A fact that none of us can avoid is that people are living longer than in previous generations. That is a great thing and a testament to the advancements in modern medicine! However, what this means is that with our aging population, it is becoming more and more likely that many of us will spend time in a nursing home facility during our final years.
According to the Center for Disease Control (CDC) an estimated 1.4 million people are currently residing in a nursing home facility. That is an alarming statistic. It is a fact of life that we need to accept that some of us will require specialized care in our older years, and this may occur in a long term care nursing home facility.
First, let’s discussing nursing homes. Nursing homes are expensive. On average the monthly nursing home bill will be a minimum of $5,000 per month and can go as high as $8,000 per month or more. Therefore, on average, the annual stay in a nursing home can range from $60,000 to $96,000 per year. The average stay in a nursing home is estimated at 2.44 years. This means that a person can expect to pay a nursing home facility between $146,400 and $234,240. Therefore, it is very easy to see how people end up spending all of their life savings during their final years in a nursing home.
However, what if you do not have enough money to pay for nursing home care? What do you do? There is a combined Federal and State agency called Medicaid. In Tennessee, TennCare is the name of the agency that runs the state Medicaid program. Under TennCare, if you cannot afford your nursing home care, you can qualify for TennCare who will pay for your nursing home stay.
In order to qualify for Medicaid you can have no more than 1 home, 1 car, 1 prepaid funeral, and $2,000 in other assets including bank accounts and retirement accounts. If you have this amount of assets or less, you qualify for TennCare and TennCare will pay your nursing home bill. However, if you have more than this amount, you will be required to pay for your own nursing home stay as explained above. However, if you are still in the nursing home and reach this minimum amount of assets left in your name, you will qualify for TennCare and TennCare will pay the remainder of your nursing home stay.
Although, there is something to keep in mind. This usually causes the surviving family extreme stress after a loved one passes away. Under the state Medicaid rules, when a person receives Medicaid benefits during their lifetime, after that person dies, or both that person and their spouse passes away, Medicaid has the right to be reimbursed for all of those Medicaid expenses that were paid out during the person’s lifetime.
In many instances, TennCare exercises a lien on the person’s home and forces the sale of that home so that TennCare can be reimbursed for all of the costs that were paid out during that person’s lifetime.
However, there is a legal strategy that you can put in place to prevent spending your assets while in the nursing home and preventing the State of Tennessee from taking your home after you pass away. This is commonly referred to as an Irrevocable Medicaid Trust. How this trust works is that once this irrevocable trust has been set up, which you will be in complete control of during your lifetime, all of your assets will be retitled into the name of this trust. However, if you need to buy a car or a house with the assets in this trust, you will need to make a distribution of the trust to an adult child and can even have the adult child turn right around and give those assets right back to you so you can purchase the house or car. If everything is set up in this manner, then you will not need to spend your own money on your nursing home care and can rely on TennCare to pay your nursing home bill.
However, there is one very important rule. In order to qualify for TennCare when you go into a nursing home and have one of these trusts in place, you will need to set up and transfer your assets into this trust at least five years before going into the nursing home. You see, TennCare has a special rule called the five year look back. If you apply for Medicaid benefits TennCare will ask you whether or not you have any assets that you transferred out of your name in the last five years for little or no value. If you did transfer assets, then Medicaid will likely determine that for the present time you do not qualify.
However, if you transferred all of your assets into an irrevocable Medicaid trust more than five years before nursing home expenses begin, your assets will be protected from you having to spend your money down on those nursing home costs and you can rely on Medicaid to pay those expenses for you. In addition, you will have also protected your home and other assets from TennCare’s estate recovery rights after you pass away. You will not need to worry about your children having to sell the family home so that TennCare can be reimbursed after you passed away. Everything is protected in the irrevocable Medicaid trust.
If you have questions or concerns regarding the proper comprehensive estate plan to put in place for your family to ensure a smooth transition of your wealth to the next generation, then please contact our office for a complimentary visit so that we can discuss your estate planning needs and concerns in further detail.
We look forward to hearing from you!