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

[pedorrero]

Hi, thought I'd share this. I used to post similar junk at RE Campfire (TMF) but got a cool reception there! Essentially, my thesis was how to impoverish myself and perhaps qualify for free government benefits. Surprisingly, not very easy. Most of my "income" comes from a family trust that is all but impervious to any legal assault. I confirmed (with the manager thereof) that even in the cases of judgments or garnishments against me, nobody could get at the Trust's assets. Ah, but "game the system" not all bed of roses as you'll see.

As a disclaimer, I would like to point out that the Trust(s) were not set up by me, nor were they intended for gouging the government. I cheerfully admit, though, that I make a hobby of seeing if there are ways to game the system.

"I fight authority, authority always wins." -- John Mellenkamp

While a Trust can provide support for a beneficiary, this may or may not be counted as "income", such as to qualify for public assistance.

Welfare isn't much fun. I am a FL resident. I looked into food stamps....even if I met the income requirement, if I'm able bodied, between 18-50, I can collect at most 3 months in any three year period. Memo to self: perhaps look into this when I'm 51.

Medicaid: varies by State. In FL, if I qualify for (Federal) SSI, I could qualify for Medicaid. In addition to other regulations, I would have to be aged, blind, or disabled (and < about $650/mo. income) to qualify.

In sum, it is very hard to game the system, even if you have the option to artificially reduce your income (as I could) and become "poor" at least using income or assets as a measure.

To me, it's particularly disturbing that, at least via Medicaid, even a penniless person won't qualify unless he has a "disability"....

I think I'll vote for national health if it ever comes around.... In the meantime, I am grateful that I have good health coverage, even if it is "100% rate increase".

 

[farmerEd]

In sum, it is very hard to game the system,

Great. I for one am glad that its hard to *game* the system. If you want some extra money, why not go out and get a job?

 

[73ss454]

Sir, I think you have too much time on your hands. Why not try doing something constructive.

 

[chinaco]

This is going to sound a little harsh. I will apologize up-front if you take my words as an insult. Although, that is not my intent. Rather it is a reality check.

You are on a board that attracts people who are responsible folks... financially and otherwise.

I suspect that most do not game the system. Most have worked hard their entire lives to provide for themselves.

Proposing or attempting to belly up to the Government Teat for a free-ride (on the safety net for the poor) is going to be frowned on. People that game the system are part of the reason we pay higher taxes.

 

[OKLibrarian]

As a ex-welfare worker, I could have told you that the rules have become so tight that gaming the system is next to impossible, short of fraud. (and let's just say that social services has plenty of ways of checking your story that they don't advertise). Especially post-welfare reform, it's a lot more likely that deserving people won't qualify for a benefit they would otherwise get thanks to an arbitrary quirk in the policy than vice versa. Not to say there aren't ways for someone to game the system, but a: I wouldn't tell anyone those, least of all someone in the financial state described above, and b: they all entail going to so much effort you'd almost be better off going to work for the hundred dollars/month or so in bennies for three months that you would qualify for in a best case scenario as a single Able-bodied adult w/o kids. (and if the GF mentioned in another thread lives with you, her earned income would knock you out of the ballpark anyway)

pedorrero, I don't mean this as any sort of personal attack, and I'm mainly posting this as a warning to those with similar ideas, as you seemed to have given up your quest for food stamps. However, people with this sort of mindset are a big part of the reason it has become so hard to apply for benefits that most of the people who qualify for them don't apply. (the last numbers I saw said something like 70% of americans in poverty don't apply for benefits they would be eligible for--there really aren't that many welfare queens out there) As Chinaco said, the ones who do figure out how to game the system just make life harder for taxpayers, caseworkers, and the poor families they are effectively stealing from. Even from a strict financial analysis, leaving ethics and legality out of it--you're far better off getting a job.

 

[Helen]

"In sum, it is very hard to game the system"

Good because we're the ones your gaming. Who do you think pays for the assistance ?

 

[retire@40]

I cheerfully admit, though, that I make a hobby of seeing if there are ways to game the system.

Your motto must be: Ask not what you can do for your government. Ask what your government can do for you.

Best way you can game the system is by getting free food, shelter, and health care from a prison cell. Why not give that a try? I'd rather see you do that than take away food stamp resources from some poor kid who really needs it and goes to bed hungry because someone is "gaming."

 

[Corporateburnout]

I am glad you called it junk because that is what it is. I recommend you try discussing this unethical and unlawful practice of gaming the system somewhere else.

This forum is for hard working people with hard earned monies that share a common goal of RE and it is definitely NOT the place for people like you.

 

[youbet]

"In sum, it is very hard to game the system"

Good because we're the ones your gaming. Who do you think pays for the assistance ?

I'm not so sure about the percentage of folks on this board who are against "gaming the system." A while back, I made a comment to a poster who was looking for information on how to transfer money from her elderly parents to herself in order that the parents might have their nursing home care paid for by Medicaid. I said that the poster was just gaming the system and that mom and dad, since they have the funds, should pay for their own nursing home care. I was deluged with posts with opinions to the contrary. Perhaps it's not gaming the system when YOU benefit?

 

[Mwsinron]

"Hi, thought I'd share this. I used to post similar junk at RE Campfire (TMF) but got a cool reception there!"


Lol big surprise :.

 

[Rich_by_the_Bay]

I don't know which is sadder - the fact that you think it is cool to "make a hobby" of gaming the system and thus screwing other folks like the rest of us, or the fact that you are clueless enough to post and brag about it here looking for a sympathetic ear.

FYI: you are treading a fine line on this board - anything that might be conceived as encouraging an unethical or criminal act will result in banning from the board.

 

[Caroline]

Most have worked hard their entire lives to provide for themselves.

Present and accounted for, Sir!

That said, I'm glad pederrero posted this, his motives notwithstanding. The underlying message is that those poor souls who ARE receiving assistance genuinely NEED it, have been put through the ringer to qualify for it, and deserve more respect than they oftentimes get.

 

[chinaco]

A while back, I made a comment to a poster who was looking for information on how to transfer money from her elderly parents to herself in order that the parents might have their nursing home care paid for by Medicaid. I said that the poster was just gaming the system and that mom and dad, since they have the funds, should pay for their own nursing home care. I was deluged with posts with opinions to the contrary. Perhaps it's not gaming the system when YOU benefit?

You are correct, this is a question on a number of people's minds. It is gaming the system, and many of the loopholes have been sewn up. One approach was called the Half a Loaf. I will not go into it here. Since the look back period has been extended this has been rendered less effective.

My Father went into a nursing home. He was there for about 1.5 years and passed away. My mother took care of him up till the time he needed to go. I felt she kept him too long... but she was worried about losing everything. The state in which she resides has a dismal Medicaid law that only leaves the spouse with $90k, the house, and $22k of income. It cost about $70k/year for the Home. She spent about $100k for his stay.

Now my mother is ill. She will wind up in a nursing home (she has very debilitating illness). Anyway, her assets will be used to pay for the nursing home.

I did a little research on this a while back. If I remember correctly, the average nursing home stay is about 2 or 2.5 years. That said, DW grandmother had a bad stroke and lingered for about 9 years up into her 90s.

Unfortunately, the laws and government support for health care in this country is not geared toward assisting the middle class (which includes most FIRE people). It has a saftey net for the poor (of which some are there by nof fault of their own and some freeloaders that do not want to work), and the wealthy. The poor have medicaid. The wealthy... not sure where that actually begins but let's say for the sake of argument >$5MM tend to be able to weather the cost without breaking them.

Bottom line is that LTC is no real guarantee, Insurance companies do not always play fair... But is is all you have. If you are going to go without it, you had better review the Medicaid laws in your state... You or your spouse may be in a bad way if one of you has to go to an NH. I do not think it is gaming the system to ensure that the survivng spouse retains the maximium assets that are allowable by law. If you do not prepare he or she may be left with less than they are allowed.

 

[OKLibrarian]

Present and accounted for, Sir!

That said, I'm glad pederrero posted this, his motives notwithstanding. The underlying message is that those poor souls who ARE receiving assistance genuinely NEED it, have been put through the ringer to qualify for it, and deserve more respect than they oftentimes get.

And I'm glad people were educated by my semi-rant. The whole "welfare queen" stereotype is a pet peeve for obvious reasons, and speaks to a general ignorance about what living in poverty in the US is actually like (as much as I know from just being an observer for 2 years). I'll even go so far to say that if your kid is graduating college and doesn't seem to be in a rush to move out and grow up, get them to apply for a job as a caseworker (there are always openings). a year there will teach them humility, hard work, empathy for their fellow man, how to live within a budget themselves, and give them a true understanding about how way too many people in this country live, whether due to circumstances or poor choices. 4 years on that stint still helps me shine in job interviews...

 

[youbet]

I do not think it is gaming the system to ensure that the survivng spouse retains the maximium assets that are allowable by law.

I certainly agree. But those who go outside the rules to hide the wealth of elderly relatives needing nursing home care in order to obtain that wealth for themselves are exactly the same type of person who would collect welfare by falsifying information.

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. They are exactly analogous to laws which prevent folks with wealth from hiding that wealth to "game the system" and collect welfare or other public aid benefits.

I support laws which allow a spouse to retain enough wealth and income to not be impoverished due to their partner requiring extended nursing home care.

 

[OKLibrarian]

Nursing home coverage was NOT my area of expertise, and it varies from state to state as well. I'll give you all the same advice I gave my clients who were looking at applying for nursing home assistance (and for SS disability as well)--find a lawyer/accountant who is expert in THIS area--they can walk you through the best way to structure your and your loved ones' assets to protect as much as possible. This is one area where spending the money is worth it. Your case worker may even be able to provide you with some names of reputable folks other clients have used.

 

[pedorrero]

No, I don't take any offense to my "game the system" mentality. I guess all you folks receiving money from government bonds (money paid to you is taken by force from taxpayers) or "not welfare" government "entitlements" (e.g. Social Security, where the average retiree receives far more than he paid into the system during his working years) is not taking advantage of the system? Oh puh-leeze!!! I guess living off government largesse is ok if you're a God-fearing, gun-owning, lifelong Republican who "worked" a "career" and is now "retired" and "deserving" of the government program (even if such economic views were once called "Socialist".) But Heaven help you if you're a minority, poor Democrat seeking assistance from that same government before age 65.

I may be "treading a fine line" but I would also like to point out that (here at least) I don't think I have ever proposed doing anything illegal. Structuring your affairs to minimize taxes or to maximize benefits is not (usually) illegal (Or is that true? Read on.) Countless examples of this to get government aid could be found. Look at "farmers" collecting agriculture subsidies and you'll find damn few family farmers. You'll find a lot of Trust or Corporations that own the maximum allowable plot of land. That way the return is maximized.

Did you know that it is, at least in one law, a crime to structure your affairs for Medicaid, or for a lawyer to advise a client how to do so? The legality of such laws is in doubt, but it's in the 1997 HIPAA law. Thus saith a 2002 book....

Apparently free speech is also one of those "game the system" abuses that must be curbed too.

If it's any consolation to all you neo-Puritans here, most of my hobby inquiries into gaming the system usually conclude that it cannot be gamed. Decades ago (when still working), I looked into dropping out of the Social Security system. Nope. I've looked into the (old) Bankruptcy code a few years back, now Medicaid. Tight regulations, very hard to game.

To me looking for the edge is just a hobby. While I have yet to find a big score, I don't consider what I do any more immoral than picking up loose change on the sidewalk.

If (God forbid) if I really needed the money, I could get a j- j- j- one of those things where you get paid to do stuff.

 

[kcowan]

I support laws which allow a spouse to retain enough wealth and income to not be impoverished due to their partner requiring extended nursing home care.

I think this is the heart of the issue. How can you protect the surviving partner when the first one lingers and requires costly health system support? A simple improvement would be to protect the house and 50% of the other assets for the surviving spouse, but make any remaining assets upon their eventual death used to repay the government support received by both spouses before any inheritances are paid out.

Also reimplement inheritance/estate taxes and use the proceeds to fund such government support (rather than pork barrel projects).

 

[bbuzzard]

I was deluged with posts with opinions to the contrary. Perhaps it's not gaming the system when YOU benefit?

Amen. I have found that almost everyone is honest until dishonesty benefits themselves. At this point most people become dishonest. Playing with your parents assets to avoid paying off debts at death is another place that honest people have a large problem staying honest. Many of my friends gladly have lied about their parents assets in order to stiff creditors. I must admit that I will not have this temptation. No assets or no debt, depending on which parent you are discussing,

 

[Caroline]

Essentially, my thesis was how to impoverish myself and perhaps qualify for free government benefits. Surprisingly, not very easy. Most of my "income" comes from a family trust that is all but impervious to any legal assault.

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?

 

[Martha]

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/index.php?topic=13073.msg243288#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]

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.