A Warning Against Medicaid Planning

Half of financial advisors have clients who ask about giving all their money to their children in order to qualify for government assistance in paying for long-term care, according to a survey sponsored by Nationwide. Forty-two percent say their clients think of Medicaid planning as a way to preserve their children’s inheritance, according to the Harris Interactive survey of 501 financial advisors.

John Carter, president of distribution and sales for Nationwide Financial said,  “Medicaid should not be a plan, but used in instances where an unexpected and financially devastating illness of one person threatens to impoverish their still healthy spouse. Medicaid was never intended to supplement the middle or affluent classes. Medicaid was meant to help care for the poor.”

Forty-nine percent of Americans who need long-term care services depend on Medicaid to pay for their long-term care expenses.

While the Deficit Reduction Act of 2005 helped make transferring assets to children much less practical by implementing a five-year, look-back provision, instead of a three-year look back, Medicaid planning is becoming a more often used tactic. However, seniors should be concerned about the following issues when thinking about impoverishing themselves:

* While Medicaid may pay the bill for nursing home care, you may not get to live where you wish. Nursing homes are not required to accept new patients who are on Medicaid.

* Medicaid often uses nursing home care as the only choice. Community based service, such as assisted living, home health care, or adult day care are not typical options for those relying on Medicaid.

* Medicaid patients do not get private rooms and if they are unhappy with the facility, they may have limited ability to change situations.

* Your spouse may not have the income needed to maintain their lifestyle.

Carter said, “Many of our advisors tell us the most important aspect to their clients when planning for long- term care is maintaining control. People who resort to repositioning or giving away their money often find they sacrifice control when having to ask for money that used to be theirs. They also give up control when protecting an inheritance for their children outweighs comfort in their final days.”

The most commonly known long term planning choice is the traditional stand-alone long-term care policy. While it is very customizable, some clients don’t like the use it or lose it nature of these products.

Hybrid products are also available. A long-term care rider can be added to the life insurance coverage being purchased. This plan will provide funds for the insured should they need long-term care. However, in the event no long-term care is ever needed, the insured has a death benefit to leave to heirs.

Carter said, “As financial professionals, it is our job to help protect our clients’ financial health without sacrificing their dignity. In many cases proper long-term care planning that includes some type of long-term care insurance protection will not only better suit clients financially, but it will also allow them to keep control of their assets, their life, and most importantly their dignity.” To learn more, visitwww.nationwidefinancial.com/healthcare.

Last Updated 7/11/2017

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