A Medicaid Asset Protection Trust could be your best solution for future nursing home costs.

One of the primary concerns of many senior citizens is passing along their assets to their children and grandchildren. They are aware that a serious illness can rapidly deplete a lifetime of savings and threaten their home. In the past, older couples would sometimes get divorced in a last-ditch effort to save something for the surviving spouse.

Nursing home costs have skyrocketed, with Wisconsin’s costs being higher than the U.S. median costs. An assisted-living facility can be expected to cost over $42,000 per year. Expect to pay about $100,000 a year for a private room in a nursing home. Long-term care insurance covers a percentage of nursing home costs, but most seniors do not have this coverage.

Medicare doesn’t cover long-term nursing home care.

Medicare will not pay for a lengthy stay in a nursing home, although it will cover brief stays, such as for rehabilitation after a serious illness or surgery. Health insurance policies either have a similar program or do not cover nursing home care at all. While some people can afford to pay for extended care in a nursing home (one or more years), most people would find it extremely difficult financially.

The traditional approach to gaining coverage for nursing home expenses is risky.

Traditionally, parents would legally impoverish themselves by “gifting” their assets to their children to become eligible for Medicaid and thus have their nursing home care costs covered. Although the intent was to have those assets used for the benefit of the parents, that could prove to be a risky choice. Adult children’s debts, divorces, accidents, and other crises could divert those assets away from the parents.

A trust will protect your assets more effectively.

It’s important to understand that there is a waiting period before asset protection trusts can take effect, so it’s essential to establish a Medicaid Asset Protection Trust before it is needed, ideally. The purpose of the trust is to protect important assets and, after the waiting period, allow the parent(s) to become eligible for Medicaid benefits, particularly nursing home coverage. The parents retain control of certain aspects of the trust; they can change the trustee or beneficiaries or appoint a trust protector.

For Medicaid purposes, the assets contained within the trust are not counted; they will not prevent Medicaid eligibility. Also, when the parents die, the trust assets will be distributed to family members and are not subject to either probate or collection/repossession by Medicaid.

Medicaid rules are complex.

If you’re concerned about the impact of nursing home costs, we’d enjoy discussing your situation and reviewing your available options. At Horn & Johnsen SC, we believe in taking the time to learn about you and your family. If a Medicaid Asset Protection Trust would be the best solution for you, we’ll design a trust that will reflect your needs and desires.