What do Timeshares and Estate Planning have to do with Medicaid?
For many years Jim and Sally had enjoyed trips to the beach. These days, however, life is slowing down for them. Several health issues now make it harder for them to travel and enjoy the sun and surf.
They are now tidying up their estate plans and making application for Medicaid benefits. A hitch in the application process came up related to their Florida timeshare.
Unfortunately, timeshares aren’t typically sold by educating people about all the facts and implications. We discussed the challenges they faced related to their Medicaid application and their timeshare contract.
Right-Sizing Your Assets for Medicaid
When applying for government benefits, one of the key elements relates to the valuation of your assets. This is far different from your objectives when applying for a loan. In that case, you want to maximize the stated value of your assets.
In this case, you are better served if you can legitimately minimize the stated value of your assets. Herein lies a challenge. While you might see your timeshare as an expense, the government will view it as an asset.
With your timeshare viewed as an asset, it very well could have a negative impact on your ability to qualify for the desired benefit. What makes matters worse, is the fact that your timeshare might no longer be useful, due to mobility or other issues. Rather than an “asset,” your timeshare feels more like an anchor. You might, in fact, need to dump the timeshare in order to qualify for Medicaid.
Dumping Your Timeshare “Asset”
Timeshares aren’t like other “assets.” Homes and cars have titles. They can easily be evaluated based on comparisons with other units for sale on the market. Arriving at the value of a timeshare is a lot less straightforward. When a government agency is placing a value on your timeshare, it might be random, and not in your favor. This might get you in a bind
Neither are they typically easy to get rid of. That’s no mystery. Because they’re so tricky, an industry is emerging to help people get rid of them. There are several ways to deal with them. Rarely is it easy.
Because timeshare contracts vary in type, there’s no single best way to dispense with them, as it relates to qualifying for Medicaid. Some contracts stipulate that the only way to exit the contract is for the timeshare company to sell it, charging you with whatever expenses apply. In other cases, you can pay the resort to take it off your hands.
Giving away the timeshare isn’t always an option either. Medicaid penalizes people for giving away assets in order to qualify for benefits.
Before You Buy
Many Types: Time share contracts come in several variations. They’re often divided into two major categories, sometimes into three. Those categories themselves have different possibilities. Lining out the specifics of all those possibilities is a study all by itself. Deeded and “RTU” Timeshares are commonly highlighted, along with what exactly is “owned” and how and when it can be used.
Attorney Review: As with other agreements, have an attorney review the timeshare contract before signing it. It’s important to understand the implications related to both your enjoyment of the timeshare and its impact on your retirement plans and whatever you want to pass on to your kids. Special attention needs to be paid to questions like this:
– Can the timeshare be transferred to a trust?
– Can the timeshare be transferred to someone else?
– What’s involved in exiting the timeshare?
Consider Your Estate Plan
Timeshares fall into an odd category in the world of buying stuff. It’s typically viewed as the purchase of a pastime or recreational activity. Few people realize the estate planning and Medicaid implications that come with timeshare contracts.
Whether buying, enjoying or thinking about leaving a timeshare, it’s important to know everything you can about your contract and your options. The best way to fully enjoy your timeshare is to be make it fit with your overall future plans.
Have questions about your time shares and estate planning? Call Brian Quinn’s office at 636-686-6790.