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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If your son doesn't pay you for the property, you are giving him a gift. The IRS imposes a gift tax on practically any gift made during the tax year. There are some exclusions to this tax; however gifts to children are not included. Individuals are allowed up to $13,000 per year in nontaxable gifts, as of 2012. Married couples can claim $26,000. In regard to property, the fair market value is used to assess the value of the gift. At tax return time, you will need to fill out a gift tax return using Form 709.
Then the elder needs to move into a skilled facility.... oops, the elder already handed out much of the funds throughout those years and deeded over the house to an heir or two where the elder had continued to live. Good grief, these Assisted Living and Skilled nursing homes are expensive....
Now what? Ok, lets look into Medicaid. Then and only then do the grown children realize that Mom or Dad should have kept their money and kept the house to help pay for this care.
I know for myself, I never heard about Medicaid paying for skilled nursing homes until I came to this forum a few years ago. So I planned accordingly whenever my parents gifted me money, I never spent a dime, I could give it back for their care.
As for my parent's house, I was glad they didn't give it to me prior to passing. Quit Claim deeding it to me would have cost me mega bucks in Capital Gain Taxes if I sold it as the house would have been an "investment" and the rules are different compared to being my "residence". Plus my parent would have had to pay a Gift Tax by doing so as it would have been more than the annual $14,000 gift tax exemption. Was so happy when my Dad sold the house while he was in Independent Living, the equity helped pay for his rent and his caregivers.
How can we educate the public to help guide them on the ins and outs of the financial implications of elder care???
I read the original post about famillies A and B.
It was an interesting story but was it in the best interests of family A to deny themselves so many luxuries? What kind of stress did it put on them emotionly.
I am not suggesting that everyone should spend everything they earn and I am a great advocate of living within one's meansand being very frugal.
I read an article in M****** E**** N*** About a family living off the grid. They of course did not believe in family Bs life style they felt there was enough enjoyment to be had living on the farm and enjoying the animals. Each child was encouraged to start their own business at about 10 years old and ranged from raising shep and chickens to selling the eggs and crafts. They were encouraged and supervised but allowed to make their own mistakes. By the time they were 20 the two elder ones had $20,000 each in the bank from their own endeavors. Now the grandchildren are following the same path. They never received an allowance and had to buy their own supplies from their profits.
We are fortunate to be old enough for Medicare which we have paid for handsomely through the years plus plus a PPO plan which picks up a lot of the rest. Even so we spend around $7,000 a year in additional cost especially for expensive drugs in the donut hole and premiums for the PPO currently $150 a month each. In 2015 I had a serious illness and my medical bills amounted to just under a million $s.
Would I qualify for medicaid for long term care? Not till I had spent between $24,000 to $84,000 a year which would not take very long.
I don't think either family behaved morally, they both took different paths and ended up in the same place long term care however it is financed
Health care is a business. Why shouldn't it be allowed to earn profits like other businesses?
And if Medicare were "free to all", who would pay the costs? As it is, Medicare offers a lot for a nominal premium - a little over $100 per month for us. Who do you think would be willing to pay extra taxes to fund Medicare for everyone?
It would be better if middle and upper class people refused to invest in companies who do not pay their workers fairly, and offer affordable insurance packages so they don't need Medicaid. It would be better if we demanded that CEOs and business owners who cheat people and break the law were held accountable to the same rules and laws as everyone else. It might be better if we shifted away from "for profit" medicine -- at least where primary care and chronic conditions are concerned -- and had a system where everyone paid in and everyone had the same access to at least a minimum standard of care. That is a socialist practice and one that most modern societies embrace. "Socialist" programs -- Medicare, Medicaid, a state-funded education system, taxpayer-funded police and emergency -- were enacted because there was a need for them.
Medicaid pays for medical care for poor people. It does not provide housing except for the frail elderly. Is there really a lifestyle incentive to be on Medicaid?
The dates you cite for the advent of Income Tax and Medicaid are accurate for the US, but people have been required to pay forms of taxes and/or tariffs since Ancient times (e.g. "Give to Caesar that which is Caesar's.") The difference is that through centuries of philosophical, religious, and scientific examination, and hard work by spirited people, we reached a point in history where we could say as a society that we want our citizens to be housed, we don't want the ill to be suffering on the streets or in prison-like institutions, etc. There will always be poverty and misfortune, but in a just society we do our best to ensure that we are not the cause of it, and that we help each other.
The statistics I read said we spend about $450 billion (from both federal and state funds) a year on Medicaid. That is an incredible amount of money. They said it's split almost evenly between children, working poor, the disabled, and the elderly as numbers of enrollees, but with actual dollars spent tipping toward the elderly quite a bit. But people are living a lot longer than they expected. The dollar is not worth what it was 30 years ago when some of these people retired, and the cost of their care has increased as well. And as a point of reference, the uninsured losses after Katrina were estimated to be about $200 billion. That's for ONE natural disaster, and we are just talking about part of the damage.
What billionaires and climate money are you talking about? Do you remember when the Cuyahoga River caught on fire? Cleveland was a joke for decades after that. And it was at least part of what prompted the creation of the EPA. We don't talk about acid rain much anymore because of environmental regulations, the Clean Air Act, the development of alternative energy, etc. I don't know what "climate money" is going to which billionaires. But I have seen with my own eyes that when legislators choose to fund research and enact regulations limiting pollution, it makes a difference for all of our benefit. Otherwise we are all subsidizing clean-ups and treatment of health problems caused by pollution.
May I just ask how you know that it's Medicaid patients -- and not NH CEOs -- who are driving up the cost of nursing home care? I'm asking because my grandpa was in a Medicaid bed and the place was terribly understaffed and the aides got paid about $10/hr (many worked two jobs) and yet the company that owns the place is enormously successful. BTW, my grandpa was a WWII vet, worked the same job his whole life till he retired at 65, then started working again till he was 80, and went on Medicaid when he was 96. He paid into the system and like most families, applying for Medicaid was a last resort.
Is your screen name is ironic? If not, you might need to do a read through of your scripture. Nowhere does it mention or criticize socialism, but it does have an awful lot to say about how we should treat the poor and infirm.
Probably why hospitals don't keep you in there long either so they can turn over the bed to a paying consumer. And of course hospitals prefer commercial insurance (in the US that is any other insurance besides Medicare & Medicaid as they are allowed to charge more since Federal & State reimbursement rates are much lower.