The costs associated with a stay in a nursing home continue to rise higher than ever and show no signs of slowing down. With annual costs exceeding $73,000, living in a nursing home could make short work of one’s life savings if no steps are taken to minimize or offset the damage. But what can you do to help protect yourself?
You need to realize that the majority of health insurance plans do not cover the cost of a nursing home. Medicaid may be of use, but qualifying for its coverage can be tough if you don’t meet the financial criteria. Although these criteria may seem unfair, they were put in place to prevent people from giving away their money in the years immediately preceding their entrance into a nursing home, then expecting the government to pick up the tab.
Despite these restrictions there are ways to get your assets out of your estate, legally, prior to entering a nursing home. One way is to through the use of gifts. The IRS allows up to $13,000 to be given as a gift – tax-free – each year. By making large gifts to your children, you may be able to avoid losing the money to a nursing home; of course, it wouldn’t hurt if your kids placed that money into a trust that’s created for your benefit. Another method is for your children to pick up the costs, which, if they pay at least 50% of the medical costs, allows them to deduct a portion.
John R. Vermillion & Associates, LLC is a member of the American Academy of Estate Planning Attorneys.