At social events, people always ask me about the new Medicare rules for nursing homes. Seniors worry a lot about having to spend down their assets and not being able to keep a certain amount. This never-ending drain on their money worries the healthy partner a lot, and since the sick partner can't do anything about being sick, they feel worse and worse. These people lived through World War II and the stock market crash of 1929. You can't buy something if you don't have the money. Most of them only got credit cards because they had to mail in payments for their prescriptions.
Their health and happiness depend on being able to use their resources to get what they need or to give their grandkids a few bucks when they come to visit. My mom is from this era, and I know it makes her day when my kids stop by to see her. She wants to give them something in return, not to get them to come back, but because she doesn't get enough visits and she values their time, especially in this day of instant gratification with iPods, the Internet, cell phones, video, etc., and because they valued their grandmother more.
So, the question "How can I hide my assets from Medicare?" is important to them. My answer is that if they didn't do something five years ago, they're probably not going to do it now. If they try to do something now, it could be seen as a way to trick a potential creditor. For example, if they put their son or daughter on the deed of the house without getting anything in return, it would be considered a "fraudulent conveyance" because they did it for less than the fair market value and got nothing in return. Or, if they knew they were giving the house to their children, it was a taxable gift, and they would have to pay taxes on it (the person giving the gift has to pay the tax, the person receiving the gift is always after taxes). But, like many people, they don't think about whether they need to file a gift tax return or if it might be a case of fraud. They only do it because it's easy for them.
The new rules about how much you can spend on Medicaid are very strict. The idea is that if you are older and have assets, you will have to get welfare before you can get help paying for a nursing home. And seniors are afraid of becoming like that. If a person in their generation had a strong back, they never asked for help. Instead, they worked to keep their pride. They don't want to be "welfare recipients" because it makes them feel bad.
Most common mistakes older people make when they try to hide their money:
- Let the kids have the house. You name at least one of the kids. Again not a good idea. What if the kids get sued, get divorced, or die young? There are too many dangers.
- Cash under the mattress, between the walls, in the basement, etc. Well, it works, but what if you don't tell anyone where you hid it? Or, let the money sit around and lose value because of inflation or lack of interest?
- Putting their children's names on their savings, checking, investment, or near cash accounts as (Parent's name "and" Child's name) or (Parent's name "or" Child's name). THIS IS NOT A GOOD THING TO DO. Too much risk, what if the child gets sued, gets divorced, or even worse, dies? You just made things worse.
We have faith in God.
The most common and useful legal tool is a trust. The best way to hide your assets is with a "Irrevocable Trust." Your property is MOVED from you to an unchangeable trust. You no longer "legally" own the assets. This means that the assets are actually given to a trustee who will manage them and own them for the benefit of all the beneficiaries. This kind of control over assets has been around since the Middle Ages, when landlords went to the Crusades and left their lands in the care of monks until they came back. There are laws about it, and the legal system generally accepts it as a legal and acceptable way to protect one's assets and pay less in taxes.
