Fourth critical mistake (and solution) in planning for your long term care
Continuing our discussion of the five most common mistakes we see folks making before they need long term care, we will turn to the fourth mistake.
You can find the articles on the first mistake (assuming no long term care will ever be needed), the second mistake (not having a long term care plan), and third mistake (not having proper estate planning documents) if you haven’t already read them.
Fourth Mistake: Transferring assets without proper legal advice
Most of the time under the VA rules, for example as of October 2013, we can transfer assets and there’s no “look back” period.
But you need to make sure that it’s smart to do. Sometimes we see people transferring assets that they never should have transferred.
Alabama Medicaid is very different than the VA Pension.
Medicaid has very strict rules about what can be transferred.
There are rules about what counts as an asset, or what Medicaid calls “available resources.”
Typically, our house is not considered an asset or a resource, so Medicaid won’t count that.
But if we transfer that to our kids or our sister or somebody else, that triggers some pretty serious consequences.
To transfer assets without having the proper legal advice can be very dangerous.
There are folks who have transferred assets without good legal advice and then realized they had created a penalty costing hundreds of thousands of dollars when their father needed nursing home care.
Solution to Fourth Mistake: Only transfer property with proper legal advice
Prevention is almost always cheaper than the treatment or cure.
We know that in health.
If I say, “I’m going to eat right and exercise 30 minutes a day,” that’s a lot cheaper than having open-heart surgery.
It actually takes less time than being wheelchair bound because I’ve had a stroke.
I know oftentimes that cannot be prevented, but sometimes we can prevent things by doing the right thing.
It’s the same thing here with transferring property.
It’s better to spend a little bit of money to figure out your options than to pay somebody to fix it.
I’ve seen clients that I’ve represented who were buying a business and they did not have a CPA check out the books.
If they did, they would never have bought the business as there was fraud involved.
Why didn’t they do that?
“It was going to cost $5,000 for the CPA to check it out.”
So they buy a 7-figure business.
They save the $5,000, but when they’re in a lawsuit they end up pay $100,000-200,000 in legal fees.
Wow, that $5,000 looks a lot cheaper now.
We’ve all made this type of mistake — it is just the details and circumstances that differe.
It really makes sense to get the right advice.
This is not the do-it-yourself time.
If we have some complicated tax issue, most of us don’t say, “Do you know what? I’ll skip the CPA. I think I can figure that out.”
Maybe we can, or maybe we’ll miss something because we don’t have the full perspective.
It’s the same thing with our health, and it’s the same thing here with transferring property.
I have seen people that make very costly mistakes and there was an easy solution before the mistake was made.
There’s still a solution after the mistake, but it may not be so easy and it may be a lot more expensive.
The solution is to make sure that you have the right advice and that you take steps in the right direction instead of going the wrong direction and then have to turn around and back-track.
Next Step To Take
We will be continuing this series and will work our way through these five common mistakes. We hope you will enjoy reading these and more importantly that you will think about this and take action.
There are all different ways to take action and you have to decide what is best for you.
If you would like more information or if you want some guidance from us, you can call our office at205-879-2447 or fill out our online contact form to do any of the following (assuming you or your family live in Alabama):
- Set up a phone conference or video conference
- Set up an in office consultation
- Request our free information packages on long term care planning, including Alabama Medicaid and the VA Pension.
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