Gift or Theft? – Part 3
In this week’s post I give you the conclusion to John’s saga with Medicaid. As you will recall, we have applied for Medicaid for John’s sister, Mary. In reviewing the 5 years of records which we must submit to the State, we found that John’s brother, Jerry took $200,000 of Mary’s money for his own use while he was carng for Mary and handling her finances. I had John prepare for the likelihood that New Jersey Medicaid would impose a Medicaid penalty – a period of ineligibility – as a result of these transfers for which Mary did not receive anything of equal value in product or service. John filed a criminal complaint for theft as well as a civil complaint in an attempt to recoup the funds. Sure enough, the state focused on the transfers. I was ready with copies of both the criminal and civil complaints. But, then we got a surprise. Based on what John told me about Jerry’s financial troubles, I never thought we would ever recover a dime from Jerry. We only filed the legal actions because that is what Medicaid requires us to do. Except that not
Gift or Theft ? (Part 2)
In last week’s post I told you about John’s call about Medicaid for his sister, Mary. During our review of her 5 years of financial records we discovered transfers of funds while their brother, Jerry was handling her finances. Jerry admitted that he took the money without Mary’s knowledge so we have to contend with a transfer of $200,000. The question then is “how will Medicaid treat these transfers when we apply for Medicaid?” The State will assume that Mary gave the money to Jerry. We can’t simply tell them that Jerry took it – what amounts to theft. If it truly is theft, I explained to John, then he needs to file a criminal complaint. He should also file a civil complaint against his brother, Jerry to try to recover the funds. Why? Because we must show that we are trying to recover the funds. It does not matter whether we succeed or not. We just need to support our contention that the funds were not a gift – not a transfer for less than fair value – so we can avoid a Medicaid penalty. John complied with my request.
Gift or Theft (Part 1)
The call from John involved another crisis planning case. His sister, Mary was already in a nursing home and had a minimal amount of assets remaining to be spent down. Before entering the facility she had lived for many years with her other brother, Jerry. Although she was able to attend to her activities of daily living, Mary is mentally challenged to the extent that she could not handle her own finances, although she was legally competent. Jerry had been handling her finances which in large part included funds left to Mary by their mom. Now, however, Jerry was experiencing his own health issues and asked John to step in. We immediately asked John to gather 5 years of records for every account Mary owned as well as the trust accounts established to hold and manage Mary’s inheritance from her mom, of which Jerry had been the trustee. It would only be a matter of months before we would be spent down and I needed to know quickly if there would be any potential Medicaid penalties to address. Sure enough there were. We encountered numerous withdrawals from Mary’s accounts. We also found many checks payable to Jerry. Some were signed
An RMD and Tax Waiver Problem (Part 2)
In my blog post last week I laid out Mary’s problem trying to draw out the required minimum distribution for 2018 from her deceased aunt’s IRA. June died in November and had not yet taken the minimum necessary (RMD) to avoid a 50% penalty. The bank holding the IRA, however, has refused to allow Mary to withdraw the balance of the RMD, insisting that a tax waiver from the State of New Jersey is necessary before it can do so. It has frozen 100% of the account. As I explained last week, Mary’s aunt did not have any children and has left her estate to Mary and Mary’s cousins. They are all nieces and nephews in relation to her aunt and are classified as Class D beneficiaries for inheritance tax purposes. The tax on the distributions amounts to 15% of the first $700,000 received by each beneficiary and 16% on anything above that. While the tax is calculated as of the date of death the return and the tax are due 8 months after death because the State recognizes that it takes time for the estate representative to figure out if there is any tax due and if so,
An RMD and Tax Waiver Problem -Part 1
Although New Jersey no longer has an estate tax we still have an inheritance tax and with it a tax waiver. Last week we received a call from Mary who had been appointed executrix of her Aunt June’s estate. June had not taken her required minimum distribution (RMD) amount for 2018 from her individual retirement account (IRA) before her death. For those not familiar with the RMD rules, let’s review. IRAs are tax deferred accounts. They are not taxed each year as the investments in those accounts grow. The tax is only owed when the account holder withdraws the funds from the retirement accounts. The longer the assets remain in the retirement account, the longer one can put off paying the tax. The government, however, does not allow this to continue indefinitely. That’s where RMD rules come into play. Account owners must start withdrawing funds from IRAs not later than the year he/she reaches the age of 70 and 1/2. The IRS has rules regarding how much must be withdrawn each year, which is a dependent upon the owner’s life expectancy. Failure to withdraw at least the RMD each year can carry a
Possible Long Term Care Insurance Legislation on the Horizon? (Part 2)
In my post last week, I talked about new legislation that is still in the drafting phase but that may be the next government attempt to provide a long term care benefit to Americans. The last attempt, known as the CLASS Act, was a voluntary program. This new program looks like it would be a mandatory one intended to provide universal coverage. As far as we currently know the current draft would provide a minimum benefit of 5 hours a day – about $100 a day on average nationally. There would be an increase in the benefit as more care is needed but the details of that haven’t yet been worked out. It would appear that anyone who receives Medicare Part A would be eligible for this benefit making it essentially universal. Unlike Medicaid home care which requires recipients to use only Medicaid approved care providers the current draft provides that the new benefit would be the equivalent of cash in the sense that seniors could choose any provider they like and pay for it using a debit card. For the moment there appears to be two ways one could qualify. Applicants can show that they need assistance with