Question:  I am 75 years old and have a modest amount of savings, a home without a mortgage and a small retirement pension plus my monthly social security check.  I am in relatively good health, and quite candidly hope to live for another 10-15 years.  I have one child who is in her 50s but can’t seem to keep a job or a marriage.  She is again without a job and is now divorced for the 3rd time.  My question is whether I should start gifting her my money and perhaps gift her my home as well in anticipation of my needing nursing home care in the future.  What would you recommend I do from a financial planning perspective, factoring in the fact that elder care cost so much in California?”

Answer:  It is great to hear that you are in good health, but your finances may not be as healthy as you are.

The good news is that your estate is under the current $5 million limit, so there are no estate tax issues.

The bad news is that, based on your information, you have very limited liquidity, and liquidity is the secret of financial survival.  In my opinion, you need to have $1 million in liquidity, that is cash, stocks, or a pension plan, so that you are financially secure during retirement.

Also, there is a real concern about Medicare.  Will it be around in 10 years and will it pay the lion's share of your medical expenses in the future, and if not, will you be able to afford these medical expenses? 

Another concern that you should have is that California is bankrupt.  What affect will this have on its ability to provide California residents with Medi-Cal benefits?

If you have not done so already, I would suggest that you do the following:

1. Meet with a financial planner to develop a financial "road map".
2. Meet with an attorney to have the following legal documents prepared:  Power of Attorney for Health, Power of Attorney for Finances, and a Living Trust (which can help your estate avoid the high cost of Probate)  

Finally, regarding your daughter.  I would suggest that at 50 years of age that she assume responsibility for herself–that she find a job, and perhaps start thinking about taking care of you and your elder care needs.

Hope this helps.

Orlando J. Antonini, CPA/PFS, CFP, QFP, RIA, NCG
Antonini CPAs LLP
San Francisco, California
Member of the national ElderCare Matters Alliance, California chapter

Question:  Would you please provide me with some information re: gifting as it relates to VA planning for Aid & Attendance.  It is my understanding that there are no penalties involved for gifting assets in order to reduce resources to approved levels.  Mom’s income is less than the medical expenses that she will pay in the assisted living facility, but her assets are a bit too high.

Answer:  At this time, gifting does not create penalties (or periods of ineligibility) for the purposes of VA pension benefits.  That being said, gifting for VA purposes may create penalties (periods of ineligibility) for the purposes of future applications for Medi-Cal for skilled nursing facilities.  Any time you do gifts for VA purposes, you should be structuring a plan that ensures that you will not be creating periods of ineligibility for future Medi-Cal applications.  Often a stroke, hip fracture, heart attack, or some other unexpected medical hospitalization and subsequent discharge to a skilled nursing facility will create a need for Medi-Cal benefits within the look-back period (currently 30 months after the gift was made, or 60 months in the case of gifts to irrevocable trusts, and 60 months for all gifts in the future when the Deficit Reduction Act is implemented with filing of final regulations with the Secretary of the State of CA).  If you have not structured the gifts to create either no period of ineligibility or very minimal period of ineligibility, then you will have shot yourself in the Medi-Cal foot when you do your VA pension gifts.  Because the gifting rules for Medi-Cal are complicated, see an experienced California attorney who knows the current rules about gifting.  Be sure to ask the attorney if they are experienced in the laws governing gifting under Medi-Cal and if they can structure a gifting program that will not create a period of ineligibility, or that will greatly minimize any gifting period of ineligibility.  Also, if you are thinking of gifting real estate, the rules are even more complicated for purposes of VA pension or Medi-Cal, and you will need an attorney with experience in both areas of law.  Any time you gift an asset that has appreciated in value since purchase, there will be tax issues to evaluation, discuss, and account for—income tax issues, capital gains step-up issues, 121 exclusions, property tax reassessment issues, so do not try to do this on your own.  Lastly, when someone needs VA pension now, it is not unlikely that they will need Medi-Cal within a matter of months or a few years, so always consider that VA gifts may create Medi-Cal penalties if not structured properly.   The area of gifts for VA and Medi-Cal is not a do-it-yourself proposition.  Get good legal advice and guidance. 

Dallas Leigh Atkins, Esq.
Law Offices of Dallas Atkins
Santa Barbara, CA  93101
805-687-8782
www.AtkinsElderCareLaw.com
Member of the national ElderCare Matters Alliance, California chapter

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Phillip G. Sanders, MBA, MSHA, CPA
Founder & CEO
ElderCare Matters, LLC
ElderCareMatters.com

Answer:  The correct answer is "It depends". It depends on your unique family, health, and financial situation. Tax consequences also have to be considered. In the event you need long-term care, there is a five year look-back period that applies to gifts (transfers of assets without consideration). Thus, if you are faced with a chronic or catastrophic illness within five years after you transfer the home to your children; such transfer may impact your ability to obtain Medicaid (Title 19) benefits. This is a very complicated area of the law and requires careful consideration.

If it makes sense to transfer the home to your children, there are several ways to structure the transfer. The first is an outright gift to your children. This is generally not advisable for tax reasons and asset protection purposes. The second is by completing the transfer but retaining a life estate. While generally superior to an outright gift, this is also not without problems. However, the retained life estate does give you some legal control over the property and also preserves some tax benefits associated with inherited property versus gifted property. The third is a transfer of your home to an irrevocable trust. This is usually the preferred method of protecting the home as it balances tax benefits with asset protection issues and also protects the home from your children's creditors or in the event they should predecease you.

As you can see, the transfer of your home is something that requires careful consideration and sound legal counsel.

Paul T. Czepiga, Esq., CELA
Czepiga Daly Dillman, LLC
Newington, CT  06111
860-597-7995
www.CtSeniorLaw.com
Member of the national ElderCare Matters Alliance, Connecticut chapter

Answer:  There is a 5 year look back period for Medicaid.  Any asset transfers, including gifts, made within this 5 year look back window will trigger a penalty period of ineligibility to receive Medicaid benefits.  There are ways to avoid triggering these penalties but an outright gift is not one of the ways.  

As an example of the problem with making an outright gift, if your grandfather gifts to you $200,000 today and in 3 years requires skilled care, the gift of $200,000 will render him ineligible for Medicaid benefits for a significant period.  During the period of ineligibility he, or you, will have to pay for any nursing home care. 

In Massachusetts, the homestead protection will not keep your grandfather’s $200,000 from the reach of nursing homes, but a primary residence is often an exempt asset for Medicaid (Mass Health).  In Massachusetts however, the nursing home or skilled care facility will be able to put a lien on your home if you use a portion of his $200,000 gift to purchase the home and put his name on the deed.  

However, since you are buying your home in Florida, it may be to your grandfather’s advantage to have him contribute to the new house and count it as his “homestead”.  If he requires nursing home care in Florida, it is my understanding that his $200,000 would be exempt, but you should check with an attorney in Florida.  

If your grandfather is truly seeking to protect assets from the reach of nursing homes, setting up an asset protection trust is often the recommended option.  Creating an irrevocable trust starts the 5 year look back clock as soon as the trust is funded.  Once the property is in the trust, your grandfather can make any type of gift or transfer he so chooses without “resetting” the 5 year look back period.  In addition the irrevocable trust allows your grandfather to protect ALL of his assets while allowing access to income.  As another added benefit, your grandfather’s life savings will be left to his loved ones without the need for probate.

To find  competent, caring elder care professionals across America who are located near You and can help you with your elder care matters, go to: www.ElderCareMatters.com - A FREE online resource to find elder care experts plus elder care information & answers to your elder care questions.

Dennis B. Sullivan, Esq., LLM, CPA
Estate Planning & Asset Protection Law Center of Dennis Sullivan & Assoc.
Wellesley, Massachusetts  02482
781-237-2815
Member of the national ElderCare Matters Alliance, Massachusetts chapter 

Answer:  I would NOT risk losing Medicaid over this car. I suggest buying the car for a nominal price.

To locate competent elder care professionals who are located near You and can help you with this type of elder care matter, go to: www.ElderCareMatters.com - A FREE online source to find elder care experts plus information & answers about a wide range of elder care matters.

John E. Settle, Jr., Esq.
John E. Settle, Jr., Attorney at Law 
Bossier City, Louisiana  71111
318-742-5513
Member of the ElderCare Matters Alliance, Louisiana chapter

Answer:  Whether giving away assets is a good strategy for your parents will depend on a number of factors including their age, health, how they feel about giving up control over their assets, and how they feel about having less flexibility regarding where care can be provided.  

Oftentimes assets are given directly to a child with the thought that the child will use the funds for the parents later when the need arises.  But a true and complete gift does not come with strings, once given to the child there is no legal obligation on the part of the child to help mom and dad later.  What if the child does have good intentions to help mom and dad, but divorces, is sued, is influenced by a spouse, or is just not good with money?  Mom and dad’s hard earned assets may be taken away forever. 

Giving assets away can be tricky.  If after giving assets away mom or dad needs care prematurely i.e., within 5 years of the gift, a penalty period or period of ineligibility for Medicaid will result.  This period will not begin to run until mom or dad applies for Medicaid. 

You don’t indicate your parents age or health status, but purchasing a long-term care insurance policy to cover a period of 5 years could be a good investment.  There are policies available that include a return of premium feature, meaning that if the policy is not used the premiums are given back.  There are also life insurance policies that have long-term care riders.  With this type of policy if long-term care is needed the policy is tapped and if not it continues as a regular life policy paying a benefit on death. 

It will be worthwhile to consult with an elder care attorney to learn about all the options for long-term care planning available.  The guidance of a professional will save the family time, money and stress in the long run.

To locate experts in your state who can help you with these elder care matters, go to: www.ElderCareMatters.com - America's online source for elder care experts plus information & answers about a wide range of elder care matters.

Heather R. Chubb, Life Transitions Lawyer
The Chubb Law Firm
Gold River, California  95670
916-635-6800
Member of the national ElderCare Matters Alliance, California chapter

Answer:  The truth is that, the Medicaid department is not authorized to send anyone over to actually take possession of the house.  However, after the death of the second parent the state wants to be paid back and may seek “recovery” from assets owned by the survivor at the time of the survivor’s death.  However, the state may only be paid back up to the amount that they actually paid out, but this still may result in the forced sale of your parents’ home. 

However, in your case there is an exception to the recovery rules because your parents have a disabled child.  When there is a surviving disabled child a recovery claim is prohibited by federal and state laws.  The surviving disabled child will need to provide documentation of disability or blindness, such as a Social Security or SSI award letter and a birth certificate showing they are the child of the deceased. If the surviving child does not have documentation of disability from the Social Security Administration, he/she can still file for a disability determination with the Medicaid department.  It is important to note that the surviving child does not have to live in the home (or even in the State, for that matter) in order for recovery to be barred. 

Signing over the home now may sound like a good idea, but it carries some big risks.  First, when your parents sign over the house they lose control and that can mean that the kids can kick them out at anytime.  In addition, if a child’s marriage ends in divorce or the child is sued the house can be taken away.  Finally, if your parents sign over the house and then need Medicaid within 5 years of the transfer a penalty and ineligibility for Medicaid for a period of time will result with the ineligibility period starting at the time they apply for Medicaid. 

As you can see Medicaid planning is filled with traps for the unwary.  I encourage you to seek the advice of a qualified elder law attorney in your state who will help guide you through the process.

To locate experts in your state who can help you with these elder care matters, go to: www.ElderCareMatters.com - America's online source for elder care experts plus information & answers about a wide range of elder care matters.

Heather R. Chubb, Life Transitions Lawyer
The Chubb Law Firm
Gold River, California  95670
916-635-6800
Member of the national ElderCare Matters Alliance, California chapter

Answer:  Most states have a look-back period of five years and any gift made in the five-year period prior to applying for Medicaid would put you in a penalty period of ineligibility for Medicaid.  This penalty period of ineligibility for Medicaid starts when you are otherwise eligible for Medicaid.  The meaning of “otherwise eligible” varies from state to state, but in Illinois this means you have $2,000 or less in assets and you are in a Medicaid facility. You should not make an outright gift or transfer of your home to your daughters.  Aside from the penalty period Medicaid will impose, there are consequences in regards to your real estate taxes as well: 1) you will lose your homestead exemption, 2) you will lose your senior exemption and possible senior freeze or deferral of taxes, and 3).  you would be transferring your basis in the property to her as a gift rather than giving her a “step-up” in basis at the time of your death.  This means, she would have to pay capital gains tax on the property based upon the difference between your original purchase price and the price she sold the home for in the future.  For these reasons, I cannot recommend you gift or transfer the property to your daughter or daughters.

As far as Medicaid is concerned, if you sell your property for fair market value to your daughter or another third party, this will not affect your eligibility for Medicaid.  Furthermore, this would allow your daughter who resides with you to establish her own homestead exemption.  However, if she rents the property back to you this would be rental income to her that she would have to claim on her taxes. 

There is a caretaker child exemption in many states which allows the transfer of the home to a child who has cared for their parent without creating a penalty for Medicaid.  Illinois is currently in the process of changing all of their Medicaid rules to come into compliance with the Deficit Reduction Act.  Under current Illinois rules, transferring the home to a caretaker child is an exempt transfer (PM 07-02-20(b)).  To qualify as a caretaker child in Illinois, the rules state, “a person’s child who provided care (either nursing or support) for the person and who was living in the homestead property for at least two years immediately before the date they entered the facility or applied for/received [Medicaid] services.”  Under the new proposed rules from Illinois, they initially proposed rules that were hyper-technical and would effectively eliminate the possibility for this exempt transfer to occur.  I created and co-chair the Task Force for Senior Fairness with fellow elder law attorney, Diana M. Law, which has worked tirelessly to combat Illinois’s proposed rules in areas we consider to be too harsh, punitive and draconian for our Seniors.  One of our wins, is that Illinois has changed their proposed rules in the area of the caretaker child.  The rules still contain more criteria to qualify as a caretaker child, but the exemption remains and is now manageable to obtain.  Once the new rules are implemented, the caseworker will also need proof of the child’s residence and a doctor’s note stating the applicant would have had to go the nursing home earlier but for the child’s assistance they were able to stay at home.

The best advice I can give you is to see an elder law attorney in your area while you are still healthy who is familiar with Medicaid, Real Estate and Personal Care Contracts so you can establish in writing that your daughter is providing care for you. 

NOTE:  The information provided above is not intended to be nor should be relied upon as legal advice.  Peck Bloom, LLC is located in the State of Illinois and the attorneys are only licensed to practice law in Illinois and Florida.  You should consult a qualified attorney licensed in your state regarding these matters.

To locate experts in your state who can help you with this elder care matter, go to: www.ElderCareMatters.com/statechapters.htm

Kerry R. Peck, Managing Partner
Peck Bloom, LLC
Chicago, Illinois  60603
1-877-845-1743

Member of the national ElderCare Matters Alliance, Illinois chapter

Answer:  A last will and testament becomes effective only upon death and does not contain provisions for planning at incapacity.  However, a properly drafted trust appoints a successor trustee to make distributions to or for the benefit of the Settlor at his incapacity (and this can be expanded to provide for others as well upon the incapacity of the Settlor (such as the Settlor's spouse and children).  Also, a power of attorney for healthcare and property can be used which names an agent to make healthcare and property decisions for a person should they become incapacitated.  These can be drafted with very broad powers, or the powers of the agent can be as limited as desired.  Also, the power of attorney for property can include provisions which allow the agent to make gifts and other estate planning decisions on behalf of a person who has become incapacitated, if that is desired.

NOTE:  The information provided above is not intended to be nor should be relied upon as legal advice.  Peck Bloom, LLC is located in the State of Illinois and the attorneys are only licensed to practice law in Illinois and Florida.

To locate experts in your state who can help you with this elder care matter, go to: www.ElderCareMatters.com/statechapters.htm

Kerry R. Peck, Managing Partner
Peck Bloom, LLC
Chicago, Illinois  60603
1-877-845-1743

Member of the national ElderCare Matters Alliance, Illinois chapter

Answer:  Most states have now enacted the changes to Medicaid eligibility under the Deficit Reduction Act of 2005. This Act changed the look back period (the period during which Medicaid "looks back" to see if any gifts were made) from three year to five years. Therefore, any transfer of the home should happen at least 5 years in advance of the need for Medicaid. However, you must educate yourself about all the issues surrounding a house transfer before you take this step. Sometimes transferring the house could be a worse solution than Medicaid (who may not even force the house to be sold). Problems include: capital gain taxes, loss of senior property tax exemptions, children creditor problems, fights between children, etc. Rules are different in every state, so this may not apply to you and your situation. I strongly advise you to talk with an elder law attorney in your state before making any transfers.

To locate experts in your state who can help you with this elder care matter, go to: www.ElderCareMatters.com/statechapters.htm

Ben A. Neiburger, JD, CPA
Neiburger Law, Ltd.
Elmhurst, Illinois  60126
630-782-1766
Member of the national ElderCare Matters Alliance, Illinois chapter

Answer: It appears that with the facts given you could put the money into a Medicaid Asset Protection Trust and he should qualify for Medicaid now.  If carefully drafted, you could be the trustee and even provide for certain bills that could be paid from these funds for his care.

David F. Anderson, Esq.
David F. Anderson, P.A.
Miami Lakes, Florida  33016
305-825-4052
Member of the national ElderCare Matters Alliance, Florida chapter

Answer:  If you are an elder care professional and you would like to "get the word out to thousands of families across America in a cost effective way about how you can help them plan for and deal with their issues of aging", then you should join our 1,250 elder care experts as a lifetime member of the national ElderCare Matters Alliance.  And, now, if you are one of the next 250 members, you will receive a 25% discount off the regular lifetime membership price.

This 25% discount is available only to the next 250 elder care professionals who join the national ElderCare Matters Alliance.

So if you are a competent, caring elder care professional – take advantage of this special 25% discount offer and pay only $337.50 for a "lifetime membership" (and there are no annual membership dues, ever!) to the national ElderCare Matters Alliance.

To request an Application for Lifetime Membership, send an email directly to: psanders@eldercarematters.com

Phillip G. Sanders, MBA, MSHA, CPA
Founder & CEO
ElderCare Matters, LLC
1-877-379-4500
www.ElderCareMatters.com

If you are an elder care professional and you would like to "get the word out to thousands of families across America in a cost effective way about how you can help them plan for and deal with their issues of aging", then you should join our 1,250 elder care experts as a lifetime member of the national ElderCare Matters Alliance.  And, now, if you are one of the next 250 members, you will receive a 25% discount off the regular lifetime membership price.

This 25% discount is available only to the next 250 elder care professionals who join the national ElderCare Matters Alliance.

So if you are a competent, caring elder care professional – take advantage of this special 25% discount offer and pay only $337.50 for a "lifetime membership" (and there are no annual membership dues, ever!) to the national ElderCare Matters Alliance.

To request an Application for Lifetime Membership, send an email directly to: psanders@eldercarematters.com

Phillip G. Sanders, MBA, MSHA, CPA
Founder & CEO
ElderCare Matters, LLC
1-877-379-4500
www.ElderCareMatters.com

Answer:  The experts of the national ElderCare Matters Alliance.

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Phillip G. Sanders, MBA, MSHA, CPA
Founder & CEO
ElderCare Matters
1-877-379-4500
www.ElderCareMatters.com

Answer:  Unfortunately under Medicaid regulation, it is any transfers that can disqualify you as a MassHealth applicant, even if they are legal under tax law.

Susana Lannik, Attorney at Law
Lannik Law, LLC
Newton, Massachusetts  02458 
617-658-2980
Member of the national ElderCare Matters Alliance, Massachusetts chapter

The ElderCare Matters Alliance is a national organization of 1,200 elder care experts who help families across America plan for and deal with their issues of aging, including providing families with a host of elder care resources that can be found on www.ElderCareMatters.com

If you are a competent, caring elder care professional – you need to belong to the national ElderCare Matters Alliance.

To request a Lifetime Membership Application to the national ElderCare Matters Alliance, send an email to psanders@ElderCareMatters.com

www.ElderCareMatters.com – America's online source for elder care experts who help families plan for and deal with their issues of aging.

Phillip G. Sanders, MBA, MSHA, CPA
Founder & CEO
ElderCare Matters
www.ElderCareMatters.com