Gifts to your Spouse as a way to Protect against Long Term Care Costs

Today’s blog post continues the series about giving money away as a method to plan ahead for protection against long term care costs.  My post of September 19, 2014, the first installment of the discussion on gifting, described how the Medicaid “Aged, Blind and Disabled” program and the Department of Veterans Affairs “Pension” (aka VA “Aid and Attendance”) program look at assets given away.  My post of September 25, 2014 discussed transferring assets to a trust for protection against long term care costs.  My post of October 2, 2014 discussed transferring assets to a Limited Liability Company for protection against long term care costs.  My post of October 9, 2014 discussed transferring assets to your children (or other family members) for protection against long term care costs.  My post of October 16 discussed transferring assets to a charity as a way to protect against long term care costs.

The current series on gifting is part of a more comprehensive series on possible ways to plan ahead to protect against long term care costs.  Previously, my blog discussed long term care insurance as an approach to planning ahead for long term care costs.  In the long term care portion of this discussion, my post of May 22, 2014 discussed whether to buy long term care insurance at all.  My post of May 29, 2014 suggested looking for a stable, proven insurer.  My post of June 5, 2014 described how to identify a proven, stable Long Term Care insurance company.  My post of June 12, 2014 discussed the importance of protection against inflation. My post of June 19, 2014 suggested planning to use insurance to pay for four or five years of long term care.  My post of June 22, 2014 suggested a daily rate to choose when purchasing long term care insurance.  My post of July 10, 2014 advised to look carefully at the list of Activities of Daily Living that can trigger coverage from the long term care insurance policy.  My post of July 17, 2014 described the differences between a “period of time” kind of coverage and a “pile of money” kind of coverage.  My post of July 25, 2014 advised to make sure that the long term care insurance includes coverage for cognitive impairment.  My post of July 30, 2014 described the differences between tax-qualified and non-qualified policies.  My post of August 5, 2014 discussed the value of long term care insurance policies that qualify for the Partnership program.    My post of August 14, 2014 discussed hybrid policies that combine long term care insurance with life insurance.  My post of August 21, 2014 described how a long term care insurance policy with a return of premium rider can be used to construct a “hybrid” life insurance/long term care insurance policy.  My post of August 28, 2014 described how to use a partnership policy to protect just enough of your life savings while holding down the cost of the insurance.  My post of September 5, 2014 described how to coordinate long term care insurance with potential veterans benefits.  My post of September 12, 2014 discussed how an elder law attorney can help maximize the value of long term care insurance.

The introductory post in the series on planning ahead for long term care costs appeared on May 15, 2014.

Today’s post, as part of the sub-series on to how to give assets away, discusses gifts to your spouse as a method to protect the gifted assets from the costs of long term care in the future.

This one has a short answer:  Don’t do it.  Don’t give assets to your spouse to protect against long term care costs.  It doesn’t work.  It doesn’t have any effect.

Why try it?

Married people worry that their long term care will impoverish their spouses.  Giving assets to a spouse to put in her or his own name seems like a logical way to protect those assets from one’s own long term care risks and, at the same time, give the spouse additional assets as a shield against going completely broke.  Unfortunately, it doesn’t work that way.

Why doesn’t it work?

Both Medicaid and the VA view a married couple as a single unit when counting assets. The spouses may just as well view their assets (for long term care purposes) as yours, mine, and ours.  Your assets are mine.  My assets are yours.  Our assets are ours.

Medicaid just lumps the couple’s assets together.  It doesn’t matter whose name is on a particular asset.  All of the assets are considered.  (It may not be necessary to spend down all assets.  That’s a question of crisis planning (i.e., not pre-planning) for long term care costs.)

VA’s result is the same, but the method is a little different.  VA considers the “household’s” assets when considering eligibility for VA Pension (aka Aid & Attendance.)  That still puts both spouses’ assets in the mix.  It’s just a different way of looking at it from Medicaid’s way.

So, as a result, giving assets to a spouse doesn’t matter.  Medicaid’s rules consider the assets of both spouses in testing financial eligibility.  VA’s rules consider the assets of the household in testing financial eligibility.  Moving an asset from one spouse to another doesn’t take the asset out of the ownership of the spouses when they are considered as a couple and doesn’t take the asset out of the household.

There are ways to protect a spouse from long term care costs, but gifting before you need care isn’t one of those ways.

For more information, visit Jim’s website.

Jim Koewler’s mission is
“Protecting Seniors and People with Special Needs.”

For help with long term care or with planning for someone with special needs,
call Jim, or contact him through his website.

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