My in-laws sold their house and bought an RV. You have $200,000 in the bank. How can they protect their assets from being used for nursing home expenses?

My father-in-law has health problems. While he’s not quite ready for a foster home, it could be a necessity in the near future. He has state pension benefits and a very small Social Security check.

My mother-in-law ran a daycare center at home and looked after a few children. Therefore, she has no social security in old age. They sold their house a year ago and live in an RV full time.

Most of her wealth is in cash. At best, they have a few hundred thousand dollars in joint accounts. They still have Colorado driver’s licenses but receive mail at our home in South Dakota.

If my father-in-law has to go to a nursing home and his assets are given away to care for him, his wife will have no income. How can her assets be protected so that she has a livelihood?

Concerned son-in-law

Dear son-in-law,

Most states have a five-year look-back period on maneuvers people make with their finances for such purposes.

Therefore, in most states, a grace period of five years would have to be observed between the establishment of such a trust and the application for Medicaid coverage. But it would all depend on the rules and limits in their particular state.

Medicare is a federal program that provides health insurance for those over 65. Medicaid, on the other hand, offers health insurance for those who have a very low income.

“Medicare doesn’t cover long-term care costs like a nursing home does,” Larry Pon, a financial planner based in Redwood City, Calif., told MarketWatch. “However, if your assets and income are low enough, he may be eligible for Medicaid.”

Spouse protection exists under Medicaid, so the healthier spouse receives a minimum level of support. Under these rules, a portion of the couple’s combined wealth and income is protected if the spouse does not move into a foster home, Medicaid States. However, there are limits.

A possibility: Medicaid Self-Directed Services is a Medicaid program that compensates family caregivers. The Family Caregiver Alliance has a from state to state Guide to such services.

Another possibility: a transfer of assets between the healthy spouse and the spouse in need of care. You can read more about the admission requirements here.

Medicaid planning strategies

Medicaid Asset Protection Trusts are one such valuable planning strategy American Council on Aging. “Whether it’s in-home services, an assisted living facility, or a nursing home, there’s an asset (resource) limit,” the organization says.

“To be eligible for Medicaid, you must not have assets that exceed the limit,” it adds. “The Medicaid lookback period is intended to prevent Medicaid applicants from giving away assets or selling them at fair market value in order to meet the Medicaid asset limit.”

In 49 US states and Washington, DC, the look-back period is 60 months; in California it is 40 months.

“If a Medicaid beneficiary comes into some money, such as through an inheritance, after the ‘initial’ lookback period, and gives away all (or a portion) of the money, they are in breach of the lookback rule. adds the American Council on Aging.

A pension or Medicaid Compliant Promissory Note can also help protect people’s savings from Medicaid or nursing home costs.

Given the amount of money and the fact that they have already sold their home – a move I would not have recommended – I would highly recommend your in-laws consult a financial planner and/or aged care attorney to see what your options are best suits your in-laws.

Social security complications

“It’s interesting that you say your mother-in-law doesn’t have Social Security,” says Pon. “It sounds like she hasn’t declared her daycare income, meaning no income or National Security taxes have been paid. This is one of the consequences of not declaring the income on her tax return.”

“Your mother-in-law should get her social security report from the social security agency,” he adds. “This report will tell you if she worked enough to qualify for Social Security and Medicare. If she’s small, it’s a good idea for her to declare her income and pay income, Social Security, and Medicare taxes.”

“If she hasn’t reported her income, there’s a chance the IRS will audit her,” Pon says. “Their risk is high when their customers claim the dependent care credit on their tax returns for fees paid to their day care business because they would have to provide their name and identification number on the form to use the dependent care credit reported on Form 2441 .”

Assuming your in-laws have been married for more than a year, your mother-in-law should also be able to claim up to half of her husband’s Social Security. This also applies to divorced couples, provided they were previously married 10 years and the ex-spouse remains unmarried. You can read more here.

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I received an inheritance of $130,000 from my mother. My husband says it’s mine to spend. What should I do with it – and why do I feel so guilty? My in-laws sold their house and bought an RV. You have $200,000 in the bank. How can they protect their assets from being used for nursing home expenses?

Brian Lowry

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