Estate planning: Prepare for future costs of long-term care

INDIANAPOLIS — Nursing homes and assisted living are expensive, so planning for future costs is important for farm families.

Dan Gordon, founder of Gordon and Associates, was a keynote speaker at the seventh annual Estate and Succession Planning for the Family Farm program held this summer. The event was hosted by the Indiana Ag Law Foundation.

Gordon’s first piece of advice was for families to have a durable general power of attorney in place.

“If someone becomes incapacitated, there is someone else out there who can complete this planning process,” he said. “In order to complete the planning process, that power of attorney has to have unlimited gift giving authority.”

Next, families should discuss who is going to pay the nursing home or assisted living bill and estimate how much it is going to cost.

In Gordon’s experience, assisted living charges range from $3,000 to $5,000 a month. Full nursing care can be twice as much.

“The state says that full nursing care costs about $6,681 a month,” Gordon said. “Most of the bills I see run anywhere from about $8,000 to $10,000 a month or more. There are several nursing homes in our area that are charging more than $300 a day.”

Families should see if the costs can be paid from current income — including Social Security, pension benefits and farm cash rent.

For assisted living, there may be enough funds to cover expenses.

If the current income isn’t enough, decide who will cover the shortfall. Funding sources may include long-term care insurance, VA benefits, your assets or Medicaid.

“This is a family decision,” Gordon said. “If you decide to cover that shortfall, where does it come from?”

Shielding Farm Assets

Gordon shared four techniques used to shield farm-related assets from the future costs of long-term care.

1. Outright gifts.

2. Gifts of land with a retained life estate.

3. Transfers to irrevocable trusts.

4. Transfers to a limited liability company, and then gifts of the interest in the LLC.

However, none of those can easily be reversed or changed, Gordon said.

“Today, in most situations where we’re doing five year-type planning, we’re going to use an irrevocable trust to hold the farm ground, or maybe to hold the stock in the family farm corporation,” he said.