Many settlors are concerned about leaving an inheritance to their children.[1] The potential cost of nursing home care, if a settlor develops chronic health conditions, is a threat to that goal and is terrifying. Genworth Financial projects that the average cost of nursing home care in Georgia in 2012 ranges between $59,495 and $63,875 per year.[2] In 2012, the Metlife Mature Market Institute projected the cost of nursing home care as ranging from $181 to $199 per day, which amounts to an annualized cost of $65,160 to $71,640 (in 2021, the average north Georgia daily cost of care exceeds $300 in many nursing homes). The average length of time from admission to discharge for a nursing home resident is 835 days,[3] which means that the “average” risk for a Georgia elder’s estate is $166,165. Of course, if an elder is physically healthy with a dementia, the length of stay might be significantly longer, increasing that risk.
Trusts are useful tools because they allow the elder to protect assets, increasing the likelihood that their estate planning goals will be achieved. Simply transferring assets from an elder to an adult child is an exchange of risks; it does not eliminate risk. If a simple gift is made, the recipient could divorce, die, go bankrupt, be sued, or could spend the money. Transferring assets to a trust allows the elder to minimize exchanged risks by establishing parameters on the funds transferred.[4]
Trusts are also used to protect individuals with special needs. An individual with special needs is unlikely to enter the work force and accumulate additional wealth, so inherited assets may be the only assets they have to supplement government welfare programs. For that reason, stretching those assets over the individual’s lifetime is a critical concern in meeting their special needs. The primary public benefits programs that must be examined are the Supplemental Security Income and Medicaid programs. Of course, there are other goals, such as creditor protection, the creation of a money management and investment system, and the assistance of oversight.
Notes:
1. Proverbs 13:22; Matthew 7:11; 2 Corinthians 12:14. Whether inheritance planning should be a worthwhile family priority (“the” family priority) is debatable. Some theologians argue that a legacy of values is more important than a financial inheritance.
2. Genworth 2012 cost of Care Survey, p. 31, https://www.genworth.com/dam/Americas/US/PDFs/Consumer/corporate/coc_12.pdf. See also 2013 Survey; and Compare Long Term Care Costs Across the United States
3. CDC, The National Nursing Home Survey: 2004 Overview (June 2009), pp. 4 and 19 (Table 7), at http://www.cdc.gov/nchs/data/series/sr_13/sr13_167.pdf.
4. It is worth noting that the purchase of long-term care insurance is another way to guard against this risk and is, in most cases, a better choice since it reduces an individual’s reliance on the Medicaid program and the whims of legislators and bureaucrats.
