And...... I would no longer be the trustee. Guess he forgot from two and a half years ago that I was her brother.
Talked to my brother in law, and see no problems. In fact, he has a meeting with his lawyer Friday and wants me
to go along. We are both in the - I don't want to screw anybody, or be screwed boat.
Subject: Medicaid Planning
Good Morning Steve,
Thank you for speaking with me the other day. I should express my apologies for not clarifying your relation to Beverly before we started simply due to some of the things we discussed will be different than I previously noted. To that end allow me to outline the 3 options available for Beverly as we look toward paying for her skilled nursing care. For the discussion, I’m going to primarily focus on the only known asset being her $800,000.00 IRA.
- Option 1 – Spend Down: This is the plan the nursing home hopes you use where you simply spend down her and her husband’s assets at $15,000.00/month until she has less than $2,000.00 and her spouse has half of the marital assets up to $157,000.00 and the house. There are no attorney fees to the plan as my involvement isn’t necessary, it just costs the $15,000.00 per month.
- Option 2 – Spousal Medicaid Planning: With the cooperation of her husband, we “funnel” the money through him by putting the funds into a Medicaid Compliant Annuity where he would be the income recipient of the annuity and he could in turn gift the annuity payments to her beneficiaries each month. This plan would protect his assets and her assets, but would require that we liquidate the retirement account, losing up to 30% on income taxes. You’ll likely lose this anyway with any plan but the tax liability would be less due to offsetting medical expenses. Aside from the tax payment and assuming spouse cooperates providing information, you would protect her assets immediately from the nursing home and she would go onto Medicaid without spending down. The attorney fees for this plan are $13,000.00.
- Option 3 – Half Loaf Medicaid Planning: With this approach we’re less trusting of spouse’s cooperation, so we would liquidate the IRA immediately to incur the tax liability, and of the remaining funds, we would gift approximately half of those funds to her beneficiary now, and the other half would be placed into a Medicaid Compliant Annuity payable to Beverly to pay through her penalty period at the nursing home and once the annuity runs out of money she would be eligible for Medicaid. The attorney fees for this plan are $15,000.00.
Regardless, we need some degree of her spouse’s cooperation to protect her assets, as well as to protect his assets from her costs, so there’s a mutual benefit to working together with him. If he fails to cooperate and provide information, then not only is it likely you’ll have to spend down all of Beverly’s assets, but he’ll have to spend down much of his assets and if he tries to do any gifting to protect his money, this opens the door to the beneficiaries being held personally liable for her medical costs because the nursing home can sue everyone. There’s a lot to digest and I’m happy to be more specific if you want to provide me more details, but I’ll wait to hear from you on how you want to proceed. |
