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Can I help my parents preserve their assets?

On Behalf of | Sep 17, 2020 | Estate Planning |

One major concern of adult children of elderly parents is that their parents’ assets will all be drained in order to pay for the care and medical treatment they may later need. That’s a legitimate concern for sure.

But the good news is that there is a way to both protect what your parents worked all their lives to accumulate and also ensure that they receive the care and treatment they need when that time comes.

Pre-planning is key to asset preservation

If your parents hope to qualify for Medicaid one day, they should be aware that Massachusetts enforces a five-year “look-back” period in which no nonexempt assets may have been given away or sold off in order to qualify for benefits.

But there are perfectly legal ways to convert assets from countable to exempt. Generally, stocks, retirement accounts and any cash will be counted, whereas personal property and household furniture will not. If you sold stocks and purchased your spouse some diamond jewelry, for example, or upgraded the furnishings and appliances in your home, you can legally convert the assets to qualify for Medicaid benefits under MassHealth.

Pay off your debts

Gone are the days when senior citizens have no debt. In 2016, senior citizens age 75 and older, according to research conducted by the Employee Benefit Research Institute (EBRI), carried 18.6% more debt than their counterparts nine years prior. If your parents intend to leave you and your siblings with a tidy inheritance, all debts must first be paid out of the estate.

A good way to reduce countable resources is to pay down debts. Pay off mortgages, car notes, credit card bills. You can even pre-pay taxes so there is a surplus. Another legitimate estate-planning tactic to reduce countable assets is to pre-pay all final expenses.

Set up irrevocable trusts

Once assets are placed in an irrevocable trust and a third party is named as trustee (other than your spouse), they are no longer considered countable in most cases. Because of the complexity of trusts, this is definitely an area where you need legal guidance to avoid any problems for you or your heirs.

Explore all avenues

This is just the tip of the iceberg when it comes to legal ways to preserve resources and assets in order to qualify for benefits. Learning more about your options can expand your choices and give you peace of mind.