With over 1.4 million Americans living in nursing homes nationwide, there’s a good chance that you will consider nursing care for yourself or someone you love at some point. Whether that decision is close at hand or further down the line for you, being financially prepared requires some forethought. This guide will help you understand what happens to your assets if you go into a nursing home and how you can protect them for the benefit of your loved ones.
Will a Nursing Home Take My Assets?
Nursing homes do not take assets from people who move into them. But nursing care can be expensive, and paying the costs can require spending your income, drawing from savings, and even liquidating assets.
Neither the nursing home nor the government will seize your home to cover expenses while you are living in care. However, if you run out of funds to pay for the care you need, your estate’s assets may be taken after your death to cover those costs.
Based on the Medicaid Estate Recovery Program (MERP), the state can seize assets from your estate after your death to recover money your state’s Medicaid program spent on your care expenses. If you do not use Medicaid to pay for nursing home care but die while owing the nursing home money, they could file a creditor claim against your estate. In either case, a claim against your estate could require selling your home.
You can avoid the state or a nursing home taking your house in several ways. The simplest is to ensure you can cover all your long-term care expenses so no claim arises. If that is not possible, asset protection strategies like transferring ownership of your house to a trust can protect it. There are also cases where your house becomes exempt from recovery claims, such as when your surviving spouse still lives there.
What Does Nursing Care Cost in Tennessee?
Nursing home costs in Tennessee vary depending on your location, whether you choose a shared or private room, and the extent of care you need. Costs will likely increase over time with inflation and demand. In 2023, the average annual cost to live in a nursing home was $104,000 for a semi-private room and $116,800 for a private room. Typically, this price includes your room, medical care, and sometimes meals and amenities.
How to Protect Assets From Nursing Home Costs
If you want to protect assets from nursing home costs and leave a secure legacy for your loved ones, your priorities are:
- Ensuring you can cover all nursing home expenses to avoid claims against your estate.
- Arranging your assets to safeguard them in case any claims do arise.
Several financial strategies can help you cover care costs and protect your assets. You should consult an asset protection attorney to find the best plan for your situation, but the following four strategies may work for you.
1. Medicaid for Nursing Home Coverage
If you meet the eligibility criteria for Medicaid coverage, this can help pay for nursing home care. Medicaid — TennCare in Tennessee — is a state program for people who need help affording medical care. Eligibility is based on your income and the countable resources in your estate. Medicaid is a valuable source of financial relief for those who need it to meet their later life care needs, but it has drawbacks:
- Limitations: Medicaid will limit your options for where and how you receive nursing home care, compared to paying with your own resources or long-term care insurance. It may not cover all the costs for the care you want or need, leaving you or your family responsible for the rest.
- Reimbursement: The state may recover your nursing home care costs after your death by claiming against your estate. This could cause your intended beneficiaries — your loved ones who would gain from your estate — to lose out.
Because of these drawbacks, you should only rely on Medicaid to cover nursing home costs if your savings, investments, and insurance are insufficient. If you opt for Medicaid, consult an estate planning attorney and use asset protection strategies like gifts and trusts to secure more of your legacy for your loved ones.
2. Long-Term Care Insurance
Buying long-term care insurance in Tennessee can secure coverage for nursing home costs, avoiding the need for claims against your estate after death. Long-term care policies are often more comprehensive than Medicare or regular health insurance for nursing home expenses. These policies also give you more options than Medicaid for your choice of care facility.
If you want long-term care insurance, you’ll need to check that you qualify and budget for the premiums. Ensure you understand the options and the extent of coverage you have with your policy, as you may need to cover some costs out of pocket. Remember that your insurer may raise premiums in the future.
You can also explore hybrid life/long-term care policies that pay out coverage to a designated beneficiary if you pass away before claiming benefits for care.
3. Gifts to Loved Ones
If you want to guarantee your loved ones will receive part of your legacy, you can gift money or assets to them before going into a nursing home. Giving your loved ones financial gifts ensures they receive what you intend for them to have rather than keeping all your financial assets in your estate, where they could become vulnerable to claims after your death.
If you want Medicaid to help pay for nursing home costs, gifts can also reduce the value of your estate, helping you qualify. If this is your plan, give these gifts more than five years before you apply for Medicaid, as there is a five-year look-back period during which your transactions affect your eligibility. Asset transfers in the five years before your Medicaid application may result in ineligibility or a penalty period during which no Medicaid benefits kick in. The length of this period depends on the value of the gift.
4. Asset Protection Trusts
Another way to protect money or assets for your loved ones is by setting up an asset protection trust account. Assets in a trust are no longer part of your estate. Instead, they belong to the trust, under the management of a trustee you appoint. Putting your assets in a trust keeps them safe from claims against your estate and reduces your estate’s value if you want to apply for Medicaid. The five-year look-back period applies here as with gifts, so set up your trust as early as possible.
Protect Assets From Nursing Home Costs With Crow Estate Planning & Probate
Protecting assets from long-term care costs can be challenging. You need to know your options and how they fit your situation and your state’s laws. The attorneys at Crow Estate Planning & Probate are dedicated to asset protection and estate planning law in Tennessee. If you’re a Tennessean wanting peace of mind about your assets going to your loved ones, Crow Estate Planning & Probate can help protect your legacy.
Contact us today to book a free consultation and learn how we can help you protect your assets.
