Is This Illegal? Immoral? Both???

[Kevin]

Originally Posted by MysticCat81

She may have avoided pesky estate taxes, but I would imagine there were some hefty gift and income taxes involved.

I imagine that "son" is now the trustee over a trust which oversees Thelma's former assetts. He probably operates the trust for his own benefit.

[MysticCat]

Originally Posted by ktsnake

I imagine that "son" is now the trustee over a trust which oversees Thelma's former assetts. He probably operates the trust for his own benefit.

I thought about that -- at least that that's how she should have done it -- but went with the OP's statement that she "gave" him the money.

[AchtungBaby80]

Maybe it's illegal and immoral, but I'd probably do it too.

[RU OX Alum]

Originally Posted by KillarneyRose

Okay legal-minded Greekchatters; have a look-see at this situation and tell me what's up:

Suppose that a woman, lets call her Thelma, is 70 years old with failing health and knows she'll need to go into a nursing home in the near future. Thelma is LOADED. Between her home, her stock portfolio, her savings account and other real estate she owns, Thelma is worth close to $2.5 million.

Thelma knows that she has a couple of years left and she also knows that the cost of staying in a nursing home will pretty effectively suck up up all of her assets. So, she signs all of her assets over to her (adult) son.

When she enters the nursing home, she claims that she has nothing. Nada. Zilch. Therefore, Medicare kicks in and pays for all her medical care.

Two years later, Thelma passes away and her son is now worth an additional $2.5 million.

My jaw was on the floor when I heard this. Is this sort of maneuver legal? I don't like to see people having to liquidate all of their assets to pay for medical care, but this just doesn't seem right to me.

I don't know if it's legal, but I would not that it was immoral. There was a 50/50 chance that even if the nursing home wouldn't have cost her that much, they would have found some way to de-fraud her of it.

I heard a story on news, local i think, about that. About nursing homes arraning it so basically, you owe them rent and rent can be adjusted at any time (like if they think you have money).

What she was smart

The only illegal/immoral thing about it is that it also evades the Estate Tax.

[Kevin]

Originally Posted by MysticCat81

I thought about that -- at least that that's how she should have done it -- but went with the OP's statement that she "gave" him the money.

The word "gave" can take on a lot of meanings when the story is second or third person (or even more degrees removed from reality). If son was made trustee over Thelma's estate, the average person would probably just assume a gift was made, and in some sense, they'd be right. Power over the spending of $2.5 million would seem like a gift to a lot of folks.

[33girl]

Like honeychile said - I know that you can only "give" X amount of money per year to your kids in some states.

Depending on where Thelma lives though, I don't blame her, since nursing homes cost $$$$$$$$$$ and she honestly might have lived longer than expected, in which case she might have blown through a really significant chunk of change. You can't go into a nursing home thinking "I'll be dead in 2 years, I only need this much" because that's when you end up outliving everyone.

[AlphaFrog]

Since she's dealing with $2.5 million, I'm assuming that a lawyer handled the transaction, and while I know they can get sneaky, I doubt there were too many loopholes that she had to go through.

[MysticCat]

Originally Posted by ktsnake

The word "gave" can take on a lot of meanings when the story is second or third person (or even more degrees removed from reality).

Of course it can, but when it's early and enough caffeine hasn't been consumed, a cigar is just a cigar and "gave" just means "gave."

[PinkandGreenJ]

Medicaid/Medicare laws are changing. There is a lookback provision that looks at the assets you had and transferred within a certain amount of time before you used thos ebenefits for a home. You may be assessed a tax or payments then.

Don't worry, GC isn't the only place where people thought of this and the problem is/has been addressed. This is not to say there aren't ways around the system but there are penalties for assisting with that too.

[PinkandGreenJ]

Originally Posted by 33girl

Like honeychile said - I know that you can only "give" X amount of money per year to your kids in some states.

Depending on where Thelma lives though, I don't blame her, since nursing homes cost $$$$$$$$$$ and she honestly might have lived longer than expected, in which case she might have blown through a really significant chunk of change. You can't go into a nursing home thinking "I'll be dead in 2 years, I only need this much" because that's when you end up outliving everyone.

Federal- $12,000 per year-(edited to add) free from Gift Taxes. You can give whatever you want, you just have to pay tax on what is over $12,000

Also remember unified credits too. There is a lot of money you can exempt from estate taxes, or shall I say in George Bush speak, the "death" tax.

[honeychile]

Legal Eagles - how much does a Living Trust help? That's the way we're thinking of going. All of my mother's money would be put in trust, and her expenses paid out from there.

Just as an FYI: as you all know, I'm a geriatric counselor. It's a small business, but the largest of its sort in the county. It's also the least expensive, as we do a volume. The cost of keeping someone in their own home with a live-in companion for one month (30 days) is $3,450. Add the regular home expenses (property/school taxes, utilities, food, etc), and you can see that living a long life isn't all that it's cracked up to be. You'd be surprised how many people will try to get along with only 4 hours a day, when they truly need a live-in. It can get pretty discouraging.

If Thelma had her estate set up in a trust and her son was made excutor of it then she should be ok, right?

Medicare is an automatic at 65yo so we all know she is entitled to that.

Now because it is taking the power and control from her and exucting it from her sons stand point she is not in pocession of any of it, so she is free and clear to enter without anything. BUt i don't know about the look back clause.

If Thelma gave her son the durable power of attny and named him sole excutor of her estate/trust , say like 6 yrs ago , she is omitted from that "look back clause" and techincally it is all still hers , but on paper he is the sole excutor. He takes care of all her needs thru him from the money she gave him. So she can enter the facility without a dime and any need that arises he can pay it from the money she gave him. She could even have a secondary insurance if HE pays for it. Medi-cal/caid wouldn't even need to be applied for since "he" pays for all her expenses

.

[Tom Earp]

Estate Taxes have been raised
before you can be taxed, and when My Father Died, He made sure that Mine and My Brothers Names were on any property, savings Account, vehicle and or stocks. Estate Taxes could not cover them as owners or Signatures of said accounts.
We were Co-Owners of said property.

The Estate Tax has been raised as it were.

Usally a single person going into a Nurseing Home has to sign over all assets for storage. That is really what it is isnt it? A place to die?

I am already set up that I will never go into a Nursing Home!

If some have never made a will, now is the time to do it.


Please make a will!

[lake]

Originally Posted by PinkandGreenJ

Medicaid/Medicare laws are changing. There is a lookback provision that looks at the assets you had and transferred within a certain amount of time before you used thos ebenefits for a home. You may be assessed a tax or payments then.

I've definitely heard of these types of situations (my good friend works in a nursing home). I want to say that the lookback provision in some states goes back at least five years. Large transactions of land, property, money, or whatever, even if they were "gifts" are looked at and your contribution or ability to contribute is based in part upon any of these transactions that may have occurred.

[KillarneyRose]

Originally Posted by MysticCat81

I thought about that -- at least that that's how she should have done it -- but went with the OP's statement that she "gave" him the money.

As far as I understand, there was no trust involved. She signed over the deed of her house and everything else to the son as a "gift". I suppose he had to pay some sort of gift tax but beyond that, it is his free and clear.