There is a misconception that people who do asset protection planning for long-term care are just giving away their assets to their children to protect from the nursing home. In nearly all situations, we discourage parents from giving assets away, whether it be their home, farm, or life savings, to their children. Giving away assets to children could leave a parent in a devastating situation.
When you make a gift to a child, whatever you give that child is now his or her asset. In the event that child goes through a divorce, gets sued from a car accident, or whatever else might happen, you now have to worry about the assets and life savings you gave your child from being lost in a legal proceeding or creditor claim. Additionally, it is often much more advantageous from a tax perspective to not give away assets to children as they will receive a carry-over basis, which often leads to capital gains taxes down the road.
We recommend asset protection planning so that you are setting aside some of your own assets for your care and wellbeing. If a person goes broke, i.e., gets down to $2,000 in assets, and then qualifies for Medicaid, that person no longer has money to cover things that Medicaid won’t pay for, such as over-the-counter items that may be important to their wellbeing, such as incontinence products. Likewise, services for eye, dental, ear, foot care, medical devices and equipment such as wheelchairs, can be limited and not “top of the line” or have other limitations, like a new pair of eyeglasses every couple of years. When you preserve your assets, you are preserving options. When you are broke, you don’t have any more options left. If you have questions about elder law planning, give us a call today at (605) 275-5665.