As with most of my posts, this is inspired from interactions I have with individuals that I advise. I have never had to think much about the finances of older people who are in poor health. Luckily for me, my mother is in excellent health and very young. So this topic has never been top of mind for me. But for many folks the sad reality is that they are watching the decline of their parent’s health and have some very real financial issues to deal with.
Most middle class and lower class Americans that need to enter a nursing home do so via Medicaid. The cost of a nursing home is extremely expensive so people can’t afford it. However, you cannot have significant assets and income and qualify for Medicaid. So in order to qualify your parents can lose all of their assets.
Medicaid is a state managed program and thus the rules differ from state to state. Many times individuals will try plan their estate by transferring assets to family in order to qualify for Medicaid. It’s not that easy, the Federal Government will “look back” 5 years to see if you have transferred assets (cash, house, securities, etc). If you have done so, you are penalized by losing eligibility for Medicaid. This can put a family in an terrible quandry.
For example, say Grandma Maloney gifts $10,000 to her granddaughter to go to college. Four years later, Grandma falls and breaks her hip and needs to enter a nursing home. Grandma will be ineligible for Medicaid for a period of time because she transferred assets during the last 5 years.
Home equity can also preclude you from Medicaid eligibility. Individuals with equity of over $500,000 in thier home are also ineligible. For many seniors that have their home paid off and live in expensive parts of the country this is common.
What To Do?
This post is not meant to be a resource for what to do. The rules differ significantly from state to state and each individual’s circumstances warrant unique planning. Heads up and plan well!
Please contact Dollars & Sense Education to bring our seminars to your company or organization!
Dollars & Sense Education – Raising Your Financial IQ!