My mother will be out of her savings (for assisted living) in about a year. A family member has generously offered to pay her costs when the funds run out for as long as she is living there, so she doesn’t have to apply for Medicaid. Are there any foreseeable problems in doing this? Family member said she could deposit $100,000 into my mother’s checking account so we can draw on it each month. She will add to it as needed. I’m wondering if this is a good thing to proceed with. Family member is very close, so I know she will honor her offer. I feel very fortunate that this can be done for my mother, I just don’t know if there are any tax issues or any other things that can go wrong, or I am not aware of. Thank you for any info you can give me.
If the facility does not accept Medicaid then a decision has to be made.
You say mom's money will run out what assets does mom have that can be used to pay for her care?
A few questions..
1.) How long, how many years can this family member afford to pay for your mom's care? 1 year...and that is generous...2 years, 3 years, 10 years? This is a big commitment.
2.) What does your family member want in return?
3.) What type of written agreement will you have? (You should consult an attorney.)
4.) Will your family member adopt me?
I suggest you meet with an elder care attorney skilled in Medicaid planning for your state, meet with the current facility manager or billing dept, and figure out what actually happens with a Medicaid switch.
If it's an acceptable level of change, then ask the relative if they'd be willing to cover the cost of monthly incidentals beyond the Medicaid allowance (around $50/mo I believe). That is where family help is most needed -- the cost of diapers, toiletries, preferred toilet paper, getting her hair done, etc.
Putting a monthly allowance into an account that the POA can access and make payments to Amazon or whatever for this stuff would definitely cost less and be more sustainable for the giving relative (but don't give it directly to the mother, to avoid Medicaid income/asset impact).
I think it's amazing that your family member is doing this.
It is very generous for the family member to do this so your mother doesn't have to apply for Medicaid... however, you need to be prepared for what may happen if that relative dies before your mother. She may need Medicaid at that time and you do not want to have to explain and prove past financial doings that have become complicated when they do the five year look back. Anything that goes into your mom's account and goes out would have to be explained and accounted for or Medicaid may be denied when she needs it most. In our state I don't believe Medicaid will pay for AL but she may need SNF in the future and that is a lot higher.
I also would not have the money deposited into the mothers account but have the kind relative pay directly to the facility.
I feel like you and the family member should see a tax professional to explore the best possible way to achieve this goal where nobody pays tax penalties. Since this person will add funds as needed, Medicaid down the road is not a concern, thankfully.
The things I can see, as someone with no legal training:
Any gift over I think $19k will be taxed. And I'm very sorry to say sometimes $100k doesn't go as far as you think. What will happen if and when that money runs out, will your generous relative be unofficially obligated to keep paying?
What is the concern about applying for Medicaid? Will mom have to move out of assisted living? Does she qualify medically for a nursing home?