Long Term Care Awareness Month – Common MisConceptions.

As we navigate the twists and turns of life, certain topics demand our attention, and one such critical aspect is long-term care. With November designated as National Long-Term Care Awareness Month, it’s an opportune time to address common misconceptions surrounding this vital subject. In this First Friday we’ll delve into five prevalent misunderstandings, ranging from the role of Medicare to the nuances of trusts in safeguarding assets with special guest Nels Donovan.



Medicare and Supplement Coverage: Clarifying the Confusion

While Medicare and supplements can assist in specific situations, such as rehabilitation after surgery or recovering from a mild stroke, they don’t provide continuous coverage for extended care. The key takeaway is that Medicare and supplements support recovery-based care, emphasizing improvement. Once care transitions to a more permanent or acute stage, coverage ceases, even if the maximum days allotted by Medicare haven’t been exhausted.

Trusts and Asset Protection: Beyond the Basics

Many individuals assume that a basic trust, specifically a revocable living trust, offers protection against long-term care expenses. However, this is a common misconception. In Wisconsin, for example, since August 2014, a revocable living trust no longer shields your primary residence. To safeguard assets, especially real estate, an irrevocable trust is necessary. The catch is that your control over the assets diminishes, plus there is a five-year lookback period in place. This strategy involves creating a revocable living trust for day-to-day affairs and an irrevocable trust, aptly named the “sidecar,” to safeguard specific assets.

The Sidecar Trust: Specialized Asset Protection

Understanding the dynamics of the sidecar trust is crucial. While the revocable trust manages everyday assets and decision-making, the sidecar serves as a protective container for assets like fully paid-for real estate. Children often assume the role of trustees for the sidecar, ensuring that these assets remain shielded. The sidecar strategy becomes particularly beneficial for assets you don’t intend to access directly, offering a layer of protection against long-term care expenses.

Flexibility Amidst Protection: Navigating Trust Dynamics

Despite concerns about limited control, the beauty of this approach lies in its flexibility. The sidecar trust can adapt to life changes, allowing for the sale of a house or the purchase of a new property. The trustee, typically a family member, executes these decisions under your guidance. This flexibility ensures that, while protection is paramount, practical considerations and lifestyle changes can still be accommodated within the framework of asset protection.

Selling the House: Navigating Trust-Informed Transactions

A common question arises regarding the sale of a house under trust protection. The process is seamlessly integrated into the trust dynamics. If the need arises to sell the house, the trustee, guided by your preferences, manages the transaction. The proceeds are then redirected to another protected asset, ensuring a continued safeguarding of your financial resources.

Trustee Selection:

One crucial aspect of effective long-term care planning is selecting a trustee for the irrevocable trust. A trustee plays a pivotal role in managing the trust and ensuring that the assets are used in accordance with the grantor’s wishes. Nels emphasizes the significance of choosing a trustee who is trustworthy and understands the purpose behind the trust. Unlike corporate trustees, family members with a clear understanding of the family’s goals and motivations are preferred. This distinction is essential to prevent potential conflicts of interest that may arise when involving banks or institutions.

The Pitfalls of Direct Asset Transfer:

Addressing a common misconception, Nels highlights the risks associated with directly transferring assets, such as a house, to a child’s name. While some may consider this a simple solution, it can lead to significant issues. Nels cites examples, including tax implications, the potential for divorce-related complications, and exposure to creditors or lawsuits. Putting assets directly in a child’s name may seem like a quick fix but often results in unintended consequences, making it crucial to explore more protective alternatives.

Irrevocable Trusts as Asset Protection:

The irrevocable trust emerges as a powerful tool for asset protection in the context of long-term care planning. Nels stresses that it serves as a contractual agreement, allowing the grantor to set rules and conditions that the trustee and beneficiaries must follow until the grantor’s passing. This legal instrument provides a robust layer of protection, shielding assets from various risks, including potential nursing home costs. It also offers a mechanism for legal enforcement if the trustee deviates from the stipulated rules.

Long-Term Care Insurance and Its Challenges:

The discussion extends to long-term care insurance, addressing its challenges and exploring alternatives. Michelle shares her perspective on the exorbitant costs associated with traditional long-term care insurance policies. She highlights the shift towards using life insurance policies with long-term care benefits, offering a more flexible and cost-effective solution. These hybrid policies allow for the utilization of the death benefit as a living benefit for long-term care expenses, providing a triple win scenario.

The Triangle of Asset Protection:

Nels introduces the concept of a protection triangle, emphasizing the three key components: personal health, insurance, and legal protections. The triangle illustrates the hierarchy of needs in asset protection, where the base represents factors under personal control, insurance occupies the middle ground, and legal protections constitute the pinnacle. This framework provides a visual understanding of the various elements involved in a comprehensive asset protection plan.

Legal Powers in Durable Power of Attorney:

Nels sheds light on the nuances of the durable power of attorney, emphasizing a crucial point. While the state provides a free statutory form for a durable power of attorney, certain essential powers required for comprehensive asset protection are not included. Private attorneys specializing in elder law can draft power of attorney documents with the necessary powers to execute crisis plans and preserve assets in the event of a long-term care situation.

Long Term Care Awareness Month – Common MisConceptions.: As we navigate the complexities of long-term care planning, it is evident that a multidimensional approach is essential. The collaboration between financial tools and legal protections, coupled with careful trustee selection and a clear understanding of the options available, forms the foundation for a robust long-term care plan. Nel’s expertise provides valuable insights into the legal strategies that can safeguard assets and empower individuals to take control of their future.

Long Term Care Awareness Month – Common MisConceptions: If you have any questions or need guidance on making informed financial decisions, don’t hesitate to reach out. Your financial wellbeing is our top priority.
If you’d like to schedule a personal one-on-one call with Michelle, click HERE to access Michelle’s calendar and schedule a day and time that is convenient for you.

We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL

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