|
E-mail this page to a friend!
Guard Your Wealth for Seniors
Afraid of Losing Your Home To Medicaid?
by Jeffrey D. Voudrie, CFP
Nov. 3, 2005 - Doris from Minnesota is considering
transferring her assets to her son so they won’t be lost to Medicaid
should she need assisted-living or nursing home care. Is that the right
move? If so, what’s the best way to do it? Read on to find out.
One of the greatest financial risks seniors face is
the rising cost of healthcare, including the cost of custodial care in
an assisted-living facility or nursing home. And seniors are worried
about this. They’ve worked hard all their lives to build a nest egg and
they shudder at the thought of it being spent on their care instead of
going to their children.
Some would prefer to have Medicaid (government
welfare) pay their nursing home costs so they can leave their assets to
their heirs. Medicaid is the government agency that pays nursing home
costs for seniors.
To qualify, you can only have $2,000 in assets
other than your home. (Be warned, the government has the right to sell
your home when you die to recoup the amount they spent on your care.) As
a result, many seniors consider gifting assets in an attempt to preserve
them.
It is considered fraud to hide assets or to lie to
the government when applying for Medicaid. I do not condone that in any
way. Gifting, though, is a viable, legal way to protect your estate, but
there are certain rules you must follow.
Most people think you can only gift $11,000 per
year to someone without having to pay Federal gift taxes. Since Federal
gift tax rates start at 41%, you sure want to avoid them!
It will take Doris over 10 years if she can only
gift $11,000 per year of her estate. But here’s the good news: you can
gift over $11,000 each year without having to pay Federal gift taxes!
Each person has a lifetime gift-tax credit that results in being able to
gift $1,000,000 without any Federal gift taxes.
So Doris can gift $100,000 to her son all at once.
She just needs to tell the IRS to consider the part over $11,000, or
$89,000, as a part of her $1,000,000 lifetime exemption. That’s done by
filing Form 709 with her taxes that year.
Notice I kept referring to Federal gift taxes. You
may still be subject to state gift taxes. For instance, here in
Tennessee, there is a 6% tax on gifts over $10,000 per person per year
and there isn’t any lifetime exclusion. Be sure to investigate the laws
in your state.
Just because Doris gifts away all of her assets
today, she can’t qualify for Medicaid tomorrow. By law, Medicaid can
investigate to see if you gifted away any assets within the three years
prior to your application. If so, they will deny you benefits for the
number of months those assets would have paid for.
Let’s say Doris applies for Medicaid within 3 years
of gifting $100,000 to her son. Assuming nursing home care in her area
costs $3,000 per month, Medicaid wouldn’t start paying those costs for
33 months! Medicaid figures that the person the money was gifted to
will feel obligated to pay the costs until then. Still, it’s better for
Doris to gift as much as she can, as soon as she can, so the 3-year
clock starts ticking.
One concern Doris has about gifting her assets to
her son is that he could lose half the amount if he gets divorced. She
would like to prevent that if possible. If she trusts her son and wants
him to have control over the money but also wants it protected from
creditors, future estate taxes and from loss in a divorce, then Doris
can gift the assets to a Beneficiary Trust instead.
You can find additional information about
Beneficiary Trusts at
www.guardingyourwealth.com. Beneficiary trusts are expensive
to set up and probably shouldn’t be used unless you want to protect
several hundreds of thousands of dollars in assets.
The bottom line is that there are ways that you can
gift large amounts without paying federal gift taxes. This is a legal
form of Medicaid planning. It can also be used to reduce the size of
taxable estates.
If you have a specific question or would like more
information give me a call toll-free at 1-877-827-1463 or go to
www.guardingyourwealth.com. You can also reach me by email at
jeff@guardingyourwealth.com.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
Guarding Your Wealth for Seniors are
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens. Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
protected from spam bots.
Click to More Senior News on the
Front Page
Copyright: SeniorJournal.com |
