How’s that for a headline?
A recent study, highlighted by Forbes in this article, has concluded that if you plan to spend 30 days or less in a nursing home, you will have a median net worth of $108,000 at the end. However, if you are unfortunate enough to require 6 months of nursing home expenses, you will be broke, owning $5,000 or less.
There are more surprising numbers in the report. First, the 30-day stay (where you keep your money) is possible because Medicare pays for the first 20 days of stay in a nursing home and the first 80 days when you are rehabbing. However, it doesn’t pay any time after that – where private pay costs (at least in New Jersey) can run as high as $14,000 per month.
Let’s be clear — in the first month, you will write a check for $14,000. Then, in the second month, you will write another check to the nursing home for $14,000 — and it will continue that way until you have no more money, or you die. (Blunt enough for you?) In just two months, you will have paid what my parents paid for an entire year of private college for me in 1997 — to be fair, I got room and board out of that too.
The Forbes article is damning. Here’s another quote to drive the point home:
Still, the story is the roughly same: Long-term care services suck the life out of your nest egg. After six months, nursing home residents will, on average, lose half their assets.
I’ll add one final thought – it is far easier to plan to protect assets before the crisis hits. By the time you get to needing a nursing home, the chance to save most of your assets is gone.
My doctor once said something that stuck with me in discussing a cholesterol issue I was having. He said, “Small problem, small solution. Large problem, large solution.” He was talking, of course, about the value of preventative medicine. Elder law asset protection planning is the same way. If you see an elder law practitioner early, you might get away with taking some pills. If you wait until the problem is at crisis mode, you are at the point of amputating some limbs to save the rest of you.
Having helped clients in both positions, I can tell you that the analogy is not too far off.
Posted by Victor Medina
Medina Law Group and The New Jersey Estate Planning Center