Nursing homes sometimes offer residents the option of setting up a trust fund—a financial account into which money can be deposited to pay for everything from care expenses to incidentals, such as haircuts and items from an on-site convenience store.

But an investigation conducted by USA TODAY reveals that these accounts may not be the safest option for storing residents’ cash. Between 2010 and 2013, state and federal inspectors have given out more than 1,500 citations to nursing homes for improper use of residents’ trust funds. Grievances included poor management and oversight, failing to properly insure funds, failing to pay interest on funds, and outright theft of tens of thousands of dollars.

For concerned family caregivers, entrusting a nursing home with even a small sum of a loved one’s money can be a difficult decision to make. Fortunately, there are steps you can take to prevent a senior from falling victim to fraud and financial abuse. To help ensure their finances are safe and well-managed, keep the following facts and tips in mind when considering a nursing home trust fund.

  1. Nursing Homes Can’t Require Residents to Set Up a Trust Fund
    It is against the law for a nursing home to mandate residents to set up trust fund accounts. This is true, regardless of whether a senior is on Medicaid and/or Medicare, receives monthly Social Security benefits, or utilizes a combination of financial resources to pay for care. The list of nursing home resident rights put forth by the Centers for Medicare and Medicaid Services (CMS) explicitly states that individuals are free to manage their money however they wish. Thus, a senior (or their financial power of attorney or appointed guardian/conservator) can opt to set up a trust fund, but they can’t be forced to.
  2. Nursing Home Trust Fund Accounts Can Earn Interest 
    The typical nursing home trust fund account shares many similarities with a regular bank account. Depending on the requirements of a given facility, a senior may be eligible to earn interest on the money they deposit in the trust. Nursing homes are required by law to regularly update residents on the status and activity of their accounts.
  3. Trust Fund Money Still Belongs to Residents
    Setting up a trust fund with a nursing home is not equivalent to turning over complete control of a resident’s money to the facility. Residents retain ownership of their respective funds in the trust and have the right to access them at any time. Furthermore, each resident’s transactions must be individually accounted for and kept separate from the facility’s operating funds. The resident (or their appointed financial representative) is the one who decides what to do with the money in the account.
  4. Ask How the Nursing Home Monitors Residents’ Funds 
    Because the money placed in a nursing home trust fund still belongs to the residents, they have the right to know how the facility monitors the account and its financial transactions. Effective oversight by the nursing home itself can cut down on the chances that funds will be misused or stolen by unscrupulous employees. When considering using a nursing home trust fund to manage a senior’s money, be sure to ask how often they issue financial statements to residents and perform internal audits on the accounts. This will give you a better sense of how safe your loved one’s money will be.
  5. Facilities Must Take Steps to Safeguard Residents’ Money 
    Most states require nursing homes and assisted living facilities to purchase patient trust surety bonds to protect their residents’ finances. A surety bond dictates how a long-term care facility must manage the funds deposited by its residents. To receive a surety bond, the facility must submit to a vetting process that includes a credit check. If a nursing home reneges on the obligations outlined in the bond document and mismanages residents’ funds, then affected residents can file a claim against the bond and may be reimbursed for any money lost.
  6. Do Your Homework Before Placing Money in a Nursing Home Trust Fund 
    Medicare- and Medicaid-certified skilled nursing facilities are subject to regular inspections by both state and federal organizations. Each facility’s results are posted on Medicare’s Nursing Home Compare website. While a solid ranking offers no guarantees, researching any type of elder care provider’s reputation is a critical first step towards finding quality care for an aging loved one. Having confidence in the facility that you and your family choose will make the decision and move a bit easier.
  7. What Happens to the Trust Fund When a Resident Dies?
    If a senior passes away while living in a nursing home and they still have money remaining in their trust fund account, then the facility must surrender those funds to the individual managing the deceased’s estate within 30 days.

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