How to Protect Your Assets From Long-Term Care Costs

Here in Wisconsin, the average cost of a night in a private nursing home room is $273, or just shy of $100,000 per year. 

Stays in skilled nursing care can range from just a few days to years on end, so the cost of end-of-life care can quickly escalate beyond even the most strategic family’s savings. And nobody knows what their needs will be…so it’s hard to plan!

Nursing homes are one of the most common causes of angst as we talk to families about the sources of income they’ll have in retirement, as well as their estate assets and goals. Here are a few key questions and ways to think about the nursing home wild card as you put together a legacy plan:

1. Where is Your Focus?

I’ve lost two parents in the last few years, and that’s made my siblings and I take an honest look at our priorities, our spending, and our goals for our lives. I ask myself often—and I urge my clients to ask themselves—whether I’m focusing in the right place. I can spend my whole life working extra and saving and stressing about future expenses that may never come, or I can enjoy my life, within reason, and trust that things will work themselves out. Have a plan, yes! But all of the following approaches, and legacy planning in general, should follow a healthy commitment to “majoring on the majors,” if you will. 

2. Can You Give More During Life?

We are legacy planners, so obviously we spent a lot of time talking to individuals and couples about what they want to happen to their assets after they’re gone. But often, once we help put some solid numbers together for what they can expect for retirement income, people realize they can begin to be more generous—with both their kids/heirs and causes they love—during life. It can start now!

So ask yourself: are there things you can do during your life that would bring you joy, and might have the added benefit of simplifying your estate assets for your family someday? 

Can you gift the family cabin, or give cash gifts, to your kids? Can you take a dream vacation together, and make amazing memories, instead of leaving more to your family after you’re gone? And when it comes to your place of worship, your alma mater, or other favorite nonprofits, can you afford to give a major gift now? It could be through a gift of real estate, an IRA Rollover, or a creative, non-cash gift like stocks, crops, or a gift in kind. Instead of initiating a major gift after you’re gone, perhaps you could set up an endowment fund now so that you can witness the impact of that gift for years to come.

3. Where Does Nursing Home Funding Come From?

Medical costs are covered by a variety of funding sources. Depending on the age and financial situation of the patient, traditional health insurance may cover some nursing home costs, with out-of-pocket payments to meet the excess. 

In the United States, anyone over 65–or anyone who has received Social Security Disability Insurance checks for more than 24 months–typically qualifies for Medicare. Medicare covers some nursing home expenses.

Medicaid, on the other hand, is need-based, and eligibility is determined by income level and family size. Medicaid also covers some nursing home expenses, but both have certain requirements for their use in this way. Medicaid also has what’s called a “5-year lookback” so, if you or your family do not pay your nursing home expenses in full, and assets are just sitting in your will (which is a public document), assets that you’ve held in the last five years may be garnished to pay off that bill. 

4. Should You Consider Long-Term Care Insurance?

Another source of medical funding can come from long-term care insurance, which is a policy specifically designed for skilled nursing care like we’re talking about here. Many such companies exist, and like life insurance, premiums are based on age and gender. If nursing home costs are stressing you out, and you can afford the premiums, this might be a great option! Just be sure you understand what your policy will actually cover; some will cover up to a certain dollar amount per day, and depending on the policy, there may be different coverage for assisted living versus nursing home care versus in-home care.

5. Can You Start a Family Trust?

One of the major benefits of a trust is that the documentation, and assets therein, are no longer accessible by the public (as they would be in a standard will). Here’s a basic overview of a will versus a trust, and how they might work together in a legacy plan. 

So, if you know you have more assets than you will reasonably use in your lifetime, but you’re worried about some of those assets getting liquidated to pay for long-term care, consider setting up an irrevocable trust to hold real estate, post-tax retirement funds, or other appreciated assets. Keep in mind that some trusts are revocable, which means those assets are not protected because you’re still in control of the assets and can reverse the trust at any time. If you set up an irrevocable trust, the assets essentially become the property of a new entity, the trust, and thus your personal estate becomes substantially smaller and less susceptible to nursing home costs.

These are some key questions I often ask clients, but know that every situation is different. If you’re interested in talking through what a future extended nursing home stay could mean for your family and your legacy plan, a consultation might be a great option for you!


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