Q: Mom might have to go into a nursing home. Seven Thousand Dollars ($7,000) a month will destroy her savings very quickly. As a first step can we get her assets out of her name?
A: As a first step, letÕs take a moment, look at everything, and maybe frame a methodology to view the situation.
First, a nursing home stay may not be necessary. Your Mom might be better suited for assisted living or even staying at home. Family members can rotate taking responsibility to help her. There are commercial companies available to help also. In addition volunteer groups can be tapped to help make the choice of staying at home a viable, less expensive alternative to a nursing home.
Not all nursing homes charge $7,000 a month. In some of the more rural counties east of us, the cost is much less. Additionally, churches own and sponsor homes. Veterans (especially if there is disability associated with service) can qualify for a less expensive stay at a government nursing home facility.
Next look at the income cash flow. Income from sources such as social security, pensions, investment income on owned assets, and possibly income generated from sources such as renting the house would all help to pay the monthly bill. Assets can also be shifted into higher income producing investments.
Just for the sake of argument, letÕs say that we have $4,000 of income a month. If so, now we are experiencing a $3,000 deficit [$7,000 (assumed cost of nursing home) less $4,000 net income.] Having to pay $36,000 a year seems to be more manageable than $84,000.
Next letÕs think "out of the box" about paying for the monthly deficit. There are five children. The family could consider whether it is worth $600 a month from each family member to preserve their anticipated inheritance.
Another idea would be to look into doing a reverse mortgage to cover part or all of the monthly deficit. I am sure you can come up with other creative ideas to fit your MomÕs particular situation.
But how long will this drain continue to have to be funded? I have been to any number of seminars, lectures, and classes where all kinds of statistics are tossed about which are supposedly from authoritative sources. I am sure there are those who will quibble about the following. But follow my methodology and plug in your own numbers.
The average stay at a nursing home both in Colorado and nationally is a bit over 13 months with three fourths of those over the age of 70 being institutionalized for a year or less and with as many as twenty-five percent of the folks over 70 never having to go to a nursing home. Thus for three out of four people over 70, the total nursing home expense exposure is $39,000 or less.
The rules have changed. Now it would take five years for a single person to qualify for Medicaid after transferring his or her assets for less than adequate consideration. Thus, to transfer assets now would only help if your Mom was in a nursing home for more than five years. The chances of that happening statistically are relatively low.
But even if you decide to transfer assets now to start the five-year period running, be warned that there are significant problems that might arise from transferring assets, often costing more than what would have been spent on the nursing home. That is why just transferring assets can be a very bad idea. I will explore this topic in a later column.
No there are no easy answers. But do not jump from the frying pan into the fire by just getting assets out of your MomÕs name.