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At least once a week, someone will post a question on this board that basically amounts to asking how to “protect” some parental asset or amount of money and still apply for/qualify for Medicaid. Inevitably, such a poster gets jumped on by numerous people replying that trying to protect assets is “cheating” and grossly unfair to other taxpayers.

I’m not so sure. I'm not advocating trying to circumvent the system -- but I would like to start a discussion about whether it's immoral. I’d like to explain why I’m not so sure, and then I’d like to know what other people think.

Imagine two identical families. We’ll call them Family A and Family B. In both families, Mom and Dad work. Both Parents A and Parents B have identical jobs and identical incomes, and both families have three kids.

That is where the similarities end.

In Family A, even before the kids are born, Dad and Mom scrimp and sacrifice to save money. This an old-fashioned phrase for an old-fashioned concept, but Dad and Mom are 100% dedicated to it, and their commitment does not change as the kids grow.

The family goes on vacation every third year instead of every year. These vacations are usually “road trips” and involve camping in tents and peeing in terrifying, spider-infested outhouses to save money on hotels. Getting to eat out once a month is a huge treat, and usually occurs only at low-end chain restaurants with a mid-week “kids eat free” night. For their entire public-school education, the kids dress primarily in clothes that their mother sews by hand instead of wearing clothes bought from the store ... and sure, maybe they get teased and made fun of at school, because they’re wearing polyester pants instead of blue jeans, but Mom and Dad decide it’s a worthwhile sacrifice because the money that is being put away will make a difference in the kids’ lives later, when it really “matters.”

The family drives a beat-up old car that Dad manages to keep running year after year because hey, maybe the upholstery is all split open and the windshield is cracked, but at least it’s paid for. Cable TV is out of the question, so if a show doesn’t come in over rabbit ears to the family’s one small TV in the living room, no one watches it.

The house, which is uncomfortably small for the family and not in the best neighborhood – and which certainly does not feature hardwood floors or a kitchen with granite counters or stainless steel appliances! – is one that can be managed on a mortgage that still leaves a fair amount of each month’s paycheck available to go into savings instead. The family COULD qualify financially for a “nicer” place, but Dad and Mom believe that it’s better to put the money away so that it will be there to make a difference for their kids down the line – maybe by buying a college education or by helping them to buy their own homes when the time comes. Everyone sacrifices, sacrifices, sacrifices. Eventually, even the modest mortgage is paid off. Gradually, the little nest egg grows.

In Family B, by contrast, just about every dime that ever comes in is spent immediately. The family motto is “Instantaneous Gratification Isn’t Soon Enough!” The family denies itself nothing, ever.

The whole family goes on vacation to Disney World every year, always staying at an official Disney resort (where the kids get their own room). At home, all the kids have their own TVs (which get every premium channel imaginable), laptops and iPads and get new iPhones every time Apple releases an “upgrade.” Eventually, the kids get driver’s licenses, and guess how the family celebrates this rite of passage? You got it! Mom and Dad buy them their own cars. The family eats out at nice restaurants three or four times a week. The family car is replaced at least every two years, and loaded with every option the family’s creaking credit score can support.

The kids get designer clothes and shoes and the latest video games and pretty much whatever else they want at every gift-giving holiday. The family lives in a huge house in a nice neighborhood, with a pool and a hot tub, and yes, they’re carrying a lot of debt on their credit cards, and yes, they’re quite a bit overextended on the mortgage and the car notes, but what the heck – isn’t that the American way? Sure, there’s no nest egg ... but what does that matter? Living life in the moment is what it’s all about.

Fast-forward. Dad is now 75. Tragically, Mom died 6 years ago from cancer, and Dad has now been diagnosed with a progressive dementia, and will likely soon need very expensive long-term memory care in a facility.

In Family B, there are next to no savings. After retiring, Mom and Dad B traveled a bit, and spent every dime that came in in pension and Social Security income. After Mom B died, the overextended mortgage on the house turned completely upside down, and Dad B abandoned the equity in the house and walked away ....

(Continued in Part B, first post)

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I don't think it's my place to judge if it's immoral. Having gone through the process for my husband it is exhausting and frustrating yet, I understand all the questions. I became my husbands legal guardian and felt that I was being questioned by a judge like I was a criminal and it was very upsetting yet, I understand why. Medicaid has an obligation to ask the hard questions because nursing home care is unbelievably expense. Financial planning isn't something people think so far in advance and it's difficult trying to explain to your parent why their money should be moved to protect them from what health problems may come to pass in the future. There is no easy answer except to look into your own sense of what's right.
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Rarely if ever have I seen evidence of a governmental agency “going after those who can afford it”.
Within present Medicaid law, you pay until you exhaust funds, then governmental funding takes over.
I paid a few thousand short of $1,000,000 to keep my mom in a very good nursing home for 5 1/2 years, because THAT MONEY WAS HERS. When my father died intestate, I was entitled to 1/3 of his estate, which I signed over to my mom.
However stupid people thought I was not to “shield” some of her assets, I did what I felt was right.
However money is made or spent during a dependent senior’s life, the law, at present, is the law, and ethics are ethics.
Each of us, as caregivers, are responsible to make the decisions that work best for us.
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Daisy, You did things by the book for your state. You were not shielding assets by setting up trusts or by gifting money to relatives. I’m happy for you and parents that they are getting the care they both need.
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In New York State, a community spouse is allowed to keep up to a certain amount of money. Three years ago my father-in-law, due to Alzheimers was admitted to a Memory Care facility. We completed a Medicaid application and were honest about assets. They had $60k in bank accounts and a monthly income of $2,000. Father-in-law was given full Medicaid coverage. Mother-in-law allowed to keep the $60k & monthly income. Fast forward to a year later when mother-in-law needs to go to an Assisted Living Community at a cost of $2,100 per month. In New York State, Assisted Living is completely private pay - no Medicare or Medicaid coverage. Keep in mind too, out of her money comes Medicare and supplemental insurance premiums, her meds and incidentals. Luckily the funds were available for her. So do I feel we "cheated" by having the state pay for father-in-law's care? Absolutely not.
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Rosyday, I know I was spitting nails when I saw that the current President changed the dollar worth for inheritance tax. Federal Tax would only be collected on estates worth over $11M. Prior to that for years the estate amount would go up in slow amounts. Last year it was $5.49M. Year before $5.45M. Thus, that $11M is a huge jump.

How does that help the average person, it doesn't. All it does is raise local/State taxes to help make up the difference :P
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Oh yes, We must be sure to scrimp on Medicaid to pay for the rich folks tax breaks.
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I think many are going to be disappointed if they think they will qualify for Medicaid. Everyone talks about Miller Trusts, etc. Those are only available in certain states. There are also discussions of increasing look back to 7 years and tightening requirements on asset management. The government cannot provide everything for everyone and they will eventually be unable to provide all of the services needed. There also is no payroll taxes for Medicaid as there is for Medicare.
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If the resources are in trust, created years beforehand, using the appropriate legal channels available according to the current laws and codes, and then somewhere along the line I find myself in the position to qualify for Medicaid, it is no longer I but my trust that owns any resources I previously had.

I still have no qualms with utilizing Medicaid if I do happen to meet the qualifications and need the assistance under those circumstances. I have paid into the system for years like most. Therefore, I see no problem with taking advantage of the legal avenues available to me, as long as I am following the law as it currently stands. No different than corporations and individuals that utilize tax advantages. If it is allowed by law, why not? If it is deemed unethical, change the law.

As CM said, our government makes veiled promises about our 'social security' and continually moves the goalposts. If social security runs out before I reach retirement age, will they then refund all of the money I have paid into it over the years? I think not.
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The thing is that this isn't about limiting tax liability. It's about "qualifying" for health care for the indigent while still having substantial resources.
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Well said, CM. "Social security" is a misnomer for sure.
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I have absolutely no issue with people using sound financial planning to minimise their tax liability, Frazzled.

I have myriad thoughts, which I won't burden anyone with (and can't be bothered), on the rights of states to help themselves to their richer citizens' wealth; and to set up social security systems under the fig leaf of "national insurance" - creating a concept of a contract - and then jiggle the claims criteria around; and then treat the benefits as a grant, rather than a right; and then on top of that claim to be helping the lower paid when actually they're just keeping their thieving mitts off those people's wages to a higher threshold - "tax credits" my eye!

i don't disapprove of them, exactly, because there is heartbreak involved and they often have worked hard all their lives and it is sad for them that their children may not inherit from it; but the people who do make me roll my eyes are the little old ladies (often from Birmingham, I've noticed, not sure why...) who keen and wail about having their houses stolen from them because they can't afford to pay for care. In vain can one explain "but your house equals two hundred and fifty thousand pounds, dearest Mrs Whaley, and that is really quite a lot of money, now isn't it?"

They've paid tax and insurance all their lives. They want to leave their property to their children, enjoy a pension, free health care and free social services, never have to worry about bills or local taxes, and be let alone to stay in their homes forever.

Which would be simply, childishly absurd and selfish of them, if it weren't the veiled promise that successive governments of all colours have been making to them for seventy years.
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I may be in the minority here, but I believe if one follows proper legal channels (i.e. creating a trust well in advance of becoming ill/dependent) and gets their affairs in order that way to pass on property/home/business to their children, it is no different than utilizing tax advantages on your yearly IRS form. The laws and codes are there for a reason. The very wealthy use them a great deal.

I have no qualms about taking advantage of the laws, systems, programs in place because as a taxpayer I too have paid into the system a very long time, as has my spouse.

That said, yes I do want to plan, have LTC insurance in place, save the best I can, etc, and hopefully never have to use Medicaid, but I will also plan years in advance using the correct legal channels in order to hopefully leave behind some of what we have worked hard for to our children also in case I do.
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I think the point is being missed. The reason you scrimp and save is to make a living, to pay your bills, including health care. No one should be qualifying for Medicaid so they can leave their kids something. If you have to spend the money you saved on health care instead of leaving an inheritance, it's sad, but the taxpayers don't owe them an inheritance to provide for your medicaid. Yes, so you worked hard and scrimped and saved. So it goes for most people. But I think your examples are invalid. People can suddenly become disabled in their adult years. There was a time that Human Services and Social Security had conditions of spending any retirement benefits before you could even collect disability. (Apparently that's changed and I'm not sure it should have because this is what we're dealing with now) Anyway, for those people, their savings and retirement is gone.
They've been on SSDI all these years and now looking at a nursing home. You can't have anything over the allotted amount. There's no place to hide savings even if you had managed to save anything over the years - they haven't been able to go over the asset allotment all those years. They worked hard, but the system made them spend down before qualifying. So the question isn't about the two families used as an example. It's about a double standard. And I'm betting that if a poor person simply had not done the paperwork, but had a million squirreled away somewhere, people would be outraged, but they're not if someone does the paperwork?
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Linda, You’re exactly on target. My grandparents had a small family farm. Their children would not let their parents go on Medicaid. My dad and his siblings paid for all of their parents nursing home care. I believe Medicaid should be there for the very low income, but not  for those who “shield” their assets. If they have the money they should use it for their care.
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Linda I think most either want to leave their family an inheritance or simply don’t want to pay for their own long term care. Why pay for long term care when they can give their money to the family and let the tax payers foot the bill?
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This is an interesting question, and I appreciate the many thoughtful responses. But I must say that what others term “shielding assets from Medicaid” I have always thought of as “going on welfare.” Most of us were rather proud of working hard in our lives in order to avoid doing that. Why would someone want to do so in their elder years in order to “shield assets?” I agree with those above that my comment does not apply to surviving spouses.
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No individual has the right to expect someone else to pay for their care because they chose to give their assets away. It is not the government’s responsibility to pick up the cost of care if someone has given their money to children or grandchildren. Medicaid has an obligation to taxpayer’s to look at everything. Spouses should not be impoverished, but that’s the only exclusion that should be available.
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Dafna, if you give all of your money away to your children and have none for your care that may be your choice; but having intentionally impoverished yourself you cannot reasonably expect the state to pick up the tab. Who do you suggest should pay, then?
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I'm torn as well, BUT scrimping and saving is a choice. Not spending money on your self is a choice. It's not always about planning, but who you are. Sometimes it's a mental health issue (my mom is a hoarder). If your money goes to your care because you scrimped and saved I'm okay with that because it is your money. If you want to give it all away to your kids so you don't have to pay for your care, that's your choice too. I'm lucky because my mom took out Long Term Care Insurance 20 years ago along with a good medicare supplement and has virtually no out of pocket for her long term care. Her nest egg is yet to be touched, but I manage it and it's there if she needs it.
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This is my opinion only. I have no problem with making sure a spouse is not impoverished by nursing home costs and they should be able to stay in their home. I don't think assets should be shielded to leave an inheritance or a house for their children or grandchildren.
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I don't know if it's immoral, but I do know that Medicaid is relentless. Find a lawyer because Medicaid will go back 5 years to look at the financials.
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I can only say that for me personally, I have saved my money so that I can take care of myself during my old age. I don't plan on leaving anything to my children, but I don't plan on them taking care of me either.
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      The original question at times morphed into a debate as to how witholding assets might be justified due to how people unequally prepared for their old age. I agree with Sandwiched, the law is objective as to who receives Medicaid. There are so many variables as to who is “worthy” to receive it.
     My parents, as they got older, suffered from mental and physical illnesses which made them make bad financial decisions until we took over their finances and helped them through bankruptcy which enabled them to keep their home. These same disabilities prevented them from being able to save because so much of their income was used for professional caregivers, but these services delayed their admittance to a nursing home by years.
     The other variable is the huge cost of LTC. Now that they are both in a nursing home, the sale of their home will allow them to private pay for only a year, at which time Medicaid will kick in. My parents two healthy pensions, including Social Security will not cover the cost of their nursing home.
       No, I would not think of withholding assets from Medicaid, and I am glad Medicaid didn’t require my parents to prove that they had been frugal and good stewards of their money throughout their life.
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Then there’s Family C. Family C lived well, but did not enjoy a lavish lifestyle (let’s call it the “road trips with Motel 6 rather than camping” lifestyle?), did manage put some money away, and paid for long term care insurance. The savings are all gone, having been used to pay for the cost of assisted living over and above what the long term care insurance could cover. There is no money and no property left. If Family A represents the “good people with savings who deserve Medicaid but can’t have it“ and Family B the “bad people with no savings who don’t deserve Medicaid but get it easily” then who are Family C? They are, quite simply, most of us. (Maybe leaving aside the long term care insurance, which not everyone knows about or believes they’ll need.) If shielding the assets of Family A makes less help available to Family C, that makes for less of a “fair” sounding scenario, so Family C is not the type of situation that is used for contrast. But it’s the reality of most middle class families in this country.
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While I understand and appreciate the question, it appears to be a false dilemma. The question that's really being asked here is whom lived his life "right;" whom made good life decisions, and that is horribly subjective. The law is objective and instead asks, "Who qualifies?" That answer is found in each state's laws regarding Medicaid. As long as you follow your state's laws about eligibility and do not knowingly lie or withhold information about anything that affects eligibility, you are acting legally within your rights. You are not "hiding" anything in this case.
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I believe the thinking goes that if the corporations do better, then they will create more and better jobs, so this is the "trickle down" approach. If people's investment portfolios grow as a result of the corporate stock growing, then they can afford more, including healthcare and facilities such as AL and NH if needed. If this turns out to be true, then it's great; if it doesn't live up to what's being sold to the American public, then that's not so good. I don't mind if corporations benefit if I and others can benefit, too. The whole idea, of course, is that if everyone ends up richer, then more taxes will be paid. Again, time will tell if this turns out to be the case. However, I agree that cutting a lot of these programs sends the wrong message.
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Rosyday, ah yes, big corporations getting a bigger tax cut. That means someone has to make up the difference in the Federal money coffers. It could mean us meer mortals will see higher property taxes, higher school taxes, higher sales taxes, higher gasoline taxes, to make up the difference....

or we see cuts in State run Medicaid programs because the State cannot budget for such programs because the Feds are cutting what each State will receive in funds.

It's the old saying "taking from Peter to pay Paul".
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Do you think it's immoral that Medicaid and social security are being threatened to make sure that billionaires and Corporations have bigger tax cuts?
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It is only immoral if the law allowing such action is immoral.

If the law is immoral, this does not make the action of the citizen immoral.

Laws are created in order to influence desired behavior, so legally shielding assets is simply acting in a manner that our lawmakers desire.
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Linda76--I'm single, without children. My bedridden 93 y/o mother is private pay in a nursing home but fortunately has enough assets that she would have to live at least another decade to use it up, so Medicaid is unlikely to be an issue here. I've saved a tidy sum, and I'm just hoping that what I have and what I'm likely to inherit (half the estate) will be enough to support me, as who knows what health care costs (or nursing home costs, if needed) will be in after a decade or more. I have an older married sister who with her husband is better off than both my mother and me combined. My mother actually worries about this--when she wonders how we're paying the nursing home I have to remind her that she and my father were frugal and held onto good stocks for 60 years (and now the bull market means she's actually gaining), and when she asks what will happen to me, I tell her that I've been saving and investing, too, and she reminds me that my sister and should also inherit. If I have money left when I die, it can go to one or more causes and/or charities.

Isn't it better if people of one or more generations can afford private pay rather than having to use the taxpayer's money in the form of Medicaid? (My widowed grandfather was also private pay in a nursing home the last year of his life.) Along these lines, is the government "better" at using your money than you are?
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