Perhaps it’s because we hear so much about Medicare, and we use it so regularly and find it to be such a worthwhile program, that we think it will take care of all our old-age needs, and simply assume that our children will inherit our home and possessions even if we first go to a nursing home before we die. That is not the case, not without advance planning. If you go to a nursing home and run out of money to pay (very easy as the expense is ruinously high), you run the risk of having a lien put on your house and your entire estate after you die.

Apparently, “a significant number of people assume that their Medicare or other medical insurance will cover the cost of their long-term care, which is entirely incorrect,” says the website of Lamson & Cutner, P.C., specialists in elder law. The differences between Medicare and the other government-sponsored program, Medicaid, are spectacularly large.

Although Medicaid does pay for long-term care, the costs of such care are so exorbitant that, whatever your estate, Medicaid will eventually take it all after you die, unless you have planned ahead, five years ahead at least, to put your property in a trust.  Aging, not being able to take care of yourself, dying—they’re all difficult subjects, but also they are the inevitable result of living and you must plan ahead for them.

Medicaid, NOT Medicare, Provides For Nursing Home Care

Medicare is just like any medical insurance provider (except that it is provided by the government). It reimburses you for medical care. But it  does not pay for long-term care, a solution that is often needed for older people who can no longer take care of themselves. Long-term care is extremely expensive. While this sounds like an argument for long-term care insurance, that too is very expensive and some people, as they grow older and come upon more medical problems, are unable to qualify for it.

In any case, waiting too long to purchase a policy can result in prohibitively expensive premiums. It can also easily result in rejection. From the ages of 60 to 69, only 42.2% of applicants qualify for the insurance.  Another caveat to keep in mind is this: insurance premiums inevitably rise; older people’s income tends to diminish. But there is much to beware of here, including the kind of “care” included, and  what happens if the insurance company cancels the policy.

Despite insurance companies advising individuals to purchase long-term care insurance even earlier than the age of 40, according to an expert source.“Consumer Reports recommends not purchasing coverage before the age of 60” (that is for those who are healthy, of course – you must be healthy to purchase this insurance) . “The older a senior is, the higher their monthly premiums,” but of course the expectation is that a person who is now 60 will be paying those premiums for a shorter period of time before they need benefits.  “Other factors affecting cost include benefits covered… and the health of applicant. Younger seniors should expect to pay …  at a minimum several hundred dollars per month. The cost could be as high as several thousand dollars per month for older seniors.” 

Fortunately, there is an alternative to the quagmire of long-term care insurance, and that is a government-provided program, (much-maligned in other contexts) Medicaid (not to be confused with Medicare, which is totally different). (You may want to review the video: Medicaid Vs. Medicare.) Often people think they have too many assets, even if it is just their own paid-off home, to qualify for Medicaid. That is not the case.  Let’s say you purchased your home for $50,000 twenty years ago and it is now worth $500,000 – you will be able to pass that entire amount on to your heirs, but only if you consult the experts and plan ahead.

Advance Planning Works

If you do not plan ahead, the government will insist on being repaid for the exorbitant costs that long-term care entails, and will put a lien on your estate when you leave the nursing home (feet first is the usual mode) if you have not planned ahead. You can retain 100% of your assets if you plan ahead, putting your estate into a trust account far in advance of your entering the residence. The government’s “look-back” time is five years. Actually, that pales in comparison to the age at which you must begin paying for long-term care insurance, but it does require a plan. Why does it seem easier to have long-term care insurance?

Maybe it’s not easier (in fact, it’s not) to have your own private insurance. Maybe it’s something else that gives us pause. Could it be our historic distaste for government programs? Keep in mind that your taxes pay for this program, and after a lifetime of paying them, you can now reap the benefits. Never mind, it’s not only not easier, it’s much more expensive to have private insurance. And it is worthwhile, even crucial, as you get older, to discuss your options with an attorney who is an expert in elder care law. It’s probably time to set up a trust. A trust can allow you to give your money to those you wish to give it to after you die, and can keep the government from getting your estate in its clutches

If you should transfer your estate (meaning your home and more) to a trust, you can of course stipulate that you will live in the house as long as you wish. And of course you can put that trust in the name of the same persons you have left your estate to in your will. However, this matter must be arranged with an attorney who specializes in the field.

Since states contribute to Medicaid, as well as the federal government, each state has different rules and it is up to you to determine the rules in your state. If you put your state into a Google search, along with the word Medicaid, you can find out what the rules are.

The Bottom Line

If you are nearing 60, you should consult with an attorney who is a specialist in elder law in order to avoid any government liens on your house or your estate in the future.