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I am consulting with a guy from Senior Benefits Consulting.

I would still suggest that you/Mom talk to an attorney, not just a consultant.

If she gifts her money, her dividend income will dwindle more than the VA benefit! I suppose we could invest it for her and give her the income.

Okay, since you are seeing "we could invest it for her" it sounds like you are expecting her to sell whatever investments she has, and actually give you money. Presumably, you have calculated any/all capital gains taxes she would be responsible for when she sells?

Alternatively, she could directly gift you the dividend paying stocks, and you *could* gift the dividends back to her without any gift tax issues, assuming that each son were giving her less than $15k/year. The dividends would not be considered income to her, since they are gifts from her sons. You (the sons) would be receiving the income, so you would be responsible for any taxes (just like she would have if she had received it) - so you might want to hold back part of the income received to account for the taxes. You would have to be sure to keep the records of her basis in the stock, since the basis for gifted stock is the basis that the original owner had.

There are some downsides to this:
- Since the stocks would now be held in the sons' names, if any of the sons get into an issue where there are credit or liability issues, these stocks could be seized to satisfy the issue
- As mentioned, the sons would have the income on their tax returns, which may end up costing more in taxes than if Mom continued to hold it
- Mom would have to trust that the sons would actually hold up their part of the bargain and gift her the dividends back

He also suggested putting the money in an annuity. But then she'll get income that could get her above the income limit! Plus annuity income is lousy compared to the dividend income she is getting.

Are you sure about the annuity income putting her above the income limits? For Medicaid, there is a way that an annuity can be used to bypass income requirements, and still give money to the spouse. I think it's called a "Qualified Income Trust" It may be that there is something similar to qualify spouses for VA benefits. Even though the annuity income might be 'lousy' compared to the dividend income she's getting, if it's combined with the VA benefits, would it be more than she's getting now?

That said - I agree with 2gifts that if the consultant also happens to be the annuity salesman, that's a big red flag, and even more reason for you to be working with an attorney instead of the consultant.

AJ
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