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xposting ...

My elderly mother (78) just sold some real estate to a commercial developer and banked maybe $500K.

Talking to her the other night she doesn't want NOBODY to get her hard-earned money. Not the IRS, not some old folks home someday. So my question to you all is - is there any way to "shelter" that amount of cash from being eaten up by the old folks home if she ever needs to go to one? LLC? Trust? Offshore account in the Caymans?

Told her I'd ask and let her know what folks said.

SG "doing her daughterly duty"
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StockGoddess asks

My elderly mother (78) just sold some real estate to a commercial developer and banked maybe $500K.

is there any way to "shelter" that amount of cash from being eaten up by the old folks home if she ever needs to go to one?


It depends on how soon she ends up in a home.

Taxpayers have gotten wise to paying the nursing home bills for people of means. Most states have "look-back" provisions that go back five years and will disqualify you for Medicaid if you've made any transactions designed to make you look poor enough to get aid.

http://insurance.lawyers.com/v2/medicare-medicaid/Rules-to-T...

intercst
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No. Not without fraud involved.

If she wanted to "hide" it and stay in a medicaid-level of facility she could probably wrangle a way to do that (swiss bank accounts?), but with the look-back at accounts that is allowed, and the fact that this would be welfare fraud, I wouldn't touch it with a 100-foot pole.

Me, I would be happy I had the money to choose to stay in a decent facility if needed.
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Well, she wanted me to ask, so I've asked.

Didn't think so, unless she starts "gifting" the money to someone she trusts but she couldn't offload much without taxes getting in the way. What is it now, about $13K a year?

She's got a bunch of land contracts, too, I don't know if they can come after those as well, or not. Would morgage holders start paying the nursing home?

So far she's perfectly healthy so we'll just cross fingers. She gets REAL posessive of those dollar bills, y'know?
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Didn't think so, unless she starts "gifting" the money to someone she trusts but she couldn't offload much without taxes getting in the way. What is it now, about $13K a year?

The gifting rule has variations. It is now $14k/person/year. If she was still married, she could give away $28k/person/year. OR she could gift the whole $500k and have it go against her lifetime exclusion limit which is currently $5.5M. But sill soon change.

http://www.smartmoney.com/taxes/income/when-to-file-gift-tax...

JLC
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not some old folks home someday

Give her a cardboard box - that's likely the only free shelter in her old age.

Anytime you start putting quotes around things, they become shady one way or another. You could suggest she start gifting money if she would like to enjoy seeing her gifts used.
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Hi StockGoddess,

So my question to you all is - is there any way to "shelter" that amount of cash from being eaten up by the old folks home if she ever needs to go to one? LLC? Trust? Offshore account in the Caymans?
Nothing so shady necessary... Medicaid planning strategies are straightlaced & commonplace nowadays.

http://www.globalstrategicadvisors.com/services/medicaid-qua...

Medicaid Qualifying Trusts
The Medicaid Qualifying Trust is an income-only, non-discretionary "subtrust" of a Revocable Living Trust.</TT?

It must be funded on a timely basis during the trust grantor's lifetime to be effective.

Asset protection strategies do not come with ironclad guarantees. However, properly crafted language in a trust can utilize what is currently available under law to help protect (to the extent possible) certain assets from a legal judgment arising from a lawsuit and/or a Medicaid "spend down". The FAPT can be applied in two asset protection planning areas - (i) a "non-reversionary" (Qualified) Personal Residence Trust (QPRT) and (ii) a Medicaid Qualifying Trust (MQT).

A non-reversionary (Qualified) Personal Residence Trust (PRT) incorporates the asset protection benefits of a reciprocating (or reversionary) Qualified Personal Residence Trust, but without the "estate freeze" strategy associated with that trust. Therefore, the value of the residence and/or any other assets transferred to the FAPT will be in the estate of the grantor for transfer tax purposes, and thus receive a full step-up in basis at the transferor’s decease.

A regular Medicaid Qualifying Trust (MQT) utilizes the beneficial terms codified under the Consolidated Omnibus Budget Reduction Act (COBRA) of June 1, 1986 to help avoid a spend-down in the event of a long-term nursing home stay. (Under normal circumstances, an institutionalized person's estate will be spent down until he becomes "legally indigent" [impoverished] for purposes of qualifying for Medicaid; only at that point will Medicaid intervene and pay for the occupant’s nursing home costs.)

Although the FAPT can function as both a (non-reversionary) QPRT and a MQT, a long-term nursing home occupant cannot qualify unconditionally for Medicaid if gifts were made to the FAPT less than 60 months from his Medicaid application date. In other words, to the extent that a particular gift was made to the FAPT, that gift will still be deemed as an available resource to spend down for nursing home costs - to the extent of the remaining period of the 60-month term from the date that the asset was transferred to the FAPT.
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"gifting" was also in quotes.

Medicaid planning strategies are straightlaced

Autocorrect get you ? ;)

Seriously, planning to get into the worst nursing homes really seems like the antithesis to a life well-planned.
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Talking to her the other night she doesn't want NOBODY to get her hard-earned money. Not the IRS, not some old folks home someday. So my question to you all is - is there any way to "shelter" that amount of cash from being eaten up by the old folks home if she ever needs to go to one?

So she is looking for a way that she can keep her money and give the tax payers the bill for a potential Medicaid-funded nursing home stay? There's a reason that they keep changing the laws around that, and it is so that people who have assets actually use those first before looking to the tax payers to fund their nursing home stay.

Would she not rather have the money available so that she could, for instance, hire in-home help when the time comes that she needs it, and is able to stay in her own house for as long as possible? Isn't that why she has tried to accumulate assets over the years, so that she can spend the money on herself and her own quality of life?

Has she been to one of those Medicaid-funded facilities? FIL and DH's aunt were in those, and they are not pretty. Given a choice, I'd much rather use my own money to pay for a better nursing home, should one become necessary, than depend on the government to pay for it and depend on there even being a slot open, should I need it.
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Didn't think so, unless she starts "gifting" the money to someone she trusts but she couldn't offload much without taxes getting in the way. What is it now, about $13K a year?

I believe they look at gifting for the 5 year look-back, so that doesn't help.

She's got a bunch of land contracts, too, I don't know if they can come after those as well, or not.

My guess is yes. Here's my roundabout reasoning why:

We know a person in his 50's, suffering from a form of dementia. Apparently, they have a tract of land as an inheritance in probate. The tract is land-locked and none of the surrounding landowners wants to grant access, so while the tract is assessed in the $100's of thousands, it's real value is closer to $50k, after the cost to gain access. One family member wants to develop it, which will disqualify him from Medicaid, while selling it for $50k will keep him qualified. Besides, he doesn't have the funds to develop the land.
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Hi RAD,

Autocorrect get you ? ;)
Sorry, I don't understand the reference ;~(

Seriously, planning to get into the worst nursing homes really seems like the antithesis to a life well-planned.

No, no, no.... Medicaid planning is to *AVOID* becoming a ward of Nurse Ratchet!

In essence its this;
a) create a properly designed trust which will take your assets out of your name and control, but feed them back to subsidize your lifestyle costs,
b) gift all non-exempt assets to a trusted person,
c) that person then funds the trust (this "one off" step is apparently a necessary dance.)

The most preferred method of long term elderly care is in-home support. If you are wealthy enough that you can afford it regardless of insurance, then you are golden.

If you cannot afford it at all, Nurse Ratchet awaits.

If you can afford about 1/4-1/3 the cost, then Medicare/Medicaid will fund the remaining lion's share, *AS LONG AS* you've appeared to be broke (due to proper planning) for the prior 5 years.

DISCLAIMER: I am in no way an expert in this... merely deep into the grokking of it myself as I help my own kin.

Dave Donhoff
Leverage Planner

"Control everything, own nothing."
John D. Rockefeller
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The most preferred method of long term elderly care is in-home support. If you are wealthy enough that you can afford it regardless of insurance, then you are golden.

If you cannot afford it at all, Nurse Ratchet awaits.

If you can afford about 1/4-1/3 the cost, then Medicare/Medicaid will fund the remaining lion's share, *AS LONG AS* you've appeared to be broke (due to proper planning) for the prior 5 years.


Screw that!

Have any of youse guys seen a Medicare/Medicaid nursing home facility?
Imagine a combination of Walking Zombies and eau-de-outhouse.

My Mom went to one for a short while. Even with bad Alzheimer's she didn't like it. She couldn't remember our phone number, but she found it on the "emergency Contact" card at the nursing station.

And after the first week, called us EVERY DAY to tell us to get her out of there tout suite.

Far better to plan to have $2+ million so you can afford to go to the Hotel Ritz Luxury Nursing Home.
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In essence its this;
a) create a properly designed trust which will take your assets out of your name and control, but feed them back to subsidize your lifestyle costs,
b) gift all non-exempt assets to a trusted person,
c) that person then funds the trust (this "one off" step is apparently a necessary dance.)


But what about that pesky 5-year look-back period?

As far as item B, I am sure there are lots of folks who tried that, and then ended up without the assets at all because the recipient wasn't as trustworthy as they thought, or something outside of their control happened that put those assets at risk like some sort of debt needing to be repaid or a lawsuit, just to name a few.

Personally, I have a real problem with someone doing all those gyrations so that we, the tax payers, can pay for their care while they leave their assets to someone else to inherit. And yes, I realize that if it is beyond the look-back period, it is legal, but I still think there is a lot of risk here for the OPs mom, and I'm not so sure she realizes it in trying to be greedy about keeping her assets.

As far as the nursing home care she is fearing, that one is easy. Just don't go to a nursing home, and there is nothing to be paying for, but she'll need someone (OP?) to take care of her instead in her own house or in their house. Or she ends up spending her assets to provide the level of care that she wants in the place of her choosing.

It's that part about having her cake and eating it too that I am finding challenging.

BTW, I have lots of recent experience with Medicaid-funded nursing homes as that's where FIL spent his last couple of years, but this is a man that had absolutely nothing, and he is the sort of person that these programs were designed to help. Not someone with assets, and yes, everything counts including those land contracts.
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Ray,

Screw that!
Have any of youse guys seen a Medicare/Medicaid nursing home facility?
Imagine a combination of Walking Zombies and eau-de-outhouse.


You missed the part about the strategy purpose to keep the senior in the comfort of their own home with their own private assistants.

Far better to plan to have $2+ million so you can afford to go to the Hotel Ritz Luxury Nursing Home.
Halla-to-the-looyah! Who could argue with that!!!

=======================

2gifts,

But what about that pesky 5-year look-back period?
Either you go naked (which is where you were before the planning anyway,) or you cover yourself with traditional or asset-based LTC (if you are insurable) for the gap.

As far as item B, I am sure there are lots of folks who tried that, and then ended up without the assets at all because the recipient wasn't as trustworthy as they thought, or something outside of their control happened that put those assets at risk like some sort of debt needing to be repaid or a lawsuit, just to name a few.
Pretty much the risk with all trust strategies... yet they still work.

Personally, I have a real problem with someone doing all those gyrations so that we, the tax payers, can pay for their care while they leave their assets to someone else to inherit.
I take a different perspective. M&M benefits are really refunds of directly-assessed taxes paid by the reclamation of direct benefits. Indirect general taxes (real estate taxes, inflation, etc.) are appropriate for indirect general benefits (roads, armies, etc.) Direct taxes (income taxes, primarily) are appropriate for direct benefits (individual entitlements.)

To that effect, I wholeheartedly subscribe to Judge Learned Hand's famous quote;

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike, and all do right, for nobody owes any public duty to pay more than the law demands.”
Learned Hand (1872-1961), Judge, U. S. Court of Appeals

When you are productive, young & strong and times are good, you pay direct taxes and claim little to no direct benefits... then, when the inverse occurs, you pay in less and begin reclaiming what you have paid for. The goal is to arrange your affairs *OVER YOUR WHOLE LIFE* to have net tax expenses (paid out, minus benefits recollected) as low as possible.

If you're wealthy enough to waive your tax deductions while productive, and waive your tax reimbursements when no longer productive, then its win/win all around!

Dave
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you cover yourself with traditional or asset-based LTC (if you are insurable) for the gap.

I was under the impression that the OPs mom didn't want to spend any money on her own care, and I thought that included LTC. DH and I actually have LTC, and it was something that I considered as part of our overall financial strategy, so I agree with you that this would be a good thing for the OPs mom to investigate, and it would allow her to keep her money to herself and not have to spend much of it on a nursing home, which seems to be her goal. But that is very different from wanting Medicaid to pay for her care while she has assets that could be used for that.


I take a different perspective. M&M benefits are really refunds of directly-assessed taxes paid by the reclamation of direct benefits. Indirect general taxes (real estate taxes, inflation, etc.) are appropriate for indirect general benefits (roads, armies, etc.) Direct taxes (income taxes, primarily) are appropriate for direct benefits (individual entitlements.)

If I am reading this right, you are saying that Medicaid is just people getting back taxes they have paid over their lives, but the cases that I have seen were for people who pretty much never worked or paid taxes, and lived on the public dole their entire lives. I guess I don't see these things the same way you do, and I still have a fundamental problem with people who have assets expecting the government to pay for their services. In the case of people who have not worked and gotten significant benefits, I consider these programs to have been designed for folks like that, and I am OK with us as a society caring for the less fortunate. But the OPs mom is not someone who appears to me to be in that 'less-fortunate' category.

When you are productive, young & strong and times are good, you pay direct taxes and claim little to no direct benefits... then, when the inverse occurs, you pay in less and begin reclaiming what you have paid for. The goal is to arrange your affairs *OVER YOUR WHOLE LIFE* to have net tax expenses (paid out, minus benefits recollected) as low as possible.

I have no problem at all with keeping taxes to a minimum, but the OPs question asked about nursing home care, and her mom didn't want to use her own assets to pay for that. Instead, she prefers to take from a limited pot to cover something she could pay herself, and as the dollars are limited, it leaves me wondering about where the dollars come from to pay for the people who really do not have any assets and need that assistance.

It just seemed more like greed to me than careful planning to minimize taxes, but others may have a different impression.
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Sorry, I don't understand the reference ;~(

Maybe you did mean straightlaced. I thought you were going for straight forward.
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Maybe you did mean straightlaced. I thought you were going for straight forward.
Yep, the former.... the strategy is clean & pretty comprehensively accepted in the elder law planning community.

The dance steps are (as I showed) a bit more than straight forward.

Dave
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If you can afford about 1/4-1/3 the cost, then Medicare/Medicaid will fund the remaining lion's share, *AS LONG AS* you've appeared to be broke (due to proper planning) for the prior 5 years.


That's cheating (ethically - I'm not referring to legally) and unfair to taxpayers. It might be legal, but it's not the right thing to do.
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