Your legacy can fall into place haphazardly if you do not think about the events that will take place after you pass away. On the other hand, you can proactively consider the impact of your actions (or inaction) from an estate planning perspective.
Wealth Preservation
When you are planning for retirement, you have to consider your own needs as a senior citizen first and foremost. You will make projections with regard to the expenses that you expect to incur and create a retirement plan that allows you to enjoy your golden years in comfort.
They say that “you can’t take it with you,” and this is certainly true, but your legacy can enhance the lives of your loved ones.
The way that you choose to approach this is a personal matter, but one thing is for sure: there is no reason to throw money down the drain because you won’t need it in the afterlife. With this in mind, there is a looming threat to your legacy that you should address in advance.
Nursing Home Costs
It is natural to assume that Medicare will make all of your health care needs affordable when you are a senior citizen, and this is true for the most part. However, there is one looming expense that is not covered by this program.
Medicare will not pay for in-home custodial care, and it does not cover a stay in a nursing home.
Over one third of seniors will require nursing home care, and 52 percent of elders will need some form of paid care eventually.
You can expect to pay over $100,000 for a year in a nursing home in the Los Angeles area, and the costs may be considerably higher 20 years from now. And if you are married, you and your spouse may be forced to contend with two sets of nursing home bills.
Medi-Cal Can Preserve Your Legacy
The Medi-Cal program will cover long-term care costs, so eligibility could potentially preserve your legacy. We are all aware of the fact that this is a need-based benefit, but most people in nursing homes are enrolled in the program, and many of them were never poor.
There is an asset limit of just $2000, but your home is not counted, and there is no equity limit. On the surface, this can be reassuring, but a lien could be placed on the home of a deceased Medi-Cal beneficiary, so this is not a real solution.
You can remove assets from your name with future Medi-Cal eligibility in mind if you create and fund an irrevocable trust. As the grantor, you would not be able to act as the trustee, and you would no longer have access to the principal.
However, you would be able to receive distributions of the trust’s earnings. If you are in a strong enough financial position, this can be more than adequate to satisfy your needs when you are still living independently.
If you apply for Medi-Cal at some point in time because you require expensive long-term care, the assets in the trust would not count, but there is one important stipulation.
The trust must be funded at least 30 months before you submit your application for Medi-Cal coverage. A penalty in the form of a period of ineligibility would be imposed if you divest yourself of assets within this interim.
Your time on the sideline would be based on the amount of the divestiture as compared to the cost of nursing home care in California. For example, if the divestiture would have paid for one year in a nursing home, your eligibility would be delayed by a year.
We Are Here to Help!
There is no one-size-fits-all legacy planning approach that is right for everyone. When you choose our firm, we will put you at ease and gain an understanding of your situation along with your goals. We will then provide recommendations so you can make informed decisions.
Ultimately, you will come away with a personalized plan that preserves your legacy for the benefit of your loved ones.
If you are ready to get started, you can call us at 310-337-7696 to schedule a consultation at our Los Angeles estate planning office. There is also a contact form on this website you can use if you would prefer to send us a message.
- Choose Your Estate Administrator Wisely - October 29, 2021
- What Is a Life Estate? - October 27, 2021
- Consider Taxation When You Choose a Retirement Destination - October 21, 2021
