Nursing homes provide vital care for seniors who need assistance with daily living. However, the high costs of nursing home care can quickly drain savings and assets that parents have worked hard to accumulate over a lifetime.
The median annual cost for a private room in a North Carolina nursing home is over $102,000, according to Genworth’s 2021 Cost of Care Survey. With costs rising every year, protecting your parents’ assets is crucial to preserve their nest egg and leave a legacy for loved ones.
This guide will explore five strategies North Carolina residents can use to shield assets from nursing home expenses. With proper planning, you can obtain quality care for your parents while safeguarding their hard-earned assets.
How Can You Protect Your Parents’ Assets from Nursing Home Costs in North Carolina?
There are several ways to protect assets from being consumed by nursing home costs in North Carolina:
Purchase Long-Term Care Insurance
One of the best ways to protect assets is to purchase a long-term care insurance policy. These policies help pay for care in nursing homes, assisted living facilities, or at home. The insurer pays out a daily benefit amount directly to the care provider.
Long-term care insurance can prevent you from paying nursing home costs out-of-pocket, preserving assets instead. Shop around and buy a policy well before care may be needed, as insurers may deny applicants who already have health issues. Be sure to understand policy limitations like benefit periods and elimination periods, too.
Establish an Irrevocable Medicaid Asset Protection Trust
An irrevocable trust can be used to shelter assets from Medicaid spend-down requirements in North Carolina. With this type of trust, your parents transfer ownership of assets to the trust.
A trustee then manages the assets on behalf of the beneficiaries. The assets are not counted towards Medicaid eligibility, allowing your parents to qualify for coverage. The trust pays for things not covered by Medicaid. After your parents pass away, the remaining trust assets go to beneficiaries like children.
A Medicaid planning attorney can help set up this complex trust correctly to comply with Medicaid rules. Assets must be transferred at least five years before applying for Medicaid benefits.
Make Exempt Asset Transfers
Certain assets are exempt from Medicaid eligibility calculations in North Carolina. Making strategic transfers of exempt assets to loved ones can protect those assets.
Exempt assets that can be transferred include your parents’ home (if it goes to a spouse, child under 21, or disabled child), one vehicle, term life insurance policies, burial plots, and irrevocable burial contracts. An elder law attorney can provide guidance on exempt asset transfers.
Establish a Life Estate Deed
With a life estate deed, your parents can transfer real estate ownership to loved ones while retaining the right to live in the home for life. The home will then pass to the beneficiaries without probate when your parents pass away.
The home is removed from their taxable estate, allowing them to potentially qualify for Medicaid more easily. Consult with an elder law attorney to properly execute a life estate deed.
Make Exempt Financial Gifts
In North Carolina, certain financial gifts made by your parents may not impact Medicaid eligibility. Annual gifts up to $15,000 per recipient do not count towards Medicaid asset limits. Paying medical bills for family members also does not count.
Larger gifts may trigger ineligibility if made within five years of applying for Medicaid. An elder law attorney can help determine if gifting specific assets will affect Medicaid eligibility.
Dangers of Transferring Assets Without Planning
It’s tempting to want to gift assets or add children’s names to property deeds and bank accounts. However, this can have disastrous results if not done properly.
If your parents gift assets but need Medicaid within five years, they may be deemed ineligible and unable to pay for care. And adding names to accounts gives those individuals access to the money and the ability to spend it freely.
Work with an experienced elder law attorney to thoughtfully plan transfers that align with Medicaid requirements. This will protect assets while ensuring your parents get the long-term care coverage they need.
Does an Irrevocable Trust Offer Full Asset Protection from Nursing Home Costs?
For many North Carolina families, utilizing an irrevocable trust offers the best chance to shelter assets from nursing home expenses. But, this complex strategy is not a blanket solution and has limitations.
Here are some key things to know about irrevocable trusts and Medicaid asset protection:
- Not all assets can go into the trust – Typically, only cash, stocks, and bonds can be transferred into the trust. The primary residence and one vehicle are exempt from trust placement rules.
- There is a 5-year Medicaid look-back period – Transfers made within 5 years before applying for Medicaid may lead to ineligibility penalties if rules are not followed properly.
- Income from assets in the trust is not sheltered – While the principal is protected, income from assets placed into the trust can still be counted towards Medicaid eligibility calculations.
- Trusts must be established before care is needed – Medicaid prohibits placing assets into a trust once a person requires nursing home-level care. Timing is critical.
- Professional help is a must – There are strict program guidelines that must be followed to create a compliant, irrevocable Medicaid asset protection trust. An experienced elder law attorney is vital.
So, while irrevocable trusts can protect a portion of assets, they do not offer full, unlimited protection in North Carolina. Proper timing, placement of the right assets, and compliance with all guidelines are key to successfully sheltering some assets.
What Steps Should You Take to Protect Parents’ Assets?
If your parents may require nursing home care in the near future, the time to take action to protect their assets is now. Here are some practical steps to get started:
- Document assets – Make a list of their income, property, financial accounts, life insurance, and valuables. This helps assess the value of their estate.
- Discuss goals – Have an open talk with your parents about their wishes to leave an inheritance or use funds to pay for care. This guides planning.
- Consult an elder law attorney – Meet with an attorney experienced in Medicaid planning and asset protection to discuss options unique to your situation.
- Consider long-term care insurance – Research policies and determine if this type of coverage would be beneficial for your parents.
- Evaluate asset transfers – An attorney can advise if gifting exempt assets in advance of Medicaid eligibility makes sense.
- Set up exempt income streams – Explore if annuities or other income sources could provide funds exempt from spend-down rules.
- Create a Medicaid asset protection trust – Work with the attorney to establish an irrevocable trust with their assets ahead of time.
- Monitor health changes – If their health declines quickly, you may need to accelerate planning to shelter assets in time.
With proper preparation, it is possible to obtain Medicaid coverage for nursing home care while still passing on a legacy. But you must act proactively, as there are strict rules surrounding asset transfers and eligibility. Starting the conversation with your parents now gives you time to navigate this complex process thoughtfully.
Finding the Right Elder Law Attorney in North Carolina
Successfully protecting assets from nursing home costs requires skilled legal advice. Where can you find an attorney well-versed in Medicaid planning and asset protection strategies in North Carolina?
Here are some tips for finding the right elder law attorney:
- National Elder Law Foundation – Search NELF’s member directory for attorneys accredited in elder law in North Carolina.
- NAELA – The National Academy of Elder Law Attorneys has a directory of vetted member attorneys in each state.
- Personal referrals – Ask at local senior centers, adult children, financial advisors, and nursing homes for attorney referrals.
- Local Bar Association – Contact the North Carolina Bar Association for a list of lawyers concentrating on elder law.
- Medicaid planning focus – Verify the attorney has in-depth experience with Medicaid eligibility laws and asset protection tools.
- Longevity – Choose an attorney who has practiced elder law for many years, not someone just getting started.
- Free consultation – Meet with the attorney at no cost to gauge their knowledge and assess your situation.
Protecting parents’ life savings requires an experienced guiding hand. Do your due diligence to vet attorneys thoroughly before selecting the right one to trust.
Plan Thoughtfully to Safeguard Assets
As nursing home costs continue to climb, more North Carolina families will need to navigate complex Medicaid rules to pay for care without draining every dollar saved over a lifetime.
While challenging, implementing the right planning strategies can help protect assets using tools like irrevocable trusts, strategic gifting, and long-term care insurance.
No solution is perfect, so starting conversations early and working with an elder law attorney at Cary Estate Planning is key. With time, knowledge, and care, you can develop a plan that provides your parents with the care they need while preserving the nest egg they want to pass down to loved ones.