Living in a nursing home is expensive. Monthly costs dwarf even the most expensive mortgage in most cases, even if someone gives up the privacy of having their own room. Older adults may have to spend what remaining assets they have covering the cost of nursing home care unless they plan ahead of time for alternate means of support.
The expenses of nursing home care are nearly impossible to cover with existing assets when living on a fixed income during retirement, which means that people often apply for Medicaid to cover their costs. Nursing homes consume a huge portion of someone’s assets and may leave them without anything to pass on to their loved ones. Even Medicaid will bring a claim against someone’s estate after they die.
How might those preparing for retirement preserve their assets after they move into a nursing home?
By planning ahead for asset protection
Asset protection planning can take on many different forms depending on someone’s needs and current resources. However, one of the most common tools used to protect someone’s resources is a trust. People often create special Medicaid trusts or asset protection plans that involve funding a trust.
Trusts are separate legal entities, which means that assets held in a trust will not pass through probate court the way that assets that are part of someone’s estate would. Therefore, creditors, including nursing homes and the Medicaid estate recovery program, cannot typically make claims against assets in a trust to recoup the cost of the services provided to an older adult.
To have the best possible protection, someone typically needs to begin their planning multiple years before they apply for Medicaid benefits or before creditors would have a reason to bring legal action against them for nursing home debts and other financial obligations. Many people start putting together an asset protection plan when they begin preparing for retirement. Major resources like real property and financial accounts can help fund the trust and will then have protection from creditor claims as someone ages or estate claims after someone dies.
There are other ways for people to protect specific assets, including changing the ownership of the assets or making strategic gifts. Carefully reviewing one’s assets with the assistance of a legal professional can make it easier to preserve some of them when an individual moves into a nursing home but still wants to leave an inheritance for their loved ones after they die.