When a spouse moves into a nursing home, it brings not only emotional challenges but also financial concerns. The high costs of long-term care can quickly deplete a family’s assets, leaving the community spouse—the spouse who remains at home—financially vulnerable. 

To avoid this, it’s crucial to understand how to protect assets if spouse goes into nursing home. In this blog, we will explore five steps to safeguard your assets while ensuring your loved one receives the necessary care.

Medicaid Eligibility and Its Impact on Assets

Medicaid is a federal program designed to provide health care for individuals with limited financial resources, and it can cover the high costs of long-term care in nursing homes. However, Medicaid has strict financial eligibility requirements. For a spouse to qualify for nursing home Medicaid, your combined assets and income must fall below specific thresholds.

Medicaid classifies assets as either “countable” or “non-countable.” Non-countable assets include items like your primary home, personal belongings, one vehicle, and some prepaid burial expenses. However, countable assets, such as savings, investments, and additional real estate, are taken into consideration when determining Medicaid eligibility.

Additionally, while the spouse moving into a nursing home must meet the asset and income requirements, Medicaid offers some protection for the community spouse. The Community Spouse Resource Allowance (CSRA) allows the spouse living at home to retain a portion of the couple’s assets, usually up to a state-specified limit.

Understanding Medicaid’s rules is the first step in protecting your finances. Without proper planning, your assets could be consumed by nursing home costs before Medicaid even steps in to help.

5 Steps to Secure Your Assets

Securing your assets when a spouse moves into a nursing home requires careful planning and knowledge of Medicaid’s rules. Here are five key steps to help protect your finances.

Step 1: Review and Organize Your Financial Situation

Start by reviewing your total assets, including savings, investments, property, and income. This will give you a clear picture of what you own jointly and individually. Next, categorize your assets to determine which ones Medicaid considers “countable” and “non-countable.” For instance, Medicaid typically exempts primary residences, personal belongings, and a portion of the community spouse’s income.

Organizing your financial situation will help you understand what might be at risk and where you need to focus your protection efforts.

Step 2: Set Up a Spousal Resource Allowance

Medicaid allows the community spouse to retain a certain amount of assets through a Community Spouse Resource Allowance (CSRA). The CSRA varies by state but generally allows the community spouse to keep a percentage of the couple’s joint assets, often up to $148,000. This protects a portion of your assets from being used to pay for nursing home care.

Applying for the CSRA early in the process ensures you maximize the assets you can protect and prevents Medicaid from requiring the liquidation of all assets before qualifying for assistance.

Step 3: Establish an Irrevocable Trust

One of the most effective ways to protect assets is to set up an irrevocable trust. When you transfer assets into an irrevocable trust, they are no longer considered part of your estate, which means Medicaid cannot count them toward your asset limit. This strategy is particularly useful for preserving significant assets like your home or investments.

However, it’s important to note that irrevocable trusts must be set up well in advance, due to Medicaid’s 5-year look-back rule. Consulting with an elder law attorney is crucial to ensure the trust is established properly.

Step 4: Transfer Home Ownership

Your primary residence is typically excluded from Medicaid calculations if the community spouse continues to live there. However, if both spouses plan to move out, you may want to consider transferring ownership of the home to the community spouse.

This strategy ensures the home remains protected, but timing is important. Medicaid may penalize transfers if they are not done within the proper timeframe, so it’s essential to understand the look-back rule to avoid penalties.

Step 5: Implement Spend-Down Strategies

If your assets exceed Medicaid’s limit, consider implementing a spend-down strategy. This involves using excess assets on exempt purchases, such as home improvements, medical bills, or paying off debts. By doing so, you reduce your countable assets while maintaining your quality of life and ensuring Medicaid eligibility.

Spending down must be done strategically to avoid being disqualified for Medicaid. Some families use this strategy to buy necessary items for the home, prepay for funerals, or upgrade vehicles, all of which are exempt from Medicaid’s asset calculation.

Medicaid’s 5-Year Look-Back Rule

A critical aspect of Medicaid planning is understanding its 5-year look-back rule. Medicaid examines any asset transfers or gifts made in the five years before applying for long-term care coverage. If Medicaid determines that you’ve transferred assets for less than fair market value during this period, you may face penalties, which could delay your spouse’s eligibility for benefits.

The penalties are calculated based on the value of the transferred assets. For example, if you gave away $50,000 within the look-back period, Medicaid may impose a penalty period where it will not cover your spouse’s nursing home costs.

To avoid this, any asset transfers or protection strategies must be implemented well in advance of applying for Medicaid. Early planning ensures that your finances are secure, and you won’t face unexpected delays in receiving coverage.

Consult an Elder Law Attorney

Navigating Medicaid eligibility and asset protection can be complex, which is why consulting an experienced elder law attorney is vital. An elder law attorney specializes in Medicaid planning and asset protection, ensuring you stay compliant with legal requirements while safeguarding your wealth.

Some key ways an elder law attorney can help include:

• Setting up irrevocable trusts and other financial structures.
• Maximizing your spousal resource allowance.
• Guiding you through the spend-down process.
• Ensuring your actions comply with Medicaid’s 5-year look-back rule.

By working with an Laywer, you can avoid costly mistakes and ensure that your spouse receives the care they need without sacrificing your financial future.

Final Words

When your spouse moves into a nursing home, the financial impact can be daunting. However, by understanding Medicaid’s rules and taking proactive steps to secure your assets, you can protect your financial security while ensuring your spouse receives the necessary care.

Reviewing your financial situation, using spousal resource allowances, setting up trusts, transferring ownership, and implementing spend-down strategies are essential steps to take. Additionally, consulting an elder law attorney from Safe Harbor Estate Law will provide you with professional guidance, helping you navigate the complex world of Medicaid planning.

The sooner you begin the process, the better protected your assets will be, ensuring peace of mind during a challenging time.