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Pre-crisis plans ease estate settlements


Q: I have close family members fast approaching retirement age. They also own their own home but are interested in someday going to live in a retirement home or retirement community. What steps do you recommend so that I can help them plan for their long-term care?

% Barbara Kelly, Towson

A: I recommend that all my real estate clients practice pre-crisis estate planning to provide for both their retirement years and to help them prepare for the long-term life care issues that can severely deplete their life savings and overall estate.

Often times, you can protect an elderly loved one's assets through the transfer of assets, such as a home, by gifting assets to children and grandchildren.

With the use of proper planning, a senior can limit the period of private payment to a nursing home to a maximum of 36 months. If the senior makes the gifts or transfers early enough, he or she could even qualify for Medicaid as soon as the senior enters a nursing home.

Under federal law and regulation, a person can make annual gifts of $10,000 per year to any other person free of federal gift tax and you can give away an additional $600,000 during that person's lifetime without incurring any gift tax liability.

Seniors must be careful to avoid the pitfalls that could render them ineligible for Medicaid benefits. For example, the total value of any asset you own jointly with another person, such as a house, is presumed to belong entirely to you regardless of how long the other person has been a joint owner. It doesn't matter who contributed the funds to purchase the house. The ownership controls.

Under current Medicaid eligibility rules, individuals must reduce their assets before becoming eligible for Medicaid. An individual can keep the following assets and still qualify for Medicaid:

* $2,500 in cash

* Any amount of term life insurance

* Whole life insurance with a face value of $1,500

* Burial plots and a prepaid burial place with a value of up to $5,000

* Personal belongings

* A residence subject to a lien

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