The Listen to Lawrence Letter: Can you still protect assets from a Nursing Home if no planning was ever done?

May 27, 2021
I welcome new members to The Listen to Lawrence Letter and just because you may be new doesn’t mean that you can’t ask an old question! So, if you’re just joining me and think I may have already answered a question you have, ask it anyway. Even if I’ve talked about something in the past doesn’t mean I won’t talk about it again because some of the best questions I receive are the ones that most people need to have answered! This is what I mean:
I’m a new member of the newsletter. An old work friend sent it to me. I have a question that might have already been answered over the years. We tried for years to get my father-in-law to consider an Irrevocable Trust to help protect his hard-earned money. He refused and said he didn’t need that. So you know how this story goes. He fell and went to the hospital and now is in a rehab facility with a nursing home or assisted living in his future.  Our question is, at this point, is there any way to protect any of his money from the corporate claws of the nursing home? He’s 82. Thanks.
I am sorry that your father-in-law is ailing and hope for his improvement.  I am going to assume for this LISTEN TO LAWRENCE LETTER that he would now be open to trying to save his hard-earned money. Sometimes clients of mine have emotional, psychological, and even practical reasons why this is not their goal. But assuming he has now “drank the Kool-aid” and is ready to do something, I want you and all my readers to know that we can almost always save something, even at the last minute.
If it would be appropriate for him to stay home with aides, then we can save almost everything. Remember, until about 1/1/22 there is no look-back for Community Medicaid (home care). After that date, there will most likely be a 2 ½ year look-back.
If assisted living is what he needs, this is more problematic, as assisted living facilities generally do not accept Medicaid. However, while you are paying privately there, you may want to make a transfer of money to get the look-back going if you need home care or a nursing home in the future.
If he needs to be placed in a nursing home now, we can still protect about half the money.  Really?  YES!  We call this last-minute maneuvering, “the half-loaf approach.” While it is a lot more complicated than this, the essence of the plan is to transfer half the money, causing a Medicaid penalty. The penalty is one month of Medicaid ineligibility for ABOUT every $13,000 transferred. While you are ineligible for Medicaid, the other half of the money will pay for the nursing home. WOW, this is very cool!
EXAMPLE: Dad needs a nursing home. His only asset is a bank account with $130,000. If he transferred the entire account to his kids, he would not be eligible for Medicaid for about 10 months (130,000/13,000 = 10). Note these are not the exact numbers but close enough to get the idea. He has no money left to pay the nursing home for the next 10 months so this plan does not work. Instead, he transfers half or $65,000 causing a five-month penalty (65,000/13,000 = 5). How will he pay the nursing home during the next 5 months?  The answer is the other $65,000! It doesn’t always work out to 50/50 because you have to take into account the actual monthly cost of the nursing home and the monthly income (like social security, pension, RMDs) that has to be applied. Sometimes we save less than 50% and sometimes more than 50%.
But the bottom line answer to your question is that we can always save something! It is never too late!
I hope this helps! Please forward this nformation to your friends and relatives to share these informative answers to some very commonly asked questions.
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As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.
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