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Monday Money Report

| July 27, 2020

Last week the market started off well, but dropped Thursday and Friday.  Thursday saw unemployment claims rise for the first time in months.  Friday, approximately one-quarter of the S&P 500 reported earnings.  While 80% of the companies that reported beat the earnings estimates, the earnings were still down.  Meaning the market expected bad news and the companies delivered, just not quite as bad as expected.

What’s the average investor supposed to do with this information? To be honest, not much. If you believe most of us are going to get up and go to work tomorrow, and companies will still be providing products and services the rest of us want to buy, the equities market, or stock ownership in publicly-traded companies, is still your best bet for long-term asset growth.  Continuing to invest in your 401(k), IRA or other investment account, in a diversified portfolio that’s aligned with your goals and risk tolerance is a time-tested approach.

There is one big pothole on your life’s journey that most of us will not manage to avoid. If you’re married, the odds are that at least one of you will need long-term care at some point.  That may be someone coming into your home, an assisted living facility, or skilled nursing care. And the bigger question is, how do you pay for that.

We had a question come in about using Medicaid trusts to preserve assets, and let the government cover your long-term care expenses.  I’m not an attorney and don’t draft those trust documents. But the quick overview is this:

Medicare, the health insurance most of us use starting at age 65, does not cover long-term care.  It will pay for skilled nursing care as long as you are improving medically.  So, if you have a fall, or a stroke, and need rehab, Medicare will pay for that, up until the day you stop improving.  Long-term custodial care, or help with what are called “activities of daily living”, is not covered by Medicare or other health insurance. 

In the local area, you’re easily looking at $8,000 a month for a facility, if not more.  It is easy to see how quickly you can run out of money without long-term care insurance or very deep pockets. Enter the Medicaid trust.  Medicaid is a government program for healthcare, including long term care, for people without other resources.   To qualify for Medicaid as a single adult in Maryland, you can have no more than $2,000 in total assets.  Once you’ve spent down to that level, you can qualify for Medicaid to pick up your long-term care expenses. 

Congress realized, though, that people would often give away their assets to their children to qualify for Medicaid. So now they look back over the last 5 years to see if you’ve given away money.  Every state is different, but in Maryland, for every $6,800 you give away, your eligibility for assistance is pushed out by one month. Enter the Medicaid trust.

An attorney can draft the trust documents, and then you retitle your assets into the trust.  After five years, you have no assets and are past the lookback period and would then immediately qualify for Medicaid should you need care.  Some people feel there are moral issues with this; you have the means but are asking the government to pay for you instead. Some people feel these are the rules, and if Congress didn’t want the taxpayer to cover this, they would change the rules. I look at two practical sides of this.  First, it’s complicated.  At a time when most people are trying to simplify their lives, this does the opposite.  Second, consider quality of life.  The facilities that accept Medicaid patients directly (that is, you enter the facility not as a private-payer who then runs out of money, but as a Medicaid recipient from day one) often have long waiting lists to get in. And those facilities are not going to have the same amenities. Instead of a menu to order from, you may have one or two options at each meal. You will probably have a roommate instead of a private room.  The activities may not be as robust, and so on.  Every family is different, and everyone needs to make their own decisions about this.  It’s not a one-size fits all approach.

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Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

LPL Financial and CovingtonAlsina do not provide legal advice.

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, consult with your attorney, accountant, and financial advisor or tax advisor prior to investing.

And if you don’t have a financial advisor, come talk to us. This is Ann Alsina with CovingtonAlsina.