The average cost of a nursing home ranges from $50,000 per year up to $92,000 per year (for a private room), which is simply out of reach for many older Americans. In Massachusetts the number can exceed $150,000 annually.  That can deplete your resources quickly, and no one wants to see their life’s savings disappear before it can be left to the next generation.

Luckily, there are programs like MassHealth, which help provide care for low-income individuals.

Will you have to sell or give away all of your assets just to pay for your health care?

Generally, no—but you’ll need to carefully plan, so that a potential nursing home stay doesn’t drain your resources before you can go home. You can’t hide assets from the government, but there are ways to legally shelter them. A skilled estate planner can assist you in strategically gifting, transferring or holding assets in trust.

Gifts and Transfers

There are several exempt categories where you can gift assets to others before you need nursing care including:

• personal effects;
• income-producing property; and
• certain pre-paid funeral expenses.

In some cases, you may also be able to gift your home and retirement funds to others, but they may be liable for a gift or capital gains taxes.

Making gifts may protect assets from your creditors but could expose them to creditors of your children. Consult with an estate planning attorney so that your loved ones aren’t surprised by hefty fees. You’ll want to consider whether they can afford to accept your gifts should there be tax liability.

Irrevocable Trusts

Perhaps you’ve heard of a “Medicaid/MassHealth trust”—it’s an irrevocable trust that’s designed to protect your assets so that long-term care won’t deplete them.

With an irrevocable trust, assets such as your home would be put into a trust and you would name a trustee to oversee the trust. You would no longer be the owner of property placed in an irrevocable trust but often times, especially in the case of your family home, you could use the property during your lifetime.

You should know about the MassHealth five-year look back policy.

Assets in an irrevocable trust are subject to the MassHealth five-year “look back” policy. The government will examine your wealth transfers for the past five years to determine your eligibility for long-term care benefits. If your home has been in a trust for five years and later sold during your lifetime, the proceeds won’t affect your MassHealth eligibility.  Assets transfered under five years ago will be considered and benefits pro-rated accordingly. An estate planning and elder law attorney can help you advantageously plan.

Life Estates

You can also hold your home in a life estate to shelter it’s value from MassHealth. With a life estate, someone else will own the property and you will be a tenant in the home for the rest of your life. After your death, the designated beneficiary will take possession.

A life estate is also subject to the five-year look back plan, but unlike an irrevocable trust, if the home is sold during your lifetime, the proceeds will be counted against your MassHealth eligibility requirements and may be exposed to creditors of your beneficiaries. As always, there will likely be tax ramifications with this and an irrevocable trust, so you should consult a specialist before making any decisions.

Next Steps

Learn More: read about Estate Planning and also Elder Law.

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Create a Plan: speak to an estate planning specialist at Baker Law Group in Hingham MA. We can discuss the best method to protect your assets while planning for your health care needs.  Call 781-996-5656 or toll free at 800-701-0352. Email info@MBakerLaw.com.

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