I recently read an article in the Post Gazette with the headline “Pittsburgh tops the list of metro areas where seniors stay in their homes the longest”. This headline got my attention, so I continued reading. It mentioned that younger homebuyers have fewer choices because of the shortage of housing stock. The basis of the article refers to older Americans who are deciding against selling their homes. They are therefore not downsizing as they once did. It is interesting that the Pittsburgh metropolitan area is home to the country’s largest population of retirement age residents, who have lived in the same house for more than 30 years.
As an estate planner, if most of our retirees are staying in their house for 10 years or longer, it has some interesting implications. For this reason, retired Pittsburghers especially, should be planning for their nest egg. One of the questions we often get from clients is whether they should put their house in their kids names. We’ve recently covered this issue in a radio show and blog, so please do read it or listen to the podcast.
Using an Asset Protection Trust
I feel very strongly that middle-class retirees should consider putting their house in an irrevocable asset protection trust. If you have your house in the trust for more than five years, you have protected that house from long term care costs. If you need care in a nursing home at a later stage, you have protected your house. Nursing homes in Pennsylvania cost about $13,000 a month or $160,000 a year. Not many people want to spend $160,000 a year on care in a nursing home.
A middle-class Pittsburgher typically owns their home. Maybe they are still working to pay off the mortgage but they also have some money in the bank. It is unlikely that they are going to do a reverse mortgage on their house or access their home equity to buy groceries. If this is the case, there is no harm in putting their house in a trust to protect it, without it impacting their life much. They cannot receive a distribution, and they have given up the ability to write themselves a check, but the house is now protected from the nursing home Medicaid system. You are not giving up your money because your beneficiaries can still assist you financially if necessary. If you cannot access your assets, neither can the Medicaid or Nursing home.
How a Trust Protects You
If you’re a single person, when you pass away, the kids are going to inherit from the trust. If you need to go to the nursing home and you spend money which is not in the trust for your care, the kids will still get an inheritance from the trust. You didn’t work for 40-50 years to accumulate a nest egg, to lose it to long term care expenses. It is unfortunate that residents in nursing homes needing long term care, are those who have chronic issues like dementia or Parkinson’s disease. Medicare won’t pay for custodial long term care. Treatments that are acute in nature, like cancer or a heart attack, are however covered by Medicare. This means you have to pay out of your own pocket. It hardly seems fair.
Whether my wife is healthy, has a house to live in and has money in her retirement years, or whether my kids are going to receive an inheritance, is almost entirely dependent on what my health care issue is when I’m retired. Nobody knows what the future holds, but we need to plan for any eventuality. From my standpoint, that means using an asset protection trust. I really wish that more retired people would consider doing this.
It is not a good idea to put your house in your kids name for many reasons. We’ve recently covered this topic in our radio show and in our blog, so please listen to the podcast. If you prefer, you can read the blog here.
Don’t Throw It All Away… Let Us Help You!
We recommend you attend one of our upcoming Three Secrets Estate Planning Workshops. We offer them all the time in cranberry and in Southpointe. You’re going to learn about wills and trusts, and so much more. We want you to be able to properly plan for your family. If it has been worth 60 years of your effort to build, it is worth an hour of your time to learn how to protect your assets and leave a legacy. Register for a workshop on our website: sechlerlawfirm.com/workshops