One fear many farm couples face is losing their farm if one spouse ends up in a nursing home. Blake Reed, an attorney, assures people there are options. The most important step is addressing the situation promptly.

Reed is a partner with Voelz, Reed and Mount LLC, Columbus, Ind. The firm limits its practice to estate planning and elder care.

In this first article in a series, Reed answers Indiana Prairie Farmer’s questions about elder care planning:

When someone is worried about the cost of long-term care, where do you start? Everybody’s case is different. First, determine what kind of resources are available. Do you have enough resources available to pay for care yourself?

Unless you have a very large farm operation, that probably isn’t realistic. Many farmers have money tied up in assets like land, but don’t have large amounts of cash available. Skilled nursing care today typically costs around $7,000 per month. Home care can be even more expensive.

Is long-term care insurance an option? If someone is fairly young and reasonably healthy, say in their 50s, it can be an option. The long-term care insurance industry has shifted. Traditionally, you paid a premium for insurance which kicked in if you went into a nursing home or needed other long-term care. If you never used it, you got nothing in return. Today, many long-term care policies are tied to life insurance policies. There is typically a death benefit payable to beneficiaries if you never need long-term care.

What you must remember is that you’re considering insuring a risk. You’re weighing the odds of offsetting what would be a large expense if you’re in a nursing home for a long time.

Where do Medicare and Medicaid fit into the discussion? First, understand the difference between the two. If you’re over 65, you likely have Medicare. If you need rehabilitation or other long-term care, Medicare and Medicare supplemental insurance can help, but will only pay for a maximum of 100 days.

Medicaid is a needs-based program. The reason people often think they need to gift assets like farmland is so they could qualify for Medicaid to cover most long-term care expenses without losing the farm. What people don’t always realize is that there is a “five-year look-back” provision for Medicaid. If you gifted assets within five years of needing Medicaid, then you will be penalized. There is a formula determining how many months you must wait for Medicaid, depending on how much you gifted and when. Sometimes more harm than good comes from gifting.

Does the look-back clause apply to your spouse? There are “spousal impoverishment rules” which apply to a spouse. For Medicaid, certain assets are exempt for a nonapplicant spouse, including real estate. This opens the window for planning for many people.

So, there are other options besides gifting land away due to worries about elder care? Yes, absolutely. There may be situations where gifting makes sense if you start when you’re younger, but there are many potential pitfalls to adding additional owners on real estate deeds. We will cover these in another article.  

Editor’s note: This article is intended for informational purposes only and should not be construed as legal advice.