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Nursing Home Care: Protecting the Nest Egg

If you have a family member or close friend who needs or will someday need nursing home care, you must learn about the alternative ways in which this $60,000 annual cost of care can be paid. This issue is so important because such costs can quickly emaciate an estate. If one spouse is in a nursing home, the other can quickly become impoverished.

Medicare does not pay the ongoing cost of care and very few people have long-term care insurance. This means that the cost of care is initially paid out of private resources. The average cost is close to $5,000 per month. The other alternative is to look to Medi-Cal, California's version of the federal Medicaid program.

Eligibility: Many Surprises
One need not be impoverished to qualify for Medi-Cal. If one spouse is in a nursing home, for example, that individual can have no more than $2,000 in his name. The spouse at home, however, can have a minimum of $90,660 (in 2003) in cash, stocks and bonds. Moreover, a residence of any value is "exempt," meaning that its value is simply not counted in determining eligibility.

Income Protections
Congress also wanted to be certain that the spouse living at home has a reasonable level of income to pay her monthly cost of living. The law provides that the spouse living at home can keep the greater of all income arriving in her name (regardless of the amount) or a minimum of $2,267 each month. If, for example, their combined income totals $2,100 per month, the spouse at home keeps every penny.

Planning Opportunities
The spouse at home can keep a minimum of $90,660 in her name while her spouse qualifies for Medi-Cal. It is possible to double or even triple this level of protection in appropriate circumstances by obtaining a Court Order that increases the level of protection. This means that $150,000, $250,000, and sometimes even more can be protected for the spouse still at home.

Many individuals facing the cost of nursing home care wonder if they can simply give away their money to their children and then qualify for Medi-Cal. If cash is given away, an individual will be ineligible for Medi-Cal for the number of months the gifted money would have paid for nursing home care. A $13,000 gift, for example, would make an individual ineligible for Medi-Cal for three months. It is often possible, however, to carefully structure gifting so that the period of ineligibility is minimized.

There are many other planning strategies allowed by the law. The goal of this article is to emphasize the fact that options exist, and an estate can typically be protected while achieving Medi-Cal eligibility to help pay all or some portion of the cost of nursing home care.

Watch Out for the "Estate Claim"
If an individual receives Medi-Cal benefits and owns an interest in her residence at the time of death, the state will assert an "Estate Claim" to recover all Medi-Cal benefits that had been paid. This is a trap for the unwary. Many realize that the house is exempt, achieve eligibility, and then relax. Family members are astonished when confronted by estate claims (ranging from $50,000 to more than $300,000) that are levied against the house after a parent's death. This can be avoided.

California law currently allows an individual to transfer a residence to one's spouse or children without causing any problems whatsoever with Medi-Cal eligibility. A person can be receiving Medi-Cal and transfer the residence without disturbing eligibility. Doing so, however, raises many tax issues that must be carefully addressed.

This is a very complicated area of law. Rest assured that Gilfix & La Poll Associates LLP can protect the family nest egg with careful, sophisticated planning.

Note: This article provides information, it does not constitute legal advice. 

Gilfix & La Poll Associates LLP attorneys practice elder law and estate planning and are available to answer any questions about Trusts, Durable Powers of Attorney for asset management, Advance Health Care Directives, and any other appropriate planning options.