When the Elderly go to a Nursing Home: How do you Minimize a Spend Down of Assets?
I have clients, most of them elderly, who may require a long term stay in a nursing home facility due to senility, Alzheimer’s Disease, dementia, etc. Quite often this results in a spend down of all of the assets that the elderly have accumulated throughout their lifetime before a client can qualify for subsidy through Medicaid (not Medicare). There are strategies that can be used to minimize a mandatory spend down of all of the assets that the elderly may have. This article assumes no long term care insurance is available to the client and the client is bound for a nursing home or retirement home. Some very broad strategy concepts that can be applied for a single person are as follows:
- Making gifts and/or transfers to a child who is disabled, blind, or a minor.
- Making gifts or transfers of the principal residence to a child who has lived with the parent for two or more years and has provided care and support to the parent. Watch the income tax impact.
- Gifts and/or transfers to children or other loved ones.
- Prepaying funeral expenses.
- Paying off debts.
- Cashing in cash surrender value on life insurance policies.
- Cashing in IRAs (although this should be a last case scenario so that earnings on deferred income taxes can continue to compound).
- Cashing in annuities or converting assets to Medicaid type qualified annuities.
- Transfers to the community spouse of the nursing home resident’s spouse’s interest in the residence.
- Transfer the vehicle to the community spouse.
- Converting excess resources into allowable income (but this may require a court order).