Self-insurance can be a matter of self-preservation

Q: Do you have a rule of thumb as to how much you would need in order to self-insure for long-term health care? Also, if you don't need Social Security income, at what age do you recommend to begin collecting benefits?

 

 

A: Enough so you can pay $70,000 per year for custodial care -- for each of you -- for years. Think Alzheimer's. The alternative is a state-funded nursing home for the one in need of care, and poverty for the one who doesn't need care!

 

I'd start collecting Social Security at age 65, just to make sure I get all the benefits I'm entitled to! And don't forget to sign up for Medicare the minute you become eligible, and to purchase a Medicare supplement policy within 6 months of eligibility, so you can't be turned down for the most extensive policy, Type J, which includes prescription drug benefits -- even if you have a pre-existing condition.

 

 

Q: I found your article on long-term health care coverage very interesting, but there is an issue that didn't appear to be addressed. In general, what type of assets would one need in order to preclude the need for long-term care?

 

 

A: It's not the level of assets, but how quickly they'd be depleted, even at the current cost of $70,000 a year for custodial care. When your money runs out, your only choice is Medicaid. Read today's headlines. State funds for Medicaid are limited today. What kind of care do you think you'll get in a Medicaid-funded nursing home in the future?

 

 

Q: I enjoy listening to you on Money Talk. I have a question for you. My wife and I are in the process of creating a revocable living trust. To transfer assets such as mutual funds to the trust, do we first need to sell the funds which are in our name, and then re-purchase them in the trust's name? This would create significant capital gains.

 

 

A: Absolutely not. You don't need to sell. Just notify the fund company of the change of title on the account. They'll want to see the first/last page of the trust documents which authorize you as trustee. Your attorney will give you that info, to pass on to the fund company. There is no tax consequence, no sale, and your cost basis remains the same. Good move. Make sure you transfer title on everything -- including your real estate.

 

 

 

 

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