Trusts to shield your income/qualify for assistance -- maybe not

[Martha]

Quote:

Originally Posted by Caroline If you dont' mind my asking (and I'm assuming you might not, given the frank discussions that go on at this site), are you willing to share how much "income" you get from the trust? Maybe the word "family trust" is giving people the mistaken impression that you are quite well-off and greedy, as opposed to just "comfortable" and planning for the worst?

According to this post, about 20,000 a year. http://early-retirement.org/forums/i...3288#msg243288

I don't know if it matters if the trust payments are big or small. If he is able bodied and just choses not to work, but can't get along on the 20,000 a year, then he is not FI and should get a job.

[pedorrero]

As somebody replied: I'm comfortably well-off. My gross income (mostly from Trusts) varies but is typically in mid-$20K's. Certainly at the low end of middle class, but in a lower-cost area quite enough to live on decently. Beats working, in any case. And there's even enough to pay for health insurance. Right now.

[wabmester]

I think this is an interesting topic, but there is a way to frame it without the morality judgements.

Medicaid was intended to aid the impoverished, but that's not how it's being used. Medicaid covers 52 million people. 1 in 6 Americans. I believe that's roughly twice the poverty rate.

Something like 60% of nursing home residents are on medicaid. How'd that happen? Either they were impoverished when they got there, they shifted their assets to make it look like they were impoverished, or they became impoverished by trying to pay for long-term-care.

That's the effect of how the system is structured and of the incredible costs associated with LTC.

Personally, I still haven't figured out how I'm going to deal with this issue. Buy LTC insurance? Buy into a continuing care community? Spend down my assets until I'm impoverished? Shift assets to my kid? Or fall asleep in the snow on one last ski trip? (Somebody help me onto this ski lift, will ya?)

The problem is getting bigger, but society doesn't exactly seem to be attacking this head-on. Maybe it's time that euthanasia became an acceptable option.

[pedorrero]

There's no good answer to how to care for the old & infirm. This is, of course, a problem that will increasingly be forced upon the USA and other countries with the aging population. One comfort (?) I have is that I am nearly the last of the Baby Boomers -- born in 1960s. So the problem will be solved, to whatever extent, by the time I become a drooling bed-wetting incompetent. This may not be the place, but a real (although illegal, immoral, etc. Take your pick) option is the "Hemingway Option." While blowing your brains out with a shotgun is kind of messy (and what do you do if gun control gets out of hand), there is always a way out....if you are still functional. One ingenious oldster took a plane ride for his birthday and decided to jump out of the passenger cockpit. He landed on somebody's pool deck. I guess he got the result he wanted. Trouble with doing yourself in: My late uncle, a very wise man, once said "There's no reason to do it [kill yourself] while you're still healthy, and you won't be able to do it when you need to!"

[chinaco]

Quote:

Originally Posted by wab Personally, I still haven't figured out how I'm going to deal with this issue. ... Shift assets to my kid? .... Maybe it's time that euthanasia became an acceptable option.

Here is a story for you. Just keep this in mind. Hiring a lawyer and using a trust is probably the way to do this. Anyway. I heard a story where someone was getting up there in years and tranferred their house to the son to shield the asset. They did it early on. In this case, the son was trustworthy. A few years later, the son got a divorce and the asset was split with the ex-wife. The parent was forced to move out.

(a bit of levity) on a serious subject... On euthansia. Remember the move Soylent Green http://www.scifi.com/sfw/issue55/classic.html You may be on to something if global warming keeps up.

[wabmester]

Quote:

Originally Posted by chinaco Here is a story for you. Just keep this in mind. Hiring a lawyer and using a trust is probably the way to do this. Anyway. I heard a story where someone was getting up there in years and tranferred their house to the son to shield the asset. They did it early on. In this case, the son was trustworthy. A few years later, the son got a divorce and the asset was split with the ex-wife. The parent was forced to move out.

Ugh. I've researched this issue for a relative. Medicaid lets you own a house without counting it as an asset. However, if you use LTC benefits some states will go after your estate for payback once you pass. Frankly, I think this is a pretty good deal. I don't mind paying for stuff once I'm dead, and I like the idea of using my home to shield some assets while I'm alive. I've heard they're thinking of changing the rules to force you to "consume" your house to pay for LTC on the fly.

Quote:

(a bit of levity) on a serious subject... On euthansia. Remember the move Soylent Green http://www.scifi.com/sfw/issue55/classic.html You may be on to something if global warming keeps up.

I liked the scene in which the old guy opted for euthanasia. They asked him his favorite color, favorite music, favorite wine, then he watched an IMAX movie as he sipped the poisoned wine. And then we get to eat him! :P

[FlogBlogger]

Quote:

Originally Posted by youbet I am a strong supporter of laws which prevent the transfer of parental money to children for the purpose of qualifying for Medicaid coverage for nursing home care.

What if parental money is transferred into an account or trust that would avoid inheritance tax? Certainly this is an acceptable practice.

It's unclear where the distinction lies between a trust that would provide Medicaid funds versus one that prevents payment of funds in the form of inheritance tax. It seems to me the net result is the same, yes? More for me, less for Uncle Sam.

Is it the case that Medicaid funds are earmarked for the needy, whereas income or inheritance tax is "pooled" and in some way we feel we have entitlement?

[youbet]

Quote:

Originally Posted by FlogBlogger What if parental money is transferred into an account or trust that would avoid inheritance tax? Certainly this is an acceptable practice. It's unclear where the distinction lies between a trust that would provide Medicaid funds versus one that prevents payment of funds in the form of inheritance tax. It seems to me the net result is the same, yes? More for me, less for Uncle Sam. Is it the case that Medicaid funds are earmarked for the needy, whereas income or inheritance tax is "pooled" and in some way we feel we have entitlement?

You began your post with a quote from me and ended with a question. But I'm not sure how your question relates to my statement or what answer you're looking for.

I still say "I am a strong supporter of laws which prevent the transfer of parental money to children for the purpose of qualifying for Medicaid coverage for nursing home care."

When the lookback period in Illinois was increased making it more difficult for the kids to use mom's money for a couple new Corvettes instead of using it for mom's care, I was glad, and I still am.

[FlogBlogger]

Maybe I'm straying off-topic...and perhaps I know too little of trusts...it just seems incongruent that a trust is bad when used to gain Medicaid funds, but good when used to gain tax avoidance. Either way, it seems one is "gaming the system"...

[wabmester]

Quote:

Originally Posted by FlogBlogger Maybe I'm straying off-topic...and perhaps I know too little of trusts...it just seems incongruent that a trust is bad when used to gain Medicaid funds, but good when used to gain tax avoidance. Either way, it seems one is "gaming the system"...

Yeah, I've noticed that too. It's OK to avoid paying taxes, but it's bad karma to spend tax money on LTC.

Personally, I want both. Zero taxes and free health care.

But I'm willing to compromise. Give me free health care, and then pay for it out of my estate.

[youbet]

Quote:

Originally Posted by FlogBlogger Maybe I'm straying off-topic...and perhaps I know too little of trusts...it just seems incongruent that a trust is bad when used to gain Medicaid funds, but good when used to gain tax avoidance. Either way, it seems one is "gaming the system"...

It seems you are simply agreeing with OP that trusts are an appropriate tool to hide wealth and gain access to charitable funds (public or private) when you could afford to pay yourself. Medicaid, ADC, food stamps, private charity, need based schlorships, whatever, should be available to those smart enough to game the system with trusts? I don't take that view. That's just not part of my outlook on life. But you and OP can do your own thing in that regard.

We've probably taken this as far as we can. Do your own thing, I'll do mine, and so be it.......

[youbet]

Quote:

Originally Posted by wab Personally, I want both. Zero taxes and free health care.

And there will indeed be a day when you'll pay no taxes and receive all the free health care your cold, dead body will require!

Your wants are virtually guaranteed to be met someday, hope not too soon!

[AlmostDone]

Let's say we have Person A and Person B. Both work at the same job for the same salary and pay the same taxes. Person A spends every penny, but Person B wants to leave something to her children so she saves as much as possible. Both eventually need nursing home care. Both have paid the same amount of taxes throughout their lives. Why does Person A deserve care paid for by the government and Person B does not? This system discourages saving.

[FlogBlogger]

Quote:

Originally Posted by youbet Medicaid, ADC, food stamps, private charity, need based schlorships, whatever, should be available to those smart enough to game the system with trusts? I don't take that view.

I take it, then, that you also agree that tax avoidance through trusts is equally immoral? If not, please help me to understand the difference.

[FlogBlogger]

Quote:

Originally Posted by AlmostDone Why does Person A deserve care paid for by the government and Person B does not? This system discourages saving.

Right! So Person B is forced to look at alternatives...such as transferring assets to other people or entities.

[chinaco]

Our country has a gap!

I look at health care like infrastructure of our country... Like roads. If the Government does not do something to protect people, or facilitate the low cost of health care.

Health care (in which LTC is part), is something the governement is going to have to get involved. Private industry will not do the right thing! They have a dismal track record for this sort of thing.

However, this does not mean that all HC has to be a government funded/administrated solution. Laws that get rid of the current discrimination of grouping and excluding people would help. Bottom line, the people that need HC cannot afford it because they cannot get into the pool.

I also believe that funding one's health care should be mandatory. No young person will pay for it (on average they don't need it). When one ages, they tend to need it. If everyone waits until they are old to pay, the pooling of money is diluted. If we go to a national HC solution (Which I am in favor of doing), I believe it should be kept private. All people in the US (citizen or owtherwise) must participate (i.e., pay), and the grouping/excluding should be eliminated. Unfortunately, this means private HC with regulation. But this is an area where Corporate America has an incentive to exclude people that need HC the most.

I am a healthy person. I am willing to pay into the pool to support those that are less fortunate. Someday, I will be in that less fortunate category (health wise).

The bottom line is that we pay for the expense anyway through medicare, medicaid, and Helath care provider cost shifting. If someone walks into an ER with a problem (serious) they get served. Even if it drives them into bankruptcy. We all pay that bill!

Since the problem is in part due to the highly fragmented nature of health care (many providers of many different services and goods) no one party will ever step up to solve the problem. It will take the government to lead. Otherwise we will all get caught in the cross-fire. Even if you personally are in good shape... you will have family members who will not be!