Disability and Assets, Retirement-style!!

My in-laws are getting ready to retire, and have a decent amount of money they’d like to hold onto in case either of them becomes disabled.

From a loose reading of the Medicaid/Medicare laws, I read that, as a married couple, if ONE member becomes disabled, assets get spent down to $84k on the assets shared in matrimony (which in this case are virtually all the assets). My in-laws don’t have zillions, but they have enough to want to hide it.

My question is (and I don’t think it’s illegal…just finding loopholes. If the reply to my question would be illegal, please remove this post, Mods) how my in-laws can remove assets from the 5-year lookback period stated in Medicare laws. There are tons of people online who claim to be able to “hide” assets, but they seem fly-by-night.

We’ve thought it through, and it seems that off-shoring of dollars is the only way to go, short of buying bullion and backyarding it.

Does anyone have any experience in doign this? Any leads? Are the fly-by-night folks actually legitimate?

-Cem

I’d recommend spending some of the money on a long-term disability insurance policy.

Not a bad idea, but my In-laws are creeping up on age 65, and the premiums would be fairly large, provided the in-laws even got through underwriting. Ditto for LTC policies, which would likely be denied due to age.

I should give some background on what we’ve ruled out:

[ol]
[li]Annuities. If my inlaws become disabled, this is still considered an “asset”.[/li][li]Buying a second home: ditto/[/li][li]Buying a super-expensive home: Medicare allows you to have a $500k home, and that’s it. Any worth over $500k still has to be spent down.[/li][li]Giving the money to kids, grandkids, etc: There’s a $12k annual cap on non-taxable gifting.[/li][li]Investments: These are assets under Medicare law.[/li][/ol]

-Cem

Isn’t this what Trusts are for?

Put all of their money and assets in a trust. If something happens to them, they just sign the trust over to someone else and say “whoops! we have no money! The Trust Of Mom and Dad Cemetary buys us lunch and underwear, though.”

My FIL and I discussed this briefly, but I think the 5-year lookback on Medicare woudl obivate this as an option.

Example: My In-laws create a trust today. They turn 65 tomorrow. When Medicare looks back 5 years, they see that the trust was created 1 year prior. Therefore, subject to being spent down before Medicaid kicks in.

To make it blunt, the In-laws are lookign for a way to shield assets if they become disabled. Is it possible? If we’re going to start an ethical discussion “Is it right to shield assets”, we’ll start another thread (this is more of a forward-looking statement…not directed at you, ZipperJJ!).

Oh, and ZipperJJ…I still get plenty of underwear each X-mas…don’t need a trust for that!

Thoughts?
-Cem

Check with a lawyer that specializes in Elder care. My grandmother was in a similar situation, and she worked with a lawyer to legally protect her assets in the case she goes into a nursing home.

Buy a Picasso.

Just to play the part of the Devil’s advocate, why should someone get advice on stashing assets to obtain government benefits at the expense of all the other taxpayers?

I think you are referring to Medicaid, our medical care program for the poor, not Medicare, our medical program for the elderly.

Both are supported by taxes.

You’re right…I’m referring to Medicaid…I know I interspersed those two frequently.

Medicaid.

-Cem

Seconded, you want an estate planning lawyer who specializes in Elder Law. This stuff is pretty complex, and fact-specific. Here is a discussion of the look-back rules: http://tartalaw.com/articles/EstatePlanningMedicareMedicaid.aspx

and another: http://www.elderlawanswers.com/elder_info/elder_article.asp?id=701#3 , which notes:

Racer72, refer to the 3rd paragraph of my second post. If you want to start a Great Debate on the ethical grounds of tax-law loopholes, have at it. Not here, please.

-Cem

Gfactor, great stuff…I’ll read and digest this info. The thought was always to eventually get an Elder Care lawyer…my inlaws and I are more interested in self-educating prior to that discussion.

-Cem

I was actually addressing the OP, not you, who seems to be confusing them.

However, the asset test applies to Medicaid, the program for the poor. Thus, even those with high assets are eligible for Medicare. Medicare does have some means-tested premiums based on income, but those with high assets or income are still eligible. Hiding assets will only be a factor in becoming eligible for Medicaid, the program for the poor. Thus, the burden on the taxpayer only increases for Medicaid, if rich folks hide assets to appear eligible.

And let’s keep the answers factual and away from ways to “hide” assets. If the transfer is part of a legal loophole, you don’t need to conceal it.

Here’s what the OP asked for:

I’d note that fly-by-night operations are seldom legitimate.

Seriously, see a lawyer. If they’ve got that much money, and are trying to dissipate it, it doesn’t make sense to do it on the cheap.

And Medicaid pays for long-term custodial care, while Medicare does not; that can be a big deal. There are plenty of other differences and it all gets very complex.

And without getting into moral issues be very careful if you transfer assets into another’s name. I knew a woman who transferred her assets into her son’s name at the age of 60 to game the system, expecting to beat the 5 year transfer rule. When he unexpectedly died all of her assets were inherited by his wife, who was not friendly with his family, and not generous either. It got very ugly, very quickly, but legally, it was his widow’s money.

I don’t want to help anyone hide assets so everyone else can pay for someone who could afford to pay for their care themselves. That being said you should be careful not to dismiss possibilities based on pre-conceived notions. Long term care insurance is routinely purchased by folks in their sixties, that is the target market for the product. It would satisy many of their problems, they would not list it as an asset, they would have help if they needed care, and they wouldn’t be burdening the tax paying public.

I would get a quote before dismissing it as an option.

It requires a special kind of trust, not just any trust, to exclude assets from Medicaid. I’m not sure how that affects the ‘look-back’.

One more time - get a lawyer that specializes in this area. It’s really not something you want to tackle yourself. If they don’t explain things well enough that you absolutely understand them, find a different lawyer. (Then you can go do your research, to confirm what you’ve been told, etc.)

You should be able to get free initial consults with any lawyer working in this area.