Protecting Mom's estate with a Medicaid trust?

[Deleted]

Long time lurker and occasional poster here. I am one of three siblings and the executor of 85 year old Mom's estate ( Dad passed 5 years ago) of just over 1 mil.  Dad put the house in a living trust before he passed, so that is not a problem.  I have been reading about asset protection (Medicaid) trusts, and am seriously considering this now, as she is in excellent health.  I know about the 5 year look back, and am thinking even the "half a loaf" plan (should it come to that) will be better than doing nothing at all.  Has anyone had any experience with these types of trusts, and any feedback recommending them or not and why?  Any pitfalls to consider, other than the fact that if any of the siblings has creditors after them, these assets would be up for grabs?  Does anyone know of a better way to protect the estate?

[swamp]

I have a problem paying for nursing home care for people who can afford it

But what you've laid out is correct

[Blonde Granny]

Rather than trying to do all this yourself, find a local certified elder law attorney and ask questions. I've hear before that some states are going after children of deceased Medicaid people, so any moves you make will require careful steps on your part.

That said, I agree with Swamp.....it irritates the daylights out of me to think someone can lay all these costs on taxpayers when the parent has assets to pay for care themselves.

[Deleted]

I had planned to consult her elder care attorney, I was just looking to explore other options. So I guess following your logic, none of the wealthy posters here have ever used tax shelters or other vehicles to protect their assets?  Does it matter that there is a chronically ill grandchild that has thousands of dollars of medical bills that could greatly benefit from his grandmothers' gift?  Not looking to do anything illegal or immoral, just trying to do the best by my family.

[happyhoix]

When my siblings and I went to see an attorney after my mom had a stroke and had to move to an assisted living facility, he told us since one of our siblings was on disability our mother could technically transfer all her money to the disabled daughter, and mom would go on Medicaid. Then, after Mom passed, that sibling could split the estate with the rest of us.

We refused to go that route because the money was my parents money and needed to be spent making her last years on the planet as comfortable as possible. We didn't want to limit our search for quality nursing home care to just facilities that accepted medicare - we wanted her to be in the best facility she could afford (which was one that did NOT accept medicare).

It was also a no-brainer because disabled sis had spent her life attempting to scam the system in an attempt to avoid working - the rest of us were pretty much certain if we transferred Mom's money over to her, by the time our Mom passed away, not a dime would be left of it and there would legally be nothing we could do about that. I didn't want my hard working parents money to get blown by a hoarder with a drug habit while Mom sat in whatever facility we could find that would accept medicare patients.

 

[The Walk of the Penguin Mich]

Your mom could gift the child $14,000/year if necessary to help defray some of the medical expenses.

However, I agree with the others in that that money is your mom's money to make her end of life as pleasant as possible.  Why would you want to deny that of her?

[kittensaver]

You're probably going to run into a tough crowd here . . . just sayin'. I also get irritated that wealthy and well-to-do individuals and families artificially impoverish themselves (or worse yet, their heirs decide to impoverish them), or hide their assets in trust so the burden of care shifts to the public welfare system.

If your mother has enough assets to pay for her future care, there are many (including me) who believe that ethically, she should do exactly that. Just because a loophole in the tax laws makes it legal doesn't mean it's ethically or morally the right thing to do.

That said, if she has a chronically ill grandchild who will benefit from some financial help, why can't she help that child now?

[Deleted]

She is not wealthy or even well to do. Dad worked multiple jobs and saved literally every penny.  I anticipate years of home health care for which that money will pay, and would only make use of a nursing home for severe dementia or Alzheimers (sp?).  It is her greatest happiness that she will be able to leave a nice inheritance to her family.  And I don't think I even need to say that there is one sibling who keeps track of every penny Mom dispenses, she would make Mom's life a living hell if she gave money to one and not all, even if it is for medical bills.  And lastly, yes she does gift the 14k each year to all of us.

[Blonde Granny]

From your first post: I am one of three siblings and the executor of 85 year old Mom's estate ( Dad passed 5 years ago) of just over 1 mil.

And yes, we can be a tough audience here and tend to say what's on our minds. Don't take it as an attack, it's just that we usually give someone something to think about. Keep coming back, you'll get used to us.

[kittensaver]

Sept 20, 2017 14:08:03 GMT -5 @cbshopper said:

She is not wealthy or even well to do.

Your mother has one million dollars in assets and she's not wealthy or well-to-do?

Ummmm . . . sorry to sound confrontational but - - have you checked your privilege lately?

[Waffle]

Sept 20, 2017 14:08:03 GMT -5 @cbshopper said:

She is not wealthy or even well to do. Dad worked multiple jobs and saved literally every penny.  I anticipate years of home health care for which that money will pay, and would only make use of a nursing home for severe dementia or Alzheimers (sp?).  It is her greatest happiness that she will be able to leave a nice inheritance to her family.  And I don't think I even need to say that there is one sibling who keeps track of every penny Mom dispenses, she would make Mom's life a living hell if she gave money to one and not all, even if it is for medical bills.  And lastly, yes she does gift the 14k each year to all of us.

You've got to be kidding. Someone has to be at least "well to do" to be able to gift 14k to 3 people each year.

[NastyWoman]

Sept 20, 2017 12:40:46 GMT -5 @cbshopper said:

Long time lurker and occasional poster here. I am one of three siblings and the executor of 85 year old Mom's estate ( Dad passed 5 years ago) of just over 1 mil.  Dad put the house in a living trust before he passed, so that is not a problem.  I have been reading about asset protection (Medicaid) trusts, and am seriously considering this now, as she is in excellent health.  I know about the 5 year look back, and am thinking even the "half a loaf" plan (should it come to that) will be better than doing nothing at all.  ...  Does anyone know of a better way to protect the estate?

Pray tell, how is this behavior any better than the much maligned "welfare moms popping out baby after baby so they don't have to work"? I know this legal and that many people have done it and are still doing it, but IMO it is morally wrong.

[NomoreDramaQ1015]

Who is the parent of the grandchild?  If you are all being gifted $14k a year why isn't his/her parent putting that money aside in a trust for their future care? $14k a year can go a long way.

I'm of the mindset if the money is there it should be put towards care.   Everyone would love to leave a legacy behind, but it's not right to milk the government for it.   That's putting a strain on a system that wasn't designed for people like your mother to use, which is resulting in a situation where it may not be available AT ALL for the people who actually need it.

[Deleted]

Wow, rudeness, arrogance and name calling! I am no better than a welfare mom popping out babies!    And not one helpful suggestion, thanks for nothing. I will never make the mistake of posting here again.

[kittensaver]

Sept 20, 2017 14:59:58 GMT -5 @cbshopper said:

Wow, rudeness, arrogance and name calling! I am no better than a welfare mom popping out babies!    And not one helpful suggestion, thanks for nothing. I will never make the mistake of posting here again.

In all honesty, you cannot expect persons who disagree with your actions to provide you with "helpful suggestions" on how to go about accomplishing them.

[swamp]

Sept 20, 2017 14:59:58 GMT -5 @cbshopper said:

Wow, rudeness, arrogance and name calling! I am no better than a welfare mom popping out babies!    And not one helpful suggestion, thanks for nothing. I will never make the mistake of posting here again.

Your plan will do what you want.
But I don't understand how setting up this trust will help the grsnkid now.

If you do go this route you need to look at a special needs trust fir the kid.

And your mom needs to tell the one sibling to fuck off

[alabamagal]

Sept 20, 2017 15:23:52 GMT -5 swamp said:

Sept 20, 2017 14:59:58 GMT -5 @cbshopper said:

Wow, rudeness, arrogance and name calling! I am no better than a welfare mom popping out babies!    And not one helpful suggestion, thanks for nothing. I will never make the mistake of posting here again.

Your plan will do what you want.
But I don't understand how setting up this trust will help the grsnkid now.

If you do go this route you need to look at a special needs trust fir the kid.

And your mom needs to tell the one sibling to fuck off

And there is your helpful advice!

[NomoreDramaQ1015]

How is asking where the $14k being gifted is going rude?  If there are three siblings and there is a disabled grandchild I am assuming one of the siblings is the parent.  It would make way more sense and likely be a lot less of a legal hedache to take that $14k a year and put it aside in a trust created by the parent.

Then if mom dies and there is money left great you can put it in the trust.  If not you've been putting $14k a year in there up to that point.

I'm thinking with the popularity of this idea that it won't be long before governments figure out how to seize these trusts.   They created the loopholes that allow them to exist, they can just as easily create loopholes that allow them to take it away after it's been set up.

At 85 you have no assurances that you'll make it thru the 5 year look back period.   Excellent health today does not assure excellent health tomorrow at that age.

[hoops902]

FAQ Time!

Is it annoying that people who can afford to pay for their care get to choose to give that money away to other people and let the taxpayers pay for their care instead? YES

Do I blame people for taking advantage of laws to their advantage? Not really.  Especially tax laws which seem to be set up specifically so that you SHOULD take advantage of them if you can.

Do I think that even if something is legal it can still be immoral?  Yes, sometimes.

How many people on this board actively try to manage their tax consequences? Pretty much everyone!

If someone is 85 and has over a million dollars, are they wealthy or well-to-do?  Obviously!

[MJ2.0]

Sept 20, 2017 15:48:03 GMT -5 NomoreDramaQ1015 said:

How is asking where the $14k being gifted is going rude?  If there are three siblings and there is a disabled grandchild I am assuming one of the siblings is the parent.  It would make way more sense and likely be a lot less of a legal hedache to take that $14k a year and put it aside in a trust created by the parent.

Then if mom dies and there is money left great you can put it in the trust.  If not you've been putting $14k a year in there up to that point.

I'm thinking with the popularity of this idea that it won't be long before governments figure out how to seize these trusts.   They created the loopholes that allow them to exist, they can just as easily create loopholes that allow them to take it away after it's been set up.

At 85 you have no assurances that you'll make it thru the 5 year look back period.   Excellent health today does not assure excellent health tomorrow at that age.

what is the point of creating these loopholes?  How does that help the government?

[Deleted]

This is why you should just buy cars and weed though, honestly. Don't pinch every penny, because you will be made to be responsible when those who did not save are not...

[Deleted]

These Loopholes help the government by forcing redistribution. 

[hoops902]

Sept 20, 2017 15:55:42 GMT -5 MJ2.0 said:

Sept 20, 2017 15:48:03 GMT -5 NomoreDramaQ1015 said:

How is asking where the $14k being gifted is going rude?  If there are three siblings and there is a disabled grandchild I am assuming one of the siblings is the parent.  It would make way more sense and likely be a lot less of a legal hedache to take that $14k a year and put it aside in a trust created by the parent.

Then if mom dies and there is money left great you can put it in the trust.  If not you've been putting $14k a year in there up to that point.

I'm thinking with the popularity of this idea that it won't be long before governments figure out how to seize these trusts.   They created the loopholes that allow them to exist, they can just as easily create loopholes that allow them to take it away after it's been set up.

At 85 you have no assurances that you'll make it thru the 5 year look back period.   Excellent health today does not assure excellent health tomorrow at that age.

what is the point of creating these loopholes?  How does that help the government?

It's hard to call this one a loophole. The help to the government is that without this "loophole" there are basically 2 options.

1. You can not look back on assets at all.

2. You can look back on assets for someone's entire life.

#2 seems completely unrealistic, so you'd be left with #1. Going with #1 would be a massive hit to the government. The "loophole" really ends up being a government loophole that they can go after some of your assets.   

[kittensaver]

Sept 20, 2017 15:55:42 GMT -5 MJ2.0 said:

Sept 20, 2017 15:48:03 GMT -5 NomoreDramaQ1015 said:

How is asking where the $14k being gifted is going rude?  If there are three siblings and there is a disabled grandchild I am assuming one of the siblings is the parent.  It would make way more sense and likely be a lot less of a legal hedache to take that $14k a year and put it aside in a trust created by the parent.

Then if mom dies and there is money left great you can put it in the trust.  If not you've been putting $14k a year in there up to that point.

I'm thinking with the popularity of this idea that it won't be long before governments figure out how to seize these trusts.   They created the loopholes that allow them to exist, they can just as easily create loopholes that allow them to take it away after it's been set up.

At 85 you have no assurances that you'll make it thru the 5 year look back period.   Excellent health today does not assure excellent health tomorrow at that age.

what is the point of creating these loopholes?  How does that help the government?

It doesn't - it helps the taxpayer. There's a reason why they are (informally) called Medicaid Trusts. One deliberately impoverishes one's self by transferring all of their assets to others and/or to a Trust. Because that someone no longer (on paper, anyway) has any money, they qualify for Medicaid benefits (Medicaid being a government poverty program), including nursing home benefits. Perfectly legal under the tax code - - but as you can see by this thread, many folks have a problem with it for other-than legal reasons. It is *always* done to protect assets for heirs. And FWIW, there have also been abuse cases when named heirs have bullied or forced the senior with money into signing off on one of these Trusts because the heirs felt entitled to the money; then the poor senior got whisked off to some awful nursing home  against their will while their heirs waited for them to die .

[hoops902]

Sept 20, 2017 16:04:53 GMT -5 kittensaver said:

Sept 20, 2017 15:55:42 GMT -5 MJ2.0 said:

what is the point of creating these loopholes?  How does that help the government?

It doesn't - it helps the taxpayer. There's a reason why they are (informally) called Medicaid Trusts. One deliberately impoverishes one's self by transferring all of their assets to others and/or to a Trust. Because that someone no longer (on paper, anyway) has any money, they qualify for Medicaid benefits (Medicaid being a government poverty program), including nursing home benefits. Perfectly legal under the tax code - - but as you can see by this thread, many folks have a problem with it for other-than legal reasons. It is *always* done to protect assets for heirs. And FWIW, there have also been abuse cases when named heirs have bullied or forced the senior with money into signing off on one of these Trusts because the heirs felt entitled to the money; then the poor senior got whisked off to some awful nursing home  against their will.

It helps the government in comparison to having no lookback period at all and letting people give away their money the day before they go into the nursing home.

The difference is we usually just use the term "loophole" when we're talking about getting one over on the rule-maker. So by that logic, no loophole ever will help the government.

If you look at it the other way, then people can give away their money anytime they want without the government entitled to any of it...then the government puts in a loophole that says "no, actually, we get a 5 year lookback". 

[Tiny]

The OP might want to consider what kind of facilities/care will be available to Mom when/if she needs such care.  Where I live - the choices of nursing homes/facilities that are offered is based on how much $$ is available.  

So, how does placement work in your area?   What nursing homes are available if ONLY medicaid is available for payment of the care?    Are you all willing to pay out of pocket to get her into a better facility?  What if it's long term?  How does that effect YOUR finances short and long term?? 

There's also a rumor in my neck of the woods - that if you are in a better facility and run out of money and go to medicaid ony  - you stay in the better facility - they don't you off at one of the lesser facilities.    So, if you can get into a better facility - you want to do that... if you don't have the $$ upfront though.. you aren't likely to get into the better facility. 

 

After all "rich people" get better care than "poor people"  - do you really want your mom to be "poor" during the time when she's most vulnerable?

(is it safe to assume that you believe poor people get the best care EVER because the government uses YOUR taxes to provide that care?)

[hoops902]

What actually happens in practice during the lookback? Let's say it's not in a trust.  Let's just say my dad gives me his entire net worth today. In 2 years he is sick...do they just say "too bad, die in the street"? Do they come after me for the money (and what do they do if I've blown it all)? I assume there are some limits you can give away safely, but what do they do if they determine you don't qualify because of the lookback period? Are you just dying in the street for all they care?

[Lizard Queen]

I think the cost of nursing homes is heavily frontloaded in order to compensate for lower Medicaid payments later. For that reason, I see no problem with keeping 5 years worth of payments, if you even have that much, and disbursing the rest, as long as you're not like a gazillionaire or something. (Though, in that case, there'd be plenty to leave heirs anyway.) It's also not fair for people to blow all their money, never even save anything, and be completely on the government dime from day 1.

[hoops902]

Yes, not that anyone really enforces it much. I'm also not sure it matters TOO much, if I've blown through all the money you can't get blood from a stone. I guess my real question was basically whether they take care of you and try to find a way to get the money...or if they just say "you don't qualify, suck it".

[Tiny]

From the OP:   "Does anyone know of a better way to protect the estate?"

I have a morbid family so the following response is perfectly OK (and taken with a grain of salt):

Ways to protect the estate?

1.) Hope mom dies without needing expensive care.

2.) Hope mom dies quickly after needing expensive care.

3.) Figure out/invest now on a way for Mom to stay in her home (or a family members home) and have everyone agree to split out the 7/24 care between existing family members.  It helps if there are LOTS of siblings/in-laws, adult grandkids who can take shifts at 'babysitting' grandma.  Ways to invest/figure out - spend her money fixing up HER home so it's friendly for a bedridden elder who needs 7/24 care.  Be prepared to pay for some "home care" or "adult day care".   24/7 care is exhausting - espeically if it goes on for years and years even if you have 6 or 8 people to help with the care. 

FWIW:  one of my siblings has done option #3 with his Mother-in-law who didn't have much of a "estate" but who has lots of kids and adult grandkids.   MIL needed assisted living care starting at 80yo.  At 89 she needed 7/24 care.  She's now 96 and still in her home but she's now got a "visiting nurse" and goes to 'day care' she cannot be left alone - she's not bedridden but can do very little on her own.     She's been cared for by family for 16 years... and her kids are in their mid to late 60's and they want their lives back. They wan to retire and move away.  Even the grand kids have lives (having kids, moving away, etc) so the 7/24 care is getting 'harder and harder'.    

It sucks to be waiting for someone to die.