Protecting your Home from the Catastrophic Cost of Long Term Care

By: Ami S. Longstreet

The average cost of a nursing home stay in the Central New York region is over $100,000 per year.  Many people want to make sure their home is protected if they ever need to be placed in a nursing home.

The home is protected if there is a surviving spouse or a disabled child living there, but with limited exceptions, if, for example, one spouse dies and the surviving spouse has to enter a nursing home, the house must be sold to pay for the nursing home before the individual can avail him or herself of Medicaid.

Therefore, for some people it is important to protect the home from being lost to pay for the exorbitant cost of long term care.

One way to do this is to transfer the house to the children and retain life use.  The problem with this technique is that if the individual does require long term care and does become eligible for Medicaid, and if the house is sold during the lifetime of that individual, not only are there income tax problems, the value of the life use comes back to the individual on Medicaid and must be spent on that individual’s care before re-entering the Medicaid program.

Another, better way, is to place the home into an irrevocable trust that protects the home, after the five year look-back period on transfers, in the event that that individual needs to go into a nursing home.  Then, with a properly drafted trust, not only is the home protected, if the home is sold, there are no tax problems and no part of the proceeds need to be returned to the individual who created the trust.

Tags: , , , , ,