The call usually comes from a hospital. A parent fell, or had a stroke, or the discharge planner has decided they can’t safely go home. The family has about a week to arrange care that costs more than most mortgages, and no idea what any of it involves.
By that point, the planning options have narrowed considerably. Here is what to understand well before you get there.
Medicare does not cover long-term care
This is the single most common misunderstanding we encounter.
Medicare can cover a limited period of skilled nursing care following a qualifying hospital stay, under specific conditions and for a limited number of days. It is designed for rehabilitation and recovery.
It is not designed for custodial care, which is what most long-term care actually is: help with bathing, dressing, eating, moving around, and supervision for someone with dementia. Families expecting Medicare to cover a nursing home stay are often surprised in the first month.
What pays, in practice
Private funds. Savings, investments, pensions, Social Security, and often the proceeds from selling a home. For many families this is where a lifetime of saving goes.
Long-term care insurance, if it was purchased years earlier. Policies vary enormously in what they cover, when benefits begin, and whether they adjust for inflation. If you have one, read it before you need it.
Veterans benefits, for those who qualify. Some veterans and surviving spouses may be eligible for benefits that help with care costs, and many families never learn to ask.
Medicaid, which covers long-term care for those who meet strict medical and financial eligibility requirements.
The lookback is the part that catches people
Medicaid is a needs-based program, so eligibility depends on income and assets. In most states the program also reviews transfers made during a lookback period, commonly five years before the application.
That means the instinct families act on, giving the house to the children when a parent starts declining, can be exactly the wrong move. Transfers made during the lookback can result in a penalty period of ineligibility calculated from the value transferred. The penalty arrives precisely when care is needed and the money is already gone.
This is why the timing of planning matters so much. Steps taken years ahead sit outside the lookback. Steps taken in a crisis do not.
What early planning can involve
Done well in advance, the toolkit is broader. Depending on your circumstances and your state’s rules, it may include:
- Certain irrevocable trusts designed with the lookback in mind
- Long-term care insurance, or hybrid policies combining insurance with life coverage
- Decisions about how assets are titled and which are spent first
- Protections for a spouse who remains at home, since Medicaid rules generally allow a community spouse to retain certain income and assets
- Coordinating these decisions with the rest of your estate plan, so one doesn’t undo the other
None of these are do-it-yourself projects. Medicaid planning is among the most state-specific and most frequently amended areas of law there is.
Even in a crisis, ask before you spend
If you’re already in the hospital conversation, you have fewer options, but “nothing can be done” is usually not accurate. Crisis planning techniques exist, and some are substantial.
What we’d urge: ask before you spend down assets on the assumption that you must, and before you transfer anything to anyone. Well-intentioned moves made in week one frequently create the penalties that hurt in month six.
The conversation nobody wants to start
If this is about your parents rather than you, the hardest part is often raising it. A reasonable opener: “If you ever needed help at home or care somewhere else, what would you want, and have you looked at how it would be paid for?”
You don’t need their account balances. You need to know whether they have coverage, what their wishes are, and who would have legal authority to act.
Let’s look at your situation while you have choices
Whether you’re planning years ahead or sitting in a discharge meeting this week, call us or send a message to schedule a free estate planning consultation. We’ll tell you honestly what’s available in your circumstances.
Visit www.heritancelaw.com to get started.
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