Show #247 Airing: Sunday, March 14, 2004
Lots of older adults put money and property into the kids’ names, to protect their assets from being completely consumed by nursing home costs. But that can be a major mistake. What if your child gets a divorce or dies? Your money, your home, could wind up in the hands of the in-law. Here to discuss a better solution is my law partner, Laurie Steiner.
Question: Giving assets to children is the number one planning tool in Ohio to protect them from nursing homes?
Answer: Yes. Middle class folks can’t afford to pay $60,000 or more a year in nursing home costs. You can’t have much money or property to qualify for Medicaid coverage. Without planning, most people lose everything--savings, retirement accounts, even their home. This can spell disaster, especially if there’s still a spouse.
To protect at least part of your life savings, you may move assets into your kids’ names.
Question: Will that protect them?
Answer: Yes. But there’s a waiting period for Medicaid as a penalty for shifting assets. So you have to transfer your assets months or even years before you get nursing home benefits. And that makes gifting very risky.
Question: What are the risks?
Answer: There are five major risks. First, let’s say you put money or your home into your kids’ names with the idea they’ll just hold these for you, let you continue to live in the house, and give you money as you need it. You’ve lost control. If they turn evil, you’re in trouble.
Second, your child may get a divorce. Or die. Some or all of your assets are now in the hands of the son-in-law or daughter-in-law. You know, the ones who never liked you.
Third, your child may have an auto accident or financial problem and get sued. Your assets may be lost in a lawsuit.
Fourth, putting assets in your kids’ names may make their kids ineligible for college financial aid.
And fifth, there are lots of possible bad tax results. For example, you’ll lose the tax breaks on the sale of your home.
Question: Any way to protect our life savings and avoid these problems?
Answer: One option is a specialized Medicaid Trust. You can put your home and savings into a Medicaid Trust, and give yourself the right to live in the home for life. You can mandate that all the investment income must be paid to you. The assets are protected from your kids’ spouses lawsuits and creditors. Your children’s college financial aid won’t be affected. And you can void most bad tax problems.
Question: Is a Medicaid trust the same as a revocable living trust?
Answer: No. Lots of folks are making revocable living trusts to avoid probate. Those don’t protect a penny from nursing home costs.
Question: Any negatives to a Medicaid trust?
Answer: Yes. No Medicaid planning strategy is perfect. A Medicaid Trust is very restrictive. It’s irrevocable. Once it’s set, you can’t change it. That eliminates any flexibility.
Question: So what's the best way to protect assets from nursing homes?
Answer: There’s no one planning strategy that’s best for everyone. There are probably 50 or more planning options. When people come to see us, the meeting usually takes at least an hour and a half, or more. We need that time to figure out the best approach for each client, to develop a plan that reflects their own unique priorities and circumstances.
If you or a loved one need nursing home care, your financial future can be put at risk. Unless you do some planning. A Medicaid Trust is one option that may help. For more information, give Laurie a call.
