I keep hearing from older taxpayers who have made a gift of their personal residence to a son or daughter in an attempt to circumvent the MEDICAID rules. Their argument is that they would rather have their son or daughter pay a huge tax upon the sale of the gifted residence than to have MEDICAID take or sell their residence. DOES MEDICAID do such a thing? Current MEDICAID rules allow a person to own a residence with an EQUITY of up to $500,000 and a car and I believe up to $2,000 in personal assets including savings in checking or savings accounts, etc. before they are disqualified for MEDICAID benefits. The use of the term "EQUITY" in a residence causes me concern but I concluded that it is simply to avoid the use of the fair market value of the residence instead. Now the lookback period has been extended to five years and ends on the date the person enters a nursing home. Does anyone understand these issues? If so, please enlighten me.
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Medicade will place a lien on the home if it is with the 5 year period. The amount is based on some formula. Yeah, the kids may have to sell the home or pay off the lien.Originally posted by dyne View Post
Medicade is one of the reasons that this country is in the mess we are in.Jiggers, EA -
As you state the rule above, this would allow one to take all their cash and pay off a mortgage, thereby protecting the "asset" from being considered. I know this has been done in the past in Florida for persons declaring bankruptcy, unless they have sewed up that loophole.Originally posted by dyne View PostComment
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Equity
OP gave me the idea he does not understand the concept of Equity in something. If I have misread, I apologize.
You can think of equity as the amount of something you actually own. For example if I own an asset worth 10K but I owe 6K on it my equity is 4K. Or if I owe 15K on it then my equity is negative 5K and if the property in question is a house I am said to be under water and am likely to be upset. If on the other hand the asset is a car I bought within say the last year with a five year loan then my situation is not unusual at all.
I would also like to add that Medicaid rules vary somewhat from state to state but in all states a middle class or wealthy person has to "spend down to medicaid". That is, they must exhaust their personal resources including any insurance and savings and either sell or borrow against their assets and spend those monies. Then when they are broke or close enough to it that they qualify for medicaid the taxpayer starts picking up the tab for their care.Comment
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I checked my state AND a neighboring state's Medicaid rules. Although the monthly income amounts varied, both stated the home did not enter the equation. Neither did car, furnishings, jewelry. The monthly income amounts and total resource amounts, however, are extremely low -- based on federal poverty levels. And they count Social Security as part of that income. You really have to be poor. Also, the information indicated that if state Medicaid funds were used to pay for a nursing home or home health care in lieu of nursing home expense, Medicaid would file a claim against the estate to recover amounts paid at the taxpayer's death. I suppose a transfer of the home during the TP's lifetime would circumvent their making a claim against it at death?Last edited by Burke; 07-19-2011, 05:07 PM.Comment
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Trust
If a person puts their assets, including house, bank accounts, into a trust, does that protect the assets it that person needed to go into a nursing home?
I have always been fuzzy on that principle. For example, my mother has her house and all her bank accounts in a revocable living trust. I just googled revocable vs irrevocable trusts and found out the difference. The revocable trust will avoid probate, but since she retains control of the assets they are still considered hers and would have to be disposed of or used before she would qualify for Medicaid.
Irrevocable trusts take it out of her control and is in the hands of a trustee. Who can be a trustee? Could I be her trustee?
Questions I have had but have not gotten the answers to.
Linda, EAComment
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I read that a recent change now requires a smaller portion of social security benefits to be considered as income for MEDICAID purposes but details were not available.Comment
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You can be a trustee. There must be a remainder beneficiary as well. Funds in an irrevocable trust are usually allocated for the care and well-being of the grantor while living, and there is also such a thing as a Personal Residence Trust. Estate-planning attorneys love to have free seminars on these things. Check around in your area and show up at one. Usually they have really good information regarding these questions. Keep in mind fees for setting up these trusts, which will include a new will due to the trust, may run several thousand dollars.Originally posted by oceanlovin'ea View Post
And do you really want your Mom in a nursing home which only Medicaid benefits pay for? The prime reason for the trust is to avoid claims from creditors, including claims made against her estate, privacy by avoiding probate, protection for the heirs if the trust is continued.Last edited by Burke; 07-20-2011, 01:17 PM.Comment
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not nursing home
My mom is 90 years old and still very active. She is still driving, but only close to home like grocery store, bank, beauty shop. She is still running a very nice natural supplement business from her home.
I really don't expect her to go to a nursing home. We will take care of her at home in case something happens to her. But her health is so good I figure her demise will be from an accident rather than stroke or something like that.
But she does have quite a bit of money socked away and we do want to protect it.
Linda, EAComment
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Sounds like one of my clients. 98 years old this year. Perfect eye sight, and still drives.Originally posted by oceanlovin'ea View Post
And she is healthier than I am.
And she brags that she buys green bananas.
She is one that will just wake up dead some morning.Jiggers, EAComment
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If you have a choice, you really don't want to be in a home that Medicaid pays for, and you don't want your mom or dad there either. IMHO, trying to redistribute assets so that the government picks up the tab is fraud, plain & simple. This is a benefit so that the poorest don't end up with no care. How many of the folks trying to do this are in the anti-tax crowd, I wonder?Comment
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A trust may be one solution. Depends on circumstances. (Children's situations, marriages, potential problems, etc.) And fate. Had an estate where client died, and due to an auto accident 2 years prior, lawsuit was filed against her estate, tying up everything for two or more years. Nightmare.Originally posted by oceanlovin'ea View PostComment
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revoccable trust
She has a revocable trust set up now. Everything is in it except her car and insurance policies and her IRA's. At least I don't think the trust is the beneficiary of the IRA's.
LindaComment
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A disregarded entity, as you mentioned earlier. Only avoids probate. Depends on the wording in the trust document as to what happens at death. It may direct all the proceeds be distributed at earliest date. It may allow for continuance as an irrevocable trust. Does the will have a pour-over clause, sweeping up any assets hanging out there which were not retitled? IRA, other annuities and the life insurance would pass outside estate and trust if they have their own named bene(s).Last edited by Burke; 07-22-2011, 11:14 AM.Comment
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Making the trust the bene of the IRAs is usually a bad idea. IRAs will pass directly to the benes, so they can make their own decisions as to how to treat the money, including taking RMDs over their lifespan. A trust or estate as bene doesn't have the options individuals have.Comment
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