Future inheritance - would like opinions

[Raddoc123]

My inlaws (early 70s) have about 1.3 mil in their portfolio which they have stated is our future inheritance since they have other income sources to fund retirement.  The only possibility we could think of them needing this money in the future is for long term care.

They are not financially savvy and would like my help in deciding what to do to preserve this money and shield it from long term care costs as they would like to rely mostly on Medicaid for LTC (this alone may be a mistake).  They would like to transfer the money to us while still alive with the understanding that it would still be available to them if needed.

We have thought about setting up a Medicaid irrevocable trust, but then this locks up the principal until they pass.  Another possibility is for them to gift the money to us in some sort of a trust to hopefully protect from a tiny chance of legal claim above limits of policy.  We have thought about buying LTC insurance but the market is so unstable.  I would like to preserve this money but at the same time would like my inlaws to have access to the money since they are immigrants and have worked hard and lived frugally.  What do you think would be the best option?  Thanks!

[CordMcNally]

Now would be a great time to talk with a lawyer that specializes in these types of scenarios. There will be a look back period (I believe 5 years) to look for any assets so technically it could be considered fraud if not set up properly.

[childay]

Agreed go see a elder law atty in your their state.

[jfoxcpacfp]

Is their portfolio comprised of IRAs? If so, they are in payout status and I don't think there is much to be done. Maybe with other assets, but not the IRAs. Also, a transfer with "strings attached" does not count as a completed gift. As for LTCI, at their ages, it would be pricey. The time to buy is usually in their late 50s to early 60s. They might want to look into a short-term LTC policy. Unless there is a history of Alzheimer's or Parkinson's in the family, chances are better they would be in for short-term stays.

They need to see an attorney who specializes in Medicaid planning, not a general advice attorney. Think long and hard before you tie their assets up into such a trust, though. I'm not a huge fan of this type of planning although, I suppose it does have a place.

A SPIA might be a better option for them.

[Hatton]

The attorney is a good idea.  My father died at age 92.  He was blind from macular degeneration and an insulin dependent diabetic. He had a nice government defined benefit pension.  He was never in a nursing home but did live in assisted living for about 10 years.  His pension was a combo of active duty military service followed by civil service.  It more than paid for assisted living.  The last 4 months of his life I hired some private duty nurses to sit with him 24/7 so he could stay where he was. Only during these last months did he dip into his savings. He died with an estate of 600k.  My point being once someone reaches the point of needing assisted living there are really no other expenses.  No car, few clothes etc.  Food is provided. Lots of scare tactics out there.

[ITEngineer]

Am I the only one that thinks this is unethical (but not illegal)? It seems unethical to transfer your LTC payments (that you afford to make) onto a societal safety net so you can leave a larger inheritance to the next generation.

My wife has worked in nursing homes for two decades. She has convinced me that I would not want to be in a medicaid supporting nursing home. I'm sure the doctors on this forum are much more knowledgeable here than I about Medicaid nursing home conditions.

That said - it is hard to predict long term care costs, but if you're telling me your parents can afford to pass on $1.3M now and still live day-to-day, I'm pretty sure they can afford any potential LTC costs and still leave a large inheritance to the next generation. If they live for another 20 years, that $1.3M could easily grow to $3-4M (5% annual return)

They can easily afford to give you $56k/year and stay under gift tax rules if they are really keen on passing some of this money on now.

[Kamban]

Raddoc123 wrote:

They are not financially savvy and would like my help in deciding what to do to preserve this money and shield it from long term care costs as they would like to rely mostly on Medicaid for LTC (this alone may be a mistake). They would like to transfer the money to us while still alive with the understanding that it would still be available to them if needed.

Click to expand...

This is the crux of the matter. They want to give it to you in the hope that by not having it makes them eligible for Medicaid and Medicaid nursing home, but also to be able to access it if it turns out they be found ineligible for Medicaid nursing home.

So they have to transfer the money to you 5+ years before they apply for Medicaid LTC. They have to trust that you will help them if the don't get it. You are most likely a honest person but many a parent has given his house or wealth away during their life and found themselves penniless and kicked out of their home. If there is a paper trail or evidence that the money is still theirs or could be theirs, then it can be construed as fraud.

Finally the ethical question. Do we want all wealthy people to clog up the medicaid nursing home which are meant for the destitute. If we do then we should not ****************************** and moan if the taxes are raised to pay for all this care, especially on the middle class and well off. I have no true answer to that. Each person has to answer according to their moral compass.

[Hatton]

I plan to pay my own LTC expenses.