Is it better to gift money or pay off mortgage?

If you are thinking Dad may need Medicaid, gifting money is a very bad idea.

Please consult an attorney specializing in Elder Law. There is a lot at stake here, and now is the time to start preparing to do things right.

No gifting of money or property. Jeanne is right see an elder law attorney well versed in Medicaid planning. Though with 200k in the bank, 50k still owed on the house, what is the approximate value of the home? How much longer on the mortgage?

Estimating 5 years to Dad needing a facility when he is already in his 90's is very optimistic. Anything could happen any day that would require nursing home care at any time.

NO gifts! Leave the stupid mortgage alone. Better to have Dad in a nursing home on private pay at first, more doors open to better places. Trust me on this, if you enter as Medicaid, choices are horribly limited. Visit some facilities now so you get a better understanding of how it works.

Listening to people at church is cheaper initially, but can really be expensive in the long run if they are not right! :)

You don't merely need an estate planner. You need someone very experienced with Medicaid. This should come out of your parents' funds ... it is for their benefit.

Have the lawyer explain the Medicaid Recovery process to you, as to whether it makes sense to pay off the mortgage or not.

Samara - " No Gifting After Ninety" should be an aging care bumpersticker.

I'm going to approach this a bit differently. I'm going to assume dad goes into NH June 2015 & I am going to work back from that date for my parents finances. This time of the year (dec - jan) is ideal for doing this as your parents are getting EOY details as to interest paid in CC; their SS & retirement awards letters get sent; any 1099's paid. You can put together a good & realistic snapshot of where they stand financially. I use the term snapshot deliberately as Medicaid will do just this, they do a snapshot of your parents finances based on the day of the application. And their $ is fixed based on the "snapshot" date.

You want to do now things to change whatever is best for dad's theoretical June Nh admission & snapshot. If your state allows for the community spouse to retain 114K in non exempt assets, then I'd start spending down to get to that point. (the 114k is what most states allow , but you have to find out what is the exact $ amount for your state) Personally paying off the mortgage would be something I would do (also it better positions mom to be able to get a HELOC or other loan if she needs $ 2 years from now). I'd call the mortgage holder to see what the pay off is AND be sure to find out if there is a penalty for early release of deed of trust. Then I'd get mom a newer & more reliable car (& trade in their cars to do this, so only 1 car). Then use whatever is left to spend down on dads care but try not to spend down under the 114k asset limit ( its really important to find out what this $ amount is as it is your parents benchmark). What all this does is to impoverish 1 of your parents (your dad) so that he will be Ok for Medicaid but leave mom with the max liquid $ allowed; a good car; & a house owned free & clear. Then when dad gies into NH, mom then gets the maximum CSRA or MMNA under your states rules. Community Spouse Resources allowance & Minimum Monthly Needs Allowance, it's kinda like alimony for the nonNH spouse.

Good luck in all this. I understand your adversion to seeing an attorney, but there are some things that you simply must have some sort of legal done in order for the document to be valid.

Yes I should seek a lawyer with estate planning expertise. Dad has mild dementia, manageable at home between me & mom and a couple paid caregivers. Eventually may need memory care in facility, and $200k won't last long. But mom wants to continue living in their current home, but (yes another but!) when Dad does die, she won't get as large a Social Sec check anymore, so the mortgage payment would be a problem. I thought she should pay it off now to protect her. Someone else at church (not a lawyer) said to park some money with each kid, and if she needs it later then they'll give it back, argh but nobody knows when or if Medicaid will be needed. They do have small LTC policy they share. Yes this kind of complicated, thought maybe someone here had already worked through and could offer guidance. I dislike lawyer bills--you don't know in advance how much it will cost, and it never seems to end, if you have questions or developments in the future I hate feeling incapable of making a choice without talking to the lawyer again...and again. Taking care of ones parents shouldn't cost so much in expert's fees.

With cash assets at $200K, and both in their 90s, pay off the mortgage, and leave the rest for when or if they may need nursing facilities. Do you really think each sibling would "save" $10K each? Your parents need a irrevocable trust where they designate what they want done with their assets. If they still have no memory problems, then THEY should make their decision what they want to do with their money, not you.

You probably do need to consult with an elder care attorney but you can also figure some things out on your own by reading 'real' info on line. 1 Prepay funerals - that is always allowed. There may be other allowed pre-payable spend downs but check this out. It varies by state. 2 Check into refinancing the house and taking more money out to update appliances, make needed repairs, etc as needed so that your Mom will not be facing any major upkeep problems in the future - the debt of repayment for the new mortgage needs to be within what you Mom will be able to pay if she is there alone. The home is a protected asset for her as long as she is able to live there regardless of what happens to your father, as are other monies spent on her at this time. So get her into as good of shape as possible before their assets need to be scrutinized by a Medicaid process. 3) And if there are any non-tracked assets that you parents want to pass along as gifts now is the time to do it - at every birthday, anniversary and Christmas. Cash is tracked - jewelry, family antiques, china etc are usually not tracked unless they are specifically insured. .. Info doesn't replace talking to an attorney but its a few of the things we learned the hard way... Hugs

Samara - also please make sure that your folks are paying for everything. It may be easier when you're at Target to pick up & pay for those towels for mom, but DON'T! If mom repays you, it looks like "gifting" if in the future either her or your dad needs to apply for Medicaid.

Really once they hit their 90's, it's my perspective, that you have to keep in the back of your mind that they will - if they live long enough - run out of funds and will need to apply for Medicaid either for community based services in their home or for skilled nursing in a NH. 200K although is a nice nest egg, is maybe 2 years of NH costs. The costs are just staggering.