Asset Depletion: Nursing home care can decimate financial futures
For Emily Dayton, the change seemed to come not only earlier than she thought it would, but also faster.
Living alone at 87 years old, Dayton was self sufficient, took care of herself and even drove to the store at least twice a week to buy groceries and "just to shop."
Then one day she woke up and couldn't get out of bed. One side of her body was numb, but luckily she was able to summon her daughter, Jean who lives in Price, by phone. Speed dial had never been so important before.
Diagnosed with a slight stroke, things went downhill from there. Suddenly there were other problems too. Her heart started to act up and she found herself dizzy much of the time. The condition would require constant care, and no doctor she saw thought she would ever get much better.
With the exception of her daughter, her five children were scattered to the wind, all living in different places around Utah and other states. Jean had her own life with a husband and kids to take care of. Who would care for her?
For awhile Jean tried to take care of Emily, first in her own home, and then at Jean's. But soon it became unmanagable in a house that not only had a lot of stairs, but was too small for everyone who lived there. Emily's condition deteriorated steadily and finally everyone agreed, including Emily, that a nursing home would be the place she would have to go.
Emily hated the fact she had to leave her life.
"All I knew is that I had visited some friends in a home, and they were unhappy," she said in a phone interview from a nursing home in Provo. "I hated to give up my life and my house. I hated not being able to take myself places. Worst of all, we had to sell everything and take all my savings to put me in this place."
Emily's situation is not unusual. People save for rainy days, either by investing or by saving money directly, but few think they will ever end up using that money just to live. Most think that it will be used for something they want to do some day or will be passed down to children or other family members.
Nursing homes are necessary for many aging individuals. While they do provide care that may otherwise prove too difficult for the average family member, the fact remains that nursing homes can be quite expensive and quickly eat away at a resident's assets.
In order to protect themselves, their families and their assets, many seniors prefer to liquidate assets or "hide" money from nursing homes.
There are mixed views on the legality and morality of this issue. Should a person have to take everything they have accumulated in their lives to get them through their final years on this planet. Or should some higher power (the government) provide for this kind of care?
The average cost of a private room in a nursing home in the United States ranges from $50,000 to $100,000+ each year, depending on a number of factors. Semi-private rooms aren't much lower in cost. In general, the resident of the nursing home pays for his or her stay. This comes through private savings, investments and even other assets, such as their homes. Individuals can see their entire nest egg depleted in a matter of a few years, leaving no financial legacy for their successors.
In order to avoid depletion of assets, those who think a nursing home might be in their future often go to great lengths to hide their assets. In doing so, it may be up to government resources, like Medicaid, to pay for the care instead.
But many taxpayers, who must foot the cost of government programs, often cry foul over these tactics.
Others argue that it is within the persons rights to shelter funds that they worked years to accumulate. They may state that the rising costs of nursing homes is disproportionate to the actual care received. With this notion in mind, tactics are taken to protect assets from being acquired by nursing homes.
Regardless of the right or wrong of this dilemma, there are things that seniors can do to protect their assets that could be eaten up by a life ending illness that lingers. Emily's family decided to go some different routes from some of these suggestions, but these are legitimate ways to shelter money, despite what some people may think of them. Here are some things to remember:
First remember the five-year rule. For those who are going to transfer assets (such as to children), it should be done early on. Nursing homes and government agencies funding individuals look back at five years of financial history. Any transfers should be done more than five years before nursing home care is needed.
There is also a financial instrument called an irrevocable trust. Individuals can transfer funds into a trust which is in the name of a trustee. No one can go after this money because it is not in the resident's name.
Seniors can increase the value of exempted items. Some personal items are exempt from Medicaid. In some instances this may be a homestead or a vehicle. Improve the home and buy a new car. Invest in new furnishings and other personal effects. When entering a care facility always state that the intention of the person who is going in is that they are going to eventually return to their home.
A person can also donate to charity if they don't want the money going to their care. Individuals can make regular contributions to charity to diminish personal assets.
Seniors can offer gifts to their family. Spend the money on family members, including big-ticket items. Setting up trusts for grandchildren or children are other options.
Transfer the deeds for property. To play it safe, some people prefer to put the deed of their house in another person's name, like a child's, to protect it from seizure.
Probably one of the best ways to protect assets, however, and for some the most ethical is to purchase long term care insurance. Having an insurance policy expressly for the purpose of nursing homes or a care attendant will provide funds from the policy instead of personal assets.
But there are some things anyone who plans to buy this kind of insurance should know.
*Insurance like this is usually meant for someone who has assets they could lose to an illness.Those with few assets are currently covered by Medicaid. Plans should also be considered only indemnity plans, not full coverage plans. Usually they only pay a fixed amount per day.
*Coverage should be sought for what a person thinks they may need. Questions to ask are about length of care (short or long term), how much the policy pays per day, what kind of care is covered (policies may have limits on what kinds of care they provide), how long the policy would pay (at least a year of care is a good idea), etc.
*Understand that unlike fixed life insurance the plans often increase in cost as a person gets older, sometimes very quickly. Also review the cancellation and non-renew clauses to be sure it can't be yanked out from underneath the person covered for reasons of health.
*Be sure the policy covers in-home care as well as nursing home care. In addition the policy should not require the person to have to have been hospitalized before the plan kicks in.
"I wish we had bought some insurance on mom," said Jean who is now handling her mothers estate. "While we didn't need to sell the house we felt it was only the right thing to do. Everything else was gone by the time we paid the medical bills. I think with the right insurance we would have been able to keep from selling her home."
Emily says that she still wants to get out of the home some day, but now knows she has no where to go except to live with one of the children.
"It's not bad here," she said. "They treat me well and I have made some good friends, but it would be nice to know if I could ever go home, it would be there waiting for me."
(The names of the people in this story have been changed to protect their privacy.)