Annuities > Protecting Your Assets
Long-Term Care On A Fixed Income
If you have limited financial resources and do not have assets
to protect, it would probably not be in your best interest
to purchase long-term care insurance. Medicaid and other state
programs can help you with care; either in your own home or
in a long term care facility. For additional information on
the options available to you, contact your state's Department
of Social Services - Elderly Services Division.
Protecting Assets & Paying for Long-Term Care
You must purchase a separate policy that specifically covers
long-term care. Most policies also cover at-home care, alternative
care, and care in skilled nursing facilities when Medicare
benefits are not available.
About Transferring Assets to
Generally, transferring assets to your children is not a good
idea. Consider the federal law that took effect on January
1, 1997, commonly referred to as "The Medicaid Criminalization
Bill." According to the law, "Whoever… knowingly
and willfully disposes of assets (including by any transfer
in trust) in order for an individual to become eligible for
medical assistance (Medicaid), if disposing of the assets
results in the imposition of a period of ineligibility for
such assistance…shall…be guilty of a misdemeanor."
Also Keep in Mind that:
You lose control of any assets you transfer
to your children. Also, there are cases where assets were
lost due to a divorce.
Those assets could cause your grandchildren to become ineligible
for financial aid at a private school or college.
If you are retired, you are probably in a lower tax bracket
than your children. Any assets in their name would be taxed
in their higher bracket.
Any assets you transfer to your children could be subject
to large capital gains taxes if they were sold. If they remain
in your name until your death, no capital gains tax may be
due when your children sell them.
About Establishing a Trust
There are two types of trusts: revocable and irrevocable.
Neither type is effective in protecting your assets from long-term
Under a "revocable" trust,
you maintain control of and have access your assets whenever
you want. Placing your home in a revocable trust will not
protect it, however, neither is it certain whether a "life
estate" will protect it. Under federal legislation effective
in 1993, the state can place a lien on your life estate or
the entire value of your home after you die, for the expenses
paid on your behalf.
When you put assets in an "irrevocable"
trust, you no longer control those assets and it’s up
to the trustee whether or not to give you anything. Since
1986, however, federal law requires a trustee to pay if the
trust’s beneficiary needs nursing home care. In 1993
other legislation (referred to under "revocable"
trusts, above) allowed states to place liens on the estate
of anyone who had received Medicaid benefits.