Question: My mother was admitted to a nursing home nearly four years ago when Dad, now 78, could no longer care for her without jeopardizing his health. Since Dad always felt he would die before her, he made sure all of their assets were titled in her name, including the house and all bank accounts. Unfortunately, Mother did not sign a power of attorney while she had the mental capacity to do so. We were going to try to find a lawyer to explain how to save some assets for Dad, but the nursing home administrator told us that since the bank accounts were in Mother’s name, there was nothing any one could do for us and that we would have to spend all except $2000 before she could qualify for any assistance. We were told that any efforts to avoid payment would be considered fraudulent, and we would be penalized.

As of today, all of their savings – nearly $120,000 – has been spent paying for her care at the nursing home. With the money gone, we have been able to get her qualified for Medicaid. But we are now told that that since the house where Dad lives is in her name, it will be taken by the state after her death. Other than her progressive dementia, Mother is in good health and is only 76 years old. Her monthly income is $365 from Social Security. He receives nearly $900 Social Security and a $175 from a pension. My parents were not rich people, but they worked hard and saved for their retirement. It is difficult to see my father humbled after seeing their life savings, and now the risk of their home being taken. Is there any way to protect the house?

Answer: The problems encountered by your parents are not unlike those which face a growing number of middle class Americans who find one or both spouses needing long-term care without the means to pay for it and without the documents in place to save assets for the community spouse. The “advice” given by the nursing home at admission was incorrect and self-serving. First of all, long-term care planning techniques are authorized by federal law and are not fraudulent. Second, no matter where you live, with proper legal assistance, planning could have left your father with the home and a large portion of the $120,000. Lesson #1: Don’t take planning advice from the nursing homes which have a profit motive in making sure you pay at the private resident rates as long as possible.

“Estate recovery” is a provision in the federal law which requires states to try recover Medicaid expenses from the estates of those nursing home residents who were over age 55 when they received benefits; however, the recovery must be postponed until the death of the recipient’s surviving spouse or disabled child or children. Each state is free to define “estate” according to its probate laws, and some are more restrictive than others.

While there is nothing that can be done to recoup the funds that were unnecessarily spent on your mother’s care, the residence is safe during your father’s lifetime – and possibly beyond with proper planning. We do suggest that you contact an elder law attorney in your area to help you while there is still time by visiting www.naela.org.

Taking the NextStep: There is an excellent article about Medicaid written by Mary Beth Franklin in the most recent issue of Kiplinger's Personal Finance magazine. By visiting www kiplinger.com, you will find not only this and related articles, but also a helpful way to in which to locate and link to the Medicaid office in your area. We highly recommend this resource.