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Tuesday, December 22, 2009

how to protect your assets trusts medacare

No Medical Insurance, no money, what do I do?

How are you going to pay for medical care if you don’t have insurance. Sad to say, what little advice I have to give you about being non-insured, if that is your problem, is at the end of this piece. It is very short.

An equally relevant topic is how to protect your estate from attack by hungry hospitals, medical testing outfits and other vultures when the chips are down. Just as bad, if you try to pay the medical people then all the rest of your debts go to hell. Same problem! Presumably, you may have a home, one or two vehicles, collection of things, money in the bank, savings in retirement accounts, stocks and other assets. To protect these items we need to have a good understanding about how things work.

Insurance pays for your expenses, why worry?

First line of defense fails, insurance does not cover it all. But then you have some expenses not covered with insurance and they ask you for the payment. Perhaps you are faced with some difficult decisions. Maybe you skip a meal sometimes or find one at the church. If things keep getting worse than you might be without water and heat in your house.

Second line of defense: Income. Any income will help you offset the cost of the extra bills. Remember, what we are trying to protect is the pot of gold at the end of the rainbow, your house or an important investments. If you have recently been diagnosed with a severe illness, your best working years are now. If you can work, you should

Third line of defense, savings. The medical expenses keep going up and you can’t afford to miss them. Where are you going to get the money? At this point the hand writing should be on the wall. If you have not taken asset protection steps it may be too late. Let’s not give up yet. Perhaps you have significant personal income and can fund your health care expenses.
Fourth line of defense, preservation. At this point we know you are not going to be out of trouble any time soon. In fact, the way things are going you are going to incur more medical expenses which you desperately need but which you can’t afford. Do you take money out of your 401 K program to pay?

No. You leave it right where it is. Otherwise you will burn that money through and be right back where we agreed. You are in trouble. It is time to turn to asset preservation.

Asset preservation. This process should have started long ago. Maybe you were worried that “one day” x could happen. Maybe it has been more recent, just notified of a cancer in a breast cell or in your prostrate gland. Now what?

Until you get to the fourth level of defense, you likely quality for insurance or Medicare. By the time you get to the fourth level of defense you have few options left.

Cough up all the rest of your assets until they are spent; Once they are spent you go onto Medicaid. Unfortunately Medicaid does not pay for everything that Medicare paid for. You do not have as wide a range of doctors, for example. Access to ‘designer’ drugs my be limited; and since you will be homeless, you are likely more susceptible to illness.

By now, there is not much an attorney can do for you rather than give you these words of advice: If you can still work, find a job that gives you medical benefits. Don’t let those benefits go for any reason!

So what is the point of the article if you can’t do anything and the slippery slope faces us as we get older? The answer is, there is a lot that can be done for you to protect your estate if it is done soon enough. In this case, soon enough is before you ever think you will need it.

What can be done? Asset protection tactics are tricky and should be discussed between you and your attorney. Each situation is unique and it is their job to help you fined solutions.

1. You can give your assets away. It sounds drastic, but the gift would be to your daughter or trusted friend. These kinds of gifts need to be made 2 years or more before you find yourself in trouble.

2. You can set up spend thrift trusts. In these kinds of trusts no one can touch the assets of the trust unless your trustee says they can touch the trust. Unfortunately one of the no-one’s who can’t access the account without permission is you. Fortunately, another who cannot access your account is your creditor. Hence you have this pot of gold sitting there but because you were forward thinking, you get to keep what you have.

3. You can put your house into the same trust we are speaking above. Once again you lose all control over the house. Who ever you put into the driver’s seat needs to be very trustworthy!

4. You can put a lien on your house so that it is so unattractive it is not worth selling. The party who wants to foreclose will have to pay the prior lean off. The question is, what did you do with all of the money. If you really have it under blanket be careful. You may be required to account for the money, especially if it is near the date creditors are climbing your back.

My suggesting is, if you are concerned about staying off of Medicaid, find an attorney and do some planning now. Just because you were diagnosed with a difficult illness does not make it too late. If you can get down the line a few years, you can establish a legitimate path to asset protection which is legal, and avoid fraud, which is not legal.

Tim Paynter is an attorney at law in the state of Colorado and invites questions or problems. The initial discussion is free. Tim is also an advocate for civil rights and the rights of the homeless and poor.

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