I like your idea of putting the assets in you parents’ names in order to get college aid. But, don’t you run the risk of one of them being sued because of a car accident or some other misfortune? I guess this could be protected with an umbrella policy.
If the money is in a proper trust (i.e., the parents are not trustees) and not in their name, then it couldn’t be discovered by opportunistic accident lawyers. And yes, there’s insurance for actual accidents and liability.
You have a bit over a million dollars to “give” to your parents, but don’t want to pay for your kids college, instead desiring to put it on the backs of taxpayers with “financial aid”.
I held back my similar initial reaction, because honestly I’d be doing the same thing. Everyone who can, does, or should, and I don’t have an ethical issue with this as long as everything is legal. Sending 2 kids away for 4 years could cost half of that million. Education is ridiculously overpriced and costs are rising at crazy rates (like healthcare). It’s almost irresponsible to not get some financial aid from that overpriced college. Also not all financial aid comes from taxpayers, a lot of it comes from the schools own endowments. Taxpayer-funded financial aid at the federal level is pretty limited to what, Pell Grant? Plus some more at state level, like Cal Grant. When I went to college, a third to a half of my financial aid package was a need-based university grant. My parents didn’t have anything to hide, unfortunately. Fortunately I got a good discount on my education. I also have friends who got seriously screwed with student loans, because their parents made too much to qualify for aid, but not enough to actually pay for college.
That’s about the only thing you’ve said about me that is correct. I’ll just leave it at that.
If you want to protect assets from any potential creditors of beneficiaries, that would require the creation of a Spendthrift Trust.
If you’re assured that an appointed trustee will acquiesce to your wishes, then language added from a Sprinkling Trust would allow the trustee the discretion to allocate trust assets among beneficiaries according to circumstances.
There’s a myth that a revocable trust cannot shield assets from Medicaid but an irrevocable trust can. It’s not about the trusts, it’s about the transfer.
Prior to the end of the look-back period, if you gave someone a sizable amount of money, or even made a sizable purchase, it can be clawed-back or subject to penalty.
I heartily agree that the cost of college is insane these days, as is the cost of nursing home and any end-of-life care.
I do have mixed feelings on these issues. I think my initial reaction is based on the fact of where I came from in life vs. where I am now. The following will make me sound old, but I’m really not.
Growing up, I came from a dirt poor family. We had no money to spare for anything, college included. We didn’t live the good life. Income was low and barely covered essentials. No luxuries, no vacations, just enough to keep a roof in a low-rent housing project complex over our heads and food in our stomachs. 3 generations under that roof regularly, sometimes 4 as needed. No, it wasn’t Section 8. That didn’t exist yet. Everyone had to pay full rent. It was just cheaper than outside the complex. I got free school lunches. Hardly anyone I knew did. Back then, it felt like something to be ashamed of.
A few people in my family would have liked to have gone to college, but with no money to spare, impossible. Financial aid wasn’t given as freely as it is today. My mother was turned down for financial aid, despite having no income, living with her parents (because of no income and medical issues), and said parents having no money to spare for such a luxury as college (see above). This was around 1979. Around 1983, I tried to get financial aid for college, unsuccessfully. The community college counselor looked over the paperwork and said I’d been denied because having $1000 in a bank account was considered too much money to qualify for financial aid! She said I should have lied and said I had nothing. This, despite still living at home with my grandparents because I couldn’t afford to move out on my own on a minimum wage job while paying my mother’s medical bills from cancer.
My mother suffered with cancer for 11 years before she finally died in 1991. The last year, I’d had to cut back severely on work to tend to her needs and made somewhere between $6000 and $8000. Yet, she/we got nothing in the form of hospice care to help with her needs. I don’t really know if such a thing was available then, but the costs of trying to help her die in some peace and comfort at home (often in vain) were enormous and were a large part of keeping me living at home and in the poor house.
Contrast that with a recent experience of an acquaintance whose spouse died late last year after a lengthy illness. Hospice was there several times a week, providing continuing care, being supportive, and it was all free of charge to them.
My great-grandmother had to be put in a county nursing home. No income to qualify for anything else. My grandmother had enough money to pay for less than a year as a private pay patient in a nursing home, before she had to go on Medicaid.
Fast forward to today. I am no longer dirt poor, thankfully. Having been there for far too long, I truly feel for those who are through no fault of their own and who really need those government programs. As I’ve tried to illustrate, dirt poor people in the 1970’s - early 1990’s often got no help at all.
I think that in some cases now, help is too freely given. Today, in the nearest school districts, a majority of students are on free lunches. Something is wrong with that picture.
My daughter was denied financial aid when she applied to college in 2013, which came as no surprise to us. She was offered some sort of $5000 loan, which I thought was ridiculous, considering she didn’t need it and $5000 wouldn’t even pay for a semester. We told her not to take it.
At no point did we ever think of trying to hide assets. Whether anyone thinks that was irresponsible or short-sighted or stupid, is irrelevant. Coming from my background, I’m just grateful to be in the position that I am today. That’s the focus of my perspective. I’ve been terribly poor and it’s not a fun place to be.
I’m not resentful that people can get help today that I couldn’t back then. I do understand the anger over financially irresponsible people spending it all without regard to their future, when they have the capacity to save and don’t.
I am concerned that as more people are figuring out ways to get aid that they don’t really desperately need, whether it be college financial aid, Medicaid planning, wealthy early retirees getting federal subsidies for ACA, or whatever else becomes available in the future, those programs will be cut to the bone and things will go back to the way they were as I experienced them.
Trying to compare my main concern over that to also having moral objections to saving on taxes, getting deals, etc., well, is a bit ridiculous and I think that most people here can see that @jcohen73 is way off base there.
As far as these private forums are concerned, I don’t ever expect to be invited. I probably wouldn’t fit in anyway, so I’ll continue to lose no sleep over it.
putting that much emotion in financial decisions is not a wise idea.
Consider buying 1% of the home from them at 1% of the tax value and make sure the deed is JTWROS. That way a nursing home cannot sell or attach the property since it is not all theirs. And it will go to you at their deaths. This is a new strategy just beginning to be used and it is legit. Otherwise if entire home is given to you then there is a medicaid look back of either 3 or 4 years.
I didn’t even think of this. Programs don’t usually get cut as more people use them. They’ll either make stricter rules so it’s harder to qualify, figure out how to increase funding, or figure out how to put breaks on cost increases (or a combination).
They’re already on to it. They simply file a lien on the house and wait. What was that commercial ? You can pay me now or pay me later. They’re gonna get paid unless you shield assets.
It’s FIVE years, except for Cali, which is 2.5 years.
Yep, that’s during the look-back period. As I delineated upthread, an irrevocable trust has no advantage over a revocable trust during the look-back period, and all the disadvantages after.
Like JoeFriday said, states are already onto this tactic. Some states have passed legislation to ignore JTWROS during the Medicaid clawback. I’m not sure if my state does, but I would hate to spend time and money to change the property deed only for my state to change the laws on me. From my research, it seems like the irrevocable trust is the best way to go. I think I have my mom convinced to talk to a lawyer about it, so we will see what happens.
To those that think I’m trying to cheat the system, my parents and I have been paying into the system all our working lives. I don’t think it is too much to ask for something in return. Why is it ok that the rich can inherit their parents’ wealth paying little to no taxes while the working/middle class has to die penniless? I have a large extended family, and I have repeatedly seen what happens when an ailing family member is forced to sell nearly everything they own to move in to a long-term care facility. It causes a lot of drama and conflict, and some of my relatives are still not on speaking terms after several years. We need to find a more dignified and less costly way to treat our elders during their final years.
That’s old law. An irrevocable trust offers no protection. As I posted upthread:
“Irrevocable trusts created during the look-back period are considered gifts under the law, and would be in violation of the look-back period, and subject to penalty, just as a transfer to a revocable trust would.”
Just search “elder law” “irrevocable”. Here’s just one example:
WHO claimed you could ?
No, you’re the one that is confused, or you’re simply not reading what I’ve posted.
As I posted previously:
Once again, it’s not about the trusts, it’s about the transfer.
I’m researching this topic again. We should probably have a separate topic on Estate Planning, but a lot of that revolves around correctly setting up trusts and wills, so I’m gonna revive this one for now.
I imagine that married people who have individual financial accounts (as opposed to joint) would want their spouse to be the POD. But what if the POD dies with you? Do POD forms allow for contingent beneficiaries?
I also have a question about trusts. Can a single trust designate multiple different beneficiaries for multiple different assets owned by that trust, or should something like that be split up into multiple completely separate trusts?