Estate Planning

[StuCam]

Husband (89) in care home, will not come out. Wife (75) at home (paid for). His LTC will pay for home for approx 3 years. Wife has LTC which she is considering using for him once his runs out if she is ok. Only assets are home and his IRA ($400,000), wife has only Social Security in her own name. Considering taking out another LTC policy on her, to use if hers goes to husband.

All thoughts welcome

[Bradly T.]

Consider selling home and convert equity to income resource or check out HECM reverse mortgage (2/3 of equity available for credit line, income, or lump sum - illegal to use proceeds for securities/annuities) - compare both to premium obligation for new LTC. Assume couple has "Shared - Care" rider on LTC policy. Wife's future housing plans/solutions are critical to recommendation-options menu. His RMD should be running over $3k/mo. at his age so perhaps he should cash flow his future costs and wife retain her coverage for her own future needs (or perhaps RMD is primary income resource for her?).....however, given the sorry state of the LTC industry, perhaps accelerating wife's benefits to him now (certain benefit) would be better than her future dependence on unpredictable life-pay insurance (uncertain future outcome)? Show me your crystal ball.....and I'll show you mine. And we both will be wrong. Wife must be in good health if considering underwriting?

[StuCam]

Bradly T, all good ideas and suggestions. They do have shared care thru John Hancock. For Medicaid the 5 year look back puts a wrench in that area. The wife is less concerned about passing assets on to her kids than she is her own remaining lifestyle.

[Bradly T.]

Good for her. Common with working class folk who did not inherit much or any wealth either. The IRA will remain the real "fly in the ointment" regarding Medicaid for either of them - can't put in irrevocable or change ownership (without a death). Client could withdraw entire IRA, pay 40% and push balance to irrevocable for Medicaid planning but I wouldn't want to be in the room when it's suggested!! Perhaps, with underwriting, Hancock would extend her benefit period to 6 or 10 years in current policy but probably not. Best of luck.

[the observer]

I sincerely hope there aren't any "financial planners" still providing advice on Medicaid planning out there??!! After all, the US attorney may currently be choosing not to enforce the law but the law still provides for severe criminal and civil penalties and "financial planners" do not enjoy privilege... As Brad said... Don't be in the room or the same building if an attorney stinks it up with that piece of advice...

[Bradly T.]

Can't pass up the opportunity to disagree with observer (it happens so rarely); the "Grannie Goes To Jail" law was either repealed, amended, or failed court challenges several years ago. Turns out it is NOT illegal to explain the rules of qualification for Medicaid or any other federal or state program and that such a facilitation of understanding is not deemed the circumvention of the rules but an APPLICATION of the rules. Reasonable....go figure! But since the GGTJ repeal, the rules for qualification are stricter and change frequently and the state's "recovery" process has gotten far more aggressive (as it should IMO to protect us taxpayers). This is one of those damnable strategies that is impossible when needed and undesireable until needed. There will be less and less Medicaid "planning" and more and more spend down risk in the decades to come as both taxpayers and governments shift financial responsibilities (or ALL kinds) to the citizens in need and away from the taxpayer. Medicaid is doomed.....sometime, somehow. Medicare? Can't predict. Social Security? Fixable and will live on.....modified of course.

[StuCam]

And to add, I have no intention of pretending to be an attorney....

[the observer]

Love to be corrected when I am wrong... Just happy most of my clients have a strong pulse! :)