Dec 7 Financial advisers are getting a
counterintuitive request from clients worried about their
long-term care needs: Make me poor.
Called "Medicaid planning," the goal is for the client to
give away their money to their kids in order to qualify for
government assistance. It is not a new strategy, but with the
cost of healthcare rising, retirement benefits shrinking and
people living longer, it is increasingly on the table.
A survey released Thursday by the insurer Nationwide
Financial found that half of 500 financial advisers polled in
July had a client considering this strategy. Most said these
clients view it as a way of preserving their children's
The first move an adviser should make if a client brings up
this plan? Talk them out of it, long-term care experts said.
"Medicaid comes up short in protecting your freedom of
choice," said John Carter, president of distribution and sales
These clients probably do not realize how complicated this
plan can be to execute and how limited their care options would
be on Medicaid, the federal and state health insurance program
for low-income Americans.
The only clients who should be aiming for Medicaid are the
ones who truly expect to need it. Everyone else should be
reallocating their assets, buying long-term care insurance and
holding strategy meetings with their families, experts said.
Bryan Langdon, who heads up the long-term care insurance
division at Fort Wayne, Indiana-based Ash Brokerage Corp,
frequently hears about people aiming for Medicaid.
They probably do not know what they are in for, he said,
describing how his 50-year-old brother, Tom, was forced on
Medicaid after a cancerous brain tumor caused him to lose his
job and private insurance. Tom is spending what is expected to
be his last holiday season in an overcrowded and understaffed
Medicaid facility - the only option close enough for his mother
to visit easily.
"Why, at the end of your life, where it's really difficult
to maintain control and dignity, would you want to give all that
up?" Langdon said.
Many clients aiming for Medicaid propose gifting their
savings to their kids via a trust, with the tacit agreement that
the kids will support them with the money.
But the government is on the look-out for this behavior, and
checks to find out if new applicants transferred assets in the
last five years. If they find evidence of someone intentionally
impoverishing themselves, the application is delayed. The delay
is based on the amount of assets the applicant transferred, said
Jeffrey Abrandt, an elder-care lawyer with New York-based
Goldfarb Abrandt Salzman & Kutzin LLP.
If a client says they will find a way to work around that
look-back period, say by planning farther out than five years,
ask them if can they count on their kids being responsible with
that money. What if the children land in financial trouble?
When clients still feel this is their best option, advisers
should not take on this planning themselves. Connect them to an
elder-care attorney familiar with the state's Medicaid rules.
If you convince a client not to aim for Medicaid, the next
step is to reassess how much they can afford for healthcare.
The average cost per year for a shared room in a nursing
home is projected to be $265,000 by 2030. Medicare and private
insurance plans cover little, if any, of these costs. And about
70 percent of people over age 65 will require some type of
long-term care service in their lifetime, according to a
A popular but expensive choice to cover costs is long-term
care insurance. Policies can cost roughly a couple thousand
dollars a year and are expected to become pricier. But they
could be a lifeline when illness strikes, paying around $150 a
day for three to five years' worth of long-term care services
either in the home or at a facility.
For clients who balk at the price, frame it as an
estate-preservation expense, said Karen Lee, founder of the
Atlanta-based wealth management firm Karen Lee and Associates.
She is 50 and for the past seven years has been paying $3,400
annually for a long-term care policy covering herself and her
"I don't like paying the bill, but it's a necessary evil,"
she said. "I hope every insurance dollar I paid goes to waste."
Some clients may have health issues that disqualify them
from long-term care insurance. If that is the case, see if they
would feel comfortable with you calling a family meeting and
discussing with relatives what they can do to help with
long-term care. Now is a good time of year, with the holidays
bringing families together.
These steps should provide clients with more security than a
plan to end up on the government dole.
(Editing by Beth Pinsker Gladstone and Matthew Lewis; Twitter