Asset Protection From A Nursing Home Spend Down

The Cost of Long-Term Care

So what happens to a person’s life savings if she lands herself in a Nursing Home, also known as a Skilled Nursing Facility (“SNF”)? What if she finds herself in an Assisted Living Facility (“ALF”) or needs In-Home Care – how much is that going to cost? The short & the skinny is that your life savings can be depleted in these situations simply because Long Term Care for the elderly is wildly expensive! You’ve worked hard all your life for your nest egg…Is it fair that if you land in a Nursing Home you could be responsible for privately paying such a facility at the tune of 8 to 10k/mo? Irrespective of your answer to that question, that’s indeed what you’ll be paying.

Ways To Pay

There are three ways to pay for Long Term Care:

(1) You private/self-pay as specified above;

(2) You have purchased a Long Term Care Insurance Policy that will pay for some or all of your Long Term Care costs; or

(3) You qualify for Public Benefits (Medicaid) that will pay for all or at lease supplement your Long Term Care costs depending on your personal facts.

Medicare & What it Pays

Let’s be clear: Medicare will only pay up to 100 days in a SNF. And most nursing home residents do not receive SNF payment for all of such 100 days. Usually, the nursing home resident does get the first 20 days of her SNF stay completely paid for by Medicare. After such 20 day time period elapses, a $167.50/day Medicare co-pay at the nursing facility commences. That can start quickly adding up. However, if the resident has a Medicare Supplemental Insurance Policy in place, then such policy will pay that entire co-pay or a portion thereof depending on the insurance plan. When the SNF determines that the nursing home resident is no longer benefitting from the “rehabilitative care” it is providing, it will notify Medicare to that effect, and Medicare of course quits paying the SNF fees entirely; laying the entire SNF monthly fee of 8 to 10k on the SNF resident. As you can see, this can easily eat up a large chunk of a person’s savings or even wipe it out.

The Third Way to Pay for Long-Term Care

So in a nutshell, if a person is in the aforementioned situation without Long Term Care Insurance, she will either have to spend down her liquid assets toward the SNF cost below $2,000.00 in “countable” assets – becoming eligible for Medicaid payment of that cost. Or she can do what we in the Elder Law Community call “Medicaid Planning!” By engaging in Medicaid Planning, we can reposition a nursing home resident’s assets, all the while preserving them, whilst having Medicaid pick up the monthly SNF tab.

Tools for Medicaid Planning

Some of the various techniques Elder Law Attorneys such as myself use in order to accomplish the aforementioned are:

(1) Personal Service Contracts;

(2) Promissory Notes;

(3) Income Producing Property; and

(4) Spousal Refusal.

I like to call this type of planning: “TAX PLANNING FOR THE MIDDLE CLASS.” Instead of maneuvering through the tax code like a good tax attorney would do for Donald Trump or Bill Gates to save them money; we are maneuvering through the Social Security Code in order to save our middle class client’s money!

Exempt Assets

Some quick and easy items to remember: (1) Here in Florida, your Homestead Residence is mostly safe {other states come after your house to pay for SNF costs}. (2) Your car is also safe. (3) Life Insurance Policies with zero cash surrender value and/or a death benefit of $2,500.00 or less are also safe. And (4), certain IRA’s are also mostly safe from a Nursing Home Spend Down with a little “Elder Law Maneuvering.”