Using a Trust to Supplement Care for Your Elderly Parents
Estate planning is for everyone. Sometimes, young adults without children assume they don’t need to plan; everything will go to their parents anyway. But as your parents age, and as you build your own nest egg, estate planning can help that savings supplement your parents’ lives rather than be used up quickly in long-term care costs.
Health Care Expenses
Americans are living longer, and the price of elder care is increasing. Seventy percent of senior citizens will require some type of long-term care. With the high cost of medical services, even those who can live comfortably during retirement may not be able to afford ongoing treatment. According to the Administration on Aging, a private room in a nursing home costs $229 per day on average. In some parts of the country, annual nursing home expenditures exceed $100,000 or even $200,000 per person. This tremendous cost is a burden to many Americans who cannot qualify for Medicaid. That’s when a trust can make a difference.
How It Works
By leaving your estate to your parents in trust, you can specify what those funds can be used for. Thus, if they are in long-term care and qualify for Medicaid, that inheritance does not have to disqualify them from those benefits. On the other hand, if you leave cash or real property, they might lose Medicaid eligibility until, for example, they use all of the inheritance you left for them for their daily nursing home costs. If they are not yet in long-term care, those assets would likely prevent them from qualifying for benefits to help pay costs needed later in life until they are all spent down.
Increasing Quality of Life
By leaving funds to your aging parents in trust, if they currently or later need long-term care in a facility and they qualify for Medicaid, those funds can still help provide for them in a supplemental manner. When a person qualifies, Medicaid covers the daily cost of the nursing home or assisted living facility. But personal expenses such as clothes, cable television, fancy manicures, salon treatments, trips, and other niceties are not covered expenses. If you’re still alive, you might pay for these things for your mom or dad. If you die first, money you leave in a trust can be on hand to provide for these extra niceties of life.
Parents often make sacrifices for their children to provide those extras in life, but as life’s arc takes our parents to their golden years, roles often reverse. The now-adult children help make life more comfortable for an aging parent. As our life expectancy increases, the chance of a parent outliving a child increases. It is likely, if you were providing extras to help your parents’ quality of life while you’re alive, you’d want to continue doing so if they outlive you. When used properly, trusts can make your parents feel more comfortable while ensuring that the inheritance is protected to provide for them in that manner.
To discuss your parents’ situation, contact an estate planning and elder law attorney.