Q: Recently we were contacted by someone who invited us to a free brunch and was pushing living trusts and annuities as a way to keep all of our assets but still qualify for Medicad. Can that be done?

A: For senior citizens, the fear of probate, taxes, and nursing homes have triggered an endless cascade of wanna-be advisors. Heck, for a free brunch, I probably would have gone too. But the topics of living trust and annuities should cause the red flags to be run up the flagpole.

Before April 1, 1998 some salespeople were advising seniors to sell all of their assets, keep $80,760, and then purchase an annuity with the remainder of the family assets. The key, however, was that the income was to be paid to the one that was the least likely to go into a nursing home. Thus, the couple could have the benefit of all their assets (through the extra income from the annuity) and yet have the spouse not receiving the annuity income qualify for Medicad.

For all annuities purchased after April 1, 1998, the dual test for Medicad qualification involving income and assets are still in place. A couple can still spend down to a combined total asset estate of $80,760 by using their assets above that amount to buy an annuity. But now the amount of income from the annuity payable to one spouse is counted in the overall picture. If the non- Medicad spouse's income, including social security benefits and annuity proceeds, exceeds $1357 a month, then a complicated penalty period is triggered which for all intents and purposes amounts to a quasi disqualification.

If the annuity makes sense financially, then do it, but if you are doing it as a hedge against nursing home expenses, consider the new rules.

Concerning the living trusts, at $2,300 it will probably cost you more to do the living trust than your estate will face in settlement expenses. Stick with the Wills.

Q: I am going to co-sign so my girlfriend can buy a car. How can I protect myself?

A: Of course your best protection is not to co-sign. Remember girlfriends come and go. But if that is not an option, you need to have your name on the car title. Otherwise, your girlfriend can stop making payments and then you will be stuck making the payments since you signed the note making you liable for the entire amount and your credit would be affected by late or defaulted payments. She may not care if payments are current because she has possession of the car plus the title (although the lender might have kept the title). You would be reduced to chasing her in Court, assuming that she is still in Fort Collins.

By having your name on the title, at least she may not be able to transfer the car with out your signature, but the down side is that you would be exposed to accidents. Just be sure that there is generous insurance (both accident and vehicle replacement) in place.

There is no magic answer for you, but hopefully forewarned means forearmed.