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Old 09-02-2008, 04:41 PM
commasense commasense is offline
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Inheritances and Medicaid

As I mentioned in a previous thread, my father is about to inherit several hundred thousand dollars from his late brother's estate. However, apparently the estate is split between my father and his sister, who is now in a nursing home under Medicaid coverage. She has spent down her entire savings (or soon will).

Dad tells me that under the provisions of Medicaid, anything she inherits will go directly to the government. If true, this is not in the best interests of her or the rest of the family (except in the broad general sense that it helps to fund the Medicaid program), so I am looking for any suggestions (legal ones, obviously) for ways the family could retain as much of this cash as possible.

Dad has an eldercare lawyer working for him, and he will no doubt get good advice from him, but I'm just looking to get as much additional information as I can. If it makes any difference, my uncle lived in Arizona, Dad and I live in Maryland, and my aunt lives in New York City.

My questions:

1. First off, is Dad right that Medicaid will take any inheritance my aunt receives?

2. Is there any way to change the effect of the will so that Dad gets all the money and can use his sister's share to take care of her? (With her consent, of course.)

3. Can she renounce or give away the inheritance before the government has a claim to it?

4. Can she opt out of Medicaid and pay her own bills with the inheritance? Depending on how long she lives, this might just put her back in the same situation in the end, but it also might enable her to afford a nicer place in the mean time.

5. If she does opt out, can she return to Medicaid coverage the same way she did before she got the inheritance?

6. Are there any other ways for us to keep as much money in the family as possible, instead of turning over hundreds of thousands to the gummint?

7. Any other advice you can give me about this situation?

Thanks.
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  #2  
Old 09-02-2008, 06:55 PM
Bridget Burke Bridget Burke is offline
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As others advised you in the previous thread, this is a matter for serious legal advice.

Personally, I must say that your concern for your elderly aunt is truly touching.
  #3  
Old 09-02-2008, 07:01 PM
LurkMeister LurkMeister is offline
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Medicaid laws vary from state to state, so the best source of information for your aunt would be an attorney familiar with NY Medicare or Eldercare law. I did find this online, though, which answers a few of your questions.
Quote:
Your father was legally entitled to renounce all or part of his inheritance within nine months of his sisterís death. The amount he renounced automatically passed to the next heir named in her will - you.

Tax law says when you disclaim an inheritance, itís as if you never had the money. Unfortunately, Medicaid law says your fatherís inheritance was a resource available to pay for his care, says Bernard A. Krooks, a Manhattan elder law attorney. By renouncing it, he transferred his assets to you.

That transfer made him ineligible for Medicaid nursing home benefits during a penalty period thatís determined by dividing the amount he transferred by the average monthly cost of a nursing home. ďLetís say he renounced a $100,000 inheritance, for example. If the average monthly cost of a nursing home on Long Island is $10,000, then for 10 months, heís ineligible for Medicaid,Ē Krooks says.

Medicaid is entitled by law to recover benefits paid during that penalty period from the inheritance your father renounced. Itís a waste of legal fees for you to contest the agencyís claim, Krooks says.

It would have been better to have had your father accept his inheritance, he said. He could then have given half of it to you without endangering his ability to pay for the nursing home. Hereís how:

Dad inherits $100,000. He gives $50,000 to his son. Assuming a $10,000 monthly nursing home cost, the gift makes him ineligible for Medicaid for five months. Dad lends the remaining $50,000 to his son in exchange for a promissory note. The loan is to be repaid in over five months in $10,000 installments. Dad uses those payments to pay for his nursing home care during the five-month penalty period.
  #4  
Old 09-02-2008, 07:06 PM
Harriet the Spry Harriet the Spry is offline
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Quote:
Originally Posted by commasense View Post
4. Can she opt out of Medicaid and pay her own bills with the inheritance? Depending on how long she lives, this might just put her back in the same situation in the end, but it also might enable her to afford a nicer place in the mean time.

5. If she does opt out, can she return to Medicaid coverage the same way she did before she got the inheritance?
My understanding is that both of these are possibilities. Medicaid is a program for the poor. Having money will make her ineligible for the program. If she becomes poor again, she would once again become eligible.

I am not aware of any provisions in Medicaid where they would retroactively charge against her inheritance for services they've already paid for.

Without trying to be too judgmental, by not using her inheritance to pay for her care she would be asking the taxpayers to pay for her care. There really isn't a "the government," it's just the taxpayers. Most taxpayers would prefer to only pay for those who absolutely can't pay for themselves.

Here is a related story: http://www.bendweekly.com/Living/3280.html

Medicare, which pays medical bills but not most nursing home bills, is largely unaffected by income and assets, in case you were wondering about that, too.
  #5  
Old 09-02-2008, 09:50 PM
commasense commasense is offline
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Quote:
Originally Posted by Bridget Burke View Post
As others advised you in the previous thread, this is a matter for serious legal advice.
Thanks for your help.
Quote:
Personally, I must say that your concern for your elderly aunt is truly touching.
If this is snark, I will only say, within the limits of what can be said outside the Pit, that you know nothing about me or my family situation. I am very concerned about the well being of my aunt.

Seeing that my family's finances are handled in a way that legally maximizes the benefit to all of us is only part of the way I'm expressing that concern.

Last edited by commasense; 09-02-2008 at 09:53 PM..
  #6  
Old 09-02-2008, 09:59 PM
Dangerosa Dangerosa is offline
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1. First off, is Dad right that Medicaid will take any inheritance my aunt receives?

Once they become your aunt's assets, they must be used for her support


2. Is there any way to change the effect of the will so that Dad gets all the money and can use his sister's share to take care of her? (With her consent, of course.)

No.

3. Can she renounce or give away the inheritance before the government has a claim to it?

No.

4. Can she opt out of Medicaid and pay her own bills with the inheritance? Depending on how long she lives, this might just put her back in the same situation in the end, but it also might enable her to afford a nicer place in the mean time.

Possibly.

5. If she does opt out, can she return to Medicaid coverage the same way she did before she got the inheritance?

Probably

6. Are there any other ways for us to keep as much money in the family as possible, instead of turning over hundreds of thousands to the gummint?

No.

7. Any other advice you can give me about this situation?

The IRS and the Medicaid program has taken a lot of care over the years to keep people from not paying their own bills. You can't come up with a loophole they haven't closed. Had your uncle cut his sister from the will, then your aunt would be out of luck, but once he dies, nothing can be done.

And do get a lawyer.
  #7  
Old 09-03-2008, 12:51 AM
commasense commasense is offline
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Dangerosa, thanks for your reply. In light of your rather forceful, but uncited, responses, would you mind either providing a cite or two, or giving me some idea of your credentials on the subject?
Quote:
Had your uncle cut his sister from the will, then your aunt would be out of luck, but once he dies, nothing can be done.
He died rather unexpectedly just as she went onto Medicaid. If he had lived a little longer, he probably would have cut her out, which would have been to her benefit, and have helped my father a lot more, too. (See below.)
Quote:
And do get a lawyer.
We have one, as I said in the OP.

As for the inference that some people seem to be making that I'm trying to cheat the government for my own personal benefit, the facts are these. First of all, I've only asked for legal options. Second, my aunt was quite poor, with only a few thousand in savings when she went into the nursing home. She had no assets, no house (she rented an apartment for 50 years). But she has retirement income from her former employer that is roughly equal to the cost of her nursing home. That is now going to Medicaid, so the U.S. taxpayers are breaking even on her.

The financial situation of my father and stepmother, both in their late seventies, is only slightly better, and we have been concerned about what will happen to them as they age. We had no idea until we saw some of my uncle's financial statements a few weeks ago that he had saved quite so much. My father had thought that he was going to inherit it all, with the understanding that he'd take care of his sister. But it turns out that the estate is split between them.

If Medicaid does take half of the estate, this is a significant loss to everyone in the family. My aunt gets no better care than she would have otherwise, my father has that much less to provide any additional support she may need or want, and he and my stepmother have lost half of a nice cushion to take care of them as they age.

There is a very slight chance I could inherit some of this money if both my father and stepmother die without needing much in the way of elder care, but realistically I have no expectation of receiving a penny of it.

So anyone who thinks I'm trying to scam the government or line my own pockets, get st... [checks forum] ...just tell me how happy you'd be to see anyone in your family lose a couple hundred thousand bucks, for whatever reason.

And thanks for [most of] the advice so far, and any further responses.
  #8  
Old 09-03-2008, 04:58 AM
Kalhoun Kalhoun is offline
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Not sure about all the legal questions, but if I were your aunt, I'd take the money and get an in-home full-time caregiver. Nursing homes (even the nicer ones) really suck. What's her condition?
  #9  
Old 09-03-2008, 07:17 AM
Dangerosa Dangerosa is offline
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Quote:
Originally Posted by commasense View Post
Dangerosa, thanks for your reply. In light of your rather forceful, but uncited, responses, would you mind either providing a cite or two, or giving me some idea of your credentials on the subject?
I'm a non practicing accountant with primary interest in tax and estates. (I'm a practicing IT Project Manager, which does you no good whatsoever, unless you want an implementation plan for swapping out your DNS infrastructure). However, as a non practicing accountant, I'm not up on current information - but the basics of estate law do not change:

Whether or not your uncle died unexpectedly, he died with a will - that will is the legal document who controls who gets what - there is no changing the will at this point in time. Moreover, the ESTATE pays any taxes, it is not your father's money until the estate is cleared and turned over to him, therefore, he has no rights to change any terms.

This is why its important to do estate planning and keep your will up to date.

My understanding - but I'm certainly no lawyer and am in Minnesota- is that medicare will not - in Minnesota - allow you to give away your assets and become eligible for Medicare without a much longer waiting period than the article about New York states. In my grandmother's case, her assets were signed over YEARS before she needed nursing home care (I recall a three year lookback period).
  #10  
Old 09-03-2008, 08:24 AM
Dinsdale Dinsdale is offline
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I have no idea as to the specifics of whatever your family might be able to do, but I post the following as support for having a good estate lawyer involved. I'm a lawyer, but not an estate lawyer, and I had no idea this type of thing was possible.

My parents refused to make a will. When my mom died about a decade ago, my dad realized (duh) that because everything went to him, they missed the opportunity for tax savings if at least a portion of their assets had passed to their children at that time. We hooked up with a lawyer who started proceedings for my dad to disavow any interest in my mom's 1/2 of their communal assets, which would have it go directly to their kids.

Then my dad died a month later before we got everything finalized. I was surprised that we were able to get the court to authorize my dad's disavowal posthumously. It was nothing other than a blatant tax dodge, but the court did not even bat an eye. The actions saved the estate several times the amount of the lawyer's bill.

With Medicare involved, it may well be different. And tax/inheritance laws have changed considerably over the past 10 years.

Good luck.
  #11  
Old 09-03-2008, 08:32 AM
Czarcasm Czarcasm is offline
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It looks to me as if you are seeking legal advice. If so, you should seek out a lawyer.

Closing thread.
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