I’ve been thinking a bit about the financial side of aging. In the U.S., it feels like the system is structured so that older adults spend down most of their life savings on medical and long-term care costs until they qualify for government programs. This raises a big question for parents: how do you actually preserve wealth to pass on to your kids, instead of watching it get depleted in your later years?
For those who’ve planned for this, what strategies or structures (legal, financial, or otherwise) have you found that help protect family assets while still making sure you have the care you need?
How to preserve wealth for your kids when late-life care drains savings?
byu/KookSlam69 inpersonalfinance
Posted by KookSlam69
50 Comments
If you’re insured well it will likely be covered. My grandparents and parents all had lengthy hospital stays at end of life and it was never an issue
My mom has some sort of long term care insurance and an annuity plus a pension. She is 80 this year and has planned well for herself.
At the end of the day, all you are really asking is “How do I get the government to pay for my end of life care so my kids get to keep my money.”
Either don’t get end of life care, or plan to pay for it. Or get sufficient insurance.
You should talk to an estate planner. They’ll help you sort out how to structure your finances.
My parents died early and relatively quick (not long drawn out illnesses). Unfortunately they didn’t have wealth to pass down.
If you aren’t going to work then the cost of living will eat into your savings. If you don’t want that then keep working. The first step is teaching your children to be financially responsible. The second is not being a financial burden to them. The third is not burdening them with student loan debt.
By the time you die they will be 50-60 years old and don’t need your saved up money unless you failed the earlier steps I mentioned.
You take care of your parents yourself, hire someone to do it, or rely on government assistance to do it. If you plan everything out perfectly and they qualify for all assistance you wont like the care they get and it wont be enough. Ask me how I know.
Your aim if they are on board is to protect large assets like houses and such but they are going to need to spend money at some point. You need to look into living trusts, medicare lookback periods, their finances, and local assistance.
At the end of the day if the parents need money for their care you spend their money. Thats what it’s there for
There are hundreds of ways of doing this. Talk to a financial planner and tax manager to discuss what is best for you.
Maintain good health and physical activity. Accept one’s mortality when given a terminal diagnosis and go gently into that good night in home hospice instead of spending $2 million in an ICU with metastatic cancer.
You simply transfer most your wealth to your kids years long before that happens. Move the house to their name, give them gifts in terms of money etc. Just has to be long enough so the clawback doesn’t take effect. Then Medicaid kicks in.
My plan is to not live to that age. I’m in poor health, so unlikely to go ~20 more years and that’ll be late 60s for me then. Don’t plan or want to be a burden.
If the priority is passing on wealth then simply don’t save for retirement, direct that money to the kids much earlier in life (and move out of a filial responsibility state).
I’m currently looking at memory care for a family member. For a married couple it’s 12-18k a month. One of the people is in bad health, but the other could live another 15+ years.
There are longterm care plans and prepurchasable burial/cremation plans, but ultimately it comes down to having enough money to take care of yourself AND still pass some down.
look into life insurance that has a long-term care rider option. this lets you access the value of the policy before you die for end of life expenses.
Extended family living is a smart bet that the vast majority of Americans either neglect or outright turn their noses up at. You can pool multi-generational resources into having one nice house or compound, while spending the rest to generate a passive income with rental properties that can help absorb any auxiliary care costs that you might need which your children and/or grandchildren can’t provide.
Most people idealize having a little slice of suburbia to themselves though, then teach their kids that it’s what they need to aspire to.
Talk to an elder law attorney in your state
I would suggest a couple of options:
1. Buy into a continuing care retirement community that offers a life care (aka Type A) contract. Under this type of agreement, the resident pays an entrance fee and monthly fee to move into the community but the best benefit is that the monthly fee does not change no matter how much care you need as you move through the continuum. For example, someone might move into a 1 bedroom home and their monthly fee is $4K (which includes things other than the 4 walls of the home) but when they need assisted living, their monthly fee is $4K, same if they require 24/7 nursing care. In some places, 24/7 nursing care is easy $18 – 20K per month. Now, there are cost of living increases but you know approximately month to month, year to year, your costs. Your family will also know the costs and there are social workers/nurses and other people around to look out for you, especially when you can’t.
2. Another option is a continuing care at home program. Designed after continuing care retirement communities, this type of program is for someone who thinks they may want to live at home for now, or forever, and they buy in, paying a membership fee and a monthly fee. Then it works like the retirement community, you know roughly month-to month, year to year how much the cost of your care is born by the organization, not you. You shift the risk of the higher costs away from you and your family. These programs appeal to people who 1. want to have the services and similar lifestyle of a retirement community, but stay in their home 2. For someone who may want to move away from where they live now to somewhere else. These plans are connected to the member so you can move homes or states and the coverage moves with you. Some even cover the costs of care if you are outside of the country for a period of time.
Both of these options are based in the care for assistance with activities of daily living, like bathing, dressing, etc. and require someone to be medically qualified at the standard of the organization, not the standard of their doctor. You have the be healthy to join and often someone can join starting at age 55. If you have had family members with health issues, not even “significant” issues like Alzheimer’s or Parkinson’s disease, join.
How about gifting to your children when you’re healthy? I mean paying for university, helping with down payments or even paying for it all, buying vehicles, transferring funds to their kids 529?
I don’t think besides a trust you can do much more if you haven’t gifted them throughout the years.
Trusts generally protect assets; but insurance products for long term care also exist to help.
I always thought this would be the case, until I lived through it. I lost both of my parents in the past 18 months. Both had GEHA insurance, and my dad required several nursing home stays and a day in hospice care before he passed. Mom passed at home.
The total medical expenses that I had to pay (after insurance coverage) for BOTH PARENTS COMBINED in their last year alive was less than 10k.
This may be too late advice for some, but we’re front loading our kid’s wealth now while she’s young – 529 and UTMA. If we die broke, it won’t be her problem.
Talk to a professional financial advisor. They know how to help you plan for your needs and your goals.
My limited understanding is, Once the kids are established and responsible for themselves, you start gifting them and establish a trust. But you still need enough to pay for your end of life care or you get stuck in a crappy nursing home funded by Medicaid. Paying for your own care gets you better care.
I will have raised my kids to be self sufficient as a good parent and not rely on my wealth when i die which will be near 0.
This has been a huge worry for me as well. It’s disheartening to think I may not be able to leave anything to my kids when I’m gone because it all had to be spent on assisted care or something.
Bought long term health care insurance back when I was 36 locked in my premiums at $58 and change a month. $500,000 in benefits in current value. I have to cover first 90 days out of pocket before it kicks in.
Its a great topic because its basically how do we get the state to pay for things that we don’t want taxed for.
I guess the answer is, you’ve got to be lucky, if you’re not then there isn’t a safety net but at least you get lower taxes in the gamble eh.
I’ve heard this honesty from nearly everyone involved in that stage of financial life: die, unless you were rich enough to plan far ahead.
Yes: the fast way to lose family wealth is to keep old people alive.
Give money to your kids before you die. (Assuming your needs are taken care of)
If passing on an estate (or hoping to), you should be talking to an estate planning lawyer well in advance. Things can be structured in a way that is advantageous to being able to pass it on, despite long term care.
But most moves cannot be done once you are old and in need of care (lookbacks, etc)
God the more I read about stuff like this the more I think I’ve made a mistake moving to USA.
I know so little about stuff like this and I am already in my 40s.
A short walk on the Arctic used to be the way…
Does it seem fair that your care in old age should be paid for by others, so that you can leave a larger inheritance for your children?
The whole point of saving for retirement is so that you have wealth to pay for your care yourself. Your children inherit what remains after you’ve taken care of yourself.
My kids are not going to be able to afford a house without downpayment money now so that is happening as a way to kick start their lives.
You get an estate planning attorney and start hitting your medicaid gift limits every year.
Did you teach your kids how to ride a bike? Change a car tire? How to do basic maintenance for the house?
Finance is no different. Teach your kids how you made your financial portfolio, and have them pass that knowledge to their kids.
You don’t want to be like the Vanderbilts who was once the most richest man in the world. Inflation adjusted, 185 billion. But today, none of his heirs have even 1 million. Pissed it all away.
To answer your direct question. Talk to a tax strategist CPA. Need to properly shield your assets to make yourself look broke so you can qualify for Medicaid, Medicare, and other financial assistance. Plan accordingly, they do look back up to 5 years. Any assets within 5 years, that would trigger the Medicaid penalty period. Other thing to keep in mind, Medicaid can and will try to reclaim funds from the estate upon your death. So it’s vital to consult with a tax strategist CPA to minimize the impact. And this is state specific, so some specific strategies may work in one state, may not for yours. Bigger picture, you put it in a special trust, but needs to be structured properly to be properly protected from federal and state.
Qualified estate planning attorney **in your locale**.
An elder care attorney licensed in your parents’ state can answer your questions.
The elephant in the room is **Medicaid.** Medicare only pays for very short nursing home stays; the real wealth killer is when aging parents need long term nursing home care. Medicaid can pay for long term care but only after you have **depleted** your assets, down to your very last $2000.
There are legal ways to re-title your assets to shield them from Medicaid, mostly involving irrevocable trusts – which you need an attorney to set up in a way that complies with Medicaid rules and your state’s laws. Generally, this needs to be done at least five years in advance of needing to apply for Medicaid assistance. You can’t just “give away” your money and your house a couple of months before applying for Medicaid – the program can “claw back” such transfers and defeat your purposes.
My father in law passed away at 58 and my mother in law has dementia. Luckily he saved over $1M through his retirement so the interest alone is enough to sustain MIL’s care costs. Even if they didn’t have enough for my wife to inherit, I’d rather them be taken care of properly with that money rather than us having to be their full time caregivers.
Right now, someone turning 65 has >70% odds of needing long term care at some point before their death. Unless someone has *very* significant assets, there are good odds they’ll need to go on Medicaid to help pay for it.
Long term care insurance is likely not a great option for folks who don’t already have a policy – the market is tanking, with few insurers still issuing policies. Those that do are rejecting more applicants and imposing significant limits on benefits. They’re a lot less generous than they used to be.
There are ways to convert Medicaid-countable assets and income into non-countable forms, but you really need guidance from a professional. Assets can be gifted or placed into an irrevocable trust prior to the Medicaid look back period. Even within the lookback period, there are options like “half a loaf” that can let you gift assets and then buy an annuity to private pay for care until the penalty period expires.
You need to work this stuff out with a lawyer who knows what they’re doing – ideally well before there’s a potential need. We plan to do so by the time we’re 60 to ensure our kids will get SOMETHING, but don’t know yet what form that plan might take.
I think a lot of them do trusts, just know that if you want to qualify for Medicaid, they look back for five years to see if you’ve done anything called an “improper transfer of benefits,” which is basically giving someone something of value for much less than it’s actually worth. Idk how that works for trusts, though.
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There are limited options and they cost money and are of limited efficacy with today’s restrictions. It mostly involves creating legal fiction to fool Medicaid into thinking you’re a lot poorer than you really are. They’ve aggressively curtailed this through the use of look back periods which allow states to access your financial history going back years. Additionally many homes have very limited Medicaid beds and some don’t even accept Medicaid patients.
The only inexpensive planning method that doesn’t require an attorney is giving away your cash to your beneficiaries well before you need advanced care, and before the beginning of the look back period which is state dependent but most commonly 5 years. If you fail the look back test, every large gift to children must be returned by them before you can be Medicaid eligible.
Long term care insurance
Estate plan
Savings
I’m not suggesting anyone offs themself… but it is technically an answer 😂
Give it to them now. Should have started giving them money the day they were born or as soon as you could.
Estate planner and Family Trust is what we did. Self-funding potential LTC needs, but the only person in our family was my dad and that was only for 6-7 months. The insurance for this is prohibitively expensive and the insurance companies originally way under-estimate the need/use. The benefits for those who paid in for decades have been cut.
You really need to be rich enough that 10 years of old age care won’t wipe you out. Which is very rich.
There are options that an estate lawyer can help you set up like an irrevocable trust. You will just want to review the pros and cons with them. It will need to be set up at least five years before you might need to go into a nursing home.
Talk with an elder law attorney, preferably well before you need extensive medical care.