Can I loan small savings from nursing home expense to my kids interest free for five years? - AgingCare.com

Can I loan small savings from nursing home expense to my kids interest free for five years?

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Protecting my small savings from nursing home expense. Can I loan it to my kids interest free for five yrs.? I have only $11,000 in savings, I would like to give/loan it to my two kids equally, I am 85, have Medicare & Blue Cross coverage if I need nursing home care & also $2,000 a month S.S.



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Medicaid now insists that loans carry the prevailing interest rates and will collect them at prevailing interest rates.
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You have $11,000 that needs to be spent on your car before you expect the taxpayer to foot the bill. It is unfair to the taxpayer.
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The sad part is this is that 11K is maybe just a single month or maybe 2 months at most to pay for a NH. The cost of LTC is staggering.

Dottie, it's good that you are thinking ahead of finances & Medicaid. Personally if 11k is all you truly have for assets & you do not have a home or a car and your 2k in SS is all you have for income, I would suggest first & foremost use some of the 11k to update all your legal if it's not done within past few years; buy a fully paid preneed funeral & burial; get new eyeglasses & hearing aid; a better quality walker, like a nicer Hugo style walker; and get some dental work done. Then see just how much $$ is left.

If you give all your 11k away -which is really a good emergency fund amount - and say crack 2 teeth and need them replaced with posts and crowns, where will the $ come from? Those dental costs could easily be 5k or more per tooth.

Medicare - is a wonderful program - but usually does not cover dental and may only cover the lowest, cheesiest eyeglasses, walker, etc. Unless your BCBS covers all of these, it's going to be all put of pocket to pay for. Getting dental work now while your still very much able to do this, to me, if a really excellent use of funds. Dental care once at the NH stage is pretty nonexistent. 11k could easily be totally spent on dental and not even pay for all the work needed.

Giving $ to kids will trigger a transfer penalty inquiry by Medicaid unless you wait to apply till march, 2021. If you were to do the "loan", it would probably need to be a legally binding agreement or promissory note of some kind done by an attorney and with payments set up to fit actuarial tables based on the lenders age. At 85, your kinda at the edge of most actuarial tables. For 11k - which sadly isn't much $ - all this is probably way way way more work & legal than 11k warrants.

Really think about spending first on yourself & your needs, please.
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In the eyes of the IRS and state taxing authorities, a "loan" that does not have an interest rate and is made to a "related party" (and your children would fall into that category) is a preferential transfer. A "loan" that does not have specified repayment terms and covers a period longer than one year is not considered a "loan" and falls under "gifting" statutes for federal and state tax purposes and might be considered an attempt to evade estate taxes (your small amount would not be an estate issue, but the same legal standing applies). A "loan" to a family member that just happens to match the Medicaid look-back period, has no written plan for repayment, and has no interest attached for the use of money will NOT be treated as a "loan" if you have to apply for Medicaid before the 5 years is up. A transfer penalty would most likely be assessed on this. Even if you got state Medicaid officials to view it as a "loan", they would require that your children repay the principal of the "loan" to offset your expenses. Of course, if you are sure that your children would repay you the amount should you need nursing home care you can do that. By the way, starting a nursing home as a private pay patient will usually get you a nicer nursing home and the staff will help you move to a Medicaid bed when you run out of money. If you start out with needing Medicaid, the choices will be significantly less...
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Dottie, why would you not want to pay a nursing home if by chance you need a higher level of care in the future?
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BCBS will not pay for long term care. If you need NH care, you will be advised to apply for Medicaid; that will mean spending down your money, either on private pay for your care, or on things that will benefit you.
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