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4 Ways to Make Sure Your Parents Don’t Go Broke in the Nursing Home (and Why It Matters)

They took care of you, now’s the time to return the favor.

Your parents are getting older, and ideally, you thought you’d be able to care for them in your own home. But unfortunately, things didn’t work out that way, and now you’re considering how to make the transition to long-term care as smooth as possible for everyone involved.

We know this is a tough call to make, but you’ll be glad to know there are a few ways to help your parents out financially and ensure they don’t go broke in the next stage of life.

Here are four tried and true elder law strategies for “how to protect parents’ assets from nursing home expenses” and why it matters.

The Cost of Living for Senior Citizens is on the Rise — You Can’t Afford NOT to Plan

When it comes to long-term care planning, it’s always better to be proactive than reactive. The more time you have to plan, the more cushion you have for the “just in case.”

Because the fact is nursing homes aren’t lowering their prices, and Medicare can only do so much. Average nursing home costs in North Carolina are $98,500 per year for a private room and $89,790 for a semi-private one.

Suppose your parent has dementia or another condition that requires special attention or medication; the costs could be higher. You could easily find yourself paying well over $100,000 a year for your parent’s care—so it’s a no-brainer why you’d want to find all the tips and tricks available to cut costs.

Four Ways to Protect Your Parents’ Money from Big Brother

If your parents are approaching retirement age, there’s a good chance they’ll need some type of long-term care eventually. With costs increasing yearly, it’s more important than ever to consider how you plan to protect their assets from the financial burden.

Here are four ways you can help them do that.

#1: Invest in Long-Term Care Insurance

This type of insurance covers long-term care expenses in case your parent needs it later in life. It works like traditional insurance—you pay monthly premiums, and your benefits are waiting for you should you ever need to use them.

But there’s a catch: long-term care insurance can be expensive and has no cash value if, for instance, your parents don’t need nursing home care after all.

#2: Purchase a Medicaid-Compliant Annuity

If you’re considering a care facility, you know that government programs like Medicaid make it more feasible for the elderly to get the care they need. If eligible, your parents could have one hundred percent of their nursing home expenses taken care of, but the catch is they’ll require your loved ones to own next to nothing to qualify.

Medicaid-compliant annuities allow you to convert your assets into one vehicle exempt from Medicaid eligibility requirements. Essentially, you’ll provide a lump sum payment to an annuity company in exchange for monthly payments to one spouse while the other receives Medicaid assistance. While only relevant if there’s one healthy spouse, it can be an effective way to “spend down” or reduce the income that Medicaid considers when deciding whether to qualify your parents for coverage.

#3: Put Their Assets in a Trust

A trust is another great tool to protect assets and offset long-term care costs. A trust is a legal document that appoints a trustee to hold assets for the benefit of a third party (beneficiary). These trusts can be created and managed during their lifetime, and your parents could appoint you as trustee to manage these assets on their behalf.

A Medicaid asset protection trust takes ownership of these assets, setting them aside so that they can’t be included in Medicaid’s valuation of your parent’s estate.

#4: Reach Out to an Elder Law Attorney to Talk Over Your Options

When it comes to planning long-term care for your folks, there are few resources greater than an elder law attorney. Elder law attorneys understand the ins and outs of planning for old age and can help you take steps now to ensure they don’t go broke in retirement.

At Cary Estate Planning, our estate planning attorneys can help you help your parents become Medicaid eligible and protect their assets, so they can live comfortably in their golden years. Contact our law firm today for a free consultation.

Author Bio

Paul Yokabitus

Paul Yokabitus is the CEO and Managing Partner of Cary Estate Planning, a Cary, NC, estate planning law firm. With years of experience in estate and elder law, he has zealously represented clients in various legal matters, including estate planning, guardianship, Medicaid planning, estate administration, and other cases.

Paul received his Juris Doctor from the Campbell University School of Law and is a North Carolina Bar Association member. He has received numerous accolades for his work, including being named among the “Best Attorney in Cary” in 2016 and 2017 by Cary News and Rising Star in 2020-2023 by Super Lawyers.

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