WHAT IF MY SPOUSE NEEDS NURSING HOME CARE?
Paying for the High Cost of Care. Today in the greater Boston area the cost of nursing home care averages more than $100,000 per year. The three main ways to pay these staggering costs are:
(1) Long-term care insurance (LTCI), an insurance specially designed to pay for this care; (2) payment by the nursing home resident and their spouse with their savings and possibly the sale of other assets; (3) attaining eligibility for MassHealth/Medicaid who will then make payments directly to the nursing home.
Obtaining MassHealth/Medicaid eligibility has become more difficult after changes in the law made in February, 2006. Despite those changes, proper planning can help families protect assets.
Mass Health/Medicaid Eligibility. Married couples have different eligibility standards than single individuals. A single person will be eligible for MassHealth if they have less than $2,000 of countable assets. When married, the nursing home spouse must have less than $2,000, but the spouse at home is allowed to keep an additional $101,640. The family home is also protected for the community spouse. All other assets in excess of the total $103,640 allowed, must be spent before MassHealth will pay.
Financial Losses for Spouse at Home. Married couples facing nursing home care are usually retired and living on fixed incomes. Typically they have retirement accounts and bank funds which produce income to help pay bills. If all assets in excess of $103,640 must be paid to the nursing home, then the financial health of the spouse at home is threatened. The payout of all the excess assets to the nursing home not only reduces the principal, but also the income that it produces. This payment of assets to the nursing home can impoverish the spouse at home. In addition, the financial situation often deteriorates if the nursing home spouse’s retirement benefits die with them. The spouse living at home then incurs the loss of retirement funds, bank funds and the spouse’s retirement or pension income. This sad situation can be largely avoided with proper planning.
PROTECTING THE SPOUSE AT HOME AND THE FAMILY’S ASSETS.
Long-Term Care Insurance. Long-term care insurance (LTCI) is the only insurance that pays for lengthy nursing home admissions. Most policies will also pay for care in assisted living facilities and for home health care. The premium for LTCI can be substantial and differs dramatically based on age and amount of coverage. Good LTCI coverage will substantially protect the spouse and family’s assets. This insurance is a worthwhile option to consider.
Annuity For Spouse at Home. Current Mass Health regulations limit the nature of the annuities that can be purchased if nursing home care is required. By paying careful attention to the annuity regulations a spouse at home can make an annuity purchase and protect a substantial amount of any assets in excess of $103,640. This unique annuity must return all the purchase money to the spouse at home within their life expectancy and begin making payments back immediately after the annuity is purchased. As an example, a couple who had $303,640 in the bank could protect the first $103,640 for the spouse at home and the nursing home spouse. The at home spouse then can purchase an annuity in the amount of $200,000.00. In this manner all assets could be protected.
Transfers To Spouse. Transfers to the spouse who remains at home is often a long term benefit to the family. It is common for the family home to be transferred from joint ownership between husband and wife to sole ownership. In conjunction with a properly drafted Will, this transfer will serve to protect assets if the spouse at home dies first.
Changes To Spouse’s Will. The Will of the spouse remaining at home should be changed so that assets do not pass directly to the spouse in the nursing home. Without this change, if the nursing home spouse is the second to die, then all assets may have to be used to pay for nursing home care. The needs of the nursing home spouse will be protected by directing their share in the Will to an appropriate trust.
OTHER TRANSFERS. One of the changes in the law made in February, 2006 adversely effects transfers. Now transfers made within five years of requiring nursing home care can create an eligibility problem. These ransfers may still protect assets but they must be made sooner rather than later.
CONCLUSION. Careful planning can provide options that will help protect the financial well being and independence of the spouse at home. Early planning options for the purchase of long term care insurance or transfers of assets remain effective. Other planning options including the purchase of an annuity for the spouse at home, transfers to that spouse, and changes to estate planning documents also can be helpful.
Please note that this is a general and somewhat simplified description of a complicated issue. Please be sure that you obtain professional advice and carefully weigh all options before any planning strategies are implemented.
As always, the attorneys at Russell, McTernan, McTernan & Fruci, LLP will be happy to answer any questions that you may have regarding these issues.
Disclaimer
The contents of this article do not include all of the significant aspects of each law discussed. Under no circumstances should you consider the article legal advice. If you wish to have additional information or to discuss any other legal matter, please contact us to set up an appointment for a 30 minute free consultation.