Living Trust for Medicaid?

[athena53]

My MIL was an extremely sharp and stubborn lady -- refusing to live with us and give up her autonomy -- and even at 98 she had 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.

I think it's a major difference when you choose to shelter assets for the benefit of a disabled dependent. To be practical, if you don't, it just increases the likelihood that they'll need government aid down the road.

 

[Teacher Terry]

Chris, you mom sheltering assets for her disabled son is another matter entirely. Either way one of them is going to end up needing public aid since she only had so much $ to go around. I see that very differently then just trying to hide assets for adult kids.

 

[retired1]

Let me get this right, this atty wants me to pay for your long term care even though you have the funds? And you then can pass on these “ funds” to others?
Seems immoral to me, so, no we are not doing this.
Just saying...

+1. Sounds immoral thing to do. This kind of activity causes government funding drain and adversely affects elderly who truly need the help. Not good.

 

[pb4uski]

Chris, you mom sheltering assets for her disabled son is another matter entirely. Either way one of them is going to end up needing public aid since she only had so much $ to go around. I see that very differently then just trying to hide assets for adult kids.

+1 When I read what Chris wrote I wondered if his Mom would have had the same view if instead of going to support her disabled son that it was just to pass money on to her adult children who are already doing well financially.

 

[Floridatennisplayer]

I will take all deductions legally allowed. I would not break the law. I have paid into the system many years and watched them foolishly spend my tax dollars. I will stay within the law to protect and preserve what I have worked hard and been taxed on for my kids not the government.

 

[Floridatennisplayer]

It would be immoral to have my hard earned money taken from my children when the law allows me to protect it. My first priority is providing for my family no one else.

 

[Luck_Club]

It would be immoral to have my hard earned money taken from my children when the law allows me to protect it. My first priority is providing for my family no one else.

+1

 

[Luck_Club]

Integrity, Honesty, & Ethics

This topic has had differing opinions. Some of those opinion have been stated with a moral superiority of "doing the right thing". I was shocked to learn that one of the posters had explored doing exactly what they are now preaching against when it was their family's money at stake.

I guess even in the anonymity of the virtual world, you still have to take the stance that people are dishonest and lack integrity until proven wrong.

 

[audreyh1]

It would be immoral to have my hard earned money taken from my children when the law allows me to protect it. My first priority is providing for my family no one else.

Providing for dependents is one thing. Hopefully folks who have dependents have life insurance, savings etc., to provide for them while they still need help. Providing for independent children who are launched and have their own resources, in some cases wealthier than their parents? That I don't really get. But I can see how people might feel differently.

 

[ChrisC]

People feel differently about lots of things, but I think what I find disconcerting is the moral indignation, almost holier than thou righteousness, against folks who decide to take opportunties that the rules plainly permit. This high-handed opprobrium against sheltering assets or engaging in transactions that the rules plainly permit is simply based on a sense of righteousness that is not based on any moral imperative (at least no one has identified it --the best we get here is that "it feels right" for some transactions as long as it does not add too much to family wealth); the idea that it causes grave harm to benefit programs is based on sheer conjecture ("what if everyone did this"), and appears also based on a lack of understanding of how difficult it is to escape the Medicaid's claws of requiring total impoverishment before one can get benefits. The 5 year lookback period for transfers is an ass-kicker and setting up irrevocable trusts to shelter assets within the 5 year lookback to accomplish that goal of impoverishment takes a lot of luck too and can painfully backfire on a family, as someone else demonstrated in another thread a while ago. Medicaid rules have been tightened and re-tightened over the last 15 years! Why not have a 20 year lookback period -- that will rule out all the sheltering of assets that benefit "undeserving" families, in the view of some posters here! And the type of irrevocable trusts allowed by Medicaid are so draconian in impact (tax wise and in permitted distributions) that it's not for faint of the heart.

The rules will get changed if there's enough public angst against them or our elected officials see major harm to program integrity or to financial program solvency. It's sort of iroinic to me that the poster who mentioned how her father and family members didn't take advantage of the VA's no lookback transfer rule and the low $80K asset resource test for VA Aid and Attendance benefits was sort of financially shooting yourself in the foot -- at least to me given the backdrop of the VA program. She received a number of pats on the back here. Certainly, her stance was "right" for her family, which should be all that matters in these situations.

But I might add that these VA rules have been around since the program's inception, I believe, and perhaps they're outdated. Yet three years ago, VA proposed changes to these rules -- I believe they would add a 3 year lookback period and increase the asset test to an inflation adjusted amount of nearly $120K. The public outcry from Veteran Organizations and Veterans/Surviving Spouses to these rule changes was significant -- the rule changes have never been implemented and I doubt that this current Administration will follow through with these proposed rule changes initiated by the past Administration, which also paused final implementation of the changes. So, perhaps she did the right thing for her family -- no one should question that -- but equally true would be the case if she did take advantage of those rules to pass on the modest wealth her father had earned over the years. No one should question either approach on so-called moral grounds.

 

[harllee]

The nicest and best run skilled nursing home in my area is owned by a Continuing Care Community. The CCC does not accept Medicaid and you have to buy into the CCC and then pay a fairly hefty monthly fee ( the monthly fee stays the same even if you have to move in skilled nursing). It is pretty pricy so I am saving my bucks so I can qualify for the CCC. I am on the waiting list and hope to move into the independent living section of the CC in a few years. One good thing is that the CCC has a "benevolent fund" so that if a resident runs out of money they are not kicked out of the CCC. I was told that there are 2 ladies in the memory care unit who are over age 100 whose money has run out. The benevolent fund has kicked in so the old ladies can stay where they are.

 

[ChrisC]

I was told that there are 2 ladies in the memory care unit who are over age 100 whose money has run out. The benevolent fund has kicked in so the old ladies can stay where they are.

They must have sheltered their assets 30 years ago to take advantage of this.

 

[Floridatennisplayer]

Chris, very nicely articulated. You said it nicer than I would have. I wonder if the “self righteous” ones here follow the same rules on everything else.

Why take allowable deductions? You are stealing from the government if you do. Honestly it follows the same path. I mean be moral in everything. Don’t take any real estate taxes deduction or mortgage interest deduction. Doing so robs the government of money they could use to help others in need.

 

[Just_Steve]

If people manage their income for ACA subsidy and my tax dollars pay for a wealthy person young enough to work, then later in life they can return this kindness and pay for my LTC.

 

[pb4uski]

Cheating Uncle Sam For Mom And Dad

 

[ChrisC]

Cheating Uncle Sam For Mom And Dad

The article proves little -- surely you can muster a more compelling story than another piece of piety, written in 2003? I'd rank it as probative and as enligthening as the poll you conducted on the ethics of some awkwardly framed situations. No one should take their ethics based on what other people do -- in life there are many matters that are left to one's personal conscience, hopefully guided by a set of sound morals. It does not advance analysis to call something "cheating" or "stealing" as the article states, when no one is playing outside the rules or moving the goalposts on the field of play -- that would be cheating! And no one is engaging in stealthy transactions like creating LLCs in Delaware, surreptitiously hiding assets from Uncle Sam, and breaking the law to obtain benefits -- that would be fraud and perhaps "stealing."

I'm heading out of this discussion now because there appears little enlightment coming from the other side and I'm finding myself just repeating myself now.

 

[travelover]

Cheating Uncle Sam For Mom And Dad

Good article.

 

[Floridatennisplayer]

Lame article written in 2003

 

[RetiredAt55.5]

Rant - ACA, College Financial Aid, Back Door Roths

If people manage their income for ACA subsidy and my tax dollars pay for a wealthy person young enough to work, then later in life they can return this kindness and pay for my LTC.

I see lots of posts complaining about ACA subsidies for "rich" people, but never any posts about "rich" folks getting college financial aid.

Perhaps any family owning a McMansion and/or a second home shouldn't be getting any financial aid either - move into less fancy digs, sell the second home, and pay the full tuition bill. I do realize some schools do look at second homes in their calculations, but those are typically the uber expension ones.

So, if total assets were considered for ACA, I guess I could "shelter" assets by buying a nice McMansion and then selling later once I determined I no longer wanted to play the ACA game. Would that be considered more "ok"?

I haven't seen anyone mention this, but should a person that retires early feel guilty about getting financial aid for their children? Why should other people be paying for that if they chose to not work?

I also never see anyone complaining about usage of back door Roth's. That practice is also costing tax revenue. Why don't I ever see anyone complaining about that? It seems when folks use those, it's deemed to be an astute financial move. Hell, even financial magazines and Vanguard have promoted back doors.

I'm getting ACA subsidies now. I'm also paying full tuition and room & board for sons #2 and #3, after fully paying for son #1, all with 529 money I set aside years ago. Stupid me - I didn't play the financial aid game well at all. Maybe I'm paying myself back now with my subsidies.

 

[Scuba]

When I first retired I was living off savings and even though my assets were substantial I had very little income. So I didn't qualify for ACA and was put on Medicaid. So even though I was a millionaire the state paid for my health insurance. As far as LTC goes I won't be using trusts as I have a MetLife LTC policy I bought in my mid-30s. It costs $28/month and pays $300/day with a lifetime cap of $360k

This is a great example. While the magnitude may be different, philosophically getting subsidized insurance when one has the resources to pay unsubsidized rates is not just a timing difference. It’s using the system for personal benefit in a way likely not intended by those who set it up. I don’t see the difference between this and legally shielding assets from Medicaid, other than perhaps the magnitude of the benefit depending on specific circumstances.

However, I don’t put Roth conversions or SS timing into the same category. Figuring out what is best for one’s personal situation seems fine to me.

We all have our own ethical code. I don’t think I’d be proud to tell the population at large that they are subsidizing my LTC or my health insurance while I count my millions, but I have no problem saying that I do my best to plan my taxable income and deductions in a way that will legally maximize my after-tax wealth. Others may feel that any legal way to take advantage of what’s available is fine. YMMV

 

[Alan]

Thanks for the interesting discussion.