A recent story making headlines involves a 78-year-old woman entering assisted living with approximately $700,000 in assets—and the possibility of receiving an additional inheritance. Her family’s concern is one we hear often: will those assets be preserved for her children, or will they be consumed by the cost of long-term care?
Unfortunately, this is not a hypothetical concern. Without proper planning, even substantial savings can be depleted far more quickly than most families expect.
The Reality of Long-Term Care Costs
Many people are surprised to learn that Medicare does not cover most long-term care expenses. While it may pay for short-term rehabilitation, it does not cover ongoing custodial care, such as assistance with daily activities.
In New Jersey, the cost of assisted living and nursing home care can be significant. Nursing home care, in particular, can exceed six figures annually. At that rate, a $700,000 estate may only last a few years.
What Happens When Assets Are Too High?
When an individual has assets above Medicaid eligibility limits, they are required to “spend down” those assets before qualifying for benefits.
This does not mean simply giving money away. Medicaid has strict rules, including a five-year look-back period, which penalizes improper transfers. Families who attempt to transfer assets without proper guidance often face costly delays and unintended consequences.
As a result, many individuals end up using their savings to pay for care until they reach the eligibility threshold.
The Hidden Risk of an Inheritance
An inheritance can create additional complications.
While it may seem beneficial, receiving new assets during this stage of life can:
- Delay Medicaid eligibility
- Increase out-of-pocket care costs
- Accelerate the depletion of total assets
Without proper planning, an inheritance intended to benefit a family can instead be redirected toward long-term care expenses.
Why Advance Planning Matters
One of the most common mistakes families make is waiting too long to plan. By the time a loved one enters assisted living, many of the most effective asset protection strategies are no longer available.
Proactive planning allows families to:
- Protect assets from unnecessary spend down
- Position themselves for Medicaid eligibility when appropriate
- Preserve inheritances for children and future generations
- Ensure access to quality care without financial devastation
Legal Strategies May Be Available
With proper legal guidance, there are strategies that may help protect assets while maintaining eligibility for benefits. These can include the use of trusts, strategic asset restructuring, and other Medicaid-compliant planning techniques.
Every situation is different, and timing is critical. What works for one family may not be appropriate for another.
The Bottom Line
Having $700,000—or even more—does not guarantee financial security in the face of long-term care costs. Without a plan, those funds can be exhausted quickly, leaving little or nothing to pass on to loved ones.
If you or a family member are considering assisted living or are concerned about protecting assets, it is important to take action sooner rather than later.
Proper planning can make the difference between preserving a legacy and losing it to the high cost of care.
Contact Us
If you have questions about Medicaid planning, asset protection, or long-term care strategies in New Jersey, our firm is here to help. Contact Fredrick P. Niemann, Esq. today at (732) 863-9900 or by email at fniemann@hnlawfirm.com to discuss your options and protect what you have worked so hard to build. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Medicaid Planning Attorney