According to the American Council on Aging, as of October of 2019, a private room in a Houston area nursing home costs an average of $205 per day, or $74,825 per year. For a shared room, an elderly Texan may expect to pay $170 per day, or $62,050 per year. Most people cannot afford the cost of living in a nursing home, and those who can are not likely to want to spend their children’s inheritance in this way.
Fortunately, there are legal options created so that people may tap into Medicaid to cover these costs. However, due to the time frame, it is important to address long-term care planning quite a bit in advance.
AARP explains that there is an income limit that a person cannot exceed if he or she wants to qualify for Medicaid to cover long-term care. Not only that, this limit applies to the five years prior to the application. During this time, if a person has gifted assets or sold them for below market value, the application will be subject to a waiting period from that point.
People can reduce assets to qualify for Medicaid by paying off debt, making home modifications, purchasing a vehicle or paying funeral costs in advance.
Creating an estate plan five years or more before the age of 65 provides quite a few more options. For example, someone may set up an irrevocable trust managed by a trustee. The assets belong to the trust rather than to the estate, so the trustor/beneficiary may set the amount of income the trust provides at or below Medicaid’s allowable income limit.
Some people choose to set up trusts for their children or for charities, as well, or begin gifting assets to family members annually so as not to exceed the amount allowable by law.