that you will almost certainly need nursing care. Once you hear this and begin the process of planning for that nursing care it may become apparent to you that you need to do something quickly to receive the care that you require. Gifting property is something that you may have wanted to do anyway but are now being pushed to do so because of your life's circumstances.
Having cash available provides you with several options when it comes to your daily life and your long-term planning. As a result, many people understandably value this cash more than the ability to receive care at a nursing home. If that sounds like you then you may not want to give away a lot of money to become financially eligible for Medicaid. In that case, you may have options available to you as far as your care that does not require receiving Medicaid or otherwise utilizing your saved money in a way that does not make sense in the long term.
When you do not have a plan
Learning that you may need nursing home care can be a shock to your system. When you are first told that the best option you have is to receive nursing care your mind may be going in 1000 different directions at once. Your first instinct may be to do one of the things discussed in this blog post as far as selling property or otherwise unencumbering yourself so that you qualify for Medicaid.
Before you jump headfirst into doing one of these things you should understand that there are options available to you that you may not have been considering at first. Many times the most immediate solution is not the best. Being patient and going through those options may not yield an immediate solution but is more likely to yield the best one for you and your family. Additionally, reaching out to the skilled and experienced attorneys with the Law Office of Bryan Fagan can provide you with additional options and help in determining what course of action to take next when it comes to your estate planning needs.
Questions about the material contained in today's blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today's blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed estate planning attorneys offer free-of-charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas estate planning as well as the consequences for your family if a probate case is filed. Thank you for spending time with us today here on our blog.