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Guarding Your Wealth for Senior Citizens
Saving Your Home Should You Need to Use Medicaid
Long-term care insurance best means of preserving
assets for those who can afford it
By Jeffrey D. Voudrie, CFP
 March 23, 2007 - For many seniors, their home is
their most valuable asset. Its painful to think that their home might
be lost to Medicaid in the event they have to go to a nursing home. I am
often asked if this can be prevented. Read on to find out.
There is a lot of confusion about this subject. You
may have heard stories about the government taking somebodys home and
are worried it can happen to you. But this typically will only happen if
the government has paid for your nursing home care.
The government program that we are talking about is
called Medicaid. Dont confuse it with Medicare. Medicare is available
to anyone age 65 and over regardless of financial status. Medicaid is a
welfare program limited to the impoverished.
Since no one likes the thought of spending tens or
hundreds of thousands of dollars on an assisted living or nursing home,
its natural to want to find a way to preserve those assets and still
qualify for Medicaid. But remember, Medicaid is a welfare program.
Qualifying for Medicaid should be seen as a last resort, not your first
choice.
Over the years, ways have been developed for
individuals with assets to qualify for Medicaid through the use of
annuities and other devices. But legislation passed in 2006 has closed
most of those loopholes, limiting your options to gifting an asset
directly to a child or to an irrevocable trust. Or you can avoid
Medicaid by buying long-term care insurance.
Long Term Care Insurance (LTCI) is the best means
of preserving assets for those who can afford it. Since it is based on
your age and health at the time you apply, the sooner you get it the
better. If you wait until you develop health problems you may not
qualify or, if you do, the premiums will be very high.
For those who only have $200,000 or less in assets,
LTCI premiums can be too expensive, easily reaching $4,000 to $5,000 a
year. Those who have greater wealth, say $750,000 or more, may decide
that they dont want to buy LTCI either, since they can cover their own
nursing home and assisted living costs without it impacting the assets
they leave to their heirs.
Its those in the middle ($250,000 to $750,000)
that can benefit the most from LTCi. Even if you only buy 3 years worth
of coverage, it will be the simplest, most cost effective way to
preserve your assets for your heirs.
If LTCI isnt an option and you might need to
qualify for Medicaid in the future, another option is to gift your
assets away. Under current legislation, any gifts made within 5 years of
applying for Medicaid will result in being disqualified for the number
of months that gift would have otherwise paid for. If you expect to need
assisted living or nursing home care in the next year or two then
gifting isnt going to help you.
You also lose all control of an asset when you gift
it away. For instance, if you gift your home to your children by putting
their names on the deed then you have lost control over your living
situation. If they want to kick you out and sell the home they can.
Worse, it is exposed to their creditors. If one of the children gets
sued you will likely lose your home.
Gifting assets to an Irrevocable Trust removes them
from your estate while still protecting them from creditors. I spoke to
someone yesterday who set up an irrevocable trust in 1993 to do just
that. The son was trustee, the father the beneficiary.
Now, the father has Alzheimers and needs nursing
care. Since he doesnt own the assets he will qualify for Medicaid. Once
you set up an Irrevocable Trust, it cant be changed. You cant have
ready access or control over the assets. It is a separate legal entity
so there has to be a trust tax return filed each year.
Long Term Care insurance is always the best bet if
you can afford it. Otherwise, it takes advance planning to preserve your
estate and qualify for Medicaid. If you wait until you think you need
care, it is going to be too late. Its essential that you plan ahead.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
Guarding Your Wealth is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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