When Does It Pay to Get Good Advice?
Recently, we spoke with a woman whose elderly mother has dementia and needs to move to a nursing home for care. The daughter was calling to see how she might get her mother qualified for Medicaid, the federal program that helps cover nursing home expenses for those who qualify.
For those who may not realize it, the average cost of nursing home care here in Alabama is around $9,000 per month. There are really only three ways to pay for that care:
- Private pay, meaning out of your life savings
- A long-term care insurance policy (which relatively few people have)
- Medicaid
The average stay in a nursing home is more than two years, which means the total cost of care can easily exceed $200,000.
If someone qualifies for Medicaid, those expenses can shift to a program that they have been paying into through taxes for many years. If they cannot qualify, the family is left to pay the entire cost themselves.
Understanding how Medicaid eligibility works is incredibly important for families who want to avoid spending hundreds of thousands of dollars unnecessarily.
A Costly Situation That Could Have Been Avoided
The woman we met with had never asked anyone for professional advice before making several important decisions. Unfortunately, those decisions created serious problems for her mother’s Medicaid eligibility.
First, she sold her mother’s home for $80,000, even though the tax-assessed value was $160,000.
Medicaid will view that difference as a gift to the buyer. In this case, Medicaid considers it a gift of $80,000. This is known as a “bargain sale,” and Medicaid rules strictly prohibit these types of transfers.
As a result, this created a penalty period of about one year, during which her mother will not qualify for Medicaid. The family will have to pay the nursing home expenses privately until that penalty expires.
At $9,000 per month, that is a very expensive mistake.
Another Problem: Informal Caregiver Payments
There was another issue as well.
Over the last five years, the daughter had been providing caregiving for her mother. When the house sold, she paid herself more than $60,000 from the proceeds as reimbursement for the care she had provided.
Unfortunately, she did not have a written caregiver agreement or contract, and she had not kept a log of the services she provided.
Because there was no documentation, Medicaid will likely treat that payment as another gift.
This creates an additional penalty period of approximately nine months before her mother will be eligible for Medicaid.
The Financial Impact
When you add these penalties together, the result is significant.
The family will have to privately pay for nursing home care for 21 months before Medicaid will begin covering the cost.
21 months × $9,000 per month = $189,000
That is a staggering amount of money that could likely have been avoided with proper planning.
Why Early Advice Matters
Consulting with an experienced Elder Law attorney for even one hour could have prevented these costly mistakes.
Unfortunately, situations like this happen all the time simply because families do not realize they need professional guidance until it is too late.
At Elder Law Alabama, helping families understand Medicaid eligibility, long-term care planning, and asset protection is exactly what we do.
Planning Ahead Can Save Families Thousands
If you know someone who is approaching the stage of life where nursing home care may become a possibility, encourage them to speak with an elder law attorney sooner rather than later.
With the right advice and proper planning, families can avoid costly mistakes and ensure their loved ones receive the care they need without unnecessarily draining their life savings.
To learn more about Medicaid planning and elder law services in Alabama, visit
https://elderlawalabama.com
If you or a loved one needs assistance with Asset Protection in Pelham, AL, contact The Alabama Elder Care Law Firm, LLC, today at (205) 390-0101