Nursing homes are really expensive and it is no wonder people are terrified about how to pay for long term care. The fear is not misplaced. The average nursing home will cost you about $10,000 per month. The average nursing home stay is 18 months. For the majority of Americans, this will quickly drain your life savings. But can this catastrophe be averted? The answer is yes – with proper planning, you can prepare an estate plan designed to protect your assets from nursing home costs.

Because long term care is so expensive, the majority of Americans rely on Medicaid to pay for care costs.

What Is Medicaid And How Does It Work?

Medicaid is a partnership between the state and federal governments to provide medical benefit assistance to people, including those over age 65, who have financial need.

In order to be considered to have financial need, when you go into a nursing home and go on Medicaid, you cannot have more than $4,000 (in Rhode Island) in “available” resources.

Available Resources

Some resources don’t count, such as your primary home and the car used for your regular transportation.  Other assets such as vacation homes, rental properties, business assets and other investments will be counted toward your resources.

The Lookback Period

Assets that cannot be used for your benefit, such as those in an irrevocable living trust, don’t count either. However, In order to be fully protected your assets must be transferred into the MPT at least 60 months (5 years) before you apply for Medicaid. Transferring assets within the lookback period are subject to a “clawback” which means you will have to spend the equivalent amount of the value of the transferred asset before Medicaid will kick in. This is known as the penalty period and something you will want to avoid.

Not all living trusts are the same

There are two kinds of trust – the revocable trust and the irrevocable trust. . In this article, I will discuss only the irrevocable type, because that is what you will need to protect your assets from long term care costs. This Irrevocable Living Trust, sometimes referred to as a Medicaid Protection Trust, is a complicated legal instrument designed to protect your hard earned wealth from being depleted for your care. But this is not just any old irrevocable trust. The language used is very specific, and very restrictive, in order to shield the assets.

How The MPT Protects your Assets

The purpose of the Medicaid Protection Trust is to remove the assets from your control, so they are no longer available to you, under any circumstances, to pay for your long term care. Unlike a revocable living trust, where you can make changes to your trust and withdraw assets at your discretion, once you place assets in the Medicaid Protection Trust they must stay there.

So you may ask, why can’t I just give my assets to my children or grandchildren and qualify for Medicaid? The reason is this: giving away assets in order to avoid paying creditors (including medical care and nursing homes) is considered a fraudulent transfer. But not all gifts or transfers are fraudulent. If the gift or transfer was made well in advance, it will be ignored.

The Dreaded Medicaid Lien

“I don’t want the state to take my house when I die.”

This is one of the top five concerns our estate planning clients bring to us. It seems really unfair–a lifetime of work and savings to pay off a home you intend to leave to your family, only to lose it in the end. But that is how the Medicaid Lien works.  If you require long term care in a nursing home, after you pass away the state will attach your estate assets and expect to be paid back for the money spent on your care. This often means that your home must be sold and the proceeds handed over to the state, not your children or grandchildren. Not only your home but all other assets in your estate are subject to the lien. Because care is so expensive, it is not unusual for the lien to exceed the total value of the estate. Sounds unfair, right? That may be, but it is the current state of the law.

Protecting Your Assets From The Nursing Home Is Possible, And An Experienced Estate Planning Attorney Can Help

If you’re concerned about protecting your assets from nursing home costs, the time to act is now. At Jill Santiago Law Offices, we specialize in crafting personalized estate plans, including Medicaid Protection Trusts, to safeguard your hard-earned assets. Don’t leave your financial future to chance—proper planning can make all the difference for you and your loved ones. Click the link below to schedule a consultation, and let us help you navigate the complexities of estate planning with confidence.

Estate planning may not seem like a Halloween horror story, but ignoring the essentials can haunt you later. Working effectively with your attorney is key to keeping the skeletons out of your financial closet and protecting your loved ones. Here are some frightening mistakes you should avoid when working with your estate planning attorney:

1. Ghosting Your Attorney (Failing to Keep Appointments)

Disappearing into the night and skipping appointments is like inviting a curse on your estate plan. These meetings ensure your attorney can exorcise any potential problems and keep your plan up-to-date. Vanishing without notice gives the impression that your estate plan isn’t a priority, and that’s a terrifying prospect. If you must reschedule, don’t ghost us—reach out and we’ll find another time before things get too spooky!

A True Ghost Story:

Not too long ago, a potential client scheduled a consultation for some rather urgent planning. Despite sending appointment reminders, the individual blew off the appointment. They called the office a few months later, in a crisis. Needless to say, I could do nothing to help!

2. Burying the Truth (Withholding Important Information)

Keeping secrets may seem like a good plot twist in a horror film, but it’s a disaster when it comes to your estate plan. Hiding crucial details like debts, business interests, or family conflicts could lead to a plan that’s dead on arrival. If your attorney asks for it, it’s not witchcraft—it’s important. Let us see everything lurking in the shadows so we can craft a plan that truly works for you.

A True Ghost Story:

Speaking of withholding information, I once had a client tell me she was married as we were signing the documents. After explaining the entitlements that surviving spouses have in the estate, we had to rewrite the plan to avoid the surviving spouse challenging the plan in court. This would defeat the whole purpose of creating an estate plan! In the end, it just creates more work for us, and costs the client more money.

3. Procrastination Is a Monster (Delaying Decisions)

Procrastinating on important decisions like choosing beneficiaries or trustees is like inviting a zombie apocalypse—you may be too late to escape the mess. Delaying your estate plan leaves vital matters unresolved if an emergency strikes. Your plan can always be revised later, but it’s better to have one in place before the clock strikes midnight. Don’t let procrastination turn your future into a nightmare.

4. Ignoring Your Attorney’s Wisdom (Or Becoming a Know-it-All Werewolf)

Your estate planning attorney is your guide through the legal labyrinth, not a full moon villain. Ignoring or constantly challenging their advice can turn your carefully crafted plan into a horror show. Estate laws can be trickier than a haunted house, so trust the expertise of your attorney before you’re trapped in a legal fog.

The internet is full of information (and misinformation). Loading up on it may actually damage the relationship you have with your attorney.  You hire an estate planning attorney to give you expert advice, so challenging their expertise with your Google search results is a sure way to make the attorney (me) say I don’t want to work with you and move on.

A True Ghost Story:

I once had a potential client push back about “all the boilerplate language in the trust” as if the language was not important enough to be included in their plan. Rather than arguing, I simply stated that our firm was not a good fit and advised them to move on!

5. Letting Your Plan Rot (Failing to Follow Up)

Once your estate plan is created, you might think the scary part is over—but it’s only the beginning. Failing to review and update your plan as life changes (births, marriages, or financial shifts) can leave your plan as outdated as a mummy’s curse. Keeping your estate plan current helps you avoid unintended consequences that could creep up when you least expect it.

Get Your Estate Plan Set Up The Right Way

This Halloween, avoid these chilling mistakes by working closely with an experienced estate planning attorney. Collaborate, communicate, and stay proactive—so your estate plan doesn’t become a ghost story! Click the link below to schedule now.