if passed directly to the beneficiaries. Even outright gifting of assets,
especially those temporarily at depressed values, may make sense.
FROM PAGE 18
not be allowed if they needed to ap-
ply and qualify for Medicaid. This
created an incentive for people to
purchase the insurance and protect
some of their assets. In the past,
buying an insufficient amount of
insurance would have exposed all
their assets to further depletion.
Many states have implemented
these partnership programs and
many more will do so in the near fu-
ture. Now is a good time to discuss
these plans with clients, particularly
when it comes to preserving assets
for heirs and not burdening loved
ones with the cost of care. AT
LONG-TERM HEALTH CARE
The destruction that long-term
health care costs can wreak on
people’s financial futures is only
now finally showing itself. More attention is finally being paid to this
type of expense now that the Baby
Boomers are starting to retire.
These costs are also misunderstood by many people. While long-term health care costs certainly include medical expenses incurred by
older people, the greater exposure
may be the portion of long-term
health care costs that represent
non-medical costs. These generally
are custodial in nature; i.e., activities of daily living, such as helping
someone get dressed, bathed or
showered, feeding oneself, etc.
While medical insurance or
Medicare provide for the medical
nature of this type of care, none or
only a very limited amount of the
non-medical care is covered.
Most people pay for non-medical care from income and savings
or through the purchase of an insurance policy. However, both of these
methods come with limitations, as
the cost of care could outlast the
savings and the insurance.
An extended need for care can
severely deplete a family’s assets.
Non-medical costs for this type of
care average $72,000 a year nationally, and can be much more depending on where you live.
In the past, planning could be
done to transfer assets directly to
heirs or into trusts to help people
qualify for Medicaid. The Deficit
Reduction Act of 2005 severely curtailed this strategy. It did, however,
provide a different way people could
preserve their assets while transferring the risk of paying for the cost of
care to an insurance company.
The DRA extended to all states the
ability to participate in a Medicaid
Partnership program whereby people could purchase long-term-care
insurance policies that extended
benefits for a certain period of time.
In exchange for using the benefits of
the policy, the policyholder is able
to keep assets that would other wise