Protecting Your Fine Art Assets from Uncle Sam in the Golden Years
If it is not enough that the fraud and forgery sharks are encircling art collectors and using the most nefarious and unscrupulous methods to protect themselves from being caught, federal and state health organizations are waiting at the shore for those lucky enough to escape. Uncle Sam via the home state wants your art assets to pay for health care for you and your loved ones.
Your Art Collection as an Asset is Up for Grabs by the Government
You worked hard all your life, protected what you saved, and looked forward to retiring at 65 with the financial and health care support from the federal government. Your payments from your wages into social security and Medicare were supposed to protect you from the financial onslaughts in old age and any health problems which would emerge as you get older. While the Fed will provide some finances in your old age, and some health care, serious problems will not be addressed by Medicare after about 90 days in the hospital.
In point, if a serious health problem emerges requiring extended care Medicare coverage turns into Medicaid which is not part of the benefits arising from those contributions made during your working years. Medicaid pays only for those unable to provide payment because they have no funds available to pay for the care. As someone who has assets such as an art collection, house, money in the bank, annuities and so on, Medicaid expects and will take those assets as payment for your provided health care costs falling outside Medicare coverage.
Exempt assets include a home with less than $500,000.00 in equity value, one automobile, a burial space, a pre-paid funeral contract, up to $1,500.00 in face value of life insurance, wedding and engagement rings, household goods, and very little else. There are dollar amounts allowed exemption status for the hospitalized spouse and the non-hospitalized spouse. Assets that are not exempt include bank accounts, stocks, bonds, retirement accounts (IRAs, 401ks, etc) and virtually anything else of value including art . Note that each state has their own specific set of exemptions and non-exemptions.
The Process of Medicaid Engagement and Its Payment Consequences
If you succumb to a severe health problem after the 90 days of Medicare it will be necessary, in the absence of any other health plan, or ability to pay, to apply for Medicaid coverage to continue being covered for your health costs. This is a state application in which a case worker evaluates your assets to determine your ability to pay. If you have no apparent assets, the socialized medicine of Medicaid will be provided by the state to the health care provider. If, on the other hand you have anything of value such as your art collection, the state will demand the collection for payment of those health costs incurred by you via your care in a hospital, home, or nursing facility.
Note here, that the government may not care being fleeced by the Wall Street idiots, the Three Pigs from Detroit, or the Ponzi fraudsters, but they took the time to create a law making it a criminal act for an attorney to provide advice for a fee regarding the preventing of the state from taking your assets as payment for Medicaid health costs.
It is not clear as to how or what standards are used by the state case worker to evaluate your fine art assets. Suffice to say that they are up for grabs and anyone who has been involved in challenging state people at any level knows that challenges take years, if for no other reason than a lack of response or interest, leading to an unfavorable result for the challenger.
To the extent that the government wants your assets for Medicaid payments even making it a crime to provide legal advice, our lawmakers have gone to great lengths and continue to raise the bar to secure these assets. One may think that one way out may be to get rid of your assets prior to Medicaid participation. Uncle Sam has got you covered on this one. Your caseworker upon receiving your application will perform a five year look back at your assets and if you transferred them within the 60 months they will be counted and depending upon state hospital costs per day will be used to make you ineligible for care for the per day cost divided into your transferred assets. For example, if the care cost is $100 per day and you transferred $100,000 worth of art within the current 5 year look back you would be ineligible for care for 1000 days. This represents your penalty for transferring assets over the last five years. If you did not transfer your assets and you would be eligible.
Protecting Your Fine Art Assets from the Claws of Medicaid
One may ask at this point why should I not pay for Medicaid services? If I am not entitled to them for free if I have fine art assets to pay for them, I should fork over the payment. Like income tax planning the Medicaid regulations and arrangements allow certain recognized deviations or exemptions. The following represent some of the possible ways to find yourself outside the crosshairs of the Medicaid asset retrieval and penalty process. Please do not take this as advice but a recognition of possible strategies to protect your assets.
1. If you have enough assets to pay for health services do not engage Medicaid. According to some statistics only 2-7% of the population requires extended long term care of 2 years. If you have about $300000 of extra fine art use it to pay for your health needs. Keep in mind here that if you go the route of Medicaid rather than choosing your health care facility by using some extra works to pay for the costs, Medicaid determines the how, where, and what services you receive. In point, by engaging Medicaid you have just entered into a partnership with an entity that has almost total power over your assets.
2. In lieu of using part of your collection to pay for extended health care, long term insurance is available instead of Medicaid. The problems with long term insurance are that current premiums are excessive reaching $5000 per policy, there is no guarantee that the insurer will be around to take care of the insured if he or she needs it, premiums may rise to the extent that they become not-affordable, and as such egregious amounts of money have been wasted, and many insurers will not insure people after 70 and even less.
3. One may set up an irrevocable trust whereby your fine art assets are no longer in your possession but belong to an heir. This does not create a problem proof resolution, since your assets are no longer under your control and if you need them you might end up fighting with your heirs to retrieve them if you need or want them back.
4. If your focus is that you really want to secure Medicaid in the future and do not care if you stay in Camden or Newark, New Jersey, it may be time to prepare for the look back period. Start transferring you art collection now so that in five years you will be ready for long term healthcare on the state rather than from the sale of your collection
Significant points to remember
1. Medicare is not Medicaid
2. Medicaid is not for free unless you have minimal assets.
3. You will pay for Medicaid with your art collection and any other valuable assets under your control within certain limits.
4. Transferring fine art assets within a five year look back period creates penalties for enrollment times for Medicaid care.
5. There are other avenues to pay for health care in your golden years in lieu of using your art collection.
6. Planning ahead is your best defense against losing your art assets.