Long-term care carries a high price

If you are like many in Minnesota, you have not wanted to think about the possibility of your parent needing long-term care. Perhaps you assumed you would be able to take care of your parent in the later years or honor his or her wishes to remain at home. Unfortunately, if you are noticing your loved one declining in physical or mental health, you may be realizing neither of these is a viable option.

You may assume your parent will rely on Medicaid at some point to fund the services he or she will need. Medicaid is means-based; to qualify for Medicaid in Minnesota, your parent may have no more than $3,000 in assets, although it varies from state to state. You may want to assist your parent by distributing some of those assets to other family members. However, each state also has a look-back period, and asset transfers that fall within that period may result in penalties. There are other options.

What works for your family?

Your first step in helping your parent prepare for the possibility of affording long-term care may be to seek legal advice. You may learn of a variety of alternatives that will allow your parent to receive the care he or she will need without becoming destitute in the process. Some of these options may be subject to Medicaid’s look-back limits, so timing may be an issue. The following are a few strategies to consider:

  • A Medicaid trust legally owns your parent’s assets and provides an income for him or her. It is irrevocable, so it is protected from government scrutiny or creditors, as long as you fund it outside the look-back period.
  • An income trust, such as a Miller Trust, holds any income your parent receives that is above the Medicaid limit.
  • A private annuity or promissory note can provide an income if your parent incurs a look-back penalty after transferring a large portion of assets.
  • A caregiver agreement allows your parent to pay in advance a trusted individual for at-home care, therefore legally reducing your parent’s eligible assets.

In Minnesota and many other states, one spouse may transfer assets to the other without penalty. If both your parents are living but only one is in imminent need of long-term care, this option may be something to consider. However, there are stipulations on the amount of assets your well parent may hold. You can find information about these options and answers to your questions by consulting an experienced attorney who will provide compassionate guidance for the options that best fit your circumstances.