My mother-in-law has annuities that my father-in-law left for his 4 children. Two children have passed on. The annuities are in both her name and my husband's and one is in my MIL and my husband's sister's name. If cashed, can 50% of that go to my husband and his sister without penalty?
Let’s say a mom, who gets 1K in SS, has been in a NH as Medicaid Pending for 8 weeks, found ineligible over 50K gifting uncovered in lookback. State Medicaid reimbursement $235 day so 213 days ineligibility. Not $-2-$ but by days. This mom would need to private pay 213 days b4 she could file for LTC Medicaid. She has no $ as under 2K to have even filed for Medicaid. Her NH private pay is $ 525 day rate. NonPOA family spent 50K last yr.
Facility sends mom & POA a bill & Eviction Notice and it is cc’d to APS and to a probono legal clinic. That it gets sent to the last 2 imo is important….
A butt-rash in this is that this happens AFTER mom has moved into a NH and there 8 weeks. LTC Medicaid application gets processed & caseworker finds questionable 50K$ transfer. POA cannot provided documentation needed so 50K penalty placed. Mom paying $1,000 SS mo income as copay to NH. Any State Medicaid $ room&board paid will be clawed back immediately upon penalty placement. So mom will have a bill for thousands of private pay rate billing placed on her account & due in full. NH will give mom & POA a bill: $525 day rate x 8 wk - $2K SS paid = $29,500 due in full & needs to be resolved with an agreement ASAP. Eviction Notice follows. All have APS & probono clinic cc’d. So if mom or POA need legal advice, or APS, you can contact either. But it also enables the facility to have APS go to the court to request an emergency ward of the State action done to name a temporary guardian for the resident. The penalty notice from the State will indicate that there was a financial impropriety that caused the penalty, so APS can use this to bolster their case that an outside guardian needs to happen and pronto. Judge does it. Family / old POA cannot move the mom as they no longer have any authority. Guardian has a lot of authority and can actually look into bringing charges against family / POA for lack of proper fiduciary duty, for taking advantage of a vulnerable adult…. if any of the family are military or work in an an industry that does background checks / clearances having this happen is serious stuff. Could cost your job, so you find a way to come up with all the money to pay penalty.
NH are very proactive as to allowing Medicaid Pending. They do scrutinize the documentation & will require POA or family to sign off financial responsibility signature onto the admissions. Transfers are going to surface eventually.
The APS/ Guardian happened to a lady x the hall from my mom at her 1st NH. Beyond awful. The lady was sweet & just adored her boy. It was a bit different of a situation as Sonny sold his moms house after she had qualified for LTC Medicaid. Surfaced during a cross check by the State on real property records. Sonny spent all the $ on himself and did not notify caseworker; it had been going for a bit on paying the bill. APS called in & Guardian moved her to another NH. Last I saw of Sonny, he was in a yelling match at NH entry & police had been called. Sonny was a real azz, he deserved whatever he got. But his mom, I cannot imagine how horrific this was for her. She was a sweet happy dementia type. No way she deserved to ever have that happen to her. It was upsetting to the other ladies too. Just awful.
On rereading the OP, reads like original annuitant (the dead dad) had it as a contract that was a roll over annuitant to his wife. It was not paid to her (wife) as a clear cut beneficiary, cause otherwise, she would have had the pay out from all annuities when dad died. So I bet it was a roll over as insurance guys like those as it keeps paying commission.
They really need CELA attorney group to review all annuities in detail. Not the agent who sold them but an outside impartial review. Cause if it was done as a roll over, then may be structured as a roll over for son & daughter as well for those annuities they are on. The annuity keeps on getting its goal posts moved out further and further out. Annuities are the devil; there’s a lot of smoke & mirrors out there with them that gullible elders can get taken advantage on.
Sometimes annuities are a good thing. SPIAs for example. I would do a SPIA in a heartbeat if I needed to IF I was a May/December marriage & my older spouse was at need for a NH/SNF & the SPIA would enable him to be eligible for LTC Medicaid and enable me to continue to live in the community and maintain my lifestyle. The probabilities tend work in your favor on a SPIA type of annuity as a community spouse. SPIA are specialty underwriting set up via an estate attorney.
OP and his family have to have good legal. Attorney might can get their forensic team to try to establish that ownership is 50/50 and go thru past IRS filings, probate records, etc; or get actuarial tables done to get the % payout for each person, and provide to Medicaid caseworker. But unless the attorney can do either of these, the State is going to consider all the $ to be moms $. And will place a transfer penalty on moms eligibility for any annuity $ not 100% placed into moms bank account and used for her own cost of living or care.
If Annuity tied to her SS# only, it’s her asset. Should she give any $ away that is gifting which causes transfer penalty if she files for LTC Medicaid.
BUT
as it’s an annuity it’s not more straightforward transfer penalty which is kinda a basic math problem (division equation based on your states Medicaid daily room&board reimbursement paid to a facility and $ amount gifted). For example mom sells her home for 100k then gives it all to Jr then 2 yrs later mom is impoverished, needs a NH and files for LTC Medicaid. Moms lives in a State that pays $235 a day R&B so basically it’s 426 days of LTC Medicaid ineligibility. It’s awful but straightforward awfulness.
Y’all however have annuities so payouts are tied into age of annuitant and that means tied into actuarial tables for %. That’s a tax attorney or CPA question. It has to, HAS TO, be done correctly and not ever a DIY. A better elder law firm, CELA level type of firm, will have tax atty and CPAs that they work with routinely.
Plus sounds annuitant has outlived beneficiary on 2? That’s probably it’s own set of paperwork hell as no clear payout option perhaps?
Personally I’d be less concerned about the “Medicaid/penalties” aspect right now and be more concerned on what type of penalty MiL will face for doing an early cash out or withdrawal on her annuities. Look at the annuity agreement, usually serious consequences for early out.
That is what hubs and you need to clearly find out & in detail ASAP.
AND my suggestion is…
get MiL to take out the maximum she can (sadly could be 5% or 10%) without penalty & without ANY fees ASAP from each annuity. ASAP. So that MiL starts to drain out all her annuities. All the $ - it will be a taxable event so it’s reported eg IRS form produced - is MiL too. Not 50% hub or his Sisters but all is his moms $. Comprende? So it has to go into her checking account to be used for her living costs. If y’all do this on each of the annuities, it gives MiL some $ AND it’s a legit move of her assets AND buys y’all time to plan out future spend down. The planning aspect that you do with an elder law attorney and I think you will need one that has an associate who does tax law as they are going to have to do the paperwork as to the breakdown on all annuities so that it’s all copacetic on IRS tables. Again imo this is never DIY
Whomever sold MiL the annuities….well there may be blowback from them on her doing this as they want their commi$$ion $tream continuing…. you don’t care… they have made pretty hefty commission$$$ off of MiL. Turn a deaf ear. If this is a family member and they had her do this fairly recently, shame on them! There is someone on this forum who’s insurance agent brother had their mom do one for majority of her house sale money, problem was mom needed the $, so every year she had mom take out the max no penalty withdrawal. Bro was some kinda pissed.
I hate most annuities with a passion. They are so often sold to gullible fearful elders under the guise of a way to stash way money from guv mint that’s ok for Medicaid eligibility. Often sold at a free steak dinner type of event and “sold” by outside reps of an insurance agent. Not a Series 7 financial advisor at a wire house who is answerable to FINRA but a sales person who gets a % of the deals they do that night for the insurance agent. fwiw it’s ok for Medicaid as you are using your $ to buy an annuity that you as annuitant own. What they don’t say is Medicaid will require elder to do something to it; just what depends upon your State.. some make you cash it in, which sucks as means loss of $ due to early withdrawal penalty, but what most do is require State to become new beneficiary. & this is why ya want to start to withdraw if you can. Comprende?
I’m assuming it’s all MiL SS #, if not, take her, your & SIL taxes to see the CELA group first as lots to unthread. Good luck.
Most attorneys will do a free 1 hr consultation.
Yes, please get with a licensed elder care attorney in your state to avoid such mistakes and to properly plan how to spend down and/or how to protect any assets (there are some things that might be done, but only an attorney should advise here). The cost of the elder care lawyer should be paid from our LO's assets, keep all receipts.
To find a qualified attorney you can start with your state bar association OR if there is a specific facility you intend/hope to move your LO too, if that facility is Medicaid qualified they typically will know which elder care lawyers to contact as they work with them all the time. Or contact your Area Agency on Aging OR Adult Protective Services as they too will likely have recommendations about attorney's to consult with. For APS -- because they often have to step in and help States seek legal guardianship (not your situation) there are elder care attorneys and firms that generally handle such services and those firms/attorneys also handle non APS clients and they are generally well versed in the various State, Federal and local considerations for your planning.
Good luck with this. Document everything and keep receipts for everything!
Best of luck!