Alice and Anton Buttons came in to visit with me. Prior to them coming in, we sent out a Confidential Survey to fill out listing all of their assets and liabilities so we can measure the true value of the estate. Anton had listed the farmland values at about fifty percent of market value putting seven hundred dollars per acre. "I think these land values are on the way down," said Anton. "There's going to be a huge drop in value coming up so I listed the land low."
After finding land was selling for closer to two thousand an acre in his area for mixed land, we compromised at fourteen hundred per acre.
"We want to make certain the government doesn't get our land if we need long-term care. We also have quite a bit of savings we'd like to put somewhere in the kid's names so this cannot be used for long-term care also. We'd like to protect everything we have. We're in excellent health now, so we thought now was the time to move these assets."
The entire estate added up to more than five million dollars. I asked Alice and Anton who they thought was going to pay for their long-term care costs should they need care in the future. Again, they thought the government and Medicaid should pay. Not an uncommon attitude out there – they were just brash enough to express it openly. Many people feel this way, but never say it out loud.
I explained, "The government would pay – if you should get through your five year waiting period on gifts – this much is true. However, when the government pays, it's not really the government that pays. Approximately forty percent of Medicaid costs are borne by the state of residence – in this case, my state. As such, my state government needs to bring in X amount of dollars to pay for this care. They get this from taxpayers. The other sixty percent comes from the federal, but we all pay federal taxes as well. As such, it's not the government who pays – it's really all of us taxpayers – friends, neighbors and other residents – who will pay."
I had one last question for Alice and Anton: "Do you really believe it to be fair you should put aside more than five million dollars in land and savings and push the burden of your healthcare on to us – to your friends, neighbors and other residents of our state?"
Anton and Alice said, "We never thought of it that way. I guess we want to be responsible for protecting ourselves and our assets, but we really don't feel it's fair to put our health care cost burden on everyone else."
With a changed perspective, we were able to move some of their savings into asset based care whereby they were able to more than double their cash savings into long-term care protection and a tax free death benefit to their children if they died without losing any liquidity. We also made moves on the ownership of their property so that if the best they could do wasn't good enough, the land was still protected. All in all, a cohesive approach to protecting the property with them shouldering their own costs of long-term care.
I've seen many, many things come and go over my many years in this business. The reason the good things tend to disappear, from a government perspective, is because people who shouldn't be taking advantage are taking advantage of the laws. As such, if our state or federal government determines too many people are not paying for their health care because they moved huge amounts of dollars out of harms' way, these loopholes will be closed.
Our country has recently moved in this direction regarding healthcare: Those that have assets will pay for those who have little or no assets to pay for their healthcare. As such, those of us who have assets had better be planning in our estates how to shoulder our own burden of health care – including long-term care.
If too many people take advantage of a system who probably shouldn't qualify, you're going to see a lots of changes and quickly. Perhaps these changes will entail longer look back periods, not allowing life estates or trusts of more than a certain value or other drastic measures. But this is what happens when too many healthy and financially capable people pass that burden on to other taxpayers.
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