The clients answer to my question was unforgettable. He had been sitting silently for 45 minutes while his son listed each of the fathers assets and the reasons why they all should be transferred to the son.
When the son finished talking, I asked if he would leave the room for a few minutes so I could talk alone with his father. "Sure," the son said. "Have at it!" waving his arm in a gesture of complete confidence. I closed the door behind the son, sat down with Mr. Smith and asked: "Do you want to transfer all of your assets to your son?" He said simply and emphatically, "Hell, no!"
We then talked about his concerns. He did not want to offend his son by voicing his real wishes. He said he might need to rely on his son for care later on and was willing to do whatever was necessary to stay on good terms.
The problem of aging with limited assets raises these kinds of personal issues, as well as obvious financial decisions. How much money will I need to live on? Will I have to go into a nursing home? What can be done to avoid that? What is the best allocation of the limited assets I do have?
Eventually, the questions may lead to wondering whether parents should impoverish themselves to qualify for government nursing home benefits.
Two lines of thought seem to be dominant in all of this. One is to give all of your money away, so you can qualify for Medicaid nursing home benefits. The other is to purchase insurance products to avoid such a result.
Giving away assets raises ethical issues about having society pay for your long-term care, even though you have assets that could have done so. In addition, many parents seem not to realize that once the assets are given away, they lose control over them. The donees may spend the money on themselves, or the money could be lost in a bankruptcy, divorce or other unexpected event.
In other words, the uncertainties of life can affect the children as much as they have the parents. The parents gifts may simply not be there if needed to support the parents later on. So, impoverishing oneself would rarely appear to be the best route.
On the other hand, purchasing insurance products offers viable alternatives. The first choice is often LTC insurance. But what if your client is uninsurable, or if the premium is prohibitively expensive in light of the limited resources available? Then, purchase of an annuity might well be in order.
