Caution! Protect Your Children’s Inheritance With Long-Term Care Protection

Caution! Protect Your Children’s Inheritance With Long-Term Care Protection

Have you thought about what you will do if your parents or grandparents fall ill, become injured, or need Assisted Living, Skilled Nursing, or Memory Care? Sadly, many families don’t consider this until it’s too late. There comes a time in everyone’s life when they need to consider what they will do in the event that an unforeseen illness or injury impacts the quality of their lives. 

Consider this: one reason your family members might need to rely on this type of medical insurance policy in hopes of preserving an inheritance for their children and grandchildren. The questions that you, your parents, or your grandparents need to be asking are as follows:

  • What is long-term care insurance?
  • What is a Medicaid-compliant annuity?
  • Does estate planning involve a long-term care plan?
  • Should I put my assets in an irrevocable trust?
  • Who can help me find the right long-term care coverage? 

This article will provide general responses to these questions. We strongly recommend you dig deeper to learn more.  

To obtain the details that impact your life and loved ones, we recommend you connect with an affordable financial planner in the Bay Area and use this quick guide to learn more.

What is long-term care insurance? 

As our bodies and minds age over time, our risk of accidents and illness increases. Some of these unpredictable happenings may cause us to seek one of the various types of long-term care. 

There is a 70% chance that when you reach 65, you will, at some point, require long-term care. There’s also a 20% chance that you’ll require long-term care in one of the facilities designed for that level of care. And, if something really debilitating happens (physical, mental, or both), then you may find you have a long-term need for 24/7 care that cannot be provided by family members.

Long-term care insurance is often a prudent choice for paying for this level of care. 

As you add to your knowledge base, consider helping your parents, grandparents, and eventually, yourself plan smarter.

What is a Medicaid-compliant annuity?

An income annuity (also called an annuity) is a financial contract between an insurance company and an individual. Purchasing an annuity enables one to give cash to the company and convert it into an income stream that returns to the individual. To be eligible for Medicaid long-term care, you must have a limited amount of documented assets. 

It can vary by state, but Medicaid has fixed asset limits. A Medicaid-compliant annuity is a financial planning strategy that allows you to lower your countable assets to meet Medicaid’s asset limit; based on your current financial circumstances. Contrary to what you may have been told or believe, a potential health condition like dementia or Alzheimer’s should not deter you from considering this financial strategy. 

Should retirement planning include a provision for long-term care?

Long-term care as part of a retirement plan can assist you in covering expenses for care and, at the same time, can potentially help your spouse maintain their current lifestyle. An estate plan may also be part of this process, so your assets pass to the right heirs after you and your spouse are both gone. Creating a retirement and estate plan and obtaining long-term care coverage can potentially ease the financial burden from relatives and ensures you receive the care you need when you or a family member can no longer provide it. 

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An estate plan includes wills and trusts that impact the distribution of your assets after you are gone. Long-term care could impact the distribution of assets because your need for care is not draining the assets in your estate. For example, if your loved one has serious health problems and requires 24/7 care, the care is not reducing the value of your estate by thousands of dollars per month. 

Without a clear estate plan and the applicable legal documents (wills trusts) potential conflicts may arise that can tear families apart. The main point: Seniors can risk reduced estates and inheritances for children or grandchildren if they have to cover the expenses of long-term care.

Should I put my assets in an irrevocable trust?

You may want to consider creating an irrevocable trust in order to:

  • Potentially reduce estate taxes
  • Become eligible for government programs
  • Protect your assets from your creditors

This strategy can help you protect your assets and decrease the risk of your heirs or beneficiaries not receiving what you want them to receive. Simply stated, putting your assets into an irrevocable trust means that your assets cannot be taxed after your death, a vital component in family wealth and inheritance preservation.

Who can help me find the right long-term care provider? 

An affordable financial advisor in the Bay Area at Humanity Wealth is available to help you take the necessary steps to create a thoughtful estate plan that reflects your wishes and provides long-term care coverage that is based on your goals and circumstances.

Our advisors encourage anyone going through these steps to remember to save statements and receipts in order to verify their annual tax returns, if audited. On top of that, here are some documents that need to be safely stored for life:

  • Social Security cards 
  • Birth certificates 
  • Passports 
  • Marriage certificates 
  • Adoption papers 
  • Death certificates 
  • Powers of attorney 
  • Wills and living wills 
  • Legal filings 
  • Military Records 
  • Retirement and pension plans 
  • Beneficiary forms
  • Inheritance documents 

Keeping financial documents in a secure place is essential to creating an organized plan of action for your family. The professionals at Humanity Wealth can help you by advising what you should retain and what you can safely discard.

At the end of the day, these efforts are about reducing your financial anxiety and stress while encouraging financial fitness and family ties. Download our free eBook to help your loved ones simplify their retirement planning efforts. This useful information applies to you too!

The Takeaway

It’s time to consider what you and your family will do in the event that an unforeseen illness or injury of your parents or grandparents takes them down another path. Hopefully, the information provided in this article will help you protect your loved ones and your future inheritance.

Here at Humanity Wealth, we truly believe that financial planning can improve your mental health

If you think that you don’t have enough funds to work with a financial advisor, we have some good news! With our subscription-based financial planning, you can afford financial advice for only $50. Give us a call with questions and let us know where you’d like to begin.

As always, please don’t forget to utilize our knowledge and resources to help you stay informed and build financial literacy

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.
Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.
Humanity Wealth Advisors and LPL Financial do not provide legal and tax advice or services.  Please consult your legal and/or tax advisor regarding your specific situation.

More about the author: Harry Sherdil

As a fiduciary financial advisor at an independent firm, Harry strives to offer the same resources, tools, and research as bigger firms while serving new and existing clients' best interests.