Giving Assets Away to Protect against Long Term Care Costs

Today’s blog post continues the series about planning ahead to protect against long term care costs.  Previous installments in the series discussed long term care insurance.  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 discusses how giving assets away can possibly protect those assets from the costs of long term care in the future.

The Medicaid Aged, Blind and Disabled program (the part of Medicaid that pays for long term care) and the VA Pension program (the VA benefit that helps veterans or surviving spouses pay for medical or care costs above their incomes) examine an applicant’s assets at the time of the application.  Applicants who have “too much money” don’t get coverage by those programs.  So, giving away assets can make a person “poor enough” to qualify.

But, of course, it’s not that simple.  (These are government programs, after all.  There can’t be too much simplicity.)

Medicaid looks back over the last five years to find what was given away.  The underlying theory is that money given away shortly before applying for Medicaid could have been used to pay for care so that Medicaid (i.e., the taxpayers) wouldn’t have to pay.  Anything given away during the look back period is assumed to have been given away for the purpose of qualifying for Medicaid.  Benefits will be restricted, or perhaps withheld altogether, for the period of time that the given-away money would have covered (just as if the applicant had the money at the time of application and needed to spend it to become poor enough to receive Medicaid.)

While the VA Pension program does not formally have a look-back period, the VA’s application process and/or its ongoing monitoring process includes a review of past tax returns to calculate what assets the participant (the veteran or surviving spouse) had before applying.  Then, the VA will force the applicant/participant to demonstrate that these assets should not, in fact, be considered available to pay for care.

Confused yet?  That’s okay.  This is all very convoluted.

So, the most important thing to remember is that giving assets away (often called “gifting”) as a method of protecting against potential long term care costs works best if done before the need for long term care is a real possibility.  In other words, gifting is best considered while you are still healthy.

Healthy adults rarely want to give their assets away, however.  They have plans for those assets.  They have to live off some or all of those assets.  What they don’t need to sustain themselves, they usually want to use on luxuries like fine food or travel.  Except for the super-rich, few adults come to the conclusion “I can give much of my money away.  I won’t need it.”

Nonetheless, people who do reach that conclusion can use gifting to protect some of their assets against the risk of long term care costs in the future.

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.

© 2014 The Koewler Law Firm.  All rights reserved.

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