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AMedicaid-compliant annuityis relevant when there's a spouse who isn't institutionalized. When properly structured, it's a way to "spend down" and reduce the income Medicaid considers when deciding if you qualify for that assistance. People tend to make this purchase when they're in a last-minute or crisis Medicaid planning situation, notes Shawn Plummer, CEO ofThe Annuity Expert. This is when a care specialist from your local Council visits you to find out your individual care needs and the best way to help you. If your property is under a residential mortgage, you'll have to get it refinanced as a "buy to let" mortgage, which will likely be more expensive.
That seems like plenty to retire on … until the husband is diagnosed with dementia. Suddenly, they have to worry about the cost of long-term care, which could be $8,000 a month or more if he needs to move into a nursing home. When someone enters care they are automatically “means tested” and ALL of your assets, including your home, are taken into account.
How an asset-protection trust can help
The rules are often set out in the trust deed and rules, and these dictate how the trust will work. Therefore, whilst it may seem appealing putting property into a Trust to avoid care home fees, it is something you need to be very careful about. The act of giving away your money and assets is in itself, not the only thing that can be assessed. Deliberate attempts to reduce your money or assets could also be included.
So, in the example of transferring ownership of your home, not only could you end up having to pay for your care, you might no longer have a house to fund those costs. In the case of Medicaid, any assets you transfer within the five years prior to entering a care facility are subject to seizure after your death. Transferring funds before you fall ill shelters your money and ensures your family members can legally keep the gifts they receive.
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This is so that the local authority can calculate how much financial support you are eligible for. If Mr and Mrs Smith owned their property and tenants in common, each owning a 50% share, they could then use trust wills to ringfence their share. With the right specialist advice, Mr Smith could have placed his 50% of the family home in a trust, while allowing Mrs Smith to continue living in the home. Paying for care fees in the future could reduce the value of the inheritance you intend to pass on. With the right planning, it can be possible for a couple to ringfence part of their estate and protect it from care fees.
Mrs Smith then remained in the home for 6 years until she passed away. During this period she incurred £180,000 in care home costs (6 years x £30,000). If you are wondering how to avoid paying care home fees, giving away assets may be an option for you. Giving away money or assets will not always be considered deliberate deprivation of assets.
What is deliberate deprivation of assets?
This requires specific planning and specialist advice from a will writing expert. If your retirement plan doesn’t include a strategy to cover the possibility of long-term care needs, it’s incomplete. Talk to your financial adviser and an attorney about using a trust for asset protection and what it could do to reduce the risk in your plan. It’s also about protecting that money from retirement risks, such as taxes and long-term care costs, and — if it’s important to you — being able to leave something behind for your loved ones. Whilst the surviving partner continues to reside in the property there are no issues, but once the survivor goes into care is when property and assets will be assessed for care costs.
The statements and opinions are the expression of the author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law. When purchasing this protection, keep in mind that theAmerican Association for Long-Term Care Insurancereports that 30% of nursing home residents are institutionalized for one to three years. Only 12% reside in a facility for three to five years, and another 12% live there for five years or more. These trusts are similar to Life Interest Trusts, but the beneficiary can receive income from the moment it is produced.
Fortunately, the value of your house is excluded from an assessment of care charges provided it is occupied by your spouse . In order for it to work, you and your partner must own your home jointly as tenants in common. Unfortunately, a property trust cannot prevent the surviving partner's share of the estate from being used to meet care bills. Neither can it help with inheritance tax planning, but it can go some way to ring fencing some of your hard-earned assets. The state meets full long-term care costs only for those with less than £10,000 of assets and income.
So, while in reality Mark now only has £20,300 in savings, the local authority treat him as though he still has £29,300. This will mean that rather than being left with a minimum of £14,250 after paying for care, the local authority only leave mark with £5,250. People sometimes think about giving away some of their savings, income or property to reduce the amount they’ll need to pay towards their care.
If you are able to access it, you can use this to meet your care costs, make home improvements to make life a little more comfortable and continue living in your home. So, in the example of giving your family home to your children, not only could you end up with the double whammy of having to pay for your care and also not having a house to fund your care costs. The value of a person’s ‘notional capital’ will be included in their overall asset value when they have their financial assessment. However, this is not straightforward and your local authority may look at whether you put your home in trust solely for the reason to avoid your care costs.
If you do find yourself having tofind a care home, you can read more about it on this site. With the average cost of a nursing home in the UK is £738 per week - £40,000 per year can be very difficult to find. Reforms are underway to reduce the likelihood of anyone with ongoing care needs losing their home and all savings. For more advice on how fees vary across regions, you can use thiscalculator.
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