A Nationwide Financial survey found that 42% of advisors have clients who are asking about giving away all of their money to their children as a means of financial planning. Once they have few assets, such clients may qualify for government assistance in paying for their long-term care.
“Medicaid can be an extremely helpful option for those who need it,” said John Carter, president of Nationwide Financial Distributors. However, Carter added that Medicaid planning may have drawbacks for people with assets who take extreme steps in order to qualify for something not meant for them.
“People who resort to repositioning or giving away money often find they sacrifice control,” Carter said. After transferring assets to their children, they may find they have to ask for cash to meet living expenses.
What’s more, divesting assets in order to protect an inheritance might turn out to diminish their lifestyle if they need long-term care. “They may lose control of where they wish to live,” Carter said. The nursing home a certain client would choose may not accept people on Medicaid. In addition, Medicaid patients do not get private rooms, according to Carter. “If they are unhappy with the facility, they may have limited ability to change.”
Although Medicaid may pay for nursing home stays, a nursing home is not the only option and may not be the most desirable place to receive long-term care. “Services such as assisted living, home health care or adult day care are not a typical option for those relying on Medicaid,” Carter said.
If advisors might want to discourage clients from impoverishing themselves to qualify for Medicaid, what suggestions can they offer? “The first step is to know what long-term care costs may be,” Carter said. “Advisors say only 15% of their clients understand those potential costs well.”
Long-term care insurance is one option available to concerned clients; another is life insurance with a long-term care rider. With the latter product, a client can be assured that money ultimately will be paid out, either for long-term care costs or as life insurance death benefits to a loved one.