Asset protection can mean different things. For instance, if you are a surgeon, or a hedge fund manager, or  you just sold your business, asset protection techniques and strategies are different from someone interested in protecting from loss due to a potential future stay in a nursing home. This article is about asset protection to prevent loss of wealth due to a stay in a nursing home.

I Took Care of You, Now Return the Favor

As a protection from nursing home costs, you could have your kids take care of you. I’ve had clients come to my office with the child who is the candidate for this honor. Sometimes the child doesn’t know this. They sit in front of my desk and let me explain asset protection strategies. When I get to the nursing home issue, the parent confidently pronounces “if my son doesn’t take care of me, then he’ll get nothing when I’m gone.” Then they look over at the (middle aged) child sitting next to them – eyebrows raised. “Isn’t that right son?” they say.

It’s important to consider: is the caretaker child in a position to help?

Can you age in place?

I have seen this work. But it doesn’t work for everyone. Often the caretaker, in their late sixties, after having taken care of the parent for ten or fifteen years, asks for some legal advice. What do they want to know? Is there going to be a lien on the house. I ask some questions. Many times, things have worked out well. Sometimes they have had a Mainecare home care aid coming to the house for years (see Option 8 Aging in Place). They ask me if there will be a Mainecare lien on mom’s house when she passes away to pay back the state for those ten years of home aids. I analyze their situation and apply the law. If necessary, we put a plan in place to prevent the possibility of a Medicaid lien. But for Option 7 to work, the caretaker child must be willing to take on this responsibility in the first place. They should also be economically capable of doing it. If a well-meaning son or daughter takes on this responsibility, and then subsequently loses their job, or jeopardizes necessary income sources, it is a recipe for failure.

Here is an important thing to know: there may be a way to give the house or other assets to the child who is taking care of their parent at home. The issue arises when the parent has to go into a nursing home after the child has been taking care of the parent for a number of years. What many people do not realize is that they must document the proof of this arrangement before the years start to pass.

I’ve had clients who took care of a parent for years. Then, the parent must go into a nursing home. The child then realizes that the nursing home will cost ten or twelve thousand dollars a month. The child comes to me and says, “but I’ve taken care of mom for the last five years. Can’t I get credit for that?” Unfortunately, many times, the answer is no. But if they had come to me in the beginning, we could have set up a plan that allowed the child to get credit for the care. Timing is very important. I’ve had child caretakers go to attorneys and ask that very question, and get the wrong answer. That is why it is important to get the information from an elder law attorney. Mainecare rules are complex, and constantly evolving.

Can Your Children Take Care of You?

Many children would love to keep their parents at home, but simply cannot do it. They have jobs and kids and are simply trying to keep it together without also turning their house into a residential care facility. But still, statistics have shown that the longer you are able to stay at home, the less likely you will need a stay at a nursing home. And if you do end up going into a nursing home, then the stay is much shorter. There is an asset protection plan that takes both into consideration. In upcoming options you’ll learn how you can plan to qualify for benefits to help you age in place, maintain control of assets you give away, and if the time comes, qualify for a nursing home.

Some key takeaways for having your kids take care of you as an asset protection strategy:

You may be able to get credit for payments to your child for rent, or caregiving, but only if you have an agreement before the caretaking starts

If you must go into a nursing home after being with your kids for years, your kids may be able to get credit for that care

To get credit you must comply with the local Mainecare practices for documentation and proof.

Long Term Care Insurance & State Plans
In order to encourage people to buy Long-Term Care Insurance, the States have formed partnerships with insurance companies. The theory is, if you buy the policy, and offset the cost of long-term care for a number of years while you are in a nursing home, the State will pay for the rest of your stay. The State puts it this way: “The purpose of the Maine Long-Term Care Insurance Partnership is to make the purchase of shorter-term more comprehensive long-term care insurance meaningful by linking these special policies (called Partnership qualified policies) with Medicaid for those who continue to require care.” If you purchase a shorter-term policy, and you need care after the term ends, MaineCare will pay the care going forward.
Long Term Care as Part of Life Insurance

In determining your eligibility for MaineCare benefits, MaineCare will not take into account your assets equal to amounts paid out under a qualifying long-term insurance policy.

For example, if you purchase a Partnership policy and it pays out $50,000 in benefits, MaineCare will disregard $50,000 of your assets when determining your eligibility for assistance with long-term care costs.

There are mainly two types of Long Term care solutions.    The first being a monthly premium paid to provide assistance up to a max benefit base. For example, $480 premium per month for a 78 year old provides $3,600 a month in long term care expenses “in home nurse care or accredited nursing facility” for a term of 6 years, ($259,200 in total coverage).  This could be invaluable to a client looking to deduct $259,200 from MaineCare assets for eligibility.

The second primary LTC program is a life insurance hybrid.  Single premium lump sum deposit provides a total coverage benefit for a set amount.  Usually  3 to 4 times the single premium.  $100,000 single premium amount for a 78 year old would equate to $300,000 to $400,000 in coverage with a monthly benefit amount of $4,861.

Each program has its benefits. The monthly premium payment programs qualify for the partnership policy however the benefit amount can be reduced over time if the insurance company applies to the resident state for a reduction in benefits.  If approved, clients can be faced with an increase in premium, reduction in benefits or policy cancelation.

The single premium benefit programs are protected day one with a paid in full policy, and benefits cannot be adjusted or reduced. However, the single premium benefit programs often times do not qualify for the partnership provision.

As with any type of insurance; benefit amounts and qualification can vary dependent on a client’s health history.  If you are unsure, your agent can submit an application, and review the benefit amounts and premiums, and then determine whether it makes for you.

There are also options to convert an IRA into Long Term Care insurance with a Tax-Qualified Annuity.

I only include this, because, even after twenty years of trying to discourage this idea, people still tell me that divorce is their Mainecare approval plan. Most recently a CPA, a seasoned professional asked me if a couple should divorce to qualify for Mainecare. What troubled me was not that she asked, but that she simply wanted me to confirm her belief that refusal to pay or divorce was a good plan to get Medicaid to pay for a nursing home. There is presently a hardship rule under the Mainecare/Medicaid rules for an applicant who can’t get money they may be entitled to. If a spouse refuses to pay, it is possible the nursing home, or institutional spouse may still be approved for Medicaid. However, it is not automatic. A guardian could be appointed to sue the non-cooperative spouse or other person who has the money and refuses. The interpretation and application of this rule varies wildly by the state. This is another reason why DIY’ing an asset protection plan is NOT a good idea. Because the rules are complicated, and they vary by state, and they are always evolving, you should get the advice of a qualified, experienced elder law and estate planning lawyer.

I Do, But Now “I Don’t”

“Well”, says the husband and wife, who have been married for fifty years, “we’ll simply get divorced”.

Think back to Option 5, the annuity. In the annuity plan, if you recall, it is important to know ahead of time who is going into the nursing home. Similarly, with the divorce or refusal to pay, it is important to know who needs nursing home care. Single people have lower resource and income limits. That means they are not allowed to own as much property and still qualify for Mainecare nursing home coverage. What if the divorced spouse with more income ends up needing the nursing home? What if the couple divorces and the ex-spouse is sued by DHHS?

Also, transfers to a spouse, currently, are exempt transfers. So, in a Crisis plan (remember Crisis vs Preplanning distinction from Option 5?) as I was saying, in a Crisis plan, we often make exempt transfers from the Institutional Spouse to the Community Spouse. But wait, you’ve divorced so we can’t use that rule anymore. Put aside the fact that the divorce could be construed as a form of fraud. So, refusal or divorce could cause you to be sued for support payments. But you could also have better Crisis planning options as a married couple. “But” you ask, “didn’t you tell me that there was an asset protection plan that qualifies me or my spouse for benefits to help us age in place, maintain control of assets we give away, and if the time comes, qualify us for a nursing home?” Yes, that is coming.

Time is an important factor in preserving assets.

So, you preserve around fifty percent immediately, and in the months to come, if you stay out of a nursing home, save more – and after 60 months save everything. Option 2 sounds like it includes protecting most or all of your money and your house, while at the same time maintaining some benefit and control, and also getting the benefit of the property you give away. If this is true than why don’t more people do it?

Time is an important factor in protecting assets.

People are doing it. You just haven’t had asset protection explained to you yet. You are faced with the possibility of a nursing home, but put off making a plan because it is not a certainty. But there are more benefits to this plan. This plan can also give your beneficiaries protections after you’re gone. You can protect your surviving spouse from nursing home liens. You can protect your kids and grandkids from divorce, substance abuse, bankruptcy, and lawsuits as well. But you can’t do any of those things if you don’t make a plan.