Read an article in the paper today about ways to protect your assets rather than spending them on longterm aged care. Can anyone explain to me why that is a good idea for society? Why ought wealthy folk be able to pass their wealth to the next generation, while having society as a whole greatly subsidize their eldercare?
I admit, that I have always found trusts confusing. They often impress me as legal fictions with the primary goal of shielding assets against loss. I don’t readily perceive the societal utility, other than maintaining/increasing/perpetuating wealth inequities.
If you are in favor of UHC*, isn’t that exactly what it does? Give HC to everyone, paid for by society as a whole, without regard to ability to pay. If we had UHC, would you require wealthy people to pay for their healthcare at all stages of life, or just the end? When does the end begin?
I think one can argue about the wisdom of policy wrt inheritance as an issue separate from HC.
*I’m assuming you are, but correct me if I’m wrong.
Trusts are used to put conditions on inheritances. Since it is the person’s money who creates the trusts they allow them to spend it the way they want.
Universal health care IMO ought not mean UNLIMITED health care. I support UHC with significant limits - what some might call rationing, others death panels. And I would favor very restricted eldercare.
I guess I was surprised that the article described an individual with a house worth $400k, and savings of $100k. It discussed what could be done to insulate those assets from being spent on longterm care, but did not hint at why that was a good thing.
Long-term care is not the same as healthcare, but I wouldn’t have a problem with universal long-term care , and if we had it I would not expect the wealthy to pay for their own long-term care. But that isn’t the system we have now.What we have now is a system where under certain circumstances some people can voluntarily impoverish themselves (either through trusts or by giving their assets away) in order to get Medicaid ( a program meant for the poor) to cover their long-term care costs and protect their assets for their heirs while other people have to pay themselves or rely on family members helping out.
To answer the question in the OP, I don’t think there are any societal benefits to people protecting their assets for their heirs. As far as I can tell , the benefits are on a strictly individual basis. The thing is though, it’s not really a policy to allow it - it’s more that it’s impossible to prevent it. Sure, you could change the lookback period to 10 years instead of 5 - but all that means is that people will start trying to get rid of the money sooner.
OK, let’s say we had that, and everything else was the same in our tax system. Why would people still not want to use a trust? My point is that the two issues need not be interdependent.
Without access to the article you are talking about, it’s difficult to comment about it.
A question in return: how would you handle a situation like that of my cousin? He has been on disability for many years (he has paranoid schizophrenia and hallucinates, and has to take some pretty hardcore drugs to control it). He hasn’t been able to hold a job in years. He is now in his 50s, and his parents are pushing 80. My understanding is that they have created some kind of trust for him, but I have no idea of the details.
Do you think that his parents should be required to spend all their assets on caring for themselves, should that money be needed? Or do you think they should be able to make provisions for their son not to end up destitute once they are no longer around to help him? My grandmother lived to 98, and there is no reason to believe my aunt won’t do the same. Her other children are not likely to be able to take care of her (one daughter has Parkinson’s which is getting worse, and the other also has myriad psych and orthopedic issues and has also been on disability for years).
It sounds like your aunt and uncle don’t have a trust just to shield their wealth. They are being very responsible and caring for their son. Hopefully none of them will end up in care facilities supported only by Medicaid.
I have seen family members end up it that situation. IMHO, anyone who attempts to take advantage of Medicaid eldercare by voluntary impoverishment will be very unhappily surprised. It is its own special hell.
As a family member put it recently, “We are being punished for saving.” For a person who sacrificed their entire life, never buying fancy cars, taking cheap vacations, etc. in order to ensure that they would have a legacy to pass on to their children, it is frustrating to see others who were able to enjoy a more extravagant life being given the same benefits, and all of the hard work and sacrifice being for nothing.
I suppose the societal benefit in this case would be that if enough people see it this way, no one would save anything for retirement or long term medical care, because what’s the point of living a frugal life if you can’t pass that money on? That would lead to fewer people having the money to spend down, and therefore a much greater cost to the state for end of life care.
I’m not sure I agree with this argument, but I understand where it’s coming from.
If my children take me into their home and care for me until I die or if I die suddenly, they can have my money. Otherwise I will spend it on the most comfortable nursing home I can find and hope the money lasts.
I can somewhat understand this argument , but the question in the OP is whether there is a societal benefit when people deliberately impoverish themselves in order to not have the money to spend down. There won’t be significantly fewer people having the money to spend down if people stop saving (and they won’t*) - the really wealthy don’t want to end up in a nursing home that takes Medicaid so they will pay for a nicer one and the poor don’t have any money to save. It’s only those in between who are worried about the spend-down - and it seems that a lot of those who can arrange not to have anything to spend down are already doing so. (Some circumstances don’t allow for this sort of planning - if you get hit by a bus when you are 56 and end up in a nursing home , you probably did not make these arrangements five years before the accident)
People don’t really save all their lives to pass something onto their kids when the nursing home is on the horizon. They want to pass whatever’s leftover to their kids rather than spending it on the nursing home. It’s not the same thing. If they were really saving it just to give it to their kids, they’d have given it earlier when it would have had more of an impact - but then it wouldn’t be available to the savers anymore.
The problem with the sneaky schemes, besides the fact that government paid for nursing homes are not that nice, is that you never know when you’ll need them. Or if. My father-in-law was in a not all that expensive (but very nice) residence in independent living until he was 99. And he was the only one of my parents and in-laws who was in at all. Give your money away too soon to game the system and you may not be able to support yourself at 90.
I agree that if you have enough money for this to be an issue, use it for your kids when it will help - like pay off their college loans. I suspect that by the time my kids inherit, it will not change their life at all.
The scenario you describe isn’t how I would define “wealthy folk” by any stretch of the imagination. In fact, I would hardly ever describe anyone who goes into a Medicaid long term care facility as “wealthy”.
Given that a huge percentage of Americans couldn’t scrape $400 together, I just don’t understand why this person’s $500k ought not be spent on her needs/wants?
For one, she doesn’t have $500k - she has $100k, and a house valued at $400k. Houses are not very liquid, as assets go.
In-home assisted living runs about $43k/year. So after a couple years, she’s out of cash, and has to sell her house. Assuming the market is good to her, and she doesn’t have to drastically reduce her selling price to move it, she now has to move into a private assisted living facility, which runs about $90k/year. That gets her another 4.5 years - at which point she qualifies for a Medicaid facility.
Well, from your OP it sounds as if her needs and wants are to be able to spend that $500k on her heirs - that’s why she set up the trust to begin with, right? From a societal standpoint, that’s certainly what I would want her to be able to do - because I may be put in a similar position, or I might have an elderly parent facing the same decision, or I just don’t see the need to enrich the private assisted living facility industry over the desires and wishes of the person in question.
Her wants and needs are not to be able to spend the $500K on her heirs- her wants and needs are to be able to spend that $500K on her heirs and get the taxpayers to pay for her care. After all, there would be no issue if she were spending that money on her heirs and not expecting the taxpayers to cover her nursing home costs. The facility is getting paid either way - either she pays for it or Medicaid pays for it.
You may want her to spend that $500K on her heirs, and I may want it- but society as a whole clearly doesn’t want it. Because society as a whole could just pay for long-term care for *everyone *who needs it - including those who need long-term care so suddenly they didn’t have a chance to shelter their assets. But society as a whole is not willing to do that and probably won’t be in my lifetime.
That’s not necessarily correct - depends on where she initially gets her care from. And if she’s being forced to pay for it, I’m guessing she’s going to go to a facility FAR more comfortable than a Medicaid facility.
Meh - if society didn’t want it, we wouldn’t have the ability to set up trusts outside of the Medicaid spend down requirement.
