My Mom has some money saved but also has credit card bills. Should we pay off those cards?

Paying off debts for purchases shouldn't be an issue. Debt is not an asset. Anymore than paying cash for purchases are.

Honestly, this is such a varied and complex issue that you should be talking to a professional, like an elder lawyer.

It really all depends on how much money she has and where you place her.

talk to an elder lawyer.
find one with experience with issues you face
which is more valuable to you cash on hand or paid off CC

Debt is not an asset. If you are placing your loved one in a retirement center and using public assistance to pay for her care, then the state, or county public assistance org. will have requirements regarding how much money she can have in her bank account and what assets she can still keep.

I agree that talking with an elderlaw attorney who knows your state's Medicaid rules is a good idea. Every state is somewhat different so your approach should be based on that. It's worth checking with a local expert just to be sure that you're making the right decisions based on your state laws.

We love to have you keep us updated on how you are doing,
Carol

I thought pretty much everywhere you could only have $2000 for Medicaid and they have the lookback period for what you do with your money, so even if you take it and pay them off they could then hold her responsible for that money, not that you could get it back but you would probably then have to spend down for her care, so would you or she have the money to do that? Is the concern the credit card companies taking her money anyway so she wouldn't have it anyway to pay for her care? how could they do that anyway, especially if she's placed somewhere and the money's being used for that?

I thought pretty much everywhere you could only have $2000 for Medicaid and they have the lookback period for what you do with your money, so even if you take it and pay them off they could then hold her responsible for that money, not that you could get it back but you would probably then have to spend down for her care, so would you or she have the money to do that? Is the concern the credit card companies taking her money anyway so she wouldn't have it anyway to pay for her care? how could they do that anyway, especially if she's placed somewhere and the money's being used for that?

You may want to look at moms financial situation from a different viewpoint. NH runs from 5K - 15K a year just for room & board. AL somewhat less.

Does mom have 200/300K to be able to private pay? Average NH stay is 2 years. Plus $ to fully pay off CC debt?

OR Does mom have a LTC policy that will pay for a facility & does she have the funds to pay NH once policy maximum is used? & fully pay off CC debt?

OR is family going to private pay for her care for the rest of her lifetime?

will mom or family pay the 20% copay for Medicare charges?

If the answers are "not really", then mom is likely to be applying for Medicaid to pay for her care & pay the gaps that medicare does not pay. Once on Medicaid, moms income will need to become her required copay or SOC (share of cost) to the facility. Mom will have no funds to pay her life insurance ( if she still has premiums); pay any costs on her home (if she still has a home); pay for dental, eyeglasses, hearing aids; funeral or burial policies. Mom will have only a small PNA - personal needs allowance - that varies by state from $35-105 a month. For my mom in TX it was $60 a mo & really just enough to pay for on site beauty salon & some clothing replacement. All other costs will need to be paid by family.

You may find that rather than paying off her CC (which is unsecured debt), it is a better use of limited funds to get a fully prepaid medicaid compliant funeral & burial policy; dental work; paying off in full any term life insurance policies; new eyeglasses (couple of pairs as these just walk in a NH); new hearing aids; a really nice walker or wheelchair as the ones on Medicaid are the most miminal; and a new more suitable wardrobe.( My moms once lovely wardrobe was pretty well gone within 6 mos of NH high heat wash & dry; really if I'd known I would have done a good bit of spend down on lots of sturdy fabric, easy care clothes & several pairs of shoes and just set them aside till needed.) If mom owns a home & it's going to be sold, then spending funds to make it market ready is a good use of funds as well. To me in my experience, it better to spend down on things that have a direct benefit for the elder rather than a CC company.

Really if $ are limited, take a realistic look at all this to decide where best spent. The CC will be relentless in trying to collect, but there is little they can do as its unsecured debt. Moms SS is fully protected from seizure or attachments by CC. Only super creditors (IRS) can touch SS income. It's not like mom is going to buy a car or needs a good credit score anymore. Good luck in all this as there are hard decisions to be made.

The only other thing to remember is that credit card debt that is written off by credit card company will be reported to IRS on 1099-C as cancelled debt. This is income to an elder and could affect Medicaid eligibility down the road. I had a tax client that got a tax bill from IRS on credit card debt written off 2 years ago that the CC company finally sent 1099-C on. The tax bill would NOT be judgment proof in all situations. Consult with elder attorney that has tax experience too.

You may have already done so, but with dementia you or someone, needs to take control of the finances so she does not waste money or get scammed.

Guestshop - yes but they should be able to do an IRS 982 filing with their 1040 to get it such that they show impoverishment. My mil was a real financial terrorist with CC debt, so 1099-C cancellation of debt was an issue. But the CPA did the 982 (reduction of tax attributes....) such that their debt offset the 1099 phantom income. The 982 is usually used for offsetting the phantom income from foreclosure or short sale & most info on 982 is geared to doing that but can be used to offset the CC phantom as well.

Really all this can get to be complex, using funds for a good elder law attorney and FA that understands how Medicaid works is very worthwhile.

yes

Igloo, you are right, but that IRS form info was not in your original posting and I wanted to make sure that sort of consequence was included in OP's or other readers decisions on seeking advice:) The tax client was very unpleasantly shocked and was not considered impoverished, although they are low income - both he and his wife are still working. As you said, professional advise that includes all factors in planning would be best.

This is an eye opener. Really, I have no input, but would like to ask; what is the "lookback" period timeframe and what assets are dissolved and what is untouchable? Does it vary from State to State? It makes sense to have an Elder Attorney handle these situations. Would it be wise to have Medicaid forms filled out in advance to save time, frustration and costly mistakes? From what I have been told, Medicaid applications can take months without results including mounds of paperwork, phone calls, forms and more forms with applicants pleading for help. This just seems a horrible nightmare...loved ones should not need to go through this!

Regardless of her medical situation, the credit card debt has to be paid either before or with her estate funds, but check with each creditor about a reduction in interest, and also rules about Medicaid in your state which are different per state.

I very much agree with igloo; I've been trying to get help for my husband's aunt and uncle for a couple of years now and they are paying on a term life insurance policy for their grandson, as well as a small burial policy for themselves while they also have credit card debt they are paying on while doing without hearing aids for her, while her hearing goes; their son has been buying her glasses while they have money sitting in a IRA that they won't touch because it's supposed to be for their funeral but they won't buy a funeral policy so this money counts against them for getting any help but they won't use it for any either. But, unlike igloo, don't believe you can pay an actual term life insurance policy; one that has a cash value built into it as well, yes, like I have on one of my children (which, thank you for reminding me), but not one that doesn't but, yes, if she doesn't have a nice walker - that is one thing they did do while they could for him and so glad; it's been so nice for him - it's just been so hard on her to feel she isn't still able to do that anymore and she needs new clothes as well. They sold their home and bought a brand new custom order manufactured double wide home, which is quite handicap accessible with a walk-in shower with a seat that has helped him to be able to stay at home but has left them, though, now strapped for funds to have the help they need to stay in it; they had this moved to their son's property, which was partly theirs at the time but instead of keeping it that way so they would have that now to use to be able to sell, they signed it over to their son so now they have no property though they could probably sell the doublewide; that's probably what he would/will do with it anyway - except I don't think he will get it all; they do have a daughter as well, but meanwhile they're using their money to pay on this credit card debt.
It's with their local credit union so I'm not really sure how aggressive they would be anyway in trying to collect; they already know what was behind it in the first place. Their concern is them attaching his private pension, which is basically what they're using to pay it anyway but which is also hurting them from being able to get any help to pay for help but they won't use it either, which I suppose if they didn't pay on this credit card they might go after it but I just don't see that and I don't see them needing any more credit; think they are probably on their last vehicle; he doesn't drive and she doesn't much and even as of today they probably aren't going to need credit anymore anyway; at least if they'd use the money they do have.
Now I hadn't thought about the tax implications in their situation; that might be an issue.

You're going to have much more to think about than credit card debt. Usually, a credit card company sells the debt to a Collection Agency (never heard of the 1099 Phantom Income thing being applied to an individual - only companies with LARGE debt). Their biggest threat is that it will affect her credit rating. I don't think her credit rating is the worry here. Let it go.

Does Medicaid count the 1099c income before or after adjusted gross income is figure from IRS

All income is counted before AGI is figured - does that answer that question?

States have different laws regarding benefits. Medicare have their laws too. Its better to talk to professionals in order to make informed decisions.

I think the credit card debt should be paid. She incurred the debt, it should be paid.

Ways of paying credit card debt: 1) Monthly payments as billed, paying the minimum until you see an attorney and know more, keeping the credit line open. 2) Contacting the credit card issuer, cancelling the credit line, and arranging affordable monthly payments; can be done through Consumer Credit Counseling, until you know more. Always look at the finances as a whole: You may need the savings for down payment or advance payment on a nursing home. Then, waiting for Medicaid bed to be authorized, funds held can be applied towards her rent/care. This gives you the option of getting care when she needs it instead of when Medicaid approves it much later. The credit cards can be paid after a home is sold. Always look at the whole picture. See an elder care attorney.

Persons who advise paying off the credit card debt are clearly responding with an OPINION that this is a moral obligation at least as much as a legal one. I, for one, would not want to be responsible for you making such an important decision based on my own personal views -- or anyone else's. Please do NOT rely on those OPINIONS. I strongly urge you to seek legal advice but only from a lawyer experienced in elder law and knowledgeable about Medicaid in your state; otherwise you are likely to receive only another OPINION.

The reason that credit card debt carries a much higher interest rate than debt secured by a mortgage, for example, is precisely because the lender/credit card company is accepting the much higher risk that it won't be paid back by some people. FYI, children have no legal obligation to pay parents' credit card debts BUT neither can children (or grandchildren/other family members) benefit from their parents' assets at the expense of the taxpayers. Public assistance from taxpayers, such as Medicaid, is NOT available so as to allow one to pass money or property to family members! I think an elder lawyer will tell you that, UNLIKE paying for a grandson's insurance policy or transferring ownership to a son of a double wide, paying off credit card date does NOT affect Medicaid eligibility.

That said, if the elder's future needs are likely to include new eye glasses, new (replacement) clothing/shoes, dental work and/or funeral/burial costs, those will not be provided by Medicaid and the elder will either go without them or the family will have to pay for them. OR, these things for the elder's care CAN BE purchased legitimately with their savings (with some limitations; ask the lawyer) any time during the five year period Medicaid "looks back" to determine eligibility, including right now which seems likely to be towards the end of that five year "look back" period. Will your parents' future needs be BETTER SERVED by pre-purchased burial insurance, having needed dental work done now and purchasing a reasonable supply of clothing and extra pairs of eyeglasses more than they will be HARMED by a poor credit rating?

Angels watch over you on this journey!

I think we're really talking about Medicaid; Medicare is only temporary for this type of situation

put everything in her name in yours 10 years before u think it will hit.

forget the government…they r morons. they screw up the post Office the Vet administration Obama care..u name it…. just put EVERYTHING in your name 10 years ahead of time .

credit rating s are ridiculous py no attention to them when it comes to your parents. if they have no money then let it go. the government has already taken more than they deserve anyway.

I'm not entering onto the legal obligations of your mother's credit card debt because I'm not familiar with US consumer law; but I'm surprised that no one has asked what she used the credit for, and whether she was competent while using the cards. If, for example, she acquired these credit cards recently and was buying - oo, I don't know - scuba diving equipment on special offer, or wildly extravagant gifts for the family or something, it might be a different scenario from one where she'd been continuing her normal practice of using credit cards responsibly to spread the cost of major purchases.

But money you spend on a credit card is real money, that you are borrowing and which you have undertaken to pay back. All things being equal, you should treat the debt as prior expenditure and deduct it from her capital when you draw up her balance sheet.

The real answers can only be developed after a sit down review of each potential medicaid applicant's particular situation. Including current and projected next year medical expenses, current assets, dates of any asset transfers, ability to pay private pay for any period of time, cost of local private pay skilled nursing, individual incomes, and more .

Consideration of the possibility of a community spouse and their future support is also a driving factor.

As in the case by 'debdaughter' about 5 past on this thread:

They probably can liquidate the IRA in part ,or whole. and with medical expenses reducing tax hit. A FUNERAL TRUST, is an immediate approved Medicaid Spend down. It does need to, and should not be purchased at a funeral home, additional trusts can be purchased for siblings as an approved Medicaid spend down, these particularly should NOT be tied to a funeral home to avoid risk and provide PORTABILITY.!
There are approved ways to apply and "shorten" penalty period,
needless to say the IRA is an asset, which if not dealt with will merely become a part of spend down, and nothing left to pay the final expenses they mistakenly think that it it will

While debt is also a spend down, serious review is in order to decide what to pay
We offer this service and consultation are no charge, if in Georgia contact me.

Perhaps my viewpoint in my first post has been misinterpreted: if shadowmay's mom has the funds to pay for all her future NH care and her debt, then great & pay it. BUT if its the case that her mom is going to apply for Medicaid for her NH, then imho consideration needs to be made as to how best use the limited funds mom has in savings as her "spend-down".

Shadow hasn't posted as to whether mom's assets are 10K or 100K, or if there's a house owed outright or has a mortgage, etc.; or just what the $ituation i$.

But whatever the case, once on Medicaid, moms income will need to become her required copay or SOC (share of cost) to the facility. Mom will have NO funds to pay any preexisting debt - whether its CC, or life insurance ( if she still has premiums); pay any costs on her home (if she still has a home); pay for dental, eyeglasses, hearing aids; funeral or burial policies. Mom will have only a small PNA - personal needs allowance - that varies by state from $35-105 a month. PNA is just enough to maybe cover beauty shop & perhaps phone or cable.

Family may find that rather than paying off her CC (which is unsecured debt), it is a better use of mom's asset spend-down to get a fully prepaid medicaid compliant funeral & burial policy; dental work; paying off in full any term life insurance policies if possible; new eyeglasses, new hearing aids, a really nice walker or wheelchair as all these on Medicaid are the most miminal; and a new more suitable wardrobe that will withstand the high heat laundry of the NH. If mom owns a home & it's going to be sold, then spending funds to make it market ready (& maximize house value or make it market competitive) is a good use of funds as well. And spend on getting mom's legal updated as needed.

To me in my experience, if they are going to be on Medicaid and have to do a spend-down, it's better to spend down on things with direct benefit for the elder rather than a CC company. IF you have to make a choice due to limited funds

Lets say Shadow's mom is 80 & has 30K in savings & lives in an apt & has 25K in CC debt. Mom fell broke both hips. Mom goes to NH for rehab (a Medicare benefit) and it's obvious she will need to move into skilled nursing care for the rest of her life in the NH section of the facility. Mom has done no advanced planning. So what to do with the 30K to qualify for Medicaid? - mom could pay the 25K in CC debt and then just be left with 5K as her total assets. OR mom could set aside 2K for the maximum allowed by Medicaid as an asset; get a prepaid NCV funeral & burial 10K; get much needed dental work 10K; get legal done (will, DPOA & MPOA) 1K; new eyeglasses & hearing aids & special wheelchair 4K; new clothes that work for someone who is now bedridden 2K; her final mo. apt rent and getting her things removed 1K. That's 30K right there and all a direct benefit for mom's long term.
What would you spend the 30K on?