Holidays can be a difficult time for families. Gathering around the dinner table often brings stress, especially if there are concerns regarding money and aging parents. Well-meaning children may bring up ideas on how Mom and Dad can avoid “giving everything to the nursing home” by giving assets to the children. I urge families to proceed with caution. Planning for incapacity and long-term care should be a longer discussion with legal and financial professionals involved to ensure that aging loved ones are protected from unintended consequences.

Long-term care planning is a complex process dealing not only with tax consequences but also possible eligibility issues regarding financial assistance for long-term care. Generally speaking, Medical Assistance prohibits giving gifts of any amount within five years of application for assistance.

Let’s look at an example. Grandma gives each of her five grandchildren $10,000 for Christmas each year for four years. On the fifth year, she finds herself in need of long-term care but without sufficient assets, so she applies for Medical Assistance. Unless the $200,000 in gifts given to the grandkids over the past five years is returned to Grandma, she will be ineligible for Medical Assistance for nearly two years. This is called a penalty period. It is calculated by taking the amount of the gift and dividing it by the Statewide Average Payment for Skilled Nursing Facility (a/k/a SAPSNF). This number is updated every July based on the monthly average cost for care in a nursing home in Minnesota.

There are some options to protect or gift assets, but such strategies should be coordinated by an elder law attorney, the person’s financial advisor, and tax advisors. An elder law attorney who is well-versed in the rules regarding Medical Assistance can work with families to plan a legacy while ensuring that the long-term care needs of the elderly loved one are kept at the forefront.

Planning for Incapacity is also best accomplished with the aid of professionals. Handwritten powers of attorney and health care directives may be valid on their faces, but they can create significant headaches if there are questions regarding the individual’s capacity to execute such documents. This is especially true when concerns of financial exploitation arise. When a healthcare directive or power of attorney is called into question because of a person’s incapacity to execute new documents, the parties must go to court in a guardianship and/or conservatorship proceeding. These are expensive and oftentimes contentious proceedings costing tens of thousands of dollars and splitting families apart in the process.

If you think a family member might need to enter an assisted living or long-term care facility, pick the right time and place to discuss it. Many aging loved ones are fiercely protective of their independence and autonomy. Conversations regarding safety risks of remaining in the home need to be approached respectfully and carefully. This promotes a more productive conversation and a higher likelihood of finding solutions that balance safety concerns with our loved ones’ wishes.  Proactive discussions and support can go a long way toward preventing a need for emergency interventions. Elder law attorneys can assist families with navigating tough conversations. They provide an objective outside perspective and practical knowledge of what the next phases of life might look like. At a time when a family may be overwhelmed and not quite sure what the future looks like, an elder law attorney can help you plot a course for the future while keeping the peace in the family.