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Law Offices of Ronald W. Rutz
Senior Voice Archives

August 9, 2001: Nursing Homes: An Overview

Q: I am very concerned about going to a nursing home and losing everything. I know you have spoken and written on this before but please touch on this in the Senior Voice.

A: Figures vary a bit among different sources but the following will give you a feel for the big picture. In general the average stay in a nursing home is a little more than 13 months. And in general, for the population over 70 years, about 20% of the group will never be in a nursing home. A second 20% will experience a nursing home but for 3 months or less (usually if there is an illness or something like a broken hip). A third 20% will stay for 1 year or less. A fourth 20% will be there for 1 1/2 years or less. And the last 20% will stay for more than 1 1/2 years. Thus part of the planning is to anticipate which group you fall into.

The average monthly cost is about $3600, so the total expense before being able to qualify for Medicaid will be about $129,600 ($3600 x 36 months) if a person went into a nursing home and then transferred assets. But to get a true picture of asset risk, multiply your income by 36 months, adding other income sources such as the net rent that could be generated from your house while in the nursing home and "income" from investments that you do not use but just reinvest. Then subtract the cost of the nursing home from your income. The resulting amount may surprise you as to how low the risk to your assets may be. Then instead of a three-year period, use the average nursing home stay of 13 months to get another risk perspective.

Buying an annuity probably will be meaningless. If the only income beneficiaries are you and your spouse, or just your spouse, then it is true that the asset total may be zero, thus meeting the asset test for Medicaid, but if the total income for both spouses from all sources, including the annuity, exceeds $1300, then the income test for Medicaid has been exceeded and you will not qualify for benefits. It might be possible to qualify by having the income go to a "Utah Trust" but the excess income will ultimately belong to Colorado Social Services.

If there is an annuity beneficiary other than your spouse, or if there are survivors' benefits, then a transfer for less than full consideration could be deemed to have been made. Thus the 36 month period to qualify for Medicaid would need to run (assuming that there is agreement as to when the 36 month period begins, i.e. at the time the annuity became effective or when the beneficiary receives money from the annuity).

Finally, a living trust will be of doubtful value (whether revocable or irrevocable) if the person setting it up is also the beneficiary. Be sure to get a second legal opinion on such an arrangement if you are tempted to try this, especially if the trust is to be irrevocable.

If you feel that you will be in the unlucky group that will be in the nursing home for longer than 13 months and your assets have significant exposure because of low income, then before giving away "the kitchen sink," try looking for things like some type of nursing home coverage for protection. But the bottom line in this area is to get a second opinion before you do something.

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