Preserving Assets and Transferring Assets to the Next Generation

February 17, 2014- By the NCPC

Author: Valerie Buck & Thomas Day

Older Americans control a large amount of the wealth in this country and have a continued interested in protecting that wealth from loss. Older Americans also want to stretch their assets out as long as possible in order to avoid running out of money well before they die.

As Americans age many look for ways to preserve, maintain or transfer their assets. Whether the assets are many or few, there are steps that can be taken to further secure and maintain a distinct lifestyle.

The National Care Planning Council (NCPC) does not encourage or discourage the strategies mentioned below. The purpose of this article is to merely highlight what some seniors and their families are doing.

Reasons for Preserving Assets

Provide Assets and Income for a Surviving Spouse
Though tragic, when a spouse of a couple dies, income is usually reduced through loss of Social Security income or reduction of retirement pension.  This can be especially hard for the surviving spouse having to learn to live on less and prepare for following years.

Protect Assets and Income from Deterioration or Loss of Property
Unexpected property loss may result in a drain on available cash assets. You might have damage to a vehicle or even to the home. Lack of regular maintenance or damage may result in expensive repairs.  There are estate preservation strategies which strive to recognize these losses and to provide potential solution to avoid these losses with adequate insurance coverage. In additional, help may be sought through grants, tax credits, and other programs that provide maintenance or savings on utility bills.

Maintain Assets to Pay for Medical Care and End-Of-Life
Paying for Medicare supplement policies, medical co-pays and the cost of prescription drugs not covered by insurance can reduce available assets.  Costs associated with dying can drain the estate. Strategies are designed to identify these costs and to deal with them while assets are still in place to provide protection.

Maintain Assets to Pay for Long Term Care
The need for long term care often occurs at the end of life.  Unfortunately, this is the time when assets are already being stretched thin.  The cost of home care or assisted living or nursing home care can be very expensive.  Assets that have taken a lifetime to accumulate can be wiped out in a matter of months.  Strategies are designed to take advantage of government programs to cut down on the burn rate of assets when the need for care occurs.

Compensate Children or Grandchildren for Their Sacrifice
It is very common for children or grandchildren to put their own lives on hold and to sacrifice their time and their income to care for loved ones in their final years of life.  It is only fitting that any assets remaining should go towards helping family members get back on their feet after the sacrifice of months or years providing care. 

Provide an Inheritance for Children or Grandchildren
Many seniors have worked hard their whole lives to accumulate cash savings, investments and a fully owned personal residence.  It does not sit well with these people to have to put out money at the end of their lives for such things as health care, long term care or maintenance.  They prefer to have their children have the money.  Many aging seniors will actually forego medical care or long term care or maintenance on their property to leave more money to their children. 

Transferring Assets for Tax Planning or to Qualify for Government Programs

Many elderly look to the government to help them pay for to pay for home care, assisted living, or nursing home care. At least two government programs may be able to help pay for this care but do prevent participation for seniors who have too much in assets.  These two programs are the Department of Veterans Affair’s Pension Benefit (more commonly known as the Aid and Attendance Benefit) and Medicaid long term care for the elderly.  In order to qualify, eligible participants must have little or no money in cash equivalent assets.  Some individuals use strategies to transfer the assets out of the name and control of persons eligible for these programs and thus allow participation in the programs. 

There are also a number of government programs that help rich and poor alike without consideration of assets.  Medicare, for example, is funded through premiums by participants and directly through the Federal general fund from taxpayer dollars.  In general, all persons 65 years of age or older who have been legal residents of the United States for at least 5 years are eligible for Medicare.

Another area where there is a no discrimination between those having assets and those without assets is tax planning. Some individuals use strategies to take advantage of the deductions available to senior households.

Seniors and their families should use caution as they considered using asset preservation and tax planning strategies to qualify for government benefits or to avoid paying high taxes.

Estate Planning & End-Of-Life Issues

A key deficiency in the process of preserving or transferring assets occurs when seniors fail to provide for orderly distribution of assets at death or fail to let their family know what to do when the senior can no longer handle his or her own affairs.

Estate planning from a qualified estate planning attorney, a financial adviser who specializes in estate planning or a CPA planner is the design and creation of documents to provide the orderly transfer of assets and property to the next generation. Wills, living trusts and a myriad of other trust documents or business arrangements to avoid estate taxes, income tax and real estate capital gains are some of the principal documents used. Estate planning also concerns issues of business succession or disability of a business owner.

Many estate planners are also adding final directive or end-of-life documents such as living wills, powers of attorney and special medical directives. But often these are considered secondary to the process of transferring assets or property. Unfortunately, these documents are much more important to family caregivers dealing with the needs of elderly loved ones.

Estate planners also need to become more involved in the planning process for long term care by helping in the production of a written long term care plan. This should also include meetings with potential family caregivers and instructions or checklists for these people. This important aspect of planning is often overlooked.

Elders or their families who are assisting them should insist on more careful planning for long term care issues when doing an estate plan.  

The National Care Planning Council

The National Care Planning Council provides a listing source of community care providers and advisers who can help the public keep, transfer and protect what assets they have from loss. Some of these services include:

• Estate Planning
• Funeral Pre-Planning
• Life Insurance
• Life Resource Planning
• Medicaid Planning
• Retirement Planning
• Tax, Debt Relief
• Trust Administration
• Veterans Benefits

The sole purpose of the NCPC’s listing service above is to assist the public in contacting eldercare providers or advisors who may be helpful. There is no charge for using this service. Members of the National Care Planning Council have agreed to abide by an ethical code of conduct. We trust that members or anyone else listed on our site will act in an honest, fair and equitable manner. We do not verify the background or business practice of our members and it is up to the public to determine the integrity of any provider in our listings.