COVER YOUR A$$et$
You have heard that you need to protect your assets time and time again but is it really true?
We are here to tell you emphatically that YES…
YOU HAVE WORKED TIRELESSLY YOUR WHOLE LIFE TO PROVIDE FOR YOURSELF AND THE ONES YOU LOVE- DON’T RUN THE RISK OF GIVING ALL THAT YOU’VE BUILT TO THE GOVERNMENT!
When approaching retirement, individuals often have big plans to travel the world or spend time with family and friends but very rarely do their plans ever involve needing long-term care. According to the Office of the Assistant Secretary for Planning and Evaluation, “more than one-half of older adults, regardless of their lifetime earnings, are projected to experience serious long-term services and supports needs and use some paid long-term services and supports after turning 65 [years old].” Similarly, seniors tend to become more frugal in their golden years with the goal of passing on a financial legacy to their children and/or beneficiaries of their estate but Medicaid eligibility requirements largely prohibit this as the program is designed for the individual to spend their own money on long-term care first before aiding the individual(s) with affording needed care.
Older adults automatically assume that they can “sign over their home(s) for a dollar” or “give substantial monetary gifts and/or donations” to spend down their money but you cannot outsmart the government so don’t even try. There is what is referred to as the “look-back” period and, with this, MassHealth/Medicaid can use any sizeable fund and asset transfers within the past 5 years to disqualify individuals from the program. Therefore, it is imperative that you begin your strategic planning now with a qualified elder law attorney or estate planning professional.
Here are some basic strategies when it comes to protecting your money from Medicaid:
Strategy #1: Enroll in a Long-Term Care Insurance Plan (if you don’t already have one)
Long-term care insurance helps cover cost of nursing homes, assisted living facilities, adult day programs and/or home healthcare for those with chronic illnesses or conditions that prevents them from being able to perform activities of daily living (ADLs) such as dressing, bathing, toileting, housekeeping, and such. The earlier you enroll in a long-term care insurance plan the better but, if you do not have one, do not just assume that it is too late. Despite your age, if you are in good health, you may still qualify (though you will obviously be paying a higher premium than you would if you had enrolled at a younger age). While the cost of long-term care insurance has increased (along with everything else in the world right now in this inflation period), consider it an investment in yourself. Having a long-term care insurance plan is added protection for you and your family who would ultimately have to become caregivers if you could not afford such care for yourself.
Strategy #2: Establish a Will & Trust
Perhaps the most important things to have in order, especially in retirement and beyond, are a last will and testament as well as a trust.
Establishing a will is beneficial as it prevents your beneficiaries from having to deal with legal challenges such as complex and time-consuming hassles of probate court. It also enables you to have the power while you are alive to do the following:
- Decide how your estate will be distributed
- Decide who will take care of any minor children or dependents (if any) when you are no longer around to care for them
- Minimize estate taxes
- Decide who will administer your estate
- Disinherit individuals you do not want to receive your property
- Make specific gifts and donations
In addition to a will, asset protection trusts and income trusts are critical. Putting your home and/or other properties you own in a trust is beneficial as once these assets are transferred, they no longer belong to you, the individual- they belong to the trust. This protects your beneficiaries from having to pay significant capital gains tax on the increase in value that the trust assets accrued during your lifetime and, once assets are in a trust, they are beyond the reach of Medicaid or any other future creditors. Similar to asset protection trusts, income trusts (such as Qualified Income Trusts or Pooled Income Trusts) are irrevocable accounts that are designed to hold an applicant’s excess income. You will want to seek expert guidance from an elder law attorney or an estate planning attorney for more information on these trusts as each one has a different function and you will need to decide whether or not an income trust will work for you.
Strategy #3: Spousal Transfers & Spousal Refusals
Transfers between spouses are permitted and are not subject to the 5-year look-back period. Therefore, one of the basic strategies is to transfer any assets that are in the name of the spouse who needs care to the name of the spouse who is in good health. Once Medicaid provides services, it has the right to seek contributions from the well spouse but, in some cases, Medicaid does not pursue its rights and in other cases it is willing to settle at a discount. At a minimum, the well spouse will receive a significant benefit because any reimbursement to Medicaid will be at Medicaid’s discounted rates, rather than at the private pay rates that the providers would have charged.
While these are a few strategies to get you thinking, we strongly encourage you to seek expert guidance when it comes to elder care and estate planning. For recommendations on an expert in your area, contact us and we will be happy to provide you with a tried-and-true referral- FREE OF CHARGE AND NO OBLIGATION!