Guidance

RESOURCES TO HELP SHAPE YOUR FINANCIAL FUTURE

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Andy Knott, CFP®, J.D., MBA
Senior Vice President
Wintrust Investments

Increasingly, baby-boomer clients are facing the reality of an elderly parent or family member entering a nursing home. Whether it is the sudden onset of a chronic, long-term illness, or a proactive planning meeting, clients are wondering if their life savings (i.e. their home and/or family assets) will be wiped out. With average monthly nursing home costs ranging from $7,000 to $10,0001 it is easy to see how a $2 million estate could be diminished rather quickly.

Ideally, long-term care insurance (LTC) will protect assets from nursing home costs. If LTC is not available—whether because of its relatively high expense or the psychological hurdle that prevents investors from purchasing it while they are healthy—it is possible to pay for nursing home care without going broke in the process.

Medicaid is a federal program administered by the states that has the potential to cover much of the cost of a long-term stay in a nursing home. Qualifying for this public benefit requires passing several asset-based and means-based tests but with the right kind of planning, a long stay in a nursing home does not have to mean complete impoverishment, according to attorney Matt Margolis of Heartland Law Firm in Glenview, Illinois, who specializes in elder law.

According to Mr. Margolis, the essence of the tests is measuring “countable assets.” For example, a home (occupied by the “well” spouse) and an automobile are not counted. Three tests are required:

  1. Asset Test: You qualify for the program if you have a certain need level, somewhat like applying for tuition assistance in college. There are different amounts for single or married as well as some other stipulations.
  2. Income Test: In this test, the applicant and his or her spouse can each keep a
    certain amount of income per month. Any excess income goes to the nursing home; then the state pays the difference.
  3. Look-back Test: Medicaid looks back five years to changes in the size of an estate. Often, recent gift-giving must be “un-given,” otherwise it counts as an available asset and can delay qualifying.

Says Margolis, “Despite the tight rules, within the Medicaid laws are some very strong opportunities to protect yourself. We help families plan appropriately, to get the most benefit as soon as possible.”

 

1. Source: Genworth 2014 Cost of Care Survey for Illinois; Private room daily rate multiplied by 365 days divided by 12 months