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when estate planning and medicaid planning collide
Old 10-01-2017, 04:44 AM   #1
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when estate planning and medicaid planning collide

our estate/elder law attorney has a monthly newsletter . i found this month's very interesting because it shows how careful and complex planning can be based on end goals .

it also shows why a good elder law /estate attorney is so important because each form of trust has it's own benefits and minefields .

i don't want to debate the ethics and morals of medicaid planning here . that is a different topic all together .

this is strictly to show how when you do x , y is effected and there can be consequences that were not even on the drawing board .

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Old 10-01-2017, 05:21 AM   #2
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Good article, brings out some basic issues including potential loss of step up in basis as a result of gifting certain assets.
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Old 10-01-2017, 05:22 AM   #3
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there are traps everywhere with this stuff and no trust fits all situations . there are only different negatives and un-intended consequences .
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Old 10-01-2017, 05:44 AM   #4
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It seems to me that the gift recipients missing out on the stepped-up basis is just sweet justice... especially where people do these medicaid transfers and end up not needing nursing home care. Works for me.
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Old 10-01-2017, 06:08 AM   #5
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there are unintended consequences with medicaid and estate planning. Not just the planning, but often not thinking thru what they want or not changing things as things progress or situations change. Maybe some of this is lack of planning follow through (updating), but I'd expect that some estate and medicaid goals may be at legal odds.
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Old 10-01-2017, 06:24 AM   #6
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Not quite understanding "sweet justice" comment. My father, he did not want to go into a nursing home and I didn't want him in a nursing home and was able to hire round the clock care as well as be there on a daily basis. With his assets, he would not have thought of asset transfer on his own. I could have done it (POA and handled all financial affairs with his blessing), but I didn't want him to feel like vultures were circling him. I did not pursue any type of asset transfer with him - although I could have. I knew exactly what I was doing, but his peace of mind was (priceless) worth more to me than the (in his case estate, not medicaid) tax bite later. Others may actually want to transfer their assets to heirs, which as a practical matter would start cash or those where there was little or no step up.
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Old 10-01-2017, 06:31 AM   #7
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The problem, with Medicaid paying for nursing care, is that you likely get sub-standard or minimal care. That's why most here, when trying to qualify for ACA subsidies, want to avoid medicaid.

When you pay more, you get more. Even in a nursing home. With money brings choices - no matter what purchase you are considering.

Why would someone with money want to give it all away, and then live in a sub-standard LTC home, just so someone else could live better? Maybe if you were out of it, and did not know any better, it would be OK.

If I am ever in that situation, I am planning on top level care at home, then a Medicaid nursing home when the money runs out. Maybe if I ever get to a LTC facility, my brain will be numb by then anyway.
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Old 10-01-2017, 06:42 AM   #8
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homes in our area don't segregate if they take medicare . you may not get a private room but care does not change from bed to bed
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Old 10-01-2017, 06:56 AM   #9
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The problem, with Medicaid paying for nursing care, is that you likely get sub-standard or minimal care. That's why most here, when trying to qualify for ACA subsidies, want to avoid medicaid.

When you pay more, you get more. Even in a nursing home. With money brings choices - no matter what purchase you are considering.

Why would someone with money want to give it all away, and then live in a sub-standard LTC home, just so someone else could live better? Maybe if you were out of it, and did not know any better, it would be OK.

If I am ever in that situation, I am planning on top level care at home, then a Medicaid nursing home when the money runs out. Maybe if I ever get to a LTC facility, my brain will be numb by then anyway.

The way you are going, your money should not run out. Later on get yourself a beautiful ranch, handicapped accessible, with a beautiful view, and lots of light from the room where you will have you bed. At least two extra bedrooms (live in help and visiting relatives). The trick is to have someone you can trust to handle your affairs when and if you can't.
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Old 10-01-2017, 07:04 AM   #10
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we checked with some of the nicer nursing homes in our area . while they have a limited number of medicaid beds once you are in privately and paying for 2 years ,done deal , they will take medicaid assignment and nothing changes .
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Old 10-01-2017, 08:04 AM   #11
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Not quite understanding "sweet justice" comment. ....
My sweet justice comment was based on a premise of people that have some modest assets and jump through hoops to have those modest assets go to their kids rather than being used to pay for their nursing home care for as long as the assets last.

At the end of the day where these schemes are successful it is simply an economic transfer from taxpayers to the Medicaid recipients beneficiaries.

If someone has some modest assets and enter a nursing home and the assets are depleted and Medicaid steps in to cover the cost then I'm fine with that. It is where people do elaborate planning to avoid having to use the remainder of their modest assets to pay nursing home costs so those assets can go to their kids that burns me.

I wish the 5 year look back was 10 years since I have a hard time conjuring up any scenario where transferring assets to kids to avoid them being used to pay for nursing home costs is sensible and not cheating taxpayers.... perhaps there are some but I just have a hard time thinking of any.
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Old 10-01-2017, 08:11 AM   #12
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here is my view:

our fair share of taxes is the lowest amount we can get them down to using the tools and laws left in place to be used .

our long term care system is the same way .

as a now famous judge in CT told medicaid he does not want a state full of impoverished stay at home spouses . the last thing his state wants is two people on public assistance as well as not having money to support the state economy .

so all these tools and laws are left in place to be used . like our tax system those smart enough to use those instruments will do it .

they already paid tons of taxes earning those assets . trying to keep more of what you worked for using the very tools and laws purposely left in place for doing that is not taking money away from any one else .

they could easily make look back forever . but there are very good reasons why they don't .
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Old 10-01-2017, 08:30 AM   #13
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I disagree.... the whole structuring your finances to minimize income taxes was simply that... relating to income taxes. I seriously doubt that Learned Hand would have been so generous on these Medicaid shenanagians.

Quote:
Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes.

Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
If it was proper for people with assets to give them to their kids and then rely on Medicaid for nursing home care then there would not be any look back provisions.... at one point there were no look back provisions and people were doing that and it was determined to be improper so they put the look-back provisions in place so it makes it harder for cheapskates to cheat.
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Old 10-01-2017, 08:35 AM   #14
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i agree with the giving them to kids part . that should not be protected the same as protecting them for a spouse . but the problem is when trusts are used to protect the spouse ultimately the assets are left over .

\
perhaps one day they will deal with that aspect but for now the laws and rules are what they are . they could change it but they have not .
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Old 10-01-2017, 11:57 AM   #15
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look-back for asset transfers is 5 years - once they need nursing care, statistically few will live that long

also, nearly all nursing facilities must take Medicaid to survive (there are few private-pay only SNFs) so to be blunt the care the resident receives is the same whether or not they are (still) private pay or have transitioned onto Medicaid.
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Old 10-01-2017, 12:27 PM   #16
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A friend of mine lives in TX and when her Mom had to go into a nursing home he went to a lawyer and was allowed to keep a ton of his $ and Medicaid paid. When he died his kids inherited the $. I do not think that is fair. I had one poor Grandma and one with $ and they were both in the same nursing home. My friend was in a home and after a year of paying the costs doubled because her level of care went up. We had spent her assets and I applied for Medicaid.
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Old 10-01-2017, 12:40 PM   #17
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Back to the OP's intent and away from the ethics debate he did not want to trigger:

One of life's little mysteries for me around here is the number of people trying to avoid paying experts to create a sensible estate plan. Rev trusts, gifts, home-made wills, .... Maybe I'm over generalizing but most of the people here seem to have plenty of money but many do not have any concern about how it will be managed or distributed when they check out. Issues like rev trusts, irrev trusts, gift tax, basis step-up, etc. really need to be dealt with by an expert who can help optimize the plan to suit the creators' wishes and to minimize taxes. I don't see many posts here about do-it-yourself appendectomies but there seem to be plenty planning do-it-yourself estate plans.

No, I am neither a CPA nor an attorney but DW was an SVP in Trusts & Estates for a major bank and I have heard many horror stories.
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Old 10-01-2017, 12:42 PM   #18
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also, nearly all nursing facilities must take Medicaid to survive (there are few private-pay only SNFs) so to be blunt the care the resident receives is the same whether or not they are (still) private pay or have transitioned onto Medicaid.
Note......

Medicaid NH results seem to vary from state to state. Some of what you're saying for NC is NOT true for Illinois. It really pays to research your own state and keep the state to state variability in mind when ready comments on this, or other on-line forums.
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Old 10-01-2017, 01:03 PM   #19
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One of life's little mysteries for me around here is the number of people trying to avoid paying experts to create a sensible estate plan. .
I haven't picked up that flavor from the discussions at all. On the contrary, it seems that the prevailing attitude is that elder attorneys and estate planning attorneys and CPA's are a worthwhile expense.
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Old 10-01-2017, 01:24 PM   #20
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we checked with some of the nicer nursing homes in our area . while they have a limited number of medicaid beds once you are in privately and paying for 2 years ,done deal , they will take medicaid assignment and nothing changes .
Ozanam Hall, nice and clean. Run by the nuns.

If i ever get time to leave my house I'll give Fatoullah a call. A poster said he has over 5 million and another that has 20 million and they sleep well at night gaming ACA subsidies. And that maneuver "made them smart". Thats peanuts compared to what one can save by gaming medicaid. I want to thank them for pointing this out, Now maybe Ill game the medicaid game , I'd like to be smarter.
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