If you live to be 65, your average life expectancy is 84 years. You will have a 43% chance of spending time in a nursing home. The average cost of nursing home care is $70,000. They are home to about 1.5 million Americans. At the rate of seventy thousand dollars per year it does not take long for most people to deplete their assets. Not how you want to spend your life savings.
The federal government spends close to $150 billion every year to house medicaid patients in nursing homes. About two thirds of all nursing home residents rely on medicaid to cover all or part of the bill. To qualify for medicaid, you have to spend down your assets. This must be done more than 3 years before you apply for medicaid or the assets will be counted. You are allowed to have one residence, one car, $3,000 in cash and investments, personal jewelry and household items, a prepaid funeral or burial account not to exceed $2,500, business property and term life insurance without cash value. In addition, your monthly income cannot exceed $2,022 in Florida (states vary). If your assets or income exceed these limits, you will not qualify for medicaid.
But what about the well spouse? If you spend down your assets to qualify for medicaid, how will the spouse who is still at home survive? This is a huge issue where there is a large age difference or one spouse is in poor health and the other is fine. The law only allows the spouse to keep the assets listed above and one half of the countable marital assets up to a limit of $109,560 (nice round number) in Florida. So, if you have $1,000,000 in investments…the nursing home gets up to $890,440 and the well spouse gets to keep $109,560 (the legal limit). If you have $150,000 in assets, the spouse gets to keep $75,000 (half of the total) and the nursing home gets $75,000. The well spouse gets to keep their personal income and up to $2,739 of joint income.
So what can you do to protect your assets from the nursing home? In the past, trusts have been used. But the rules have changed and the assets in a trust are countable if you have any ownership or receive any income from it. You can buy a big house or lots of jewelry with your investments. Both are noncountable assets. Or, you can do what a lot of seniors are doing and get a divorce. Divorce of people age 65 and over is on the rise. Trendy even. So far, the medicaid rules do not prohibit a separation of assets through divorce. This may not be the best solution, but it beats losing most of your assets.