Giving real estate to an adult child
One of the most common mistakes is for a parent to transfer the deed for real estate into the name of the child. There are several reasons this is not a good idea.
- There is no requirement that an adult must sell a home to pay for nursing care. In the worst case, the PA Department of Public Welfare might be able to attach a lien to recover Medical Assistance funds spent on nursing care after the death of the last titled owner of the property, assuming it was the spouse of the person who needed the nursing care.
- If the property is given to a child or anyone else within 60 months of the time of application for Medical Assistance, the transfer of ownership of the property will be determined to be a gift that will likely result in a substantial penalty.
- Divorce, bankruptcy, illness, or other unexpected events can impede a child’s ability to return the title of a transfer property to the adult. For this reason, a desire to transfer ownership from the older person who has owned and still occupies the property to another member of the family can best be accomplished by use of a trust. 4) If a child or another person is involved as a caregiver for two years before the time of nursing home admission, there is a way to transfer the deed without penalty or avoid estate recovery by PA DPW.
Gifting more than $500 per month
People often seek the advice of their accountant as to what they may do in relation to giving resources they hope not to need to their children or grandchildren. Sometimes this is in relation to a desire to help with college tuition, down payments on a house, or other situations. Accountants think about what is permitted within the context of the regulations of the Internal Revenue Service. IRS regulations presently permit gifts of up to $14,000 per person to any one individual in any one year. Therefore, an accountant is answering the question to the best of his or her ability when the accountant advises his or her client that a gift of up to $14,000 per person is “OK”. However, such a gift is not ”OK” for purposes of one’s eligibility with respect to receiving Medical Assistance. Those rules are that, in the 60 months prior to the time that one applies for Medical Assistance, there may be no month during which more than a total of $500 is gifted. The concept of gifting is complex. If a person has demonstrated historical charitable behavior, it is probable that such monthly gifting could be excluded, however, it would require expense and appeal of a caseworker’s literal interpretation of the law. Results cannot be guaranteed. Generally, it is best that no more than $500 of gifting be represented on any single bank statement. Significant cash withdrawals must be accounted for or they can be deemed to have resulted in gifts.
Basic Estate Planning Documents
Basic estate planning documents which work well for most persons do not make adequate provisions for older persons who reasonably anticipate the need to apply for government assistance to offset nursing care costs in excess of $100,000 per year. A durable financial power of attorney must have specific language in it which allows for unlimited gifting. Also, a person’s will should be altered to allow that a spouse does not receive more than the required elective share of 33%. Often, family dynamics change in such a manner that it is wise to look at provisions related to how any beneficiary would receive proceeds resulting from a will so that circumstances, such as an unanticipated gift to a minor grandchild, a gift to a child in the middle of a divorce or bankruptcy, a gift to a loved one who is receiving government assistance for a disability, or a spouse in a nursing home can be fully considered so that family assets can be protected and assigned for their intended use.
Annuities are misunderstood, not only by those who buy them, but also by those who sell them.
This is a particular problem for persons who seek to accelerate their qualification for a Veterans Administration special pension which provides assistance for care for those who need assistance with at least two of their activities of daily living (ADLs). Depending upon how an annuity is structured, it may be considered to be either a resource or source of income. In the worst of conditions, it is sometimes illogically considered to be both. Only immediate annuities which meet the very narrow requirements of the Deficit Reduction Act should be used by persons whose circumstances foreseeably could result in an application for Medical Assistance in a skilled nursing facility. Fixed annuities can be useful for persons who are planning for retirement; however, the termination penalties result in a loss of principal and should be considered carefully by persons who purchased these annuities to be in effect during a time for which it is reasonably foreseeable that they might need skilled nursing care and be unable to pay for it from their private funds.