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Tax Sheltering Money
Old 08-21-2010, 08:49 PM   #1
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Tax Sheltering Money

An older couple I was talking to this evening were inquiring on the best way to tax shelter about $60K other than gifting.
A little background, in order for an elder parent to receive some kind of VA benefits he has to have less than say $80K of assets. He has $140K, so in order to get down to the cap he has to get rid of $60K, and ideally pass it down to his family with minimal tax consequences.

Any ideas or suggestions, any and all replies are appreciated

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Old 08-21-2010, 09:21 PM   #2
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I agree with haha. I will add that there are ways to immediately remove the assets without adverse tax consequences through contributions to irrevocable trust(s). However, the formation and maintenance of these methods are almost certainly too burdensome and expensive for $60K - you would probably need to add two zeros to that amount to make it worth the cost. The laws on how these are set up vary substantially by state so you would need to talk with an attorney specializing in estates and trusts in your state.

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Old 08-21-2010, 10:02 PM   #3
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Do they have any grandkids or great-grandkids going to college? They can pay tuition directly to the college. No tax consequences for that.

If they get sick, then a day or two in the hospital should use up a lot of it. Any medical expenses are deductible above the 7.5% of AGI floor if they itemize.

They can give money away to charity.

I'm not sure I understand the "tax-sheltering" part. Maybe you meant "asset sheltering"?
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Old 08-21-2010, 10:32 PM   #4
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They should be talking to an elder-law attorney that knows the laws inside and out and can advise based on their personal situation.
Disclaimer - I am an independent insurance agent. If the above message contains insurance-related content, it is NOT intended as advice, and may not be accurate, applicable or sufficient depending on specific circumstances. Don't rely on it for any purpose. I do encourage you to consult an independent agent for insurance-related advice if you have a question that is specific in nature.
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Old 08-21-2010, 10:53 PM   #5
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I pulled my earlier post because I wasn't saticfied with it.

Depending on the exact rules of the VA, buying an immediate annuity might be a good plan. For some purposes where assets are more important than income, this works.

Also, paying off the mortgage might help. But it doesn't pay to act without exact situation specific knowledge.

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Old 08-22-2010, 03:12 AM   #6
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Not sure I fully understand all of the circumstances...

Do they want to tax shelter the assets?? or lower their spendable assets?

Does this $80k include assets such as home or car?

The immediate annuity idea may be good if it keeps them below the income level... assuming there is an income qualification.

If the situation is that they need to transfer $60k into some asset they still own and legally and get down to $80k... then first identify the legal belongings that are exempt. For example, if the house is exempt, perhaps they can use the money for something needed on the house to maintain its value or enhance it. This could be large recurring expenses that will soon be needed like furnace replacement, roof, etc.

They need to make sure the expenditure of the money is legitimate (to be on the right side of things). Not to mention that it would be embarrassing to be rejected if the organization does a historical account check during the qualification.

They could just wait to qualify and spend down the $60k on living expenses... That is probably why they saved it.

I always thought our home would look nice with a 14k G water faucet... Although gold prices are too high for me.
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Old 08-22-2010, 04:56 AM   #7
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Originally Posted by frayne View Post order for an elder parent to receive some kind of VA benefits he has to have less than say $80K of assets. He has $140K, so in order to get down to the cap he has to get rid of $60K, and ideally pass it down to his family with minimal tax consequences.
Per the 80k asset test, here's the related info:

I get VA medical benefits but I don't have to do the asset test since I have a service related disability (yeah, I paid for the privilege - and still doing so ).

This is for those vets that fall into the "priority code" sequence for those seeking aid:

It sounds like this person is a Priority 7/8 to have the asset test. I really wonder about this situation. If it is a couple and only one was in the military, only that person would be eligible for care (assuming one did not retire from the military).

Otherwise, I would think that their care would come from Medicare (which is not currently asset tested).

Just a bit confused on the reasoning behind their request. That, along with the hassles of getting VA benefits (do they have a VA facility close by?) is the reason I use my BC/BS for benefits rather than travel over 100 miles to get services, even though I qualify.

OTOH (and you may not like my comment), this sounds like a bit of a scam (e.g. to hide/defer assets), much as done in Medicaid in later life; that is give your assets to your relatives and get admitted for care based on your low asset situation.

I don't like that scenerio at all....

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