The silent threat to most people and their estates is...Long-Term Nursing Care!
A lot worse than probate
Most of our clients plan their estates to avoid court probate, a process that can occur when you pass away and can cost 2-4% of your estate. Yet, very few plan to avoid an even bigger and more financially disastrous process—Long-Term Nursing Care—that can take from you while you’re living (as well as from your beneficiaries after you’re gone) up to 50% or more of your estate!
Then why isn’t this talked about?
The threat of long-term nursing care to you and your loved ones’ financial security remains silent and rarely discussed mainly because today’s older generation is the first one to encounter its magnitude. Only those who are already undergoing long-term nursing care, or know someone who is, truly understand the significance of its cost and the family disaster that can occur.
Here are the facts about the size of the threat
Statistics tell us that it is more probable than not (more than a 50% chance) that you, your spouse or parent will require long-term nursing care. The average yearly cost of this care in California now exceeds $100,000 (and continues to rise at a pace much faster than inflation). Thanks to modern medicine, people with afflictions that in the past would have resulted in a quick death—such as Alzheimer’s, Parkinson’s, MS, and Dementia—can now be sustained for many years. This means that the cost of one person’s long-term nursing care may well exceed $1 Million!
This impact hits not only you, but your spouse and children
If most of your liquid assets (cash, stocks, IRA’s, etc.) are used to pay for long-term nursing care, what will happen to your spouse? Will he or she have to sell your home and move out (or strip out the equity with a reverse mortgage)? Will the surviving spouse have enough left to live on? Will your children have to suffer a loss of work income to personally take over your care? Will your children wind up with the burden of paying for your care? (Note: in California and many other states, “filial obligation” law requires your children to pay for any long-term nursing care bills left unpaid by you!) Or, will a big chunk of the inheritance you wanted to leave your children and grandchildren be gone?
What are your options in dealing with long-term care?
Your first option is to do nothing and for you, your spouse and possibly your children to bear the entire cost. (Medicare only pays for limited long-term care benefits.)
Your second option is long-term care insurance. However, depending on your age and health, this insurance may not be available, may be too expensive or may only afford you limited coverage.
Your third option is to spend down virtually all of what you have and obtain Medi-Cal. This is a government benefit, known nationally as Medicaid, that can pay for most or all of your long-term care costs. But this approach may take a great deal of time before benefits are available and may leave little available to support your surviving spouse. Plus, any of your assets remaining that pass to your children (including your home) may have to be sold to reimburse all the benefits you received.
Your fourth option—and the one that many people should consider, but just don’t know about—is Medi-Cal asset protection planning. There are a number of completely legal ways to structure your and your family’s assets so that you, your spouse or parent can qualify more quickly for Medi-Cal, preserve most of your assets and won’t be required to reimburse Medi-Cal after death. One such way is to place your home (and possibly other assets) into a special trust known as a "Medi-Cal Asset Protection Trust'' or "MAPT".
Unfortunately, people have many misconceptions regarding Medi-Cal
You may believe that you must be impoverished to get Medi-Cal, or give away and lose control and use of all your assets (including your home), or have to wait 2½ to 5 years to start getting benefits. None are true. Or, you may believe you can just put off planning until you or your spouse move into a nursing home. Although you may qualify for Medi-Cal even after entering a long-term care facility, there are two good reasons not to wait. First, California has not yet adopted the much more restrictive Medi-Cal qualification rules already being used in the other 49 states, so you should take advantage of existing rules soon. Second, by waiting until you’ve already entered a nursing home, you may also have to wait for benefits to kick in when you need them right away!
Take care of this important matter NOW
The earlier you see us, the greater the likelihood of saving your lifetime’s hard-earned assets for you, your spouse, children and grandchildren. The Medi-Cal Asset Protection Trust, its funding and the Medi-Cal application process should be handled by qualified professionals. Call our office at 1-800-756-5596 and arrange a free initial Medi-Cal planning consultation right away.
This is intended to be a quick summary containing general information only and does not constitute legal advice. Before proceeding to set up any estate planning, you should consult with a qualified attorney.