Elderly Parents and Medicaid Lookback

[taubel]

DH's parents are in their 80s and not in the best of health. They currently live in an apartment together and are capable of caring for themselves, but FIL is in the early stages of dementia and will soon give up driving (and MIL does not drive).

They do not have any assets, other than small pensions and about $150K in bonds and savings.

MIL recently announced that she was going to give most of her money to DH and his sister so it doesn't all go to a nursing home someday. But of course it may be too late for this due to the 5 year lookback when applying for Medicaid.

We have gotten basic advice from an Insurance Advisor I work with and a relative of ours who is a CPA. Neither of them know much about elder law or Medicaid, though.

The insurance advisor said they should gift each child and grandchild $13K immediately and, keeping about $50K and hoping that and their pensions can get them through nursing care should they need it.

The CPA thought that FIL should transfer all the money into MIL's name and then she should gift it to DH and his sister.

Of course, we have lots of questions. If they were to gift us this money, would it be safest to put the money in a savings account for five years and not touch it until then?  

Are there ways they could give us small amounts of cash throughout the year instead?

DH and SIL will probably have to consult with an elder care lawyer, but I worry that is going to be expensive and maybe not worth it for such a small estate.

Anyone been through this or have any ideas for us? 

[babygirlie]

I, personally would save the money for them as it's theirs and they may very well need it in the coming years. I would put the money in a trust with their names and whoever it is she wants to gift the money to and hopefully the executor of the trust will dole it out fairly.

[zebra15]

You need a tax attorney and an estate planning attorney to do this.  There are possible tax implications all around as well as cash flow issues for your parents.

[taubel]

Originally Posted by babygirlie 

I, personally would save the money for them as it's theirs and they may very well need it in the coming years. I would put the money in a trust with their names and whoever it is she wants to gift the money to and hopefully the executor of the trust will dole it out fairly.

We actually are planning to keep the money set aside until they pass away, just in case they do need/want it. We are also considering the possibility of buying a larger house in which one of them could live with us if necessary. We (and they) are just trying to avoid having the money be wiped out in one year of nursing home care.
 

[taubel]

Originally Posted by zebra15 

You need a tax attorney and an estate planning attorney to do this.  There are possible tax implications all around as well as cash flow issues for your parents.

We were told the amount of money was too insignificant to involve an estate planning attorney. They have no assets aside from this small amount of money.

I suppose we can consult with a tax attorney, though, on the tax implications for the "giftees."

I was just hoping somebody on here had dealt with a similar situation and had some tips to give us.

[SleeplessMommy]

If they gift $13K to each grandchild, the taxes will be pretty minimal. That would make a nice college fund and presumably not be touched for 5 years or more, in case medicade were to demand it back.

I think a single meeting with the appropriate estate lawyer would be worthwhile.

[mar123]

Why is medicaid involved if they are in their 80s? Shouldn't it be medicare? Dh's grandmother was recently moved to a nursing home (she is 94). She was in excellent health until suddenly she began having mini-strokes. She has very little money- actually, she often told her kids that she had no money, so FIL was paying her phone bill, another child was paying another bill, etc. When she ended  up in the hospital, they went through her information and it turns out she had 15K in a checking account- far too much to get into the nursing/rehab home with medicare paying for it. The hospital admin told her kids to write a check to themselves and put "loan payoff" on the memo. They of course are keeping it for her, but in an account without her name on it. If you keep it in account with her name, the govt will find it.

And if she gifts them $12K, it is tax free.

Good luck with your decisions!

[TiredX2]

Originally Posted by SleeplessMommy 

If they gift $13K to each grandchild, the taxes will be pretty minimal.

Taxes?  I think the gift tax exemption is currently $13K per person (so, as a couple they could actually give each child $26K with no tax implications).   Or is there another tax I am overlooking?
 

Originally Posted by mar123 

Why is medicaid involved if they are in their 80s? Shouldn't it be medicare?

The rules for this vary by state, but you can have Medicare and Medicaid.  If you are both elderly and low/no income then you can qualify for both.
 

[laura163]

Can someone explain this Medicaid lookback?  Is it for nursing homes or something else? I haven't heard of it.

[Auntie Sapphire]

The Medicaid "look back" rules are meant to keep people from making themselves appear to be low-income (which would qualify them for Medicaid assistance) by transferring their assets to others. Medicaid will look back five years from the application for gifts and transfers. Here's an example:

 In 2007, Mary gifted $15,000 to her grandson for college, and $10,000 to her granddaughter to help pay for her wedding. In 2008, Mary put her house, which was worth $200,000 at the time, in the name of her three children. At the time of these gifts, Mary was in good health.

In 2010, Mary suffered a stroke and needed nursing home care. After spending her remaining savings, Mary ran out of money and needed to apply for Medicaid. Because Mary’s gifts were made within the prior five years, she had to report them on the application. Based on the value of the gifts, Medicaid assessed a penalty period of 821 days — or a little over two years. Mary will not be able to qualify for Medicaid benefits during that period.

(source: http://fiftyplusadvocate.com/archives/1706)

In general, Medicare will not pay for nursing home care, and Medicaid will only pay if the person has no assets.