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Estate planning should include consideration of funding for long-term care, P.1

A recent article in Forbes magazine took a look at various financial risks, 13 to be precise, that can be avoided. The various risks touched on occur because no action was taken, insufficient action was taken, or too much action was taken. Interestingly, and appropriately, some of these risks deal with things estate planning is intended to address.

One of these, an obvious one, is the failure to do any estate planning at all. This problem is actually quite common. There are a number of reasons for this, but there are various risks one takes by not setting up an estate plan. Another one mentioned, the one we'll focus on here, is to assume that federal money will take care of one's nursing home expenses down the road, that one's spouse will be able to provide care if any is needed, and failing to inform oneself about Medicaid rules. With life spans increasing and health care costs rising, this is a big issue for many people. Taking the time to do a little long-term care and Medicaid planning is an essential aspect of estate planning.

Good planning, either in advance or in response to unexpected need for can, can help preserve one's estate. While specific Medicaid planning strategies will vary depending on each person's situation, there are a number of broad principles/tools that can be outlined.

Transfers outside the so-called "look-back period" are one such technique. The purpose of these transfers is to reduce one's assets for the purpose of qualifying for Medicaid. These transfers should be made carefully, and will full understanding of the consequences. Transferring assets within the look-back period, which is currently five years, will make one ineligible for Medicaid for a period of time determined by dividing the amount transferred by what is determined to be the average cost of a nursing home in one's state. Those intending to make transfers should consult with an attorney before doing so.

Permitted transfers include those to a spouse, a child who is blind or permanently disabled, and to trusts for the sole benefit of anyone under the age of 65 who is permanently disabled. Oen may also transfer one's home to a child under 21, a child who has lived in the home for at least two years prior to one's move to the nursing home and who provided care during that time, or a sibling who has an equity interest in the house and who lived there for a minimum of one year before one's move to the nursing home.

Source: Forbes, "13 Financial Risks You Can Avoid," Eve Kaplan, June 19, 2012

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