Today, paying for nursing home care is, for many people, the single biggest threat to leaving anything to their children.
"Senior citizens are in a dilemma," Warren attorney Jack Alpern said. "Do they hold on to the assets they have, running the risk that it could all be used up, or make a gift and hope that five years go by?"
That five years at issue is known as the "lookback period," a time that begins on the date an individual applies for Ohio Medicaid assistance.
Another term to know is the "ineligibility period." This is the amount time during which an institutionalized person is not eligible to receive Medicaid.
"The penalty period is calculated from the day you apply for Medicaid," Alpern said.
He added that in Ohio, people are required to pay for their own skilled care until their assets dwindle to $1,500, except for married couples.
An example: Edith gives her $200,000 vacation home to her daughter. The average cost of nursing home care in her state is $5,000 per month. Edith's ineligibility period is 40 months - the amount of the gift divided by the average cost of care.
That period will not begin until Edith actually applies for Medicaid and seeks long-term assistance, and it will run for 40 months from that date.
However, if she gives the house to her daughter more than five years before the date of her application, the lookback period would have expired, and there would be no penalty period.
This illustration from Lawyers.com is an example of what Alpern says people really need to know.
"Most people wait too long to do this kind of planning," he said. "Anybody at any age can end up in a nursing home due to an accident or with an illness. There is no such thing as too soon."
Laurie Gerdy, adviser with Emery Financial Group in Vienna, said in one local case, a father never received Medicaid - the family had enough money and therefore, they had to pay.
"Another family is still self-paying, and the caseworker just found $4,000 in a life policy they need to spend," Gerdy said.
And in another family, a daughter is now selling the deceased parent's home to pay back Medicaid.
"The moral of the story: The family can be left with nothing if asset protection is not in place," she said.
Whether to bring assets down to such low levels is a matter of conscience, Alpern said.
He may ask a client on a scale of 1 to 10, how important is it to them that their kids get an inheritance? - "If the answer is 3, we don't talk about gifting.''
"For some people, it's really important to be able to give something to their heirs," said Lisa Solley, chief of community relations, wellness and training for the Area Agency on Aging 11 Inc.
But she said some people don't end up taking services because of it, which then affects their quality of life.
"It's sad, because if you get no services and your health deteriorates to the point where you have to go in a nursing home, your spend-down goes much quicker," Solley said. "Ultimately, it happens to people anyway."
Alpern offers two choices: Purchase long-term care insurance (the sooner, the better), or give away assets.
"What's right for each person needs to be discussed thoroughly and carefully with an elder law attorney," he said.
Solley said her organization refers people to information on the state's Job and Family Services website, as well as to the local ombudsman.
"Plan for your future and plan for long-term care services," she said. "We recommend they see a lawyer specializing in elder law."
There are other financial actions to consider.
"Any transfer of control is a gift," Alpern said.
He offered another example: "Mom is getting up in years and wants to make sure her son can do her banking. She adds him as an owner of the account, and half of whatever's in that account is considered a gift."
He said the government also counts gifts to charity.
When it comes to married couples, Alpern said the government doesn't care in whose name the assets are owned, nor does it care about prenuptial agreements. Should a spouse be left at home, they are permitted to keep the house, about $111,000, one car and a prepaid funeral contract for both of them.
There are ways to protect assets, such as an irrevocable trust or limited liability company, but Alpern said very few people even realize what they are facing.
"Medicaid will get tougher," he said.