5 Ways to Protect Pensions From Nursing Homes

Older adults are too often targeted by financial thieves

Older adults are often targeted by thieves and financial tricksters, and those residing in nursing homes can be the most vulnerable of all. If your loved one is in a facility—or will soon be entering one—how can you make sure their pension-plan payments, Social Security income, annuity income, and any other funds are protected from unscrupulous employees? Here are a few pointers.

Key Takeaways

  • To protect a loved one in a nursing home, have them set up a power of attorney with a trusted representative.
  • Make sure to interview nursing home staff prior to selecting a home and ask about safeguards against theft.
  • Use electronic direct deposit for payments rather than checks, which could be fraudulently cashed, and also get bank statements electronically.

Set Up a Power of Attorney

Have your loved one legally appoint a trusted relative or friend to act as a representative with the authority to manage money and make financial decisions. You can do this by asking a lawyer to draw up a power of attorney (POA) document. In fact, you can do this long before you think your loved one might ever end up in a nursing home.

The POA can be written to go into effect only if the patient enters a facility or can no longer make their own decisions. POAs can also act as a deterrent: If a sticky-fingered staffer at a facility knows someone else has control over a resident's finances, they might be less likely to target them. 

Ask About Safeguards

Another important step is to interview the appropriate nursing home staff prior to admission. Ask about how they respond to late or missed payments (unpaid bills can be a sign of irregularities), how they handle cash for residents, how they release money from residents’ accounts, and whether they allow salespeople to make onsite presentations.

Also, ask about the facility’s policies on theft and what measures they take to safeguard residents’ checkbooks, ATM cards, federal benefit cards, and other sensitive documents against theft, including identity theft

Finally, ask what the facility’s procedures are if they suspect a resident is being financially exploited or is a victim of theft or fraud. A trustworthy facility will have clear procedures in place to prevent and detect problems. 

Use Direct Deposit

Don’t have checks mailed to the nursing home. Instead, have payments directly deposited to the resident’s bank account. Nursing home residents should receive their bank statements electronically to prevent someone from gaining access to their financial information by stealing their mail.

Residents should also avoid logging into sensitive accounts from any public or shared computer, which can compromise account security. If you suspect mailed checks have been stolen and fraudulently cashed, notify the U.S. Postal Inspection Service as well as the facility. And, as always, watch out for fake mail and email that pretends to be from a financial institution but is really a ploy to steal money. 

Don’t let the nursing home directly accept federal benefit payments on behalf of a resident and avoid the use of nursing home trust funds.

Don’t Let the Facility Receive Disbursements

A nursing home can be appointed a patient’s representative payee. This means the facility can directly accept federal benefit payments from the Social Security Administration, Department of Veterans Affairs, Department of Defense, Railroad Retirement Board, and the Office of Personnel Management on a resident’s behalf. The facility is then supposed to use those payments for the resident’s benefit—to pay legitimate bills for which they are responsible, for example.

The potential for financial elder abuse is obvious with this arrangement (if not from outright fraud by the nursing home, then from administrative mixups). There have been cases of nursing homes overpaying themselves with that income.

“If a resident has dementia to the extent that it limits his or her ability to handle finances, a trusted authorized representative, often a family member, should handle income and bills,” says Eric Carlson, directing attorney of Justice in Aging, a national organization that uses the power of law to fight poverty in older adults. “Some residents do not have such representatives, and these are the residents at greatest risk."

Don’t Bank With the Facility

Nursing homes may offer resident trust funds into which patients can deposit their pension checks, Social Security checks, and other monies. The problem is that unscrupulous nursing home employees can potentially steal from these accounts.

According to a 2022 report from the Federal Bureau of Investigation (FBI), nearly 90,000 people over the age of 60 were victims of fraud, with more than $3 billion in losses.

Nursing homes cannot require residents to deposit funds in resident trust funds and have no legal right to manage residents’ money. Even if a resident does put money in one of these funds, they must authorize every transaction or appoint a representative to do so (unless the resident or representative directs the nursing home to release some or all of the funds on an “as needed” basis).

If you are going to deposit your funds in such an account, know whether your state requires audits and background checks. If not, find out whether the nursing home conducts its own criminal background checks on the people who will have access to residents’ accounts and if it performs voluntary audits of accounts.

How Do I Protect My Assets From Medical Bills?

Medical costs in retirement can be a significant drain on your resources, including the cost of skilled nursing care or residence in a nursing home. One thing you can do to protect a portion of your assets is to set up an irrevocable trust, which assigns a trustee to manage them.

When Can a Nursing Home Take Your House?

If you own a home but live in a nursing home, the nursing home cannot seize your house to pay for your care. Medicare generally does not consider "modest" homes to be countable assets. However, Medicaid may consider the home a recoverable or countable asset after your death.

Should I Set Up a Trust to Protect Assets From the Nursing Home?

A revocable trust is still considered to be under your control, so it will not protect your assets when it's time to pay for a nursing home. You may be able to set up an irrevocable trust to protect some of your assets for your heirs, but control over those assets shifts to the trustee, not you. Medicaid has a five-year look-back period, too; if you transfer the assets to that trust within five years of claiming Medicaid eligibility, you're subject to a penalty period that will delay your eligibility anyway.

The Bottom Line

Given that they may not be able to feed themselves or get out of bed, let alone manage their finances, nursing home residents are especially vulnerable to exploitation. Taking steps to prevent theft or fraud means avoiding not just financial losses, but also emotional distress and even being evicted from the facility because they can no longer pay the bill.

Article Sources
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  1. Federal Bureau of Investigation. "Internet Crime Report 2022," Page 18.

  2. Code of Federal Regulations. "42 CFR 483.10 - Resident Rights," Pages 47-48.

  3. Office of the Assistant Secretary for Planning and Evaluation. "Medicaid Treatment of the Home: Determining Eligibility and Repayment for Long-Term Care."

  4. Centers for Medicaid and Medicare Services. "Important Facts for State Policymakers Deficit Reduction Act."

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