You Don't Want to Go Broke in a Nursing Home?
While ignorance may be bliss, that bliss may be short-lived once things go awry with your health. For this reason, in 2020 this article will focus on how a little knowledge and preparation can drastically improve your life journey when you have physical or mental impairments.
Let’s begin with a major concern of seniors – the possibility of going broke in a nursing home. Considering that the average cost of a skilled nursing facility in West Virginia is now over $10,000 per month, this may be a valid fear.
The worst-case scenario for a long-term care issue is where a person needs skilled nursing home care but has not adequately prepared. As a result, they may spend their life savings very quickly. Elder law attorneys often refer to this scenario as a “crisis” case. Unless a person has a substantial income or savings, it is challenging to spend $10,000 per month for any amount of time and still have sufficient assets to return home with the same standard of living they had prior to the crisis. Once the person has spent their assets other than $2,000, a home, a vehicle, and perhaps a small life insurance policy, they may qualify for long-term skilled care Medicaid.
A court-ordered conservatorship may be required if the person does not have the capacity or general durable power of attorney. A conservatorship is a process by which the court names an individual to manage the finances of a person who no longer has the capacity to do so. The court continues to monitor the management of that person’s finances by requiring an annual accounting to be filed.
The best-case scenario involves some pre-planning in advance of a potential long-term care event. The level of planning may vary depending on the person’s family, assets and income, but a general durable power of attorney for financial decisions is almost always helpful. Executing this document does not limit your ability to manage your own affairs, it just appoints an agent who has a fiduciary duty to act on your behalf as well. Even if you have the capacity to understand the decisions that are being made on your behalf, being unable to travel to your financial institutions or attorney’s office during a health-related event can make it difficult for you to manage everything personally.
An additional pre-planning step may be to purchase long-term care insurance of some sort. There are various options that have changed over the years, so it may be worth investigating whether insurance would be a good option for you. Many seniors mistakenly believe that their Medicare or Medicare supplemental insurance will cover this, but unfortunately, the most Medicare alone will pay is 20 days of care and combined with your supplemental insurance 100 days of care.
Another valuable tool may be an irrevocable trust that is designed to specifically for this purpose. These trusts are drafted quite differently than those trusts that have been used in the past to avoid estate taxes. They are drafted to complete the gift to the trust for Medicaid purposes without having adverse consequences for highly appreciated assets. These trusts work best when they are done at least five years prior to the person needing and applying for long-term care Medicaid. These types of trusts are often used to protect real property, investments, or even life insurance.
Next month, we will look at the pre-planning best-case scenario in more detail to see how it simplifies a crisis plan.