Estate Planning and the Nursing Home

Have you ever heard that you should give your house to your kids to protect it from the cost of a nursing home? If the thought concerns you that you may someday lose your home or your savings because you need long-term care or nursing home care, you should know your options. Contrary to what you may have heard, you do NOT have to give your house or other assets to your children to protect them – there are other legal options available.

Long-term care planning involves arranging your assets in a way that protects some or all of your assets from the devastating cost of long-term care or nursing home care. Planning of this kind will often involve the use of a special type of deed, an irrevocable trust, or maybe long-term care insurance. This type of planning is most effective when it’s done before any problems arise. The ideal time to start planning for asset protection is at least five years before nursing home care might become a serious concern.

Other than gifting assets directly to children, setting up an irrevocable trust is often the most effective option to protect assets. After five years, assets funded to a properly drafted and managed irrevocable trust will be considered unavailable if a nursing home stay is required. These assets are then preserved for a spouse or loved ones.

In Virginia, the person making the trust can act as the Trustee, meaning the person creating the trust can still have management control over the assets in the trust. For example, if real estate is held in an irrevocable trust, the person setting up the trust can maintain full control over the property. The only limitation on the Trustmaker is that the real property, or the proceeds from the sale of the real property, cannot be distributed out of the trust directly to the Trustmaker. This limitation provides protection.

Transferring assets into an irrevocable trust is usually preferable over gifting assets directly to children. When assets are gifted directly to children or other loved ones, you lose the control over those assets. Gifting the property directly to the children also subjects the assets to the child’s creditors, lawsuits, or if the child goes through a divorce, the child’s divorce settlement. With an irrevocable trust, you can maintain control of the assets and the property is not subject to the liabilities of the children.

Long-term care insurance is another great way to protect assets, but most policies do not cover the full cost of care and usually have a short period of coverage. Sadly, not everyone can qualify for a long-term care insurance policy. As a result, an irrevocable trust may be the only alternative.

Asset protection planning ensures your spouse is cared for if you become ill, without impoverishing your spouse. Making responsible informed decisions on the best planning procedures to meet your goals should involve a discussion with an attorney experienced in this very complicated subject. To protect your legacy for the next generation, consider planning today to protect your assets.

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