Assets & Annuities > Protecting Your Assets

Long-Term Care On A Fixed Income
If you have limited financial resources and do not have assets to protect, it would probably not be in your best interest to purchase long-term care insurance. Medicaid and other state programs can help you with care; either in your own home or in a long term care facility. For additional information on the options available to you, contact your state's Department of Social Services - Elderly Services Division.

Protecting Assets & Paying for Long-Term Care
You must purchase a separate policy that specifically covers long-term care. Most policies also cover at-home care, alternative care, and care in skilled nursing facilities when Medicare benefits are not available.

About Transferring Assets to Your Children
Generally, transferring assets to your children is not a good idea. Consider the federal law that took effect on January 1, 1997, commonly referred to as "The Medicaid Criminalization Bill." According to the law, "Whoever… knowingly and willfully disposes of assets (including by any transfer in trust) in order for an individual to become eligible for medical assistance (Medicaid), if disposing of the assets results in the imposition of a period of ineligibility for such assistance…shall…be guilty of a misdemeanor."

Also Keep in Mind that:

You lose control of any assets you transfer to your children. Also, there are cases where assets were lost due to a divorce.

Those assets could cause your grandchildren to become ineligible for financial aid at a private school or college.

If you are retired, you are probably in a lower tax bracket than your children. Any assets in their name would be taxed in their higher bracket.
Any assets you transfer to your children could be subject to large capital gains taxes if they were sold. If they remain in your name until your death, no capital gains tax may be due when your children sell them.

About Establishing a Trust
There are two types of trusts: revocable and irrevocable. Neither type is effective in protecting your assets from long-term care expenses.

Under a "revocable" trust, you maintain control of and have access your assets whenever you want. Placing your home in a revocable trust will not protect it, however, neither is it certain whether a "life estate" will protect it. Under federal legislation effective in 1993, the state can place a lien on your life estate or the entire value of your home after you die, for the expenses paid on your behalf.

When you put assets in an "irrevocable" trust, you no longer control those assets and it’s up to the trustee whether or not to give you anything. Since 1986, however, federal law requires a trustee to pay if the trust’s beneficiary needs nursing home care. In 1993 other legislation (referred to under "revocable" trusts, above) allowed states to place liens on the estate of anyone who had received Medicaid benefits.