Mom is 90 and living with me. I plan on taking care of her as long as possible but the day may come when she needs assisted living or a long-term nursing home. She has too much money in her savings account to qualify for Medicaid. She wanted to leave this money to my brother and I upon her passing. How can she safely and legally distribute this money to my brother and I (gift?) and leave only $2,000 in her checking and savings so she can get Medicaid? I understand you cannot gift someone within five years of needing Medicaid. I understand she can give me about $8,000 a year for an IRA for me that will not be taxed but what about the rest of her cash on hand? I also do not want to by paying a huge amount of tax on money that she gifts me (or my brother). My brother already has an IRA.
however if there is an answer out there I would love to hear it
Is she paying you anything now? If not, why not? Have a contract legally drawn up so that when the time comes for Medicaid, any monies given to you for taking care of her won't count against her for Medicaid eligibility (otherwise it will be considered gifting you).
I'm not understanding why she should be able to contribute to your IRA every year? Or is this part of an employment contract with you?
IF there is no employment contract and you are caregiving for free, why do you think any inheritance should be split between you and your brother (who doesn't help out)?
She pays me nothing now but really hasn't had me have to care for her that much. At certain times, like falls, surgeries, illnesses, etc. I have had more responsibility but she is fairly independent right now.
I'm not sure what the contract should state. That I get her $73,000 if she needs Medicaid? That doesn't make sense and certainly would not be legal when applying for Medicaid - would it?
The IRA donation was one way our financial advisor said we could reduce her income and I wouldn't be taxed on the money right away.
There is no employment contract. It doesn't seem necessary at this time and is a little cold considering she is my mom. I have always thought that my brother should benefit from her money after she passes. She wanted her money to go to both of us and my brother is going to make sure I get the house.
Her money is for her care until she dies. Not for you or your brother until then. What you are trying to figure out is how to defraud Medicaid and they have seen it all and you will be caught.
Now that you have put it in writing it is proof that that is your intention.
Leave your moms money alone until she is dead.
The IRA donation was one way our financial advisor said we could reduce her income and I wouldn't be taxed on the money right away.
There is no employment contract. It doesn't seem necessary at this time and is a little cold considering she is my mom. I have always thought that my brother should benefit from her money after she passes. She wanted her money to go to both of us and my brother is going to make sure I get the house."
You would not get a contract to get her $73,000 (is that her savings?) -- you would get a contract to provide caregiving services for her. You would get paid as you earn the money (with the appropriate taxes being taken out).
I am not understanding how money contributed to someone else's IRA account would not be considered a gift and therefore subject to an eventual Medicaid penalty if done within 5 years of determining Medicaid eligibility.
Do you think your brother should benefit more than you when your mother passes? Because that is what will happen if you do caregiving for her for free. When were you and your brother put on the house deed? Does your mother contribute towards house taxes, insurance, upkeep, utilities, food, etc.?
You say your brother "will make sure you get the house." Many here have been promised things that don't end up happening.
You say you don't do much for your mother now, but at age 90 things can go downhill very quickly. Make very sure you are set up for Medicaid eligibility when that happens, or YOU will be the filltime 24/7/365 caregiver. Even if you can hire caregivers (from your mother's money!), you will become the default caregiver for probably a good portion of the day and when the caregivers don't show up, are sick, quit, etc.
Look at it this way: Ever since she became an independent adult, it has been her responsibility to pay her bills and be self-supporting. That doesn't change just because her bills may one day be in the $10,000/month range instead of say, the $2,000/month they are now.
Yes, her money may run out if she goes into a nursing home, and that's why Medicaid exists as a safety net for her. She still has the responsibility to pay her bills until she no longer can.
I get it -- it stinks that she may not be able to leave you and your brother the money she intended, but that's the case with anyone. Most people don't really think about that money they've saved "for retirement" isn't just meant to finance trips to Europe and golf games but is also supposed to pay for the not-fun side of their later years.
We had to remodel my parents' house in order for them to be able to stay in it longer, and it cost my dad $100,000. He almost had a stroke as he wrote out those checks to the contractors, but he did it. It wasn't because he was cheap (although he'd never spent that much money on anything in his life), but because he hadn't really thought about that money being there for HIS use. He wasn't accustomed to spending money on himself.
Your mom needs to reset her thinking about that money. It isn't hers to do with as she pleases -- quite yet. She needs to pay her bills first, then after she dies, what's left can go to you and your brother. That's how it works, and the taxpayers aren't supposed to be paying for her nursing home.
Medicaid is a "means tested" benefit. It is for folks who are impoverished.
Yes, your mom can spend money on herself--trips, jewelry, furniture etc., but "gifting" (yes, the IRA contributions are gifting) will trigger a Medicaid penalty.
Please get mom, brother and you to a certified Elder care attorney asap so you can understand this better.
I know I do not have any tolerance for this behavior.
I deliver food to half million dollar and up homes and know people that live in dump apartments, spending 75% of their measly SS just for rent and can't get the same food program because there are only so many spaces available for the service.
Personally, I think that it takes big ones to not spend your money and use social services, for whatever reason. Especially when the truly needy can't get the services because some greedy family wants an inheritance.
Yep, I probably sound rude but, frankly, I don't care. Not when people want to hustle the system at the expense of others.
As Barb said what IRS and Medicaid allow are two different things. Seems your Advisor knows nothing about Medicaid law.
There is no way you can protect Mom's money at this point. If Medicaid is needed in the next 5 years, no large transactions that benefits someone other than Mom can be done and will cause penalties. This means either someone cares for Mom in the penalty period or they pay for her care.