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I know there's a five year look back for medicaid. I'm worried about what happens if my MIL splits her money between her two sons and then she needs care in a NH. My BIL is living hand to mouth and I'm fairly sure that he and his wife will spend their share of the money fast way before the 5 year look back is over. When I said that to my husband his answer was "Well ... I'll just tell him he can't spend it for 5 years" ... OK and I'll tell the earth not to rotate ... or the sun not to shine ... I think I'll get the same response. There's no problem with us holding onto it but they are another story. Wondering if it means anything since my husbands name is also on the account with my MIL It has been on the account with her for years ... (survivor to take all account). Does something like that change things with the 5 year look back? We're in New York ... Thanks for any ideas ... information or help anyone can give me ... I know there are a lot of very knowledgeable people on this board and I want to get an idea of what the thoughts are here ... Thanks ... Peg

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Anchor, my advice is to explain to BIL exactly how the Medicaid look-back works, and how the gifts would affect MIL's eligibility. Tell him that if, for example, MIL is not eligible for 18 months due to the gifts to BIL, he should plan on caring for his mom in his home or hers for that period of time. Maybe this information will motivate him to avoid Walmart emergencies.
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I thought so akdaughter ... and unless there's a lottery ticket with my MIL's name on it that's definitely not in the cards ... She hasn't had to file in years due to her low income ... So now I guess it will just be a matter of filing the gift tax form come April ... I already mentioned that to her and she was taken back ... Oh well ...what's done is done ... and now you do what you have to do ... BIL has said ... he won't touch it unless its an emergency ... My worry is will Walmart be under the emergency category? Money she gave both of us 2 years ago he told me is already gone ... ours is sitting in a separate bank account ... just like we never even got it ...
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Thanks, AK. I was hoping you'd come along and respond.
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Anchor, you are exactly correct about the gift taxes. Although MIL needs to file a gift tax form with her 2015 income tax return, there is no tax due at this time. This is often misunderstood, and incorrect information has appeared on this forum on several occasions. The IRS keeps track of the lifetime gifts, and if the estate at death plus the lifetime taxable gifts exceeds the exemption (currently a little over $5 million), the taxable gifts are included in the estate for the purpose of calculating the estate tax. Needless to say, the vast majority of people are never affected by the gift tax.
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I understand now; thanks for your explanation.

I'm not so sure your MIL's money "management" is unreal as it is either a (1) lack of financial understanding of the investments and tax issues, or (2) a bit of confusion about the issues, or (3) not really wanting to take the time to learn and understand the issues.

What you might consider is developing a plan for management of her assets for her, and have your husband present it, unless you and she have a good rapport. I'm thinking if one of her sons raises the issue, she'll think it's suggestive rather than interfering, as some MILs might think. Apparently she's become more of an "independent" thinker since her husband died.

The trick might be allowing her to think it's really HER plan, not a suggestion by the responsible son.

Do you think she'd listen if either you or your husband had a heart-to-heart talk with her? I suspect though that even thinking about leaving her home is probably not in her mind at this point, so I would focus on the gift tax issue.

It wouldn't hurt to prepare a draft 2015 1040 return showing her what she'll be losing if she doesn't follow the gifting rules. That might be more impressive than anything you or your husband could say. Those big numbers on the "tax you line" on a 1040 tend to be a wake-up call.

I think the funds already deposited by the BIL are probably on their way to extinction through spending. Unfortunately I don't know if anything can be done about that now. As the saying goes, the horse has already left the barn.

I'm thinking at this point though it wouldn't hurt to see a tax adviser for advice to see if there's any way that the approximately $100K funds can be salvaged w/o incurring gift taxing penalties, but I kind of doubt it, especially if it's in BIL's account and he's the sole owner of the account now.

I've prepared some Form 709 gift tax forms for one EP attorney for whom I worked, but I'm not familiar with the issues of lifetime exemption and how they factor in.

Another avenue of investigation is to e-mail IRS with your questions. I've done that several times in the past and prefer it to calling because with an e-mail, I have advice in writing. I've gotten different interpretations on the same issue when calling.

I used to have a link to e-mail IRS but I don't have it on this computer.

Sometimes financial advisors have so-called retirement seminars. There are quite a few in my area. They use the lure of providing retirement planning to get clients, but you might be able to get some free advice on the gifting issue. Generally you usually at least get a rubber chicken dinner.

It is frustrating to see people throw money away foolishly, especially to an in-law who hasn't demonstrated responsibility.
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I'm concerned about both Garden ... but finding out that she had already done it put the gift tax to the front of the line in concerns. Yesterday I found out that when she removed the money from the account she already lost $2,000.00 dollars because it was in a CD which wouldn't come due until 2017 ... Unreal ... just unreal is all I can say. So again ... lots of concerns including whether or not there will be any gift tax on what she's did ...
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Is your concern the gift tax or the Medicaid issue? In your original post, it seemed to be the possibility of gifting then applying for Medicaid if necessary down the road. But your last post focuses more on gift taxes.

I also don't understand why you would be concerned about getting "caught", apparently if you don't interpret the gift tax situation correctly - it really isn't your responsibility. Not to challenge your understanding or financial knowledge, but the family should see a tax pro if there's a concern about tax on gifts. e.g., a $20K gift may not be fully taxable, it might only be the excess of the $14K exclusion.
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cmagnum hit the nail on the head. When her husband was alive he made ALL the decisions she was just the "yes sir" wife that was there to serve him. Now that he's no longer alive she's lost ... has no purpose in life and just sits and thinks all day. Super stubborn now even though with her husband she had no back bone at all ... what he said would go ... no matter what his word was law! Wanted to get her involved in a Senior Citizen group and she won't hear of it. Whenever its brought up she says its not her to do things like that. So instead of getting involved in something she sits and thinks and thinks and when you "over think" things the ending is not always good. Just heard that MIL and BIL went to the bank and removed her money. BIL opened an account and deposited the check already into his account. MIL told my husband that she has his check and will give it to him when she sees him ... Check is for under 100K but what do we do now that she's already closed her account and withdrawn the money?
Trying to find info on whether there will be a gift tax due ... I don't believe so because of what I read online on the Turbo Tax website which says ...
"The annual federal gift tax exclusion allows you to give away up to $14,000 in 2014 and 2015 to as many people as you wish without those gifts counting against your $5 million lifetime exemption. (After 2015, the $14,000 exclusion may be increased for inflation.)

Say you give two favored relatives $20,000 each in 2014 and give another relative $10,000. The $20,000 gifts are called taxable gifts because they exceed the $14,000 annual exclusion. But you won’t actually owe any gift tax unless you’ve exhausted your lifetime exemption amount. Assuming you haven’t, the two taxable gifts simply reduce your lifetime exemption by $12,000 [($20,000 - $14,000) x 2 = $12,000]. The $10,000 gift is ignored, because it’s below the $14,000 annual exclusion.

If you give three individuals $14,000 each in 2014, these gifts are ignored because they don’t exceed the annual exclusion."
By the way that reads my MIL will have to report the gift but won't have any gift tax on it. My head is swooning and I feel like I could scream ... I don't want to get caught in anything because of someone else's doings.
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Anchor, any money in a joint account is considered the elders by Medicaid, and in this case it probably is from the sounds of it. They should see an elder law attorney and maybe setup a trust. I would think that they would also be advised to close the joint accounts. Are they "Pay on Death" accounts or truly joint? Their funds should be protected in some fashion to ensure that the money is available for necessary care when the time comes. If funds are spent the only option for care is a strictly Medicaid facility, many are not very nice places. There are nicer facilities that have SOME Medicaid beds, but only after a two or three year period of self pay.

Maybe take the folks shopping to see some assisted living communities in their area. Once they see the cost of these they may change their minds on giving away money now. A trust would protect the funds while at the same time providing a method for inheritance to be distributed upon death. In fact the account that your spouse is on, if coowner, should be changed to a POD. Do the folks have Powers of Attorney setup? Very important to get that addressed now while they are still able to do it.
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If your brother is that oblivious to reality himself, he might not listen to concrete P's and Q's.

If mom's oblivious without any dementia, then were is the loss of contact with reality about finances coming from?

Also, if she does go through with this which I wish was someway to prevent, then she is creating a gift tax if the amount is beyond the limit of gifting for each person? Would she be able to pay the gifting tax if she passes the limit? Does she grasp that by giving the money away she eliminates every getting additional government help if she were to need it?

If she doesn't get that, then I'd find a gerontologist or neurologist to evaluate her for a second opinion.

She just may be extremely stubborn and in denial of reality without having dementia. Has she always been this stubborn and sort of out of touch with how life really works?

I've known some people like that, but they were usually pampered by their husbands and had a very rude awakening when the husband died. I wish husbands did not do that to their wives. That is so abusive and treats the wife like a child instead of like an adult.
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When you say "oblivious" do you mean cognitively impaired? Has she ever been evaluated for dementia.?

The big issue is Medicaid eligibility. If she gifts money, she won't be eligible for Medicaid. If she's not eligible for Medicaid, then she's going to have to be cared for by someone at home. Is Walmart bil up for that?

Is MIL's idea that by splitting the money now, she "hides" it and avoids using it to pay for her care? She can't do that.

I think I would take her to a lawyer and have her/him explain this all to ALL of you, in the same room, so that there is no confusion.
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No dementia Windy ... just oblivious to the situation at hand and has been for the longest time. As for the account where she has the money its just a bank account that has his mothers name as owner of the account and my husband name not sure if it read as a joint co owner or In Trust For account. I told him that he'll deal with any repercussions if his brother blows the money ... because we're not picking up the tab for him to enjoy Walmart and eating out ... etc. Only catch to that is the old "You can't get blood out of a stone" thing ... I'm looking for something concrete to make his brother think before he does his usual stupidity routine.

Hoping for all the P's and Q's available ... Thanks Windy!
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Does mil understand the situation? Dementia involved? What type of account are you referring to? Your hubby should consult an attorney. If mil gets medicaid coverage at some point, this gifting, look back period had better be done by the book. At minimum, keep copius records of any transactions and put any money you receive from mil until things are more clear. BIL? Let hubs deal with him. He gets money, blows it, big trouble for him could take place.

Hopefully you'll get good advice on this forum. There are some folks here that know all the Ps and Qs.
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