Smart Quiz! What is the #1 cause of major asset seizures after 65?
Answer: Medical Coverage Gaps
Specifically, Medicare has so many limits and hoops to jump through that you could develop a whole new medical issue just dealing with them.
Medicare Part A has no monthly premium and primarily covers hospital care, but it has a hefty copay for overnight stays and a deductible that exceeds $1,000. Medicare Part B has a premium and covers preventative maintenance, research, approved medical equipment, ambulance rides and a second opinion before surgery.
Neither plan guarantees 100% coverage of medical bills, especially if you have an extended hospital stay. Also, these Medicare plans don’t cover the essentials like eye exams for glasses, hearing aid exams, most dental care, or routine foot care that many adults over 65 require.
With so many uncovered expenses, it’s not surprising that medical bills are one of the main reasons older adults file for bankruptcy. However, bankruptcy puts you at risk for asset seizure, but so does failing to take action. If you cannot pay your uncovered medical bills, the courts may seize your assets to pay the bills.
To guard against asset seizures before medical expenses get too high, you have two main options: Get supplemental health insurance, also known as gap insurance, and/or protect your assets.
Here’s what you need to do:
1. Look to Medicare Supplemental, also known as Medigap. Medigap plans help cover some of the costs like deductibles, copayments, some treatments outside the U.S. and hospital stays beyond what Medicare will pay, but only up to a limited amount (100 days for rehab in a nursing home and no time at all in a nursing home for custodial care). Medigap does not cover prescriptions, vision, dental, long-term care or hearing aids.
Medigap is sold by private insurance companies and comes with its own monthly payment. You must have Medicare part A and B to qualify for Medigap, but you cannot be on Medigap and Medicare Advantage at the same time. If you are on Medicare Advantage, you can apply for Medigap. Just be sure that your Medicare Advantage coverage expires before the Medigap kicks in.
2. Once you’ve obtained as much medical coverage as you possibly can, it’s time to protect your assets with estate planning. You can do this by creating a trust.
Many people put their homes and other assets in a loved one’s name so nothing can be seized if they can’t meet their medical bills. However, some people take advantage of their family members in this situation. A better option may be to put your assets into a trust instead of completely signing over your home to someone else.
There are many types of trusts, including family trusts, generation-skipping trusts, and asset protection trusts. Deciding which trust type meets your needs can be difficult since each one has different guidelines and restrictions. It’s wise to consult with an estate planning attorney before you make any asset-related decisions.