You have put your heart and soul into the family farm, and you have felt rich in many ways because of it. Keeping the house and land in the family, passing on an honorable trade from one generation to the next, contributing to the nation’s food supply, and providing a good life for your children and grandchildren are certainly accomplishments to feel proud of. Unfortunately, if you are like the majority of family farms in East Texas, the one kind of rich you are not is cash rich. So as you get older and a health crisis arises, you may find you don’t have a way to pay for the long-term care you or your spouse needs. How can you afford a nursing home at $4000 a month when all of your assets are tied up in the farm? Now is the time to find out.
Your Father’s Worry Is Not Your Worry
It wasn’t that long ago that one of the biggest worries facing family farms in Texas was the death tax. Twenty years ago, if you died and left behind a farm worth more than $625,000 all told, your estate would owe taxes of over 40% on the excess amount. In order to pay the estate tax that was due, heirs often had to sell off the farm. This is not a concern these days, however, unless your farm is worth over $5.5 million (or $11 million for a couple). As the average age of Texas farmers climbs every year, the biggest concern facing them is how they are going to keep the farm for the next generation while paying for the expensive long-term care they or their spouses may need.
Farmers Don’t Have Pensions and Get Very Little Social Security
Many farmers file their taxes as a sole proprietor under a Schedule F return. In order to earn maximum Social Security credit, your net farm income must exceed $5,440 each year. If your farm is not profitable, or you are utilizing tax deductions and expenses that result in an income loss for the tax year, you will not earn credits and will not be eligible for much in the way of Social Security benefits when you retire. And unless you worked a “regular” job in addition to running the farm, you will not have a pension or employer-funded 401k in retirement either. This leaves a lot of farmers in the lurch when they suddenly need money to pay for a nursing home.
If I’m Cash Poor, Won’t Medicaid Pay for My Nursing Home?
Medicaid benefits are available to those with limited assets and income to pay for nursing home care. As a retired farmer, you may have little or no income, but you probably have assets that exceed the Medicaid threshold. While the house itself will be exempt from Medicaid accounting, the land, livestock, and farming operations—in other words, the bulk of your assets—could be counted and would likely disqualify you. If you have retired from working the farm and leased the property to someone else—even if that person is a family member—this is now rental income, and is not exempt from Medicaid. Because of the 5-year lookback rule for Medicaid, you can’t just give the land to your children in a crisis and qualify for Medicaid either.
So, What Can You Do?
You want to keep the farm in the family and you want to be well cared for in your declining years. These are not unreasonable desires, and there are ways to accomplish these goals, especially if you plan ahead. You can hold the farm property in trust so that you are still in charge but the assets won’t count against you if you need a nursing home. You can show that certain assets are necessary for self-support and are therefore exempt from Medicaid. There are also ways to protect the farm house from a Medicaid lien after you are gone. How can you do all of this? By working with an Elder Law attorney who understands the unique issues faced by farmers in the Ark-La-Tex. Contact Ross & Shoalmire, PLLC, today to learn more.
