By LaPorte Law Group, PLLC MA & NH
Congratulations! You are at the stage of your life where retirement is in sight. Perhaps you have paid down your mortgage or is close to being paid off. Perhaps you’ve amassed a bit of a nest egg to enjoy your senior years, travel, fund a charity, or spoil a few grandchildren.
However, how can you protect your home and savings in a health crisis?
The answer is to PLAN NOW. Having a legal strategy will save you significant stress and
potentially, heartache. At a minimum, three things are recommended to begin with before the age of 60.
Have your wills done.
Designate a financial power of attorney.
Designate a healthcare power of attorney & your HIPAA Authorizations.
Consider use of a trust to save money and protect assets. Statistics show 1 in 3 elders will end up requiring some level of living assistance. Home health care is extremely costly. In-home care ranges from $21-$70 an hour depending on skill and level of care. A private room in a nursing home facility is well over $100,000 per year. Boston, Manchester, and Dartmouth NH facilities one may need currently average $155,125 per year.
How then, does one protect one’s assets, especially their home?
Long Term Health Insurance & Hybrid Plan Alternatives
Long term health insurance is most commonly pre-paid in a lump sum, set aside to help offset anticipated nursing home fees. This type of insurance, unfortunately, is a gamble. It has no refund. If the insurance is not used, it is gone. There do exist hybrid plans that include a death benefit paid out to named beneficiaries if one doesn’t need to go to a nursing home. They tend to cost less than Long Term Care plans.
Spend down countable assets.
The less cash held in accounts, the less nursing homes can collect. Spending down may include paying off home mortgage. Pre-pay burial expenses. Moving selected assets to spouse’s name. Again, consult with a lawyer as states vary as to what assets are exempt.
Set up a Trust – Revocable vs Irrevocable
A REVOCABLE trust, basically a will, takes effect AFTER one’s death. This type of trust can be changed, updated while the client is living. Proceeds are dispersed to beneficiaries as directed upon the client’s death. Having stated this, the home is still considered a countable asset as it was still owned by the client up until death. It is fair game for collection of fees for care provided by a health care facility. We’d like to avoid this scenario.
An IRREVOCABLE trust begins well before your demise. This type of trust comes with exceptional benefits as well as some serious conditions to discuss with a lawyer as well as the person to be holding the trust. Why?
Your home is signed over to a named trustee. A clause of Life Estate should be included or a Use and Occupancy Agreement drawn up, meaning you legally are entitled to reside in the home until death. However, you no longer own your home, your named trustee does, and it is no longer considered a countable asset for collection of your debts. Things to consider, as the home is no longer yours, you cannot borrow against it in the need of costly home repairs, car maintenance etc.
An irrevocable trust will also have consequences for the holder. The transfer of home is becomes the transferee’s their asset. He, she or they may incur a tax bracket change. It is subject to their creditors’s reach. It is also common property in the event of divorce. All of these may occur before your death.
The Five Year Lookback Period
Medicaid can and will look back into your financial doings five years prior to assistance of nursing care. Financial gifts, property transfers, sale of assets, and sometimes even a questionable divorce after decades of marriage. Medicaid is determined by level of need, the more assets that can be assigned to you, the less need for Medicaid to pay.
In conclusion, there are many things to contemplate looking beyond the horizon. We are here to answer questions, concerns, and help navigate the sometimes confusing options to be encountered moving through your senior year.
LaPorte Law Group, PLLC