I was speaking with a nice couple from Franklin, Tennessee recently following one of my educational events, and this couple had a lot of questions about nursing home expenses. This couple told me a story about one of their friends that went into the nursing home and immediately had Medicaid to cover their expenses. This husband and wife couple asked whether this would automatically happen for them when they go into the nursing home.
I explained to this couple that Medicaid is not automatic and there are a lot of different circumstances that go into whether you receive Medicaid assistance. I explained that in order to qualify for Medicaid you need to be of limited financial means and require long-term medical care, such as in a nursing home facility. However, Medicaid allows you to own a home, a vehicle, and a prepaid funeral regardless of value, and then no more than $2,000 in extra assets in your name. If you own more than this $2,000 in extra assets in your name, then Medicaid will force you to spend down your assets. This is referred to as Medicaid Spend Down. In this situation, you will have to spend these extra assets on your own nursing home care until you have no more than $2,000 in other assets in your name. Then, at this point, you will qualify for Medicaid and Medicaid will pay for the remainder of your nursing home stay.
However, after you die, or after you and your spouse die, Medicaid also has what is called its estate recovery rights. I continued to explain to this couple that after you die, your children will receive a letter in the mail from Medicaid requesting reimbursement for all of the costs that were paid out while you were in the nursing home, and Medicaid can actually force the sale of your family home so that Medicaid can be reimbursed for all those costs that were paid out while you were in the nursing home.
I continued to explain to this couple that there is a legal strategy that can be put in place to protect their assets and preserve their assets for their loved ones after they are gone from nursing home expenses and Medicaid’s estate recovery rights. I explained that there is a special kind of trust called an Irrevocable Medicaid Trust. I discussed with this couple that we can set up this trust and transfer all of your assets into the name of this trust, and so long as we complete this strategy at least five years before you go into a nursing home facility, all of your assets will be protected from nursing home expenses and you will immediately qualify for Medicaid. However, I explained, that there are very important rules and certain restrictions put on you with this type of trust, and we should really sit down in my office to discuss this matter further before making any decision or putting in place any legal strategy.
In addition, I explained to this couple that because your family home would be in the name of the Irrevocable Medicaid Trust, this would also prevent Medicaid’s estate recovery rights and its lien against the home after you are gone.
If you have questions about estate planning, irrevocable and revocable living trusts, and avoiding nursing home expenses, please reach out to me before you go see any other lawyer or make any other decision on your estate planning so I can send you our free legal report “Estate Planning in Tennessee,” which goes over all the common questions about probate in Tennessee, Medicaid, nursing home expenses, and protecting your assets for your loved ones.
Also, if you would like to learn more about estate planning, avoiding nursing home poverty, and avoiding probate in an educational environment, please reserve a spot at one of our upcoming live educational events or webinars that we have scheduled this month.