Moving assets to kids to be eligible for Medicaid

[marko]

You need to find a lawyer who specializes in Elder care. ASAP

 

[Corporateburnout]

guys..I'm just exploring and trying to learn a bit here......relax....i have one brother who is destitute and mental challenges... THATS really her biggest concern....and to see a big chunk go effectively from having it available to him to some crap nursing home with crap care stinks...I think it makes sense to maybe have a strategy...

I assisted my sister who has a son with special needs so I have some knowledge in the matter. If your brother qualifies as disable per SSA definition of disability then your mother should consult an attorney who specializes in special needs trusts. A third party OBRA 93 trust does not have a medicaid 5 years look back provision but any money left in the trust will be paid back to medicaid upon his passing.

 

[Luck_Club]

If you are a millionaire and arrange your MAGI to get an ACA subsidy then how is that different? I don't agree with people doing either one but if the government doesn't like it then they can do something to stop it.

I agree, every time these questions about medicaid planing come up, the don't do it crowd because it is wrong, never have a problem with managing their income to get free/subsidized health insurance.

Math is hard, but $7000 a year times 25-30 years is about the same as the $170K for nursing home care. Not to mention Medicaid will pay a lower rate then the private pay rates, so the true cost could be less.

 

[Mr._Graybeard]

We have a lot of nursing homes in our area of varying quality. Generally, the better ones will turn you away if you have to rely on Medicaid upon admission. There are alternatives for Medicaid patients -- one of them near my home had an electrical fire a few years ago and a bedridden patient suffered fatal burns.

 

[pb4uski]

The nursing homes in our area typically expect new residents to be private pay for at least a year, and then if they end up on Medicaid that is ok. This was as of 10 years ago so I don't know if it has changed.

 

[ncbill]

5 year "look-back" for asset transfers.

One major exception is for a child taking care of the parent in their own home...if the child has done that for 2 years then transferring the home to the child is an exempt transfer.

Wish I had known about that when my mom was sick...my younger sibling would have qualified.

 

[audreyh1]

Has she ever considered long-term care insurance ?

I'm no expert, but I believe there's lots of stipulations related to the transfer of assets/property. It has to be done a certain number of years before she went into a nursing home/assisted-living facility.

She can only transfer $10,000.00 to each child per year.

I'm not even certain any of this is accurate, so I'll stop here, & let others more experienced in these matters take over.

What is this $10,000 per child per year limit? Never heard of it.

 

[pb4uski]

... Math is hard, but $7000 a year times 25-30 years is about the same as the $170K for nursing home care. Not to mention Medicaid will pay a lower rate then the private pay rates, so the true cost could be less.

Most of the ACA subsidized wealthy folks that you are about would only be on ACA subsidies from early retirement at 55 or 60 until 65 when Medicare starts... so 5-10 years at the most.

Also, they would often have lower than average subsidies because of pension income or Roth conversions to just below the cliff... many of our forum members seeking ACA subsidies manage thier income to just below the cliff.

The annual subsidy for a single person who is just below the cliff in my state is $3,144 in 2020.... so 5-10 years of benefits would be $16-$31k.... less than 1/5th the value of the benefits received by Medicaid planning folks.

So yes, it seems like math is hard..... for you!

 

[Corporateburnout]

What is this $10,000 per child per year limit? Never heard of it.

I think he meant the 15K gift tax exclusion per person. Any amount over this exclusion will have to be reported to the IRS by the donor using form 709.

 

[Moemg]

Most of the ACA subsidized wealthy folks that you are about would only be on ACA subsidies from early retirement at 55 or 60 until 65 when Medicare starts... so 5-10 years at the most.

!

A lot of the really young fire group use this as a tactic to retire early so they have the subsidy for 30 years or more .

 

[pb4uski]

A lot of the really young fire group use this as a tactic to retire early so they have the subsidy for 30 years or more .

I call BS... there might be a few 35 year olds retiring and getting ACA subsidies but they are rare enough to ignore.

The same thing could happen with Medicaid LTC planning... that 70 yo mom with dementia whose assets were transferred to her kids might be in a nursing home until 100 and cost us $2.25 million! But this is rare enough to ignore as well.

The $170k was based on the average nursing home stay of 835 days and the average nursing home cost for Mediciad LTC patients of $203 in 2018... if you want a fair apples-to-apples comparison of the financial advantage then you also need to look at average ACA subsidies and average years on ACA subsidies.

 

[Chuckanut]

I assisted my sister who has a son with special needs so I have some knowledge in the matter.

A bit off topic, but well worth mentioning, IMO....

There is a tax free savings account similar to one used to save for a child's education, but it is used to help pay expenses of children who have special needs, and who will need extra funding as they grow up. It's called an ABLE account.

https://www.friendshipcircle.org/bl...t-the-able-act-and-tax-free-savings-accounts/

Congress has introduced legislation called the Achieving a Better Life Experience (ABLE) Act, which would enable parents of special needs children to have a tax-free savings account similar to a college savings account to provide funds for the future care of their children.

It seems that every once in a while our elected representatives stop fighting each other long enough to do something worthwhile for the people. Will Wonders Never Cease!

 

[MissMolly]

I agree, every time these questions about medicaid planing come up, the don't do it crowd because it is wrong, never have a problem with managing their income to get free/subsidized health insurance.

Math is hard, but $7000 a year times 25-30 years is about the same as the $170K for nursing home care. Not to mention Medicaid will pay a lower rate then the private pay rates, so the true cost could be less.

FYI - I did not manage my income to ensure ACA subsidy and I also think it is wrong for those of significant means to be doing this. Although legal under the law, I doubt is was the original intent of the law.

 

[pb4uski]

There is a nuance of a difference in that in Medicaid LTC planning the beneficiary's heirs benefit whereas for ACA subsidies the taxpayer benefits directly, and that benefit may ultimately trickle down to the taxpayer's heirs or it may end up being paid to a nursing home if the taxpayer ends up in nursing home.

In both cases the beneficiary receives a benefit that I think most reasonable people would agree was not intended by Congress. However, Congress recognized that Medicaid LTC planning is a problem and has tried to close the loophole with the 5-year lookback. OTOH, Congress seems to either be unaware or not care about wealthy people receiving ACA subsidies as they have never tried to change it.

While we don't get ACA subsidies, I do manage my income to a low tax rate by tIRA withdrawals and Roth conversions, so I guess that I'm a scofflaw in Luck_Club's eyes as well since I manage income to minimize current and future taxes.

And what about all those folks who put money in deductible IRAs and 401ks to defer taxes.... what is the world coming to?

My point is that it is hard to tell where the line is but that unike ACA subsidies, Congress decided to curb Medicaid LTC abuses but just didn't design the restrictions optimally.

 

[jim584672]

Elderly Medicaid is very state specific and you need an Elder care attorney.

In NY people place their homes in a Life Estate Trust so they can live in the home and in 5 years it can pass to your heirs with no force sale. Also any accounts that transfer on death and avoid probate avoid Medicaid claw backs. It is a complex topic both legally and ethically.

In my area nursing home care was around $14,000 a month the last I checked.

 

[Fishingmn]

My parents could be considering this too and I also struggle with whether there is an ethical issue. As others said, doing ACA subsidies and aggressive tax planning is okay with most.

The other scenario that I think is relevant.

Couple A - Lives modestly their whole life and saves a pile of money hoping to give it to kids upon death.

Couple B - Lives high on the hog spending their money lavishly on travel and toys all through life without saving much.

In retirement they both live modestly. Couple A because that's what they've always done and Couple B because they are forced to by necessity.

Now both go into nursing care. Is it fair that Couple A's assets are depleted while Couple B immediately goes on governmental assistance? Is Couple A's ethical decision now to protect their assets any different than Couple B's ethical decision which was to not save for their retirement?

 

[pb4uski]

Interesting dilemma... but why should taxpayers fund Couple A's kids inheritance if Couple A has resources to support their own long term care.... if there is anything left then Couple A's heirs will receive it.

But ant/grasshopper dilemmas abound in society.... let's say that couples A and B are in-laws with the same parent and the parent needs financial help... is it fair that their might be higher expectations of couple A to help the parent? and many others.

 

[razztazz]

See? Some types of people got it all figured out and justified. Worst case: Well OK, it's bad when we do it but not as bad as when the Lesser-thans do it. That's an order of magnitude.

SNL could do a season's worth of sketches on some of these threads

There are a couple reasons that they are different.

First, and most importantly in my mind, is an order of magnitude.... Obamacare subsidies average a little over $6k a year per enrollee (so say $13k for a couple) but Medicaid long-term care benefits cost taxpayers about $74k a year. The average nursing home stay is 835 days so at $203/day that is $170k that taxpayers are subsidizing families to transfer assets to their kids for those who do Medicaid LTC planning.

Secondly, and I concede that this argument may ring hollow for some, but Obamacare subsidies are technically tax credits for taxpayers whose income is low and it is well established case law that it is fine to arrange your financial affairs to minimize taxes, to wit:



And for the record, while I arrange my finances for tax advantage, I have never received premium tax credits and would never engage in Medicaid LTC planning... we will pay for our own care as long as we have resources and if we run out of money then our heirs will bear the impact.

 

[pb4uski]

See? Some types of people got it all figured out and justified. Worst case: Well OK, it's bad when we do it but not as bad as when the Lesser-thans do it. That's an order of magnitude. ...

Clear as mud. This isn't a bloody creative writing contest.

 

[razztazz]

Now both go into nursing care. Is it fair that Couple A's assets are depleted while Couple B immediately goes on governmental assistance? Is Couple A's ethical decision now to protect their assets any different than Couple B's ethical decision which was to not save for their retirement?

For the wealthy to do this the only ethical question is: is it legal.? Is it permissible? Can we "do it"? (Get away with it?) It's like the weather. Everybody talks about it but nobody does anything about it.


Not to waylay the thread but, what you have just put forth is perhaps a better case for universal medical care than a case against the moral implications of tax or late-in-life estate didlings.

 

[mountainsoft]

My mom will be 81 in February and I would describe her as someone who is in "okay" health.
As we know health can deteriorate sometimes quickly, sometimes slowly does it make sense to move her assets ( all liquid now) into one or more of her kids accounts?
The logic being that if she ever has to go into a nursing home or even assisted living that all her money won't evaporate and she can just have Medicaid pay for it?

Rules vary by state, but generally your mom would need to gift her money to her kids at least 5 years before she applies for Medicaid. Any assets given away after that 5 year look back would need to be repaid before Medicaid will start paying for care.

You can currently gift up to 15K per person, per year, without paying taxes on the money. I think you can gift more than that, you just have to pay taxes on it. I don't know the rules for that.

Medicaid is not accepted by all assisted living homes. They need to be licensed with Medicaid, and they usually require you to pay out of pocket for a year or two before they will accept Medicaid. Around here, I'd say about 25% of the assisted living homes accept Medicaid, the other 75% do not (private pay only).

Once on Medicaid, your mom would only get to keep a tiny amount for personal expenses. Here in Washington I think it's something like $76 per month. That won't even pay a cable TV bill, let alone any haircuts, clothing, extra groceries, etc.

My mom had a stroke a couple years ago. After we sold her house and consolidated her assets, she gifted 15K each to me and my wife. We will use this money to help her with some of the extra expenses once she is on Medicaid. She will be 74 in June, and her personal assets should last about six more years if there are no large medical expenses or something. Assuming she lives to 80, she'll need to go on Medicaid. We'll be retired by then, so we won't have a lot of extra cash to help, but we'll try to make the most of the 30K she gifted to us.

 

[Sunset]

Big danger here for the OP mother is whoever grabs the cash will leave the parent destitute long before a nursing home is even needed.

 

[Dtail]

Well interesting thread on both sides as usual.
I for one have no qualms with medicaid planning. Actually my parents pushed for it as none of the 4 children did so.
About half their assets are in a irrevocable trust and half are not; thus potentially setting up full pay for a certain period of time.
Well at least I am consistent, as I manage MAGI heavily for 11k tax subsidies.
Let them change the rules......

 

[pb4uski]

....You can currently gift up to 15K per person, per year, without paying taxes on the money. I think you can gift more than that, you just have to pay taxes on it. I don't know the rules for that....

Not correct... if you gift more than $15k per person you need to file a gift tax return but no gift taxes are due unless your gifts exceed the estate tax limitation, which is millions.

 

[Moemg]

I call BS... there might be a few 35 year olds retiring and getting ACA subsidies but they are rare enough to ignore.

.

Lots of blogs by thirty something retires prove me right including one by one of our members .