Many seniors live to spoil their children and grandchildren. Especially their grandchildren. There’s something so satisfying about sending gifts—large and small—to the people who will carry on your legacy.
You’re in retirement and your expenses won’t go up that much, you think. So why not help Junior buy his first car, or contribute generously to Granddaughter’s college fund?
Here’s a good reason: being too generous can mess up your own long-term care.
Long-term Care: The Hidden Costs of Aging
As we’ve discussed in the post Do You Believe These Medicare Myths, many seniors believe Medicare will cover all their needed healthcare expenses. This is not so. Besides for the fact that every hospital stay comes with hefty cost-sharing measures, like deductibles and co-payments, there are many other healthcare costs that are either not covered, or only partially covered.
When seniors experience a medical event—for example, a hip fracture—they may find their medical expenses quickly deplete any money they have left. In fact, multiple studies have shown that the vast majority of Americans will face significant long-term care expenses. For example, assisted living facilities in the Chicago area average $59,000 a year, while nursing home costs can reach $100,000 for a private room.
Long-term care can easily wipe out all of a senior’s retirement savings after just one year.
Medicaid: Not Always the Panacea
Even seniors who are aware of the devastating effect a single significant medical event creates may assume they have a safety net in Medicaid. Medicaid is a free, or very low cost, health plan for the elderly and indigent. It fills the gaps between Medicare coverage, removing the financial cost-sharing burden. Once a senior has depleted his or her assets and their net worth has gone below a certain amount, they become eligible for Medicaid.
But many seniors are not aware of a specific factor in Medicaid eligibility: How recently they depleted those assets. If last year you gave away the rest of your retirement portfolio to your child so she could buy a home of her own, you won’t be eligible for Medicaid this year.
Any asset transfer within the five years prior to applying for Medicaid that doesn’t meet specific criteria will make you ineligible for Medicaid. Even selling your home and giving the proceeds to your loved ones can affect your eligibility.
The best way to avoid these problems is to make every gift with the approval of a long-term care or elder law specialist. They can advise you how to help your loved ones financially without ruining your own chances for quality long-term care. To find an elder law attorney in the Chicago area, click here.