Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, March 9, 1992 TAG: 9203090011
SECTION: BUSINESS PAGE: B5 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Long
I have two CDs amounting to $9,000 and one flexible money market certificate for $20,000. I have already drawn the $2,000 interest from the money market and a small accumulated interest from the CDs. Interest rates are so low, it will take a long time to build any interest now, and I will have a rough time meeting expenses in the future. I am anxious to know how I could get some help.
A: The cost of nursing home care is devastating for most people, and little help is available unless there are children or other relatives to pitch in. Medicare and medical insurance cover only direct medical bills, not charges for custodial care.
The only source is Medicaid, but you are not eligible because you still have some money available to you. Corinne Gott, director of social services for Roanoke, said your assets of $29,000 are too high for you to qualify. You must spend down to $2,000 before your husband is eligible for Medicaid. When you reach that point, you can apply to your local social services office for payment of the nursing home bills.
Because your husband is already in a nursing home, it is too late to shift assets or to obtain insurance.
You should do what you can to protect yourself with the money you have left. If you have a car, pay any balance due on the auto loan or buy a new car now. If you have a mortgage or any other debt, pay it off. Pay any anticipated expenses, such as a pre-arranged funeral so you will not have those costs later when you haven't the money left.
\ Assessing collectible
Q: I have a political pamphlet dated 1890 entitled "The Grand Old Party." Could you give me an estimate as to its value or could you suggest a source that may be able to?
A: A spokesman at Christie's auction house in New York said the value depends on the political race involved, the political situation it discusses and the condition of the pamphlet. An item about a candidate who won has more value than a pamphlet about a loser. He said a general pamphlet about a party probably has little value.
The Christie's spokesman recommended that you consult a book called "Guide to Presidential Collectibles" written by Ted Hake. It was published by Wallace Homestead Book Co.
\ Of life, trust, Medicaid
Q: You recently discussed the Medicaid trust. Would you please discuss the inter vivos or "living" trust as it would be applicable to the Medicaid trust?
My husband and I have placed all of our assets into inter vivos trusts with us as trustees for our sons, who will take possession of the assets upon our disability or deaths.
A: A living trust is a trust established during lifetime rather than at death. Deborah Oehlschlaeger, a Roanoke estate lawyer, said a Medicaid trust is a living trust that is properly designed to protect depletion of assets from expenses of nursing home care.
Oehlschlaeger said a Medicaid trust must be irrevocable and unchangeable. The grantor of the trust must forfeit control of its assets, although he may retain the right to income while leaving the assets to named beneficiaries. Income received by a beneficiary from the trust must be used to pay for long-term nursing home care, she said, but the trust assets could be protected.
Transferring assets into a Medicaid trust is like giving a gift to another person, Oehlschlaeger said. Medicaid cannot force the trust to sell the assets or give them to a nursing home before it starts paying the nursing home bills.
But asset transfers to a Medicaid trust make the trust grantor ineligible for Medicaid for up to 30 months from the date of the transfer, she said. If the trust is properly drafted, continuing presence of assets in the trust should have no further disqualifying effect after the 30 months.
Not all living trusts are Medicaid trusts. Oehlschlaeger said a carefully drafted Medicaid trust can be an extremely valuable Medicaid planning tool. But all Medicaid planning, including creation of a trust, must be tailored to the particular needs and circumstances of each person.
Bookstores carry some references on Medicaid planning, and you may want to look for them. But be aware that books offer very general advice are no substitute for counsel of a lawyer experienced in Medicaid planning, especially in creating the trust.
\ Bet hedging
Q: I have two questions for you.
First, I recently received a booklet from a company called British American located in San Ramon, Calif. It is run by a man named Ken Roberts. This booklet attempts to sell a course which would train a person on how to make money in the commodities market. Have you ever heard of this company or the course it sells?
Second, what determines whether a person should get a 15-year mortgage versus a 30-year mortgage?
A: The answer to the first question is no, but you have to wonder why he is peddling courses through direct mail if he can make so much money through commodity trading.
The average investor should think twice before getting involved in the the commodities market, which is one of the highest risk investments around. Professionals must pay full-time attention to commodities prices and trends so that they can drive up their gains. That's the only way to offset losses that even professionals suffer on many of their bets.
The advantage of a 15-year mortgage is that you pay dramatically less interest over the life of the loan. But you can accomplish the same thing, with more flexibility for you, by taking out a 30-year mortgage with the right to pre-pay on the principal. Then commit yourself to making extra payments against principal every year.
\ How to buy a car
Q: When buying a car, is it better to pay cash or to borrow through a home equity loan at 10.5 percent, leaving cash in money-market checking at 4 percent? I have been told that I will get back interest paid on home equity when filing the long form on income tax.
A: As a general rule, you would be better off paying cash for a purchase than paying interest on borrowed money. But a lot depends on your individual situation.
You should not spend your only cash cushion on a car. Finance the vehicle if the cash in your money market account is your only liquid investment. You need to keep money on hand in an emergency fund, ideally equal to three to six months' income.
It is true that if you borrow against your home, you will in effect be able to write off 15 percent or 28 percent of the interest cost, depending on your tax bracket. But you would be putting your home at risk, rather than just the car with an auto loan.
\ Mag Poff covers banking and finance for the Roanoke Times & World-News. She will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke, Va. 24010.
by CNB