Ethical & Practical Questions When Planning for Long-Term Health Care

The Wall Street Journal recently published an article by Kelly Greene entitled Inoculating Estates From Health Costs, WSJ, Apr. 3, 2010, which asks, “Should you give away your nest egg to your heirs—and then stick Medicaid with your nursing-home tab when the time comes?” 

Although legal, this strategy has its potential drawbacks:

• Some people struggle with moral dilemmas involved
• Medicare covers long-term health needs in only a few circumstances
• Strained budgets are pressuring the Medicaid system to cut costs, leading to suboptimal care
• Baby boomers may have little say on where they spend their golden years and may be moved far from family in a facility they dislike
• Regulators look at gifts made up to five years before applying for Medicaid and a penalty period starts when you apply for Medicaid
• Giving money to your children could complicate their finances in unexpected ways

Vincent Russo, an elder-law attorney, offers an alternative: Keep your money. If you later need long-term care, you can then give away half your assets, pay for the long-term care you need at that point with your remaining assets, and then apply for Medicaid if it becomes necessary. Your children get something and you get a say over your care. 

See Kelly Greene, Inoculating Estates From Health Costs, WSJ, Apr. 3, 2010.

Special thanks to Jim Hillhouse (Wealth Counsel) for bringing this to my attention.