A House Divided

One of the biggest issues seniors face as they get older is how to preserve an inheritance for their children. Their biggest fear is spending all of that money on assisted living and/or nursing home care. As each family situation is different, so is each solution. Perhaps you can learn something from the experience of one of my clients.

Here's their situation in their own words, with their names changed, of course:

"Tom's mom has decided that she wants to move to a retirement home while she can make her own decisions about where and when to go. She's on the waiting list at one that's so nice I may go too!"

"Anyway, we are looking at options of what to do with her house. She's always wanted the house to go to Tom and his brother Les even if she has to use up every other asset she has."

"Les is disabled and on Social Security Disability Income. Mom sends Les about $150.00 a month to help out. Her first thought was to sell the house and divide the proceeds now. Tom thought it might be better for her to lease it and then she could still send Les money each month."

"Also, if she were to sell, we think she should keep the money in case she ends up needing it to live on. I know there are tax limits on gifts of money, (and not sure what all that would do to Les's assistance eligibility). Maybe she could sell, give each $10,000 and keep the rest for her future living expenses. Anyway, I think she could well be heading toward some mental issues (lots of forgetfulness, etc.) so we need to make the right decision."

"What say you, Mr. Financial Guy?"

These are difficult situations. First, you need to make sure that you have the appropriate legal documents in place to handle any incapacity that may/may not occur. There should be Powers of Attorney for Assets and Healthcare and/or a Living Trust. There should be a Living Will. If she doesn't have a Living Trust you will want to make sure that her Will is up to date.

There are issues relating to Les receiving an inheritance in that it might disqualify him from SSDI. It's important that any inheritance he receives go to a Special Needs Trust. Otherwise, the government might take the money as pay back for what they've spent. Be sure and consult a qualified attorney for this kind of trust.

Depending on her income, she may need the money to cover her assisted living and/or future nursing home care. Some want to leave an inheritance and try to get the government to pay for their care. That is done through Medicaid. To qualify, one has to be indigent--having less than $2k in assets.

So if she sells the home and uses the money for her care, she will need to spend it down to $2k before qualifying for Medicaid. There is a 5-year look back period when someone applies for Medicaid. If they have gifted money within that period, they will be denied benefits for the amount of time that money would have otherwise covered.

There are really two unknowns here. First, whether mom will need all her money for her care and, second, whether that will occur within 5 years. If she sells the house, she can gift all the money to her sons now without having to worry about Federal Gift Taxes (other than filing a form). She should check to see if there will be any state gift taxes.

As long as her other money lasts for 5 years the gift wouldn't impact future Medicaid eligibility. Another option is for her to consider long term care insurance. She has to medically qualify and her memory issues may keep that from happening.

In short, Mom should make sure she has enough money to cover her expenses for the next five years. She might need some of the house proceeds to cover this. Then she could go ahead and gift the remaining house proceeds to her sons. If she qualifies, long term care insurance could help cover future health care expenses. And you're right to not put off these kinds of difficult decisions. Deal with it now, before it's too late.

Related Videos
Play Video Estate Planning - Why a Will is Not Enough to Avoid Probate	Play Video Money-Saving Myths: Fact or Fiction	Play Video Money Mistakes to Avoid	Play Video Learn about Real Estate Investment Trusts	Play Video How to Create a 2009 Budget

Listed below are more articles related to the above article from the "Estate Planning" article category.

People interested in the above article "A House Divided" are also interested in the related articles listed below:

 

Estate Administration In Canada

When an individual dies, the assets owned by him must be located and protected. These assets are called as the deceased’s estate. The debts of the deceased must be paid out of the estate assets. After the debts have been paid from the estate, whatever remains can then be distributed among the beneficiaries named in the deceased’s will or according to the provincial law of intestacy. When an individual dies without a will, he is said to have died intestate.

Set Up A Living Trust To For the Sake of Your Descendants

Living trusts are usually set up so that any assets may be passed to inheritors or beneficiaries without necessarily going the probate way. Many people have experienced cases where, when owners of assets pass away, the beneficiaries fight over these assets just because there was no established living trust that will directly pass the assets to the real beneficiaries.

Tune Up Your Finances

With the beginning of a new year, it seems everywhere you turn you hear something about self-improvement. There are plans for weight loss, exercise regimens, quitting smoking, going green and more. What about your finances? Even if you think your finances are in 'good shape', everyone could use a little 'tune up' to make sure everything is running smoothly. And it's not as hard to do as you think. There are some very simple steps you can take that can make a world of difference.

Estate Planning - Some Simple Advice

Most Americans do not know how their assets will be divided once they die. Arizona attorney Steve Allen, known as the "estate planning doctor," has started a website to explain the complicated subjects of wills and trust.

Don't Fail to Plan for the Inevitable

The American Bar Association says that 19 percent of Americans do not have a will. Steven Allen, an estate planning expert, says this can cause families more grief and heartache after a loved one dies.

Estate: Readers Question: A Trust for Grandchildren

Imagine what it would be like if each one of your grandchildren earned a scholarship to pay their college costs. Wouldn't that be great? In a sense they can. Not only that, they could receive grants to help them purchase their first home, start a business and even provide additional retirement funds! Read on to find out how.

Estate: How to Lower the Price of Gas

Gas prices seem near all-time highs and the summer driving season hasn't even started yet! A recent email presented a simple solution that will force gas prices back to the $1.25 a gallon range. Read on for details and to learn basic principals that may make investing more profitable.