How do I save my house if I have to move into a nursing home?

We get this question a lot.  It usually goes something like this:  “The government is trying to take my house and all my money now that I’m in a nursing home!”  Or, “The nursing home is trying to take my house and all my money now that I’m in a nursing home!”

Let’s back up a little.  The first thing to know is that, if you’re in a nursing home, the nursing home does not want your house, or your stuff.  They don’t even necessarily want YOUR money.  All the nursing home wants is to get paid.  It doesn’t care whether that payment comes from you, or your family, or Medicaid.  It’s a business, and like any other business, to be profitable, it needs to be paid for the care it provides.

The second thing to know is that the government doesn’t want your house, your stuff, or your money. It just wants to make sure that, if it’s paying for your long-term care via Medicaid, you are a citizen who actually needs to have your care paid for.  Medicaid was designed to support those in poverty.  In order to ensure this policy aim of Medicaid is achieved, the government has to scrutinize whether you are someone who, in fact, is unable to pay for long-term care with your own assets.

Now, that being said, there are some ways an attorney can help you plan for an eventual need for long-term care in a way that does protect your assets to the greatest extent possible.  Folks can set up certain types of trusts over 5 years in advance of needing long-term care that can protect assets in the event they do need to pay for a nursing home later.  Of course, these trusts have some downsides, including the fact that you are turning over control of your assets to someone else who serves in the role of Trustee.

Some folks are advised to deed their house to their kids in their older age and keep their fingers crossed that more than 5 years will pass before they need long-term care.  We very rarely advise people to do this, as once the house is deeded over, you have no control over what may happen to it!  (Your child may go rogue, creditors of your child may attach liens onto the house, it may get taken by an in-law if your child gets divorced, etc.).

The good news is that Medicaid does not require applicants to sell their houses as long as there is any “intent to return home” following the stay in the nursing home.  There is always some possibility of returning home, even if only on respite care.  Therefore, the house is generally excluded from any Medicaid eligibility determination.  Medicaid will, however, attach a lien onto the house for any money it pays for the covered person’s care.

There are other ways to protect your house and assets when a Medicaid application is imminent.  Rules allow for you to transfer the house to a child who has lived in the house and provided care for you during the previous 2 years, without penalty.  The house can also be transferred to an adult disabled child, again with no penalty.

Assets can be spent on various items to benefit yourself and save money down the road while helping you speed up the process of qualifying for Medicaid.  Moreover, if you have an adult disabled child, you can transfer money to a “sole benefit trust” for that child, without any penalty from Medicaid.

There are some ways that assets, including your house, can be salvaged when planning for and transitioning into long-term care.  It’s really not a bad idea to start thinking about long-term care when setting up your estate plan.  We also regularly refer clients to financial planners who can discuss the pros and cons of considering long-term care insurance as a component of your estate and financial planning.

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