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When should you start asset protection?

When clients or the children contact me and say, “we are concerned about asset protection” I often ask “protection from what or from whom?” The answer is generally “the state” or “the nursing home.” In other words, they are trying to protect their savings from catastrophic health care costs.

This includes at-home care, rest homes, assisted living facilities, and nursing homes.

When thinking far in advance versus in the midst of a crisis, there are basically four ways to protect your assets/savings from catastrophic health care costs: die without ever needing care, guarantee that your children will take care of you in your final months/ years, buy long term care insurance, or transfer assets to get the so-called five year Medicaid look-back started.

Often, the most realistic strategy out of the above four is to transfer assets. If you are willing to take such a dramatic step, then when? It depends on a variety of factors, the primarily your age and your health. I am not a fan of elders transferring their home or other assets during their 60s unless there is some indication that they will need substantial care in the coming years. As I am unable to see the future, I cannot definitively say that “at 68 years old you should transfer your house.”

I generally am a fan of transfers in your early 70s, depending upon your health and family genetics. The longer your parents and grandparents have lived, the greater your chance of living longer. Should that lead you to believe that there is no rush? What if a member of your family has been struck with Parkinson’s, and you think you might be next? Under those circumstances I would say transfer sooner, rather than later. It is all a matter of comfort level. What keeps you awake at night? Are you concerned that a health care facility or “the state” might consume your savings? Or are you worried that your children might become estranged, predecease you, divorce, go bankrupt, or get sued. Or, worse yet, take the money you have transferred to them “for safe keeping” and leave you high and dry? There are clearly inherent risks involved in transferring assets.

If you are going to jump into the fray and transfer assets, do it all at once. Don’t transfer your house this year, your summer cottage next year, and some of your savings the year after. In doing that you are stretching the look-back period by not making the transfers all at once to get the five-year clock ticking.

I realize substantial asset transfers is a leap of faith, but if you can’t stomach the risks and also don’t want your savings consumed, then buy long term care insurance. That’s what my wife and I did. We don’t have to worry about when and if we should transfer our assets. All we have to worry about is earning enough money to pay the LTC premiums.

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