Costs for care homes: How can families prepare in advance, Ms Gromes?

SBC: Let’s take a closer look at the situation when real estate is involved. Many families assume that their children or grandchildren will eventually inherit the family home. When can this become a challenge if a family member is admitted to a nursing home?

Gromes: Here’s how it works in practice: Anyone who moves into a nursing home and applies for welfare must disclose whether they have made any gifts in the past ten years. If this was the case, they must truthfully check “Yes” —anything else would constitute welfare fraud. The social services office then reviews the case, requests a copy of the notarized contract, and contacts the children who co-signed the gift agreement. Finally, they determine whether the gift must be reversed.

In practice, this is usually not feasible at all, because the children often live in these homes themselves and have already renovated them and added value to the property. In this case, they must pay the remaining balance. A nursing home spot costs about 4,500 to 5,000 euros; part of this is covered by long-term care insurance and Social Security—and the rest remains unpaid. In practice, this averages out to about 2,000 euros per month. This pushes many families to the brink of financial ruin.

SBC: Are there ways out of this very stressful situation for families? And when should people start addressing this issue in a timely manner?

Gromes: Many people try to protect their home by gifting it away during their lifetime through a notarized contract. The ten-year period is crucial here: If the gift was made less than ten years ago, the state can demand that it be reversed. As a result, ownership reverts to the care recipient’s estate, and the assets can be tapped to cover long-term care costs.

>> Many people try to protect their home by gifting it during their lifetime through a notarized contract. The ten-year period is crucial in this regard. <<

To avoid this deadline, you would have to transfer ownership of a property fairly early on. The average age of admission to a nursing home is over 81, so you should start planning for this no later than when you are between 65 and 70 years old. In the notarized contract, you can also protect yourself further as part of the gift, for example, with a registered right of residence or a right of usufruct . (Editor’s note: A right of usufruct is the use of another person’s property or assets without being the owner.)

The problem, of course, is that most people have just finished paying off their home and are already expected to pass it on to the next generation. That’s emotionally difficult, and I understand anyone who hesitates. But realistically, there’s only this short window of time to settle the matter reliably. Some people end up in a nursing home as early as age 60 after suffering a stroke—so you can never be completely prepared.

When it comes to supporting parents, a different timeframe applies: If it’s foreseeable that a parent will soon need to move into a nursing home, the children should seek legal advice about half a year to a year in advance. That way, there’s still time to make preparations and plan things out.

But this can only be done in advance. Once the social services office sends a letter, it’s too late. The tricky part is that a fall or a hospital stay often triggers everything suddenly—then the parent can’t return home, and the window of opportunity has closed.

SBC: Are there any pitfalls to watch out for when drafting a gift agreement?

Gromes: Something that’s often overlooked is that a right of residence or usufruct has a real monetary value. If this right is worth, say, 20,000 euros a year, the beneficiaries—such as the children—may have to pass this amount on to the nursing home annually.

>> A right of residence or usufruct has a real monetary value. If this right is worth, for example, 20,000 euros a year, the beneficiaries—such as the children—may have to pass this amount on to the nursing home annually. <<

That is why the contract should clearly stipulate that the right of residence ends when the person moves permanently into a nursing home—not only upon death. For example, you can stipulate that after six months in a nursing home, the move is considered permanent. Especially in old age, moving into a nursing home is usually final anyway. If this is specified in the contract, you’re on the safe side.

And here’s another common, costly mistake: If an existing right of residence is subsequently revoked without compensation, this legally constitutes a new gift—and the ten-year period starts over. Many people overlook this as well.

SBC: If the property only becomes an issue upon the person’s death, could a bill still come from social services?

Gromes: That depends on what benefits the deceased person received. For benefits intended solely for living expenses, nothing is reclaimed. For long-term care benefits, however, it is—in which case the heirs may be held liable. However, this is always limited to the value of the inheritance; there’s a cap on that.

Here’s an example of such a case: If one spouse is still living in the house, it’s protected and won’t be seized. When that spouse dies, the children inherit the house—and that’s when social services gets involved. Some agencies, such as the one here in Darmstadt, even have themselves entered in the property registry.

SBC: In your experience, what are the most costly mistakes that family members and those affected make?

Gromes: Children far too often pay out of their own pockets without checking whether they’re actually required to. I see this happen all the time in practice: Someone moves into a nursing home, there’s a shortfall between the costs and their pension, and the children simply cover it. But there’s a perfectly normal legal provision for this: social assistance. After all, the children are only liable if their income exceeds the annual income threshold of 100,000 euros. Nevertheless, many pay out of their own pockets without asking themselves whether they’re actually obligated to do so.

>> All too often, children pay out of their own pockets without checking whether they actually have to. <<

An application for welfare should be filed immediately—not after six or twelve months. An exempt asset of 10,000 euros may remain in the account. Often, the application is delayed out of shame or fear of the social services office, even though there is nothing to hide. That is the real, costly mistake.

Furthermore, my clients often pay more than is necessary. Here’s an example: When care costs rise, it’s sometimes due to investment costs. It’s perfectly fine to ask: What exactly was invested? What formula is used to allocate these costs? I had a case where someone had to move into a room that was four square meters smaller, yet the rent remained the same—and when I asked for an explanation, I received no answer. As a family member, this can make you unpopular, and you have to realize that the nursing homes hold all the cards. Anyone who withholds payments certainly risks having their contract terminated. But you don’t have to accept every increase without question. It’s worth asking questions.

SBC: What advice would you give to families who are currently dealing with a caregiving situation?

Gromes: Get a clear picture of all the figures regarding pensions, assets, and costs as early as possible. Don’t worry if a parent is still living in the house or apartment. That person is allowed to stay there—they don’t have to move out just because the house might be too big. Of course, in the case of very large properties, social services will eventually check whether the property needs to be sold. But often these are older homes in need of renovation that aren’t all that easy to sell or rent out.

And this is what matters most to me: Don’t provide care at home any longer than necessary. Time and again, I see family members providing care far beyond their limits and becoming ill themselves in the process. The wife who cares for her husband day in and day out, even though she herself has long needed care—out of fear of losing the house. This happens far too often and goes on for far too long.

And finally: Seek advice early on, not just when the letter from social services arrives. If you wait too long, you’ll lose the very options you would have had before.

Thank you very much for the interview!

Stefani Gromes has been practicing law in Darmstadt since 2000 and is a certified specialist in social law. At her law firm, she specializes in social and family law, with a focus on parental support, long-term care, pensions, and issues related to reduced earning capacity. Learn more at http://www.arbeitsrecht-da.de.