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Know Your Client Rule.

April 12, 2017



Know your client” is an investment securities mandate but it should be part of the practice of all financial professionals.I had an Elder Law attorney refer a case to me where the husband had dementia and the healthy spouse was concerned if she could pay the facility while paying her bills and not go broke.


As I do in all cases, unless it is obvious Medicaid is the only option, I ran a cash-flow analysis to determine if self pay was a possibility or Medicaid was needed.90% of their assets were in qualified money owned by the impaired spouse (husband).Also, he owned a pension and most of their Social Security income was in his name.


It turned out they could and did self pay until his passing.The “know your client” rule came into effect in order for me to make my determination. I had to know their concerns, assets, income, expenses, and goals.If I didn’t and rushed to get them Medicaid qualified, I could have cost them a major tax liability or created additional expenses (costs).In order to get him Medicaid qualified a couple of things would have to happen:

  1. A Medicaid Compliant Annuity would have had to be used which would have required moving the qualified money into her name, as mentioned, would have resulted in a major tax hit.

  2.  We would have had to move the balance of money into her name leaving him no more than $2,000 in his name. This would also result in a taxable event.


From my experience if a professional jumps immediately to Medicaid planning it can be costly.  If one can self pay they have more long-term care options.  It should first be determined if self pay is possible.  If not, then Medicaid planning makes sense.  Make sure to take the most efficient planning road.



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Tel: 503-680-0251​


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