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Q: "My father is 67, and he has a condition requiring round-the-clock care, which we can't provide because my husband and I both work.  We must admit him into a nursing home. He owns his own house and has mutual funds valued at $250,000. Is there anything we can do to protect his assets—and my inheritance?"

A: It’s never too late to plan, even for your father who is entering a nursing home.  Frequently we are asked to develop and implement a Medicaid/Asset Protection Plan for senior citizens who are about to enter or are already in a nursing home.

            In your father’s situation, as in all cases, the first thing we have to do is identify your father’s goals.  In this regard, you told us that he wishes to protect and preserve his assets to: 1) provide for his needs and 2) see to it that his family inherits his estate.  He does not want to spend everything he worked a lifetime to acquire on nursing-home care.  The reality is that, without a Medicaid/Asset Protection Plan, he will spend everything but $2,000 for his care, and his family will be out in the cold.

            Our aim, based on your father’s goals, is to implement an Asset Protection Plan that will enable him to transfer assets to you (as well as your siblings) and, once the transfers are made, to qualify him for Medicaid.  Once he qualifies, your father will contribute his monthly income (less a modest personal-needs amount) toward his bill, and Medicaid will pay the balance of his costs for the nursing home.

            Based on the facts in your father’s situation, he has two major assets: his home and $250,000 in mutual funds.  In order to develop a viable transfer strategy, we need, at a minimum, to know his monthly income and expenses, and I assume that he does not have long-term care insurance, which would pay the nursing-home cost.  For the purpose of this analysis, I will assume (since you did not indicate your father’s monthly income) that your father receives less than $1,600 income on a monthly basis.  This would, once he otherwise qualified for Medicaid due to his age (65 or older), medical need and nominal assets of $2,000 or less, provide eligibility to the “Medicaid Only” program.  Our goal, since he already meets the income, age and medical-need tests, is to reduce his assets to the applicable levels of $2,000 or less.

            In your father’s case, we would most likely recommend a transfer strategy that would have the effect of transferring from him to you (and your siblings) approximately 40 to 50 percent of his mutual fund as well as an interest in his home.  The exact amount of the transfers would be determined following an in-depth analysis of his need and resources.

            Assume for a moment, by way of example only, that we transferred one-half, or $125,000, of his mutual fund to you.  This would result in a period of Medicaid ineligibility.  Medicaid would determine the exact period by calculating how many months of nursing-home care the amount transferred would have purchased.  For this calculation, Medicaid uses the sum of $5,540, which supposedly represents the statewide average monthly cost of a semi-private room in a nursing home.  Your calculation would look like this: $125,000 divided by $5,540 = 22.56.  The result would be that your father would be disqualified from receiving Medicaid for 22 months.

          The balance of the mutual funds retained by your father ($125,000) would be used, along with his monthly income, to support him in the nursing home until the disqualification period expired.  Now, this is one method of approaching your father’s situation.  There are other strategies available, such as monthly transfers or intelligent spend-down, which would need to be evaluated, and the example did not discuss how we would deal with the house.

            The point is, however, that with thoughtful planning, taking all factors into consideration, Medicaid/Asset Protection Planning can protect and preserve a significant amount of your father’s assets.

            Lastly, if your father chooses to engage in Asset Protection Planning, we recommend that you, as the recipient of the transfer, hold the funds until your father qualifies for Medicaid and possibly until he passes away.  By doing this, you can meet any of his needs not covered by Medicaid or provide him with items to make his life nicer and more comfortable.

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Carl Ahrens Price and Casey Price provided the answer to this question. They are attorneys and partners in the New Jersey-based law practice Price & Price, LLC, specializing in mature adult and elder law. The answer they supplied is based on New Jersey law and would vary slightly from state to state. You may contact them via e-mail at  caseyprice@priceandpriceelderlaw.com, or visit their Web site, www.priceandpriceelderlaw.com, to learn more about this and

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