Question About Bankruptcy and $$ in the Bank

[Princess Dolly]

Sounds like a plan to hide the fact that Mom has any assets, so she can get the govt. (ie tax-payers) to pay for any care she might need in her old age.

And no body does that? There isn't a whole profession out there that works on shielding assets in a legal manner?

Anyway, like others said is he a joint account holder or just someone listed on the account as POD or something like that?

 

[tnmt]

yeah, other people out there hide their money but it doesn't make it right, especially when taxpayers have to foot the bill when they actually have money hidden. I can almost guarantee that is the case here. OP, would you like to explain why she did that???? Probably would just make up a story for it anyhow.

 

[Nayan]

Geez jump much!! It was her DS not her DH

Sorry I read it wrong!

 

[tnmt]

Another thing, it doesn't matter if you can PROVE he didn't put a dime in. His name is on the account and that is all that matters. It is like it is his money too. Sounds like he will have to wait to file BK for a while.

 

[Danibelle]

Sounds like a plan to hide the fact that Mom has any assets, so she can get the govt. (ie tax-payers) to pay for any care she might need in her old age.

And there is a look back period (of 5 years) for transferred assets when you are dealing with Medicaid.

 

[Acklander]

Another thing, it doesn't matter if you can PROVE he didn't put a dime in. His name is on the account and that is all that matters. It is like it is his money too. Sounds like he will have to wait to file BK for a while.

Either wait on the bankruptcy or use the assets to pay off his debts. Either way, I recommend you dip into the funds to pay a lawyer to properly untangle the web you wove.
With all the additions of names to make sure it went to whom you wanted in case of everyone dying at the same time didn't anyone think of just a simple will?

 

[*pixie*dust*]

I am in MI and I work in Training & Compliance at a Financial Institution. Yes, they absolutely can take that money and they can also go back retro actively for that money. We have seen it happen many times at my financial institution.


Edited to add: The moment son was put on the account he became an owner of the money. They best course of action to protect your mother is for son to put off filing for a few months. If he has already filed and didn't list the money as an asset, then he can have legal problems for misrepresenting himself if the money is discovered. He could have his BK file dismissed at the very least.

 

[MIGrandma]

I've decided I don't like being put in this position with Mom's money.

I'm an only child so there is no one else to deal with it, unfortunately.

Dad had Alzheimer's, and Mom took care of him at home for several years, until he started getting violent at night. They called it "sundown syndrome." He got physical with her and she feared for her life. As a family it was decided he needed to be put into a nursing home. He worked all his life, the last 25 years at General Motors. They were not good at saving money. They sold their home and moved into a senior citizen apartment building. It was determined they could not afford, on their own, to pay Dad's way in the nursing home and the home started the paperwork for Medicaid. They advised her to speak to a lawyer. She (and I went with her) spoke with the lawyer at the Commission on Aging and the lawyer recommended "spending down" any assets.

They didn't have much $$ in the bank so there wasn't much to "spend down." The nursing home said she could put $2,000 into a savings account in Dad's name for incidentals (hair cuts, clothes, anything personal he needed) so we did that, with my name only being on the account as having power of attorney.

So, when he died we tried to transfer his savings (he still had the original $2,000, as he died 6 months after going into the nursing home) to her account and it wasn't allowed since my POA was no longer valid after his passing. We had to go through probate to get the money transferred, and pay fees to do that.

So, when Mom cashed in the life insurance policy she wanted to put it into the bank in my name only so her name wasn't tied to it. Yes, just in case she had to go to a nursing home. If some of you think that's wrong, so be it. It's what she wanted to do. I never thought there would be any kind of issues because to me it is HER money, NOT mine. I guess to the law that's not the case.

Someone mentioned gift tax, she didn't give the money to me. It is HER money, just in my name. And the premiums to the life insurance policy were paid by my Dad, from his income which was already taxed so why would it be taxed AGAIN?

This is just proving to be more trouble than it's worth and I'm wishing I would have said no when she asked to put it in my name. But I never thought there would be issues so I had no problem with it.

We are going to the bank this afternoon, to talk with them (I'm sure they've had other issues with people filing bankruptcy), and if need be we'll be walking right across the street to the lawyer's office to make an appointment.

I HATE that our son is planning to file for bankruptcy. I am a firm believer in a person paying their own debts so I totally disagree with him on what he's going to do, but I have no control over what he does. I just wish I never, never, NEVER would have added his name to the account.

I thought I was protecting my Mom's money, so nobody would have to pay to have it transferred to another account if DH and I were killed in an auto accident or something. And here I may be just causing more headaches.

 

[crashbb]

Sorry I read it wrong!

I had to read through it a few times to figure out it wasn't the OP's DH, so don't feel too bad.

 

[MIGrandma]

Either wait on the bankruptcy or use the assets to pay off his debts. Either way, I recommend you dip into the funds to pay a lawyer to properly untangle the web you wove.
With all the additions of names to make sure it went to whom you wanted in case of everyone dying at the same time didn't anyone think of just a simple will?

My parents DO have a will, but it still had to go through probate to get Dad's money transferred to Mom. I have no idea why, I am not a lawyer.

 

[cornflake]

Someone mentioned gift tax, she didn't give the money to me. It is HER money, just in my name. And the premiums to the life insurance policy were paid by my Dad, from his income which was already taxed so why would it be taxed AGAIN?

That may be the way you and she see it - that it's her money, but presuming the money was in her possession, like it was a check made out to her, and she handed it over or transferred the money to you and the money went into an account in your name?

It's legally your money and was/is subject to a gift tax because it was a gift from her to you. If you then give it back to her, the same would apply going the other way too, unless you set up trusts and whatnot which it doesn't sound like you did.

 

[ilovemk76]

I've decided I don't like being put in this position with Mom's money.

I'm an only child so there is no one else to deal with it, unfortunately.

Dad had Alzheimer's, and Mom took care of him at home for several years, until he started getting violent at night. They called it "sundown syndrome." He got physical with her and she feared for her life. As a family it was decided he needed to be put into a nursing home. He worked all his life, the last 25 years at General Motors. They were not good at saving money. They sold their home and moved into a senior citizen apartment building. It was determined they could not afford, on their own, to pay Dad's way in the nursing home and the home started the paperwork for Medicaid. They advised her to speak to a lawyer. She (and I went with her) spoke with the lawyer at the Commission on Aging and the lawyer recommended "spending down" any assets.

They didn't have much $$ in the bank so there wasn't much to "spend down." The nursing home said she could put $2,000 into a savings account in Dad's name for incidentals (hair cuts, clothes, anything personal he needed) so we did that, with my name only being on the account as having power of attorney.

So, when he died we tried to transfer his savings (he still had the original $2,000, as he died 6 months after going into the nursing home) to her account and it wasn't allowed since my POA was no longer valid after his passing. We had to go through probate to get the money transferred, and pay fees to do that.

So, when Mom cashed in the life insurance policy she wanted to put it into the bank in my name only so her name wasn't tied to it. Yes, just in case she had to go to a nursing home. If some of you think that's wrong, so be it. It's what she wanted to do. I never thought there would be any kind of issues because to me it is HER money, NOT mine. I guess to the law that's not the case.

Someone mentioned gift tax, she didn't give the money to me. It is HER money, just in my name. And the premiums to the life insurance policy were paid by my Dad, from his income which was already taxed so why would it be taxed AGAIN?

This is just proving to be more trouble than it's worth and I'm wishing I would have said no when she asked to put it in my name. But I never thought there would be issues so I had no problem with it.

We are going to the bank this afternoon, to talk with them (I'm sure they've had other issues with people filing bankruptcy), and if need be we'll be walking right across the street to the lawyer's office to make an appointment.

I HATE that our son is planning to file for bankruptcy. I am a firm believer in a person paying their own debts so I totally disagree with him on what he's going to do, but I have no control over what he does. I just wish I never, never, NEVER would have added his name to the account.

I thought I was protecting my Mom's money, so nobody would have to pay to have it transferred to another account if DH and I were killed in an auto accident or something. And here I may be just causing more headaches.

Apparently paying your debt does not include Medicaid.

 

[Uptown Girl]

I've decided I don't like being put in this position with Mom's money.

I'm an only child so there is no one else to deal with it, unfortunately.

Dad had Alzheimer's, and Mom took care of him at home for several years, until he started getting violent at night. They called it "sundown syndrome." He got physical with her and she feared for her life. As a family it was decided he needed to be put into a nursing home. He worked all his life, the last 25 years at General Motors. They were not good at saving money. They sold their home and moved into a senior citizen apartment building. It was determined they could not afford, on their own, to pay Dad's way in the nursing home and the home started the paperwork for Medicaid. They advised her to speak to a lawyer. She (and I went with her) spoke with the lawyer at the Commission on Aging and the lawyer recommended "spending down" any assets.

They didn't have much $$ in the bank so there wasn't much to "spend down." The nursing home said she could put $2,000 into a savings account in Dad's name for incidentals (hair cuts, clothes, anything personal he needed) so we did that, with my name only being on the account as having power of attorney.

So, when he died we tried to transfer his savings (he still had the original $2,000, as he died 6 months after going into the nursing home) to her account and it wasn't allowed since my POA was no longer valid after his passing. We had to go through probate to get the money transferred, and pay fees to do that.

So, when Mom cashed in the life insurance policy she wanted to put it into the bank in my name only so her name wasn't tied to it. Yes, just in case she had to go to a nursing home. If some of you think that's wrong, so be it. It's what she wanted to do. I never thought there would be any kind of issues because to me it is HER money, NOT mine. I guess to the law that's not the case.

Someone mentioned gift tax, she didn't give the money to me. It is HER money, just in my name. And the premiums to the life insurance policy were paid by my Dad, from his income which was already taxed so why would it be taxed AGAIN?

This is just proving to be more trouble than it's worth and I'm wishing I would have said no when she asked to put it in my name. But I never thought there would be issues so I had no problem with it.

We are going to the bank this afternoon, to talk with them (I'm sure they've had other issues with people filing bankruptcy), and if need be we'll be walking right across the street to the lawyer's office to make an appointment.

I HATE that our son is planning to file for bankruptcy. I am a firm believer in a person paying their own debts so I totally disagree with him on what he's going to do, but I have no control over what he does. I just wish I never, never, NEVER would have added his name to the account.

I thought I was protecting my Mom's money, so nobody would have to pay to have it transferred to another account if DH and I were killed in an auto accident or something. And here I may be just causing more headaches.

The life insurance death benefit went to your mom with no taxes, since your mom gave you the money--yes, since it is in your name in the bank, she "gave" you that money under the eyes of the law, even if you consider it to be her money. I see no issues with doing that for Medicare purposes at all. The law is written as such that it is legal to do so, however, depending on the amount, you may owe gift taxes on that amount because of how the transfer was handled. You would have been MUCH better off putting that money into a trust. I think it would be in everyone's best interest to consult an estate planning attorney asap, before your son files.

The issue with your Dad's savings account is that it wasn't set up to TOD (transfer on death). That is a simple, easy form to fill out at the bank. A good estate planning attorney would have been able to have this set up properly from the start. What you pay in probate costs is a lot more then paying to have a proper will and trust set up. Even with a will, a will cannot distribute money, only "things" and that was the issue. Again, call an estate planning attorney, now, today, and get these things done properly.

 

[Uptown Girl]

Another thing I would do with some of that insurance money is get a long term care policy for your mom if she still qualifies (health is reasonably good). It will save a lot of hassle for you down the road--the premiums have a tax deduction associated with them too.

 

[Acklander]

I've decided I don't like being put in this position with Mom's money.

I HATE that our son is planning to file for bankruptcy. I am a firm believer in a person paying their own debts so I totally disagree with him on what he's going to do, but I have no control over what he does. I just wish I never, never, NEVER would have added his name to the account.

I thought I was protecting my Mom's money, so nobody would have to pay to have it transferred to another account if DH and I were killed in an auto accident or something. And here I may be just causing more headaches.

Yeah, it probably would have been much cheaper to just pay the probate fees.
While you may disagree with your son filing bankruptcy, the reality is, there's a very good likelihood that, by adding his name on to the account, he won't be able to file for bankruptcy unless he burns through grandma's money first. Honestly, if it were me, I'd by pass the bank and head directly to the lawyers office. I'm not sure where you got the original advice to add all the names on the account (well, everyone's name except the person who the money belongs to) but it obviously didn't come from a lawyer. Yeah, they can be expensive, but, as your learning the hard way, they actually do something for those big bucks. You need professional advice, not just the freebie advice from the bank.

 

[kiddo76]

So, when Mom cashed in the life insurance policy she wanted to put it into the bank in my name only so her name wasn't tied to it. Yes, just in case she had to go to a nursing home. If some of you think that's wrong, so be it. It's what she wanted to do. I never thought there would be any kind of issues because to me it is HER money, NOT mine. I guess to the law that's not the case.

Someone mentioned gift tax, she didn't give the money to me. It is HER money, just in my name. And the premiums to the life insurance policy were paid by my Dad, from his income which was already taxed so why would it be taxed AGAIN?

It either is her money and would count towards assets for Medicaid or it's not. It can't be 'her money' for gift tax purposes and 'your money' for Medicaid purposes. You can't have it both ways. Since she was the benificiary for the insurance, she didn't have to pay income tax on the benefit. However, once she transferred the money to you, that is considered a gift to you and would be subject to the IRS gift tax laws.

 

[tnmt]

I just can't believe people try to hide their money just so taxpayers have to foot the bill for their nursing home care later on in life. This is exactly why the economy is in the shape it's in today. We are paying for other people's stuff while they sit on their money reaping the benefits. Lovely, just lovely! Makes me want to vomit! MIgrandma, I hope you at least pay the gift tax that was due on that money. You only have to do that if it was over 13,000 though, I think.

 

[focusondisney]

Another thing I would do with some of that insurance money is get a long term care policy for your mom if she still qualifies (health is reasonably good). It will save a lot of hassle for you down the road--the premiums have a tax deduction associated with them too.

Best post of the whole thread! What is the money being saved for anyway? I think the OP is in her 50's at least, so her mom is in her 70's probably. They are counting on Medicare for any future nursing home needs. Other than protecting an inheritance,what other use are you protecting the money for? Is she worried about having huge medical costs? Again, medicare/ medicaid will cover those if she has no other assests but long term care insurance might give her peace of mind. Might be a good way to spend her money on "her".

 

[cornflake]

I just can't believe people try to hide their money just so taxpayers have to foot the bill for their nursing home care later on in life. This is exactly why the economy is in the shape it's in today. We are paying for other people's stuff while they sit on their money reaping the benefits. Lovely, just lovely! Makes me want to vomit! MIgrandma, I hope you at least pay the gift tax that was due on that money. You only have to do that if it was over 13,000 though, I think.

There are legal ways to transfer and put in trust monies so that nursing home care can not bankrupt people (who spent their lives as taxpayers, generally) - which you can certainly be for or against but I don't think it's as simple as you're making it.

Due to the way health care is handled in this country, decent nursing home care generally falls into two categories - private, which can run tens of thousands of dollars a month, or medicare-funded, for which one has to have close to no assets to avail themselves of.

So, first, if you've worked all your life and saved to be able to leave something to your children, your assets (including your home) can be run through in less than a year just so you can have basic nursing home care.

Or, if you fall in the midrange, where the care you could afford would only be either a month or two or a very substandard private institution, you have to somehow dump the money and home you worked for to be able to get any care, because you can't afford any decent private care and are not destitute.

Hence, yes, there are legal avenues to set up trusts and whatnot to allow people - who have generally worked all their lives and paid into the system - to get the benefits of that system. Like I said, think of it what you will, but this isn't generally about multi millionaires hiding assets in island nations and taking advantage of whatnot, it's people trying to protect fairly modest inheritances that wouldn't really matter in a private situation.

 

[Praying Colonel]

This thread is a great example of why a do-it-yourself will kit is not a great idea for many people. If MIGrandma's parents had obtained the services of a competent estate planner, much, if not all, of this mess could've been avoided.

A good estate plan involves much more than just drafting a will, and a good estate planning attorney can save a ton of headaches by dealing not only with drafting the will but proper planning to pass all assets.