By Michael D. Koppel, CPA, PFS, CITP, MBA
Retired Partner at Gray, Gray & Gray
As we grow older, many fear being in a nursing home or, even worse, in a locked Alzheimer’s unit. While these situations can be extremely difficult for both the individual and his/her family, there is another major consideration weighing on most of us: the COSTS. Will the costs of this care rapidly deplete your assets and income to the point where you will need Medicaid? Will you be left with no assets remaining for your heirs?
Currently, the median cost of a semi-private room at a Massachusetts nursing home is approximately $12,000 a month. Alzheimer’s units tend to be more expensive. (Costs vary significantly by facility and by state.)
There are various techniques to help protect an individual and/or couple’s assets from the costs of nursing home care. A so-called “Medicaid Trust” is one method.
What is one of the most common assets to put into a Medicaid Trust? For many, it is their home. A Medicaid Trust is designed to protect the home (and other assets that are put into the trust) from being used to pay for the individual’s (or his/her spouse’s) nursing home costs prior to Medicaid paying the costs. Recently, the Massachusetts Supreme Judicial Court reversed two rulings of the Massachusetts Superior Court: the cases Daley v. Secretary of the Executive Office of Health and Human Services & Another (SJC 12200)) and Nadeau (Nadeau v. Director of the Office of Medicaid (SJC 12205). While these are Massachusetts rulings, they may provide a good starting defense in other states.
Keep in mind that the cost of care at a nursing home or an Alzheimer’s unit may be substantial, but proper planning can help to lessen the stress of this difficult situation. Proper planning can often help an individual or couple avoid having their assets used to recoup Medicaid costs; however, the tax law has significant lookback rules which make it crucial to plan early – and while healthy.
Remember, Medicaid Trusts are not appropriate for everyone, and this type of trust is “irrevocable”. It is also important to note that a Medicaid Trust can be established so that the income goes to the creator of the trust. For many people, a Medicaid Trust is an important consideration in retirement and estate or gift planning.
Retirement and estate or gift planning require careful consideration. Gray, Gray & Gray can help. If you have any questions, please contact Gray, Gray & Gray’s Tax Department at (781) 407-0300.