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Giving all your money away could leave you without health insurance Posted: February 28th, 2013

By Beth Orenstein

Beth Orenstein is a freelance writer from Northampton, Pa. A graduate of Tufts University, she covers health topics.

By 2030, the cost of a year in a nursing home is projected to be $265,000.

Many people think they can give their money to their children and have the government can provide their health insurance and pay for their long-term care.

Half of the advisers surveyed for Nationwide Financial said they have clients asking about giving all their money to their children so they can qualify for Medicaid. More than two in five (42 percent) of the 501 financial advisers surveyed said they have clients asking about giving their assets to their children so they can avoid paying their long-term care expenses.

Medicaid intended for poor

The advisers say it's not a smart move.

In a press release on the survey results, John Carter, president of distribution and sales for Nationwide Financial, says Medicaid was meant to help care for the poor. It isn't intended to supplement middle class or affluent families.

The Deficit Reduction Act of 2005 has made it more difficult for parents to give their assets to their children so they can qualify for Medicaid. The government now looks back at what you've given away in the last five years versus three.

Drawbacks to Medicaid planning

Still, if you are thinking of giving away your money to qualify for Medicaid, the financial advisers say you should know that:

  • You may not get to live where you wish. Nursing homes are not required to accept patients who are on Medicaid.
  • The nursing home may be your only choice. Community based services such as assisted living, home health care or adult day care aren't often options for people who rely on Medicaid.
  • You aren't likely to get a private room in the nursing home.
  • If you are unhappy with the nursing home, you may not be able to move to another.
  • Also, your spouse may not be able to maintain his or her lifestyle.
  • And you will have to ask your children for your money when you need it.

Talk to your financial advisor

People who live to age 65 have a 70 percent chance of needing some type of long-term care in their lifetime.

Advisers say the best option is to work with a financial planner and estimate the cost of your health care and health insurance costs in your retirement years. Then you can plan accordingly. A number of products are available to help you plan for your health insurance and health care in your retirement years.

According to the survey, fewer than a third of advisers (31 percent) believe their clients understand the various long-term care options available to them.