Estate Planning & Nursing Home Care
Good estate planning might be described as finding ways to transfer the wealth you have accumulated to others before or after your death so the least amount of taxes and administrative fees will be imposed. While estate planning raises questions concerning federal estate and gift taxes, state inheritance taxes, probate, attorney’s and executor’s fees, and other matters affecting your estate after death, the large cost of nursing home care also enters into the estate planning equation.
Nursing home care is now a multi-billion dollar business in the United States. The statewide average cost for skilled nursing home care exceeds $6,700 per month. Even with monthly social security and pension checks, the average nursing home patient often has a monthly deficit of $6,000 to $7,000 to pay out from personal savings.
At an average cost of over $6,757.67 per month as of January 1, 2007, nursing home expenses could eliminate most of our savings – often within a year or less. Because of this high cost, many senior citizens tried to transfer their assets to family members in an effort to reduce their assets and meet Medicaid eligibility for nursing home care assistance. They tried to get the best of both worlds, having Medicaid pay for their monthly care, while assets they owned are transferred to other family members.
However, Medicaid and Medical Assistance rules include a “look-back” provision. If someone transferred assets to another individual within a certain period of time prior to seeking benefits, a period of ineligibility would result as a punishment. As the costs of funding State and Federal programs increased, the statutory “look back” period was extended from 36 to 60 months as of now. For example, the total value of assets transferred within 60 months of applying for benefits is divided by the average monthly cost to private nursing facility patients (i.e., $6,757.67 as of January 1, 2007) to arrive at the number of months of ineligibility. For that number of months, the burden of paying for care is placed on the patient or person seeking someone’s admission to a nursing facility.
The 60 month “look back” provision is now in effect as a result of a law known as the Federal Deficit Reduction Act of 2005 (enacted February 8, 2006).
Pennsylvania has another law which addresses repayment to the State of Medical Assistance benefits received for nursing home care, home or community based services, and even expenses for hospital and prescription drug services. The “Estate Recovery Act,” passed in August 1994, requires Executors or Administrators of estates formally opened through Court (i.e., probated), or transferees of property, to notify the PA Department of Welfare in Harrisburg after the death of an individual who received Medical Assistance benefits. Failure to give the State notification, and a transfer of assets via probate without giving the notice (and making repayment) can result in imposition of individual liability.
It is apparent that because the governmental programs providing benefits for nursing care and other expenses are being overwhelmed, lawmakers are taking steps to eliminate the amounts required to be paid by the government for such expenses. As the laws stand now, you must either be very rich, or very poor, to afford nursing care. Therefore, consideration of nursing home costs is becoming a critical part of estate planning.