As you reach retirement age, you may wonder how to keep your hard-earned money safe. The cost of living, predatory companies or relatives, bad investments, and lack of estate planning can all contribute to lost nest eggs. With the extended average lifespan in the US at 78 years of age, you may need to support yourself for decades of retirement. Let’s look at smart ways to ensure that your hard-earned money is still working for you in your seventies and beyond. Learn how to protect your money as you age.
Avoid Nursing Home Costs
Because 70% of those 65 and older now will need long-term care, you must plan for this. Many older adults take advantage of Medicaid programs that pay for long-term care costs, such as nursing homes or assisted living. If your income and assets are below the specified state level, Medicaid pays your everyday care costs.
By planning five years before you need Medicaid, you can keep your assets safe and still receive funds from Medicaid to pay for long-term care at a nursing home facility. Because Medicaid has a 5-year look-back policy, you must be careful. If you transfer or give away assets for less than their market value during the 5-year lookback period, you face a Medicaid ineligibility penalty period.
You can avoid the penalty period by putting your assets into an irrevocable trust before the 5-year look-back period. An irrevocable trust holds your assets much like a bank account. However, the named trustee legally guards the trust and acts according to the original trust parameters. A trust can expressly state its purpose, such as for additional long-term care costs for you.
You no longer own the assets in an irrevocable trust. However, when you create a trust, you work with your attorney to place the parameters for its future use. You decide how to define what happens to the real estate and other assets in an irrevocable trust.
Keep Exploitation Probability Low
Whether we like it or not, there may come a time when we can no longer care for ourselves and are at the mercy of others for our well-being. If you have planned well, others will use your assets to care for you during this time. If you mindlessly give away assets to irresponsible or uncaring relatives and assume they will care for you, this mistake could cost you everything.
There are countless cases where uncaring grown children or grandchildren move in with an elderly individual and drain their savings down. Often the older person is then forced into a poorly run assisted living or nursing home and expected to live as a destitute on Medicaid alone. Medicaid barely covers the absolute necessities of life.
To avoid exploitation, plan wisely who you will trust before your health or well-being fades away. You can ensure that someone you trust is in charge by drawing up a durable general power of attorney to declare another individual as your personal representative. This power of attorney chosen by you may make any and all decisions for you regarding your money and estate. You can also draw up a healthcare power of attorney with your lawyer. The healthcare power of attorney makes any health care decisions for you (that you haven’t already planned for in your advanced directives).
Keep Money in Conservative Investments
If your investments are on the risky side, retirement might be the time to put them into investments that will withstand a bear market. You can discuss your monetary strategy with a financial advisor who can help ensure that your money is stable.
It is always best to go ahead and set up a time to discuss this now. It can’t hurt to make sure you are investing wisely at this stage of life. Your strategy at 55 may look very different from a strategy in your seventies. Talking with an expert can help keep your income steady and stable at all stages of your life.
Be Very Careful with Joint Real Estate Ownership
Owning a house with someone makes you vulnerable to their debts and struggles. If a son faces bankruptcy, you can lose your equity in the house also. A daughter who jointly owns a home with you could owe money to creditors who will come knocking. You just don’t know what someone else is doing with your money and assets when you jointly own. It’s important to retain control of your real estate assets unless you’ve spoken with an attorney who advises you otherwise.
And what happens if you want to sell your home to finance your spot in assisted living? The co-owner legally must also sign off on a sale. If your joint owner won’t sign, you no longer have the equity in the home available for your use.
Another issue is the Medicaid look-back period. If your child owns a home with you, you can still qualify for Medicaid if they have cared for you for at least 2 years. The home can then be inherited by your child without Medicaid ineligibility. They can inherit the home because of the work they put in to take care of your needs. However, if you just give away half of your home’s value without thought, you can become ineligible for Medicaid assistance.
Plan Now
Making a plan for your future now can save you hundreds of thousands of dollars in the long run. With longer lifespans, planning for retirement often must take you through your eighties. Depending on your health and when you retire, you could need 30 years of savings just to get by. Knowing what is at stake and how to make ends meet during this time determines your future quality of life.
We Can Help
Don’t make easy-to-avoid mistakes. Instead, talk to our estate planning attorneys at Hopler, Wilms, and Hanna to draw up the legal documents needed to protect yourself and your loved ones. We work with you to protect your assets through estate planning legal frameworks. Our estate planning attorneys focus on trusts, wills, advanced directives, and power of attorney frameworks needed to plan for your well-being. Contact us today to find out how we can help you set up a protected future.