When my widowed Dad needed to move to assisted living my sister started talking about how he and Mom never sheltered anything for us and he could be wiped out by nursing home costs, leaving nothing for us to inherit. She insisted that all of her sophisticated friends had their parents shelter their assets so that they could get Medicaid.
Dad was a Veteran and my sister wanted him to qualify for the Aid and Attendance program. There is an asset limit of about $80,000 (depending on your age and condition). He had about $250,000 in an IRA.
My sister set up a meeting with an Elder Attorney Law practice. I was trying to stay open minded and was there to learn. The idea was to take all of his money out of the IRA and put it into an irrevocable trust. I knew it would all be taxable. This was presented to us as a way to qualify him for the Veterans aid and also to be set up in case he lived past the 5yr Medicaid look back period.
Most of this made me uncomfortable, especially since I was his POA and he was not at the meeting. The assumption is that EVERYBODY DOES THIS. Only unsophisticated simpletons who like to pay for things they don't have to pay for would not take this route! The taxes and lawyers fees were substantial, but of course that would be outweighed by the benefits he would get - if he lived long enough.
My sister was shocked that I would even think twice about this. Why would I even question what all her friends have done or these fine Elder Law attorneys?
We took a few days to explain it to Dad and I wanted to think about it and make a spreadsheet or two. My sister wanted me to just sign the papers since I was POA. I'm glad I hesitated because Dad called his accountant and told him "My daughters want to make me look poor". He knew exactly what "move all your money to an irrevocable trust so that you can qualify for government benefits" meant. Even on his downhill slide he understood. He remembered being a kid during the Depression and how his single mother was "on the dole".
My sister and I got together to decide if we would proceed or not and she agreed with me to not sign and if needed we would revisit the issue later. Dad lived another 4 years, paying his own way for assisted living and then a hospice facility. When he died we each got a small inheritance, which was good enough for me.
He was quite proud that he had worked and saved and invested so that he could pay his own bills when he needed help near the end.
Well, for my MIL, we were in a similar situation and we went the other way, though we did not obtain any VA Aid and Attendance benefits as my MIL died before we could apply for the benefits. My MIL grew up in the depression as well, born 3-31-19 and died 7-5-2017, grew up dirt poor, female and black in the rural segregated South, and she was always self-sufficient up until she became incontinent and not very mobile -- almost wheelchair bound. She worked as a Secretary in the Federal Government and had a very modest pension and survivor's annuity, and a modest house. Much to our surprise, she had unknowingly to us, saved around $135K in a Stock DRIP, that she titled jointly with her daughter (my wife) and son (my BIL). Her total assets were around $250K, with a modest income stream of $2500 from her pensions and SS. MIl lived with us on an emergency basis for several months until we couldn't provide the care we wanted for her; so we arranged for a care home/assisted living facility, which would have eventually -- if she lived long enough -- eventually eat all of her assets and leave nothing to take care of her son, who has MS and will eventually need skilled nursing care.
We establised an irrevocable trust, dopping her assets into it (including jointly titled stock), for the benefit of my BIL. We kept around $20K of her assets to private pay for her assisted living, which she enjoyed for the last 5 months of her life. If MIL had lived long enough she would have been eligible for VA Aid and Attendance benefits of around $1100 per month -- along with her income stream from pensions and social security, this would have kept her going in the facility she was staying, which cost $3700 per month -- we would make up any difference and if she later needed skilled nursing care, we would backstop her care for that too.
My MIL was an extremely sharp and stubborn lady -- refusing to live with us and give up her autonomy -- and even at 98 she was fully aware of the financial process we had recommended to her. Our lawyer met several times with her and she didn't blink twice about "sheltering assets" to stretch her financing of assisted living and to take care of her son. For our family, we thought MIL, as a surviving spouse of a WWII veteran, earned the right to these VA benefits -- and we were willing to take these steps, permitted by VA rules to obtain them.