If she says all our groceries, travel, gas, meals out, etc. do I have to declare as income? She also pays all kids education, room and board, for university and lots of gifts.
You can have a caregiver agreement set up by Elder law Atty. So if she in future needs nursing home, you have good accurate records. Also have Atty set up POA & Health Proxy. I suggest don’t be 24/7 caregiver. It takes an emotional & physical toll on caregiver. Was Dad a WWII Vet? You can apply for Aid & Attendance. Atty can help with that too...or Medicaid Home Care ...it’s not enough to just get paid...you need a life too. Burnout is real...You can use her $$ wisely...for her care & any supplies...Also house maintenance Hugs 🤗
If you are not getting paid as an employee and paying taxes, what happens when you apply for Social Security and Medicare? My mother did not have enough work quarters so when she applied she was denied SS. Instead she got half f what my dad received. After he died they took that away and awarded her his SS amount. She was a homemaker for 67 years with only part time work paying toward SS.
Consult a CPA, SS, and an attorney to protect your own future.
Better to be safe than sorry. If you spend a couple hundred with a good Elder Law atty, they can answer your questions. While it might seem sensible to have her pay your expenses (sort of the equivalent of living in her home, room and board covered for caregiving), the IRS may not view it that way.
The IRS also has "gifting" limits per year per person and a lifetime cap. Paying for the kids' education, room and board are likely going to exceed the IRS limit, easily! It would be better for her to set up some kind of education trust fund for paying those costs. It might also be wiser to set up a trust fund to cover your costs - there will likely be some cap gains to be paid, but her money can grow while it's there and the funds withdrawn are usually a combination of principal (what is deposite initially) and gains, so the hit wouldn't be too bad.
Medicaid is another issue. If she has unlimited funds and will never need Medicaid, that won't be an issue. Although it might seem fine for now to provide her care, she could reach a point where you can no longer provide the care needed. Then you would have to either hire help or find a LTC facility. Has she enough funds to cover that, should the need arise?
Assuming her income and assets are finite, you haven't given her age or health status. If she's in her 80s and is relatively healthy, she could live for MANY more years! Could she outlive her assets? We set up an irrevocable trust for mom. It has actually worked very well for her. Her income doesn't cover 1/2 of the cost of the MC facility, so the rest comes from the trust funds (more is included to cover things she needs that the facility doesn't provide.) Even though it is set to a lower risk than say for someone in their 30s, despite having to take about 4k/m, the balance has remained fairly steady, despite it being years now! Unless the stock market REALLY tanks, she should be set for years to come! At 97 with dementia and a recent stroke, it may not be that long, but there should be enough.
(I will note that it took a while to fully understand why this was done. To me it was more to protect her assets from her or nefarious scammers, but also to earn more while it's invested than she was getting from CDs. He told me NOT to feed it into her account, but rather through mine, but then I would have to claim it, pay cap gains, etc. I didn't want or need to do that, so I didn't follow those instructions! Turns out several years later in talking with the atty, he told me to let him know when she has to go to a NH, then we'll apply for Medicaid. So, for many Elder attys, the name of the game is to protect the assets and provide inheritance. I really didn't like the idea, and had no intention of going with this plan. IF she needed NH, her funds would be used to pay for it. That's MY way. But, it turns out that the place she is in is for life. They told me she wouldn't have to move! I'm thankful for that as that would be difficult, but it also avoids the whole Medicaid scenario.)
I think it would be best that you gather all known financial info and consult with an Elder Law atty with the "plans" you have and figure out how best to cover it all legally. For instance, could she be paying for "room and board" vs caregiving? Would that make a difference? The "gifting" for education and IRS rules also needs to be addressed. This likely isn't going to be a DIY. A few hundred to discuss, maybe a few thousand to set everything up (POAs, wills, trusts, etc.) will be well worth it. CYA!!!
Great question. Talk to CPA and/or tax lawyer. There may be a limit on what is considered "a gift" in your state and if you need to declare her support as taxable income.
You need an elder attorney to set this up. With out legal advice, if mom runs out of money and needs a Medicaid bed - Medicaid is going to count all that money she paid for other people's needs as gifting. The total of the gifts will determine a penalty period where they will not pay for the bed.
Basically, she is currently giving away money (education, gifts) that should be used only for her medical needs. She's probably already created a hefty penalty period.
I agree with Igloo. You need the advice of an Elder Law Attorney. Your mother giving monies in odd ways would be looked at as gifting. It would have repercussions to her weree she ever to need care. If she wishes now to pay you instead of a long term care it should be up front, for rental, for groceries and for care and there should be a care contract, and your income reported to a CPA at years end. There is no way you can be WRONG about this safely. See an elder law attorney. Your Mom may be a multimillionaire; we cannot know. If so she is likely OK to do gifting for Universities. If not, she would never qualify for the aid she may one day need.
Bobby, just how much $ does mom have? How old is she? Like does she have so much $$$$ that realistically she will never ever run out of money and die with an estate with a$$ets? Maybe 88 yrs old relatively healthy with a fully owned well maintained home, $3K a mo income and 500-700K in the bank today. That’s imo what she would need to have to pay all her living costs & your family’s living costs, kids tuitions and then pay for her own private pay LTC in a NH for 2.5 years when she hits 92-94 years then dies.
If that’s not her current $ & If she lives long enough she will outlive her $ and you will run out of ability to caregive for her as her needs increase and she’ll end up applying for LTC Medicaid. LTC in the US is horrendously expensive, anywhere’s from $8-$20k per month. Average NH stay is 2-2.5 years. if she cannot privately pay for care, or you don’t pay for it, she’ll end up applying for Medicaid. Medicaid will require years of her finances and $ given to you or your kids or things paid by her for you or your kids will place gifting penalties on her Medicaid application. It will be hard to defend a check written out to Whatsamatta U or B&N / Follett college booksellers by her.
Really mom & you all are best served to gather up her financials and schedule an appointment with an elder law atty. I’d suggest one that is CELA level if she has $$$. That’s what she needs to spend $ on & please try to set this up soon so y’all start 2021 responsibly & all legit.
Otherwise, agreed. Paying family for care or paying for expenses, unless she's loaded and can later cover the cost of a NH if she needs it, this is dangerously thin ice!
The IRS allows a given amount of "gifting" with no tax repercussions, but I would imagine Whatsamatta U is going to exceed that by a lot! Currently that is $15k per person for the year. There is a lifetime limit, but no clue what it is - we'll never get there! Some states may also have some kind of limit (unclear, I don't know if ours does, but we ain't loaded, so likely never will find out!) Not sure how the IRS might "interpret" paying someone else's expenses. If it's handed over instead as the $15k per person (so if there's a husband and wife, each gets $15k, for a total of $30 for the year) that should cover a lot of expenses...
Medicaid though... if there's any chance... All in all, for a few hundred bucks it would be best to get a legal review and ask all these questions. Better to CYA...
Medicaid will be the kicker, but no one wants the IRS knocking at the door.
Consult a CPA, SS, and an attorney to protect your own future.
The IRS also has "gifting" limits per year per person and a lifetime cap. Paying for the kids' education, room and board are likely going to exceed the IRS limit, easily! It would be better for her to set up some kind of education trust fund for paying those costs. It might also be wiser to set up a trust fund to cover your costs - there will likely be some cap gains to be paid, but her money can grow while it's there and the funds withdrawn are usually a combination of principal (what is deposite initially) and gains, so the hit wouldn't be too bad.
Medicaid is another issue. If she has unlimited funds and will never need Medicaid, that won't be an issue. Although it might seem fine for now to provide her care, she could reach a point where you can no longer provide the care needed. Then you would have to either hire help or find a LTC facility. Has she enough funds to cover that, should the need arise?
Assuming her income and assets are finite, you haven't given her age or health status. If she's in her 80s and is relatively healthy, she could live for MANY more years! Could she outlive her assets? We set up an irrevocable trust for mom. It has actually worked very well for her. Her income doesn't cover 1/2 of the cost of the MC facility, so the rest comes from the trust funds (more is included to cover things she needs that the facility doesn't provide.) Even though it is set to a lower risk than say for someone in their 30s, despite having to take about 4k/m, the balance has remained fairly steady, despite it being years now! Unless the stock market REALLY tanks, she should be set for years to come! At 97 with dementia and a recent stroke, it may not be that long, but there should be enough.
(I will note that it took a while to fully understand why this was done. To me it was more to protect her assets from her or nefarious scammers, but also to earn more while it's invested than she was getting from CDs. He told me NOT to feed it into her account, but rather through mine, but then I would have to claim it, pay cap gains, etc. I didn't want or need to do that, so I didn't follow those instructions! Turns out several years later in talking with the atty, he told me to let him know when she has to go to a NH, then we'll apply for Medicaid. So, for many Elder attys, the name of the game is to protect the assets and provide inheritance. I really didn't like the idea, and had no intention of going with this plan. IF she needed NH, her funds would be used to pay for it. That's MY way. But, it turns out that the place she is in is for life. They told me she wouldn't have to move! I'm thankful for that as that would be difficult, but it also avoids the whole Medicaid scenario.)
I think it would be best that you gather all known financial info and consult with an Elder Law atty with the "plans" you have and figure out how best to cover it all legally. For instance, could she be paying for "room and board" vs caregiving? Would that make a difference? The "gifting" for education and IRS rules also needs to be addressed. This likely isn't going to be a DIY. A few hundred to discuss, maybe a few thousand to set everything up (POAs, wills, trusts, etc.) will be well worth it. CYA!!!
Basically, she is currently giving away money (education, gifts) that should be used only for her medical needs. She's probably already created a hefty penalty period.
Like does she have so much $$$$ that realistically she will never ever run out of money and die with an estate with a$$ets? Maybe 88 yrs old relatively healthy with a fully owned well maintained home, $3K a mo income and 500-700K in the bank today. That’s imo what she would need to have to pay all her living costs & your family’s living costs, kids tuitions and then pay for her own private pay LTC in a NH for 2.5 years when she hits 92-94 years then dies.
If that’s not her current $ & If she lives long enough she will outlive her $ and you will run out of ability to caregive for her as her needs increase and she’ll end up applying for LTC Medicaid.
LTC in the US is horrendously expensive, anywhere’s from $8-$20k per month. Average NH stay is 2-2.5 years. if she cannot privately pay for care, or you don’t pay for it, she’ll end up applying for Medicaid. Medicaid will require years of her finances and $ given to you or your kids or things paid by her for you or your kids will place gifting penalties on her Medicaid application. It will be hard to defend a check written out to Whatsamatta U or B&N / Follett college booksellers by her.
Really mom & you all are best served to gather up her financials and schedule an appointment with an elder law atty. I’d suggest one that is CELA level if she has $$$. That’s what she needs to spend $ on & please try to set this up soon so y’all start 2021 responsibly & all legit.
Otherwise, agreed. Paying family for care or paying for expenses, unless she's loaded and can later cover the cost of a NH if she needs it, this is dangerously thin ice!
The IRS allows a given amount of "gifting" with no tax repercussions, but I would imagine Whatsamatta U is going to exceed that by a lot! Currently that is $15k per person for the year. There is a lifetime limit, but no clue what it is - we'll never get there! Some states may also have some kind of limit (unclear, I don't know if ours does, but we ain't loaded, so likely never will find out!) Not sure how the IRS might "interpret" paying someone else's expenses. If it's handed over instead as the $15k per person (so if there's a husband and wife, each gets $15k, for a total of $30 for the year) that should cover a lot of expenses...
Medicaid though... if there's any chance... All in all, for a few hundred bucks it would be best to get a legal review and ask all these questions. Better to CYA...
Medicaid will be the kicker, but no one wants the IRS knocking at the door.