Estate question...

[disney junky]

A friend of mine just told me that his parents put their house in his, his sisters and his brothers names so that when they pass, the house will be theirs. If none of these children actually want the house, what is the advantage of this over simply selling the house and having the proceeds from the sale become part of the estate? His parent's were told there was some tax advantage. Is this true? If so, what?

 

[tar heel]

That may have been why your friends' parents did that, BUT it's often done for another reason: to relieve the parents of assets in case one of them ends up in long-term care, and thus qualify them for Medicaid. Several of my parents friends have done this. I think it's, if not illegal, certainly unethical. Did your friends' parents also transfer their other assets, such as bank accounts?

There are some tax DISADVANTAGES to transfering ownership if the house is worth lots more than when they got it. When you inherit a house, you get a stepped up tax basis to what it is worth then rather than when it was bought.

 

[disney junky]

That may have been why your friends' parents did that, BUT it's often done for another reason: to relieve the parents of assets in case one of them ends up in long-term care, and thus qualify them for Medicaid. Several of my parents friends have done this. I think it's, if not illegal, certainly unethical. Did your friends' parents also transfer their other assets, such as bank accounts?

There are some tax DISADVANTAGES to transfering ownership if the house is worth lots more than when they got it. When you inherit a house, you get a stepped up tax basis to what it is worth then rather than when it was bought.

Actually, they just bought it yesterday. It's actually next door to the one son, and just down the street from the daughter. I don't know if other assets were transferred, I doubt it.

 

[arielsleepingbeauty]

I am a social worker for the elderly. I see the transfer of estates going on all the time from parents to relatives. If a parent's home is still in their name and then goes into a nursing facility, even if they do not have the money to private pay for the facility, they can receive state aide as long as their monetary assets are under $2,000. When they pass even if their house is willed to a relative, as long as it is still in their name, the state has the right to recoup their losses. Each state may be different, but i live in MA and if a parent transfers thier home to a relative over 5 years before they go into a nursing facility, the state can't touch it. When it comes to nursing homes, people don't want to use their own money for their own care. They see it as a waste when the state can just pick up the tab. It's a sad way of thinking, but it happens everyday.
It's always best to consult your lawyer about transfer advantages and disadvantages.

 

[Loubon]

Joint ownership of assets is usually done to avoid probate. Probate of a will is a process where the court has to approve the distribution of the assets regardless of how specific the will is. It can sometimes take a long time because relatives need to be contacted to make sure the will is not contested. Depending on the state and the circumstances the asset(s) can be tied up for a year.

 

[golfgal]

Obviously there are a lot of reasons to transfer the ownership of a house to someone else. Like it was said, in order for that said house NOT to be considered as as asset when someone goes into a nursing home that transfer has to take place at least 5 years previously. There are plenty of people that can't afford a nursing home and need Medicaid to cover the costs. If you do that you turn your house over to the state to help fund your stay. A lot of people don't like that idea, not that I can blame them, but you are basically getting a free ride in the nursing home then.

Several years ago MN banned the building of NEW nursing homes, thus the advent of the many assisted living places. There is a bill before our legislature, well, it is still in committee, that will require everyone in the state to have long-term health insurance to cover their retirement years/living, etc. In the year 2030, I think, there will be more people over the age of 65 then in any other age group. There will be over 1 million people that are 100 or older. Something needs to be done.

The other advantage of that is when your parents die, if the house in your name, your name is on their checking account, etc. closing out their estate is MUCH easier. Getting a Power of Attorney is also a good idea.

 

[disney junky]

Several years ago MN banned the building of NEW nursing homes, thus the advent of the many assisted living places. There is a bill before our legislature, well, it is still in committee, that will require everyone in the state to have long-term health insurance to cover their retirement years/living, etc.

Does this stand a chance of passing? I would think if the cost were high, there could be a mass exodus of elderly from MN. I'm curious, why a ban on new nursing homes?

 

[golfgal]

Does this stand a chance of passing? I would think if the cost were high, there could be a mass exodus of elderly from MN. I'm curious, why a ban on new nursing homes?

In 2030 MN will have more people over the age of 65 then Florida and Arizona. I think it does have a good chance of passing eventually. The ban on the nursing homes came from the fact that you can't pick and choose WHO gets a bed in a nursing home, the need exceeds the space, so they won't build anymore to force people to look for other options vs the state paying for their nursing home stay. If MN continued to build the nursing home, allowed everyone/anyone in them it would bankrupt the state.

Right now in MN your only options to pay for nursing home care are either to pay out of pocket to a tune of upto $330/DAY--less for some places obviously but that is pretty common around the Twin Cities, surrender all your assets and go on Medicaid if you can qualify or pay for it with a Long Term Care Insurance plan. Not many have the savings to pay for nursing home care out of pocket, the state can't afford to pay for everyone that needs nursing home care so that leaves the LTC insurance.

The biggest hold up now is how the state is going to fund the program. The state would act as a re-insurer but the policies would be bought from private companies, much like Flood Insurance and the federal government. If the costs for the payouts exceed the reserves for the insurance companies, the state would have to make up the difference. Once they figure out the funding, the bill will pass.

 

[golfgal]

I will have to check on the figures but the cost of LTC is MUCH less then paying for an assisted living place or nursing home. You may spend $20,000 over the plan years (saying you bought the coverage at age 40) on LTC but your nursing home costs could and probably will exceed $100,000. Kind of a no brainer solution in my book.

Also keep in mind, you never know when you might need the care. There are a LOT of 40 year old in nursing homes with brain injuries, etc.

 

[mickeyfan2]

I will have to check on the figures but the cost of LTC is MUCH less then paying for an assisted living place or nursing home. You may spend $20,000 over the plan years (saying you bought the coverage at age 40) on LTC but your nursing home costs could and probably will exceed $100,000. Kind of a no brainer solution in my book.

Also keep in mind, you never know when you might need the care. There are a LOT of 40 year old in nursing homes with brain injuries, etc.

DH and I carry LTC insurance. When we got ours about 10 years ago there were three plans 2 year, 5 year and unlimited. We took unlimited with the 5% inflation rider. Our annual premiums are a little under $3K/year for the two of us and will never increase. Ours also pays 100% out for in home care. We both feel it is well worth the money.

 

[LoveBWVVBR]

I am a social worker for the elderly. I see the transfer of estates going on all the time from parents to relatives. If a parent's home is still in their name and then goes into a nursing facility, even if they do not have the money to private pay for the facility, they can receive state aide as long as their monetary assets are under $2,000. When they pass even if their house is willed to a relative, as long as it is still in their name, the state has the right to recoup their losses. Each state may be different, but i live in MA and if a parent transfers thier home to a relative over 5 years before they go into a nursing facility, the state can't touch it. When it comes to nursing homes, people don't want to use their own money for their own care. They see it as a waste when the state can just pick up the tab. It's a sad way of thinking, but it happens everyday.
It's always best to consult your lawyer about transfer advantages and disadvantages.

Just so you're aware, the Medicaid "look back" laws changed in early 2006. They are much more strict now.

People use irrevocable trusts for Medicaid planning (or at least, they did until the laws changed...not sure now). The parents in the OP may have done this, or they may have put the assets in a revokable living trust with the children as beneficiaries/successor trustees. The plus to a revokable living trust is that the asset bypasses probate. The irrevokable (Medicaid) trust was done by many people for obvious reasons (to avoid paying for $$ nursing home care).

 

[golfgal]

DH and I carry LTC insurance. When we got ours about 10 years ago there were three plans 2 year, 5 year and unlimited. We took unlimited with the 5% inflation rider. Our annual premiums are a little under $3K/year for the two of us and will never increase. Ours also pays 100% out for in home care. We both feel it is well worth the money.

Your rates are based on the age at which you purchase the policy so you are better off buying the coverage young for this reason, your rate stays the same for the life of the policy. You pay roughly $250/month which is LESS then ONE DAY in a nursing home. These plans haven't been around all that long so a lot of people don't really understand them OR the benefit of having one. You were smart picking the unlimited because the average nursing home stay is LONGER then 5 years, then what would you do.

 

[barkley]

if they are trying to do it for medicaid they should consult with an elder law attny. in THEIR state of residence. states administer medicaid and have different eligibility guidelines (in california the home is exempt for consideration under certain circumstances, and if you transfer it anytime AFTER you are found eligible the value is not countable. if you transfer it -when i administered the program it was within 30 months- before you become eligible you can be penalized with years of inelgibility depending on the value of the home.

one of the things that always concerns me with situations like these-if just one of the people it's transfered to gets into a legal entanglement or runs up bad debts-that house is up for grabs. another issue that can come up is when it's time to sell-if the owners don't reside there for the minimum number of years they will not be able to take advantage of capital gains exemptions-and could end up paying out way more in taxes then if it had been structured as an inheritance.

i'm surprised any state would look at funding (or acting as private guarantor) for ltc coverage. the criteria for medicare or medicaid to cover elder care isn't based on the 'title' of a facility-it's based on the level of care needed/received by a patient. just changing things so places are called ltc's or 'assisted living' won't lower the number of people who draw from the gov. programs (they are pretty tight in determining if an individual requires the level of care they pay out for-an elderly person just 'wanting' or 'needing' to be in a care facility but not REQUIRING skilled nursing care are not covered by either program). currently states that adhere to the minimum federal guidelines for their version of medicaid get the bulk of the expenses (including staff salaries for adminstering the state's program) funded from federal dollars. it seems like a state that opted to guarantee an ltc program would get 'bit' from both sides-healthy workers would move and take their tax dollars with them, and the feds would'nt be contributing because primary insurance always takes first presidence over state or fed assistance.

 

[golfgal]

Oh, and I should add, you CAN buy one of these on your parents too. Might make a good Christmas gift for them!

 

[golfgal]

if they are trying to do it for medicaid they should consult with an elder law attny. in THEIR state of residence. states administer medicaid and have different eligibility guidelines (in california the home is exempt for consideration under certain circumstances, and if you transfer it anytime AFTER you are found eligible the value is not countable. if you transfer it -when i administered the program it was within 30 months- before you become eligible you can be penalized with years of inelgibility depending on the value of the home.

one of the things that always concerns me with situations like these-if just one of the people it's transfered to gets into a legal entanglement or runs up bad debts-that house is up for grabs. another issue that can come up is when it's time to sell-if the owners don't reside there for the minimum number of years they will not be able to take advantage of capital gains exemptions-and could end up paying out way more in taxes then if it had been structured as an inheritance.

i'm surprised any state would look at funding (or acting as private guarantor) for ltc coverage. the criteria for medicare or medicaid to cover elder care isn't based on the 'title' of a facility-it's based on the level of care needed/received by a patient. just changing things so places are called ltc's or 'assisted living' won't lower the number of people who draw from the gov. programs (they are pretty tight in determining if an individual requires the level of care they pay out for-an elderly person just 'wanting' or 'needing' to be in a care facility but not REQUIRING skilled nursing care are not covered by either program). currently states that adhere to the minimum federal guidelines for their version of medicaid get the bulk of the expenses (including staff salaries for adminstering the state's program) funded from federal dollars. it seems like a state that opted to guarantee an ltc program would get 'bit' from both sides-healthy workers would move and take their tax dollars with them, and the feds would'nt be contributing because primary insurance always takes first presidence over state or fed assistance.

In MN the state is not required to pay for an assisted living situation, only nursing home living. If you are on Medicaid, you can't be in an assisted living place, you are in a nursing home. It has everything to do with a 'name' here. The level of care at an assisted living home is MUCH less then that at a nursing home as you know.

In our case it makes perfect sense for the state to require this because in the long run people are mostly paying for their own care that way vs getting 100% paid for by the state. There will be some people that pay for their LTC for years and only use up 6 months of coverage, others will use 10 year of coverage. With the law of large numbers, it averages out in the end. People will pay for their care out of their premiums and the investment dollars the insurance companies receive from those premiums. In most cases those dollars are sufficient to cover the claims. In the event of a 'disaster', although I don't know how that would come into play for LTC, the state would cover any excess costs.

Put it in terms of a Katrina type situation, insurance companies have the reserves to pay out their claims, mostly. With the FLOODS that happened after the hurricane, those costs exceeded the reserves of the insurance companies because floods are SO costly. The federal government then stepped in and paid the remaining costs, within the policy limits.

 

[barkley]

In MN the state is not required to pay for an assisted living situation, only nursing home living. If you are on Medicaid, you can't be in an assisted living place, you are in a nursing home. It has everything to do with a 'name' here. The level of care at an assisted living home is MUCH less then that at a nursing home as you know.

In our case it makes perfect sense for the state to require this because in the long run people are mostly paying for their own care that way vs getting 100% paid for by the state. There will be some people that pay for their LTC for years and only use up 6 months of coverage, others will use 10 year of coverage. With the law of large numbers, it averages out in the end. People will pay for their care out of their premiums and the investment dollars the insurance companies receive from those premiums. In most cases those dollars are sufficient to cover the claims. In the event of a 'disaster', although I don't know how that would come into play for LTC, the state would cover any excess costs.

Put it in terms of a Katrina type situation, insurance companies have the reserves to pay out their claims, mostly. With the FLOODS that happened after the hurricane, those costs exceeded the reserves of the insurance companies because floods are SO costly. The federal government then stepped in and paid the remaining costs, within the policy limits.

for states that get fed funding they are only required to pay for nursing home care if the patient requires certain specific items of 'nursing care' so a person can't just go into one because thats the only thing the state will pay for (most states require medical documentation as to what specific items of nursing care the person requires that can ONLY be provided in a skilled nursing facility-if they go into a nursing facility there are regular re-evaluations to see if they can go without those areas of care, and if so the states/feds no longer pay any portion-we had clients that revolved in and out of nursing care centers when they were found to have 'recovered' such that an assisted living would meet their needs-which of course they had to find a way to self fund).

it would be interesting to see what type of ltc plan the state figures on finding-most of the plans still only cover skilled nursing care, so if the patients don't meet that criteria (and it can be higher criteria than the gov. programs) they will still be without coverage and come looking at the state to help (and unless the state is going to totaly do away with all medical programs that get fed funding they have to offer the bare minimum which includes skilled nursing care).

 

[mickeyfan2]

Your rates are based on the age at which you purchase the policy so you are better off buying the coverage young for this reason, your rate stays the same for the life of the policy. You pay roughly $250/month which is LESS then ONE DAY in a nursing home. These plans haven't been around all that long so a lot of people don't really understand them OR the benefit of having one. You were smart picking the unlimited because the average nursing home stay is LONGER then 5 years, then what would you do.

Thank you for the kind words. Thanks to a finacial person we looked into them. I read a book about them and then found the plan we wanted. We figured the unlimited was the way to go at our age. What if we were 50 and ended up there? That could be for 40 years!!! The company we picked added an advanced plan a few years after we got ours. They offered us a free change to that plan with a small premium change and no proof of insuability needed. We took them up on their offer. The best move and money we have every spent IMHO.

 

[golfgal]

for states that get fed funding they are only required to pay for nursing home care if the patient requires certain specific items of 'nursing care' so a person can't just go into one because thats the only thing the state will pay for (most states require medical documentation as to what specific items of nursing care the person requires that can ONLY be provided in a skilled nursing facility-if they go into a nursing facility there are regular re-evaluations to see if they can go without those areas of care, and if so the states/feds no longer pay any portion-we had clients that revolved in and out of nursing care centers when they were found to have 'recovered' such that an assisted living would meet their needs-which of course they had to find a way to self fund).

it would be interesting to see what type of ltc plan the state figures on finding-most of the plans still only cover skilled nursing care, so if the patients don't meet that criteria (and it can be higher criteria than the gov. programs) they will still be without coverage and come looking at the state to help (and unless the state is going to totaly do away with all medical programs that get fed funding they have to offer the bare minimum which includes skilled nursing care).

In MN LTC plans cover skilled care, Intermediate care and custodial care, all of which can simply be related to either old age or an injury or illness of some kind. At minimum LTC covers care/housing in nursing homes, assisted living places, home health care and adult day care. A person has to not be able to do 2 of the the 6 daily living activities alone-bathing, dressing, eating, toileting, transferring, continence. If you can't bath or get out of bed unassisted, you qualify for benefits under the LTC plan. That care can be in your home or one of the other places mentioned above. LTC coverage is LESS strict then government qualifying programs. With medicaid one qualification aspect is meeting state/federal impoverished guidelines-which most middle class people would never meet yet can't afford a nursing home on their own-or even an assisted living place. You also have to prove a permanent disability (including disease--alzheimer's for example).

Most insurance companies in MN sell LTC plans. These are the plan MN's would be required to buy. Most offer many levels of service, care, premiums, etc. just like any other kind of insurance. I think plans have changed quite a bit since you have worked in the industry or the coverage in MN is different because you seem to think these plans are different then they are. There won't be one state plan. It will be like car insurance, you are required to have it but you buy what you want from whom you want with in state minimums of course.

 

[barkley]

In MN LTC plans cover skilled care, Intermediate care and custodial care, all of which can simply be related to either old age or an injury or illness of some kind. At minimum LTC covers care/housing in nursing homes, assisted living places, home health care and adult day care. A person has to not be able to do 2 of the the 6 daily living activities alone-bathing, dressing, eating, toileting, transferring, continence. If you can't bath or get out of bed unassisted, you qualify for benefits under the LTC plan. That care can be in your home or one of the other places mentioned above. LTC coverage is LESS strict then government qualifying programs. With medicaid one qualification aspect is meeting state/federal impoverished guidelines-which most middle class people would never meet yet can't afford a nursing home on their own-or even an assisted living place. You also have to prove a permanent disability (including disease--alzheimer's for example).

Most insurance companies in MN sell LTC plans. These are the plan MN's would be required to buy. Most offer many levels of service, care, premiums, etc. just like any other kind of insurance. I think plans have changed quite a bit since you have worked in the industry or the coverage in MN is different because you seem to think these plans are different then they are. There won't be one state plan. It will be like car insurance, you are required to have it but you buy what you want from whom you want with in state minimums of course.

boy i know allot of people that need to head out to mn-the average ltc plans that are sold around here are noway as liberal. one of 'best' ones offered is considered 'best' because it 'only' holds people to 3 of the criterias you've listed above (and it's still set up that you have to apply for medi-CAL and accept it to pay first before the private coverage kicks in).

i know that policies differ, but with any of them a person realy needs to check the fine print-we had people walk through our doors daily who had paid for these plans believing they had coverage for their elder needs-only to find that there were exclusions and requirements that made it difficult to receive the benefits when they were truly needed (and unlike gov. programs which have mandated timelines for granting/denying and issuing benefits-privatly held insurers can keep a person waiting for what is sometimes the rest of their lives ).

 

[mickeyfan2]

boy i know allot of people that need to head out to mn-the average ltc plans that are sold around here are noway as liberal. one of 'best' ones offered is considered 'best' because it 'only' holds people to 3 of the criterias you've listed above (and it's still set up that you have to apply for medi-CAL and accept it to pay first before the private coverage kicks in).

Mine is only two IIRC and has no stipulation about Medicare. This is a private policy between me and the insurer. Now will I collect? Only time will tell. I actual hope to never need the policy.