Long-term care costs pose a significant risk to the continued existence of the family business

PUBLISHED ON 20 August 2024

COLUMBUS, Ohio — The cost of long-term care continues to rise, posing a potential financial risk to farmers seeking to protect their farm assets for future generations. In the past two years alone, the cost of home care has increased by more than 20%, while nursing home costs have increased by 10 to 15%. According to the Genworth Care Cost Survey 2023The latest costs for care services are listed below:

• USA, home health aide: $75,552/year
• Ohio, home health aide: $73,212/year
• USA, Nursing Home – Semi-Private Room: $104,016/year
• Ohio, Nursing Home – Semi-Private Room: $100,380/year

These figures make it clear why care costs pose a significant risk to the continued existence of the family farm. Even a short stay in a nursing home can result in significant costs.

According to the Administration for Community Living, people age 65 and older are 69% likely to need some form of care, requiring an average of three years of care. Typically, one of those three years is spent caring for a spouse or family member at home, one year is spent receiving paid care at home, and one year is spent in a nursing facility. For farmers who need care, that equates to an average cost of about $180,000 per person, and for a married couple, it’s twice that. However, some people require more than three years of care, which can significantly increase the cost of care.

Medicaid can help cover the cost of long-term care, but it has strict eligibility requirements. One important condition is that Medicaid limits the amount of assets a person can own to still qualify for benefits. In Ohio, an unmarried person cannot own more than $2,000 in eligible assets. Most farmers will not qualify for Medicaid without thorough planning. Another critical factor is the five-year lookback period, during which Medicaid reviews any asset transfers made within five years of applying for coverage. If assets were given away or transferred below market value during that time, Medicaid can impose penalties, delaying eligibility for benefits.

Given these costs, statistics and Medicaid rules, it is critical for farmers to develop strategies to minimize the risk of long-term care costs depleting their farm assets. Here are some common strategies farmers can consider:

1. Donation of assets: Transferring farm assets to family members while retaining enough money for immediate needs can help ease the burden of long-term care costs, but this strategy should be approached with caution because it is subject to Medicaid’s five-year look-back period.
2. Irrevocable trusts: Transferring farm assets into an irrevocable trust can prevent them from being included in long-term care cost calculations, ensuring the farm is preserved for future generations. However, this plan is also subject to Medicaid’s five-year look-back period.
3. Self-insurance: Farmers with significant savings or assets may choose to self-insure by setting aside money for potential long-term care expenses, reducing the need to sell farm assets.
4. Nursing care insurance: Purchasing long-term care insurance can cover the costs of long-term care and provides a buffer against the high costs associated with care in nursing homes or at home. However, long-term care insurance can be expensive and not everyone is eligible for coverage.
5. Wait and see: This strategy involves setting aside enough assets to pay for long-term care for five years while waiting for Medicaid eligibility.
6. Do nothing: Some people with sufficient income to cover the cost of care may not need to take asset protection measures.
7. Combine strategies: Often a combination of these approaches can provide the strongest protection, balancing immediate needs with the long-term preservation of agricultural assets.

By understanding the risks and costs of long-term care and carefully considering these strategies, farmers can take proactive steps to ensure their farm’s legacy is preserved, even if unforeseen health costs arise. Always consult legal and financial advisors to determine the best approach for your specific situation.

For more information and a detailed explanation of LTC, see Long-term care and the farmPublication available at farmoffice.osu.edu.

— Robert Moore, Ohio State University CFAES