...Long Term Care Insurance...

If I need long term care, can I protect my retirement savings and assets from forced liquidation by government?

If I need long term care, can I protect my retirement savings and assets from forced liquidation by government?Before the government will pay out for your long term care, they'll effectively seize and sell your investments: house, boat, second home, social security, pension, savings, stocks, bonds, mutual funds, and even life insurance cash values to pay for long term care - Yikes!

Retirement assets are all fair game. A state government welfare agency, such as AHCCCS - the Arizona Health Care Cost Containment System, WILL come after your money to pay for long term care. They will even attach your estate after death to reclaim what they spent for your long term care! They are strict and effective. They have to be, because the long term care spend-down laws are very specific. The courts enforce these laws.

Also, the AHCCCS investigators are very sharp. They are trained to get money for their state's treasury. Trust me. If you have assets, and you need long term care, they will eventually get what they're after... whatever assets you have left.

The upshot is: welfare does not help with LTC unless you're broke or bankrupt.

Remember, most people end up paying for long term care out of pocket until their retirement assets are gone -- Some eventually go onto the state welfare program. But, in order to get onto your state welfare dole, you must have legitimately reduced your assets and income down to the federal poverty level - bankruptcy.

In Arizona, you must have less than $3,000 of assets before the state will help! It's a similar story for every state.

The next question: "How do they know whether you are broke enough to qualify for the state welfare program? Can we protect our retirement assets and prevent forced liquidation of retirement investments?"

Well, first off, you must understand that the state welfare program counts almost ALL of your assets in their liquidation calculations.

If you have too much wealth in any of the following assets, you will not qualify for welfare assistance: cash, stocks, bonds, mutual funds, IRAs, CDs, annuities, real estate, life insurance cash values, vacation homes, second vehicles... just about everything is considered a "countable" asset. Only your spouse's primary home, up to $2,000 in cash, and personal goods such as jewelry and so forth will not be counted by the state welfare administration in this calculation.

Can you give away assets before long term care (or in many cases, after you need long term care, which is totally illegal)? B ut hey - By giving away assets, you not only stop the government from spending down those assets, now you will never be able to spend them yourself, because you really must give everything away! And, it must be done at least 3 years before applying for your state welfare program.

The Spousal Impoverishment Act of 1988 made a difference in keeping people from losing their very last few dollars, but it didn't change things enough. One good thing about the Spousal Impoverishment Act is that the at-home spouse can keep working and maintain their salary without having it confiscated by the government.

It is abundantly clear that government will not foot the bill for the 40 million baby boomers who will statistically need long term care. Nursing homes will poke holes in the retirement lifeboats of everyone who lives long enough. Government is saying, "Get your private long term care insurance or take your chances with your family's assets."

I think it's important to mention that you want to obtain your long term care insurance through a knowledgeable, objective advisor. These contracts contain many, seemingly small, details that can end up being quite important when it's time to get payments from your insurance company. You want an expert in your corner assisting you with any confusing details and decisions.