The Wealth Counselor LLC

Wealth-Preserving Strategies for Generations to Come

Home Trusts and Estates Planning for Incapacity Asset Protection
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Have you properly planned for
the possibility of incapacity?

If you need long-term care, how will you or your family pay for it? What is your plan? Several people spend their final days in a nursing home because they ran out of money to pay for home health aides. Will that be you?

Pillar 2: Planning for Incapacity  

About half of all people today are expected to have some period of disability during their lifetimes. It's important to have a lifetime plan. Without one, you risk a court-appointed guardian who may be a stranger or, even though related, someone you would not choose to act for you.

If you require long-term care, a legal guardian may be required to use all of your assets for your care instead of taking advantage of Medicaid rules allowing significant transfers to children and other beneficiaries. A well-drafted revocable living trust provides that, in the event of incapacity, the back-up trustee is authorized to transfer out of the ill person’s name whatever assets the Medicaid law allows. This is a great comfort.

Many people prefer long-term care insurance because it is the only option that helps keep people out of the nursing home — by paying for home care and allowing the individual to preserve his or her personal assets established over a lifetime. For married couples, the home care option may protect the spouse that doesn't need care from comprising their health and finances with the heavy burden of caregiving in their later years. The Wealth Counselor LLC focuses on three main options for protecting assets from high nursing home costs:

  1. Irrevocable Medicaid Trust 
  2. Asset transfers to adult children
  3. Long-term care insurance

Special Needs Trust

The preferred option for people that plan ahead who cannot get long-term care insurance is to set up an Irrevocable Medicaid Trust. Known as an “income only” trust, the Irrevocable Medicaid Trust must name someone other than the Grantor or their spouse as the trustee, usually one or more adult children, and limits the Grantor to the income. The principal must be unavailable to the Grantor in order for it to be protected. The person's lifestyle is not generally affected since they still receive their pension and Social Security checks directly. An emerging technique, especially for older persons, is the use of the home care-only policy combined with the Medicaid Trust. Thus home care is provided, with asset protection if nursing home care is required.

Asset Transfers to Adult Children

The second option, when someone is turned down for long-term care insurance or cannot afford the premium, is asset transfers to children which are effective vis-a-vis Medicaid after the five year look-back period has expired. The object is to protect as much of the assets as possible and to qualify for Medicaid benefits at the earliest possible moment.

Long-term Care Insurance

The  main objection to long-term care insurance is expense, although                
it is easy to set up. There are six ways to reduce costs:

   1. Medicaid 100-day elimination period 
   2. Daily benefit purchased can be reduced by income from pensions,
       Social Security, and investments
   3. Limit the benefit period to a period years - 3, 5 or 10
   4. Work with an independent agent to get three or four quotes 
   5. Choose a home care-only policy 
   6. Reallocate assets from under performing investments

Contact The Wealth Counselor
The Wealth Counselor LLC
1325 G Street, NW, Suite 500 
Washington, DC 20005