Important Changes Affecting Health Care Planning

    For many years, purchasing long-term health care insurance was seen as the perfect way to pay for health care needs in one’s later years.  There were many great policies, which offered home care, nursing home care and care in assisted living facilities.  While many complained that the premiums were high, when weighted against the benefits, it seemed like obtaining the insurance made incredibly good sense.  

     Unfortunately, over the last few years, many companies are no longer offering long-term care insurance, and the premiums on the ones which are being sold are exhorbitant.  One option which is now being touted as an alternative is the purchase of a type of life insurance policy which has a long-term care rider.  The premise is that even if you never need long-term care, your insurance premiums will at least provide your estate with monies upon your death.  The long-term care coverage in these policies, however, tends to be quite minimal and not adequate for most people. 

What is the solution to the foregoing?  The creation of an irrevocable medicaid trust is becoming a much more recognized way of protecting your assets in the event you should ever need long-term health care and do not have sufficient insurance.  One must establish the trust at least five (5) years in advance of needing care, so it is important to consider it as a necessary planning tool at a young age  Starting the planning somewhere between the ages of 65 and 70 is considered ideal.  Putting your residence in such a trust really has few, if any, disadvantages, as one’s daily life will not change and one is not giving up much in the way of control.  Such a trust is drafted so as to provide the grantor with the right to reside in the property for the rest of his/her life, to have the trustees sell the property and purchase a replacement residence, if that is desired, or sell the home and invest the sales proceeds, paying to the grantor all of the income generated on the investment.

            A medicaid trust can also protect one’s liquid assets, although the control one can retain with respect to liquid assets is more limited.  The trust can provide that the grantor receive all of the income and dividends generated by the assets, but it can not allow the grantor to access the principal of the trust.   Of course, putting all of one’s liquid assets would not be a good idea, but transferring a portion of them certainly makes sense. Keeping some assets, such as some bank accounts, outside of the trust, will permit a client to have monies under his or her direct and unfettered control  Moreover, the transfer of liquid assets does not need to occur immediately, but it is more easily done down the road if the medicaid trust is already established. 

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