I ponder this question from time to time as I look around at my friends and family. That is, what is the market and what demographic group needs to consider Medicaid nursing home planning? Planning in terms of helping insulate a family’s assets from being spent down to pay for nursing home care before qualifying for need-based Medicaid paid nursing home assistance. Medicare does not pay for nursing home care except for a short, limited post-hospital recovery period.
The average nursing home expense varies by location. Assume Georgia is $6,000 month and that you will stay in a nursing home for 5 years. This will require $360,000. If both spouses end up with 5 year stays, this is $720,000.
For many high-end clients this cost is not material and self-funding is the most reasonable and likely course of action.
But here is an example more broadly regardless of whether you feel you will self-insure or not. What if I fall on the sidewalk, hit my head, and end up in a nursing home for 20 years? My wife and kids will spend down easily $1.5 million or more of our family assets to cover my nursing home care. But, there are ways this family exposure can be limited. One is an inter-vivos QTIP trust.
And, on the other hand, if nursing home care is the result only of old-age, what — for many families who might have a net worth under $5.0 million — should they do for Medicaid nursing home planning, if anything?
The significant hurdle for this under-$5.0 million crowd is the severe Medicaid 5-year look-back penalty rule (that I will cover in my next blog post). What this means is that ad hoc attempts to transfer away assets to kids, etc., if the transfer occurs within 5 years prior to applying for Medicaid nursing home assistance, will result in an ineligible Medicaid penalty period.
So, last minute giving away of assets is no solution. This “giving away” look-back covers virtually any manner of reducing your assets, including gifts, paying grandchildren’s tuition, etc.
Fortunately, there are Medicaid planning options that are effective in helping these families retain assets. And, for most people in this under-$5.0 million range, a minimum Medicaid planning goal, in my view, should be to try and save the family home from being sold and spent down for nursing home care.