The Home and Not Much Else (Part 2)

In last week’s post I laid out a common fact pattern we see in our office.  In short, it’s a case where long term care is needed and there is not much in the way of liquid assets to pay for it but there is a house which the senior owns – usually with a small or no mortgage.

In general, there are 3 ways to pay for care – using your own funds (referred to as private pay), long term care insurance and government benefits – maybe a VA benefit but more often Medicaid.  Both these benefits are needs based.  Because the home is an exempt asset if the applicant or a spouse is living in it as a primary residence, it is possible to qualify for these programs without selling the home – assuming the other eligibility requirements are met (eg. no transfers were made that would cause a waiting period for benefits).

Just because one can qualify, however, doesn’t mean that will completely solve the long term care financing problem.  That’s because these programs may not cover the entire cost of care.  For example, the VA Aid and Attendance pension will max out at about $2200 per month for a married couple and somewhat less for a single applicant. This often won’t be nearly enough to cover the cost of care.

Medicaid will cover the cost of care in a nursing facility, which only requires the recipient to contribute some or all of his/her income towards the cost, however, there may be additional uncovered costs in an assisted living facility or if care is administered at home.  The Medicaid at home program covers on average 30 hours per week of care.

That’s where the equity of the home comes into the picture.  Tapping into that equity can bridge the cost gap but it must be done in such a way so as not to cause ineligibility for those same government benefits.  I’ll explain what I mean next week.