The Time to Act is Now!

As people get closer to retirement or have recently retired they normally stop accumulating assets and enter the phase of their life when they begin to use their assets to fund retirement.  When you are no longer accumulating assets the need to protect what you have and preserve your estate becomes even more important.  While many people fear the astronomical cost of nursing home care which can top $10,000 to $15,000 per month, they often ignore what can be done to protect their assets from other everyday risks. 

The following article will focus on some fundamental steps that everyone should take to protect their assets and end with a discussion of what you can do to preserve as much of your estate as possible if you ever need to enter a nursing home. 

Do you own a home? 

If you own a home the most important step that you can take to protect your house is to file a declaration of homestead with the registry of deeds in the county where your home is located.  A declaration of homestead protects up to $500,000 in equity in your home per family (or $500,000 for each person if you are age 62 or older or disabled).  This protection is from all unsecured creditors and would provide protection if you were sued for being at fault in an automobile accident.  If you filed a declaration of homestead and then transferred your home to a trust, under current law the homestead exemption is lost. 

Do you own rental property? 

If you have rental property it is important to review how the property is owned.  If you own the property in your own name and an injury occurs at the rental property potentially all your assets are at risk.  By transferring the ownership of your rental property to a corporation or limited liability company (“LLC”) that you own, you can limit the potential risk to the assets owned by the corporation or LLC. 

How do you operate your corporation or LLC? 

Many people come to my office after having set up a corporation or LLC and think that their personal assets are automatically protected.  While forming a corporation or an LLC is a great first step, the legal entity must be operated properly to provide protection for your other assets.  When you sign a lease with a new tenant are you just signing your name or do you indicate you are signing as “president” of the corporation?  Having a corporation in place is not enough.  It must be operated appropriately and failing to do so may put your other assets at risk.   

How can I preserve my assets if I enter a nursing home? 

The time to begin positioning your estate to minimize the potential exposure to nursing home costs is well before you enter a nursing home.  The Federal Medicaid program is administered by Mass Health and will pay for nursing home care if an individual does not have sufficient assets.  When you apply for Mass Health there is currently a 5 year look back period during which any assets transferred by you must be reported.  Although the rules are complex, the bottom line is that generally assets transferred within the past 5 years will prevent your eligibility for Medicaid.  If you have excess assets, you may want to consider transferring them to the next generation. 

Are there any “last minute” planning opportunities regarding Medicaid eligibility? 

Under current law a person who is about to enter a nursing home can purchase an annuity with his or her assets.  Although Mass Health is required to be listed as a remainder beneficiary of the annuity, this still may provide an opportunity to reduce ultimate nursing home expenses.