My mother has dementia that is progressing quickly. We are anticipating having to place her where she can get the care she needs. When they review her finances and see that she took money out to pay those off will that be an issue to place her somewhere?
1099-C do not have to be issued the year that you defaulted. Debtor can carry it on their books with interest & fees. (NOTE: Debt will likely have been sold to a debt collection agency too but collections cannot issue 1099-C). For my MIL, it was a couple of store issued VISA cards defaulted & had interest + fees that added about 1/3 more to original amount. Total 1099-C amount became "income" reported to IRS by OC. Totally Phantom Income. But income, so taxes owed.
For those on NH Medicaid, this poses 2 problems:
1. If your state does Medicaid income match up with IRS, it shows up. If the 1099-C amount takes you over allowed assets, then ineligible for Medicaid.
2. If taxes are owed and not paid, IRS can place a lien on SS. Most debt collectors can’t get SS income as it’s protected from lein or garnishment. But IRS is a “super-creditor” and can. For those on NH Medicaid, this matters because they HAVE to do a required co-pay of their monthly income to the NH for Medicaid compliance. Between these 2 factors is kinda why the need to do 1040 & 982. Hopefully, zeros out so no taxes due or income made.
In the past, mostly 1099-C were issued on foreclosures (or short sales). Most 982 info and worksheet is geared to foreclosures. I went over & over on it and it could have been written in Latvian for all I knew. So we got our tax person to do it for MIL & she got it to zero income so no Medicaid income issues or IRS taxes due.
Phantom income and taxes due seem to come as a totally unexpected & expensive surprise. Can you imagine the taxes on a 300K house that you walked on & kept no records of expenses on to offset the amount……..yikes!
But regarding the funeral "trust" issue, not sure if this is what you're meaning or not, but didn't realize until the time care that the pre-buy funeral that my parents bought wasn't actually bought from or paid to their funeral home, even though it was purchased at it, but was actually an insurance policy and is something I've tried to get them to do but they don't really understand that's how it works and with things that have happened in this state that have led to that being the way it has to be done anyway, they're concerned about pre-paying, so....also it is an allowable approved VA expense as well
You know its hard to just stay tippy-top on all things for your parents. My mom had a NCV prepaid policy. Dad died in the 1980's and they had a niche in a mausoleum fully paid as well. I assumed that all was done with a bow on it for mom's future needs. WHen she went onto hospice (broke hip @ NH from pulling her wheelchair…..) I went to FH to just go over things. Well surprise after surprise as to what was covered and what was not. Lots of things that were excluded from the policy were free & provided by the city back in the 1980's. Not so anymore (like police escort requirements & fees); everybody on mom's pallbearer list # 1 & # 2 had either died or physically unable to do…..; the $ 500 floral prepaid was excluded from inflation……etc, etc. Now I was able to get some things changed to her policy as it was old & grandfathered in to do changes but most policies you can't change and there end up being all sorts of costs added on. It took about 4 months to get all the changes in effect. Mom was on hospice 18 months so it worked out fortunately.
The whole debt & death issue depends so much on state laws. I'm dealing with probate for my mom; for her state - TX - it's a level of claim probate state and with CC being a Class 8 debt (btw MERP is Class 7). So usually the Class 8 CC claims are not paid as there is no funds left in estate once the prior classes are paid.
not sure, maybe that's why my dad had them cash in both their policies, since they were cash value, and pre-pay their funerals - funny, in a way, never thought anything about it, guess just assumed everybody did, but when my parents moved back from Detroit in early 60s dad bought 4 burial plots for them and us way back then and their headstone with everything carved on it except their death dates so just grew up with that being a total non-issue. But, wow, never heard of anybody breaking their hip from pulling their wheelchair - so sorry - but also never heard of going onto hospice from breaking their hip either - unless, just thought of this, did she not have surgery or maybe replacement? like my mom did - she certainly didn't go on hospice, though, looking back and after what happened with dad and being told he should have and they could have been called in much sooner, seems like maybe could and should have been for her but nothing was ever said. They only died 4 yrs. apart but understand about having to stay on top of things; seemed like everything went fine with mom's but when came time for dad's ran into little issues like what you talking about, only more it was the obituary in the paper - there was a charge for this time; had issues with pallbearers as well with them being gone, but more their preacher was gone by that time and they'd just gotten one 6 weeks before who didn't know dad, though we were able to get the old one back but had to get it done and he had to come from over halfway across the state so needed to cover his expense (especially since his new job paid considerably less than what dad's church was paying him and he hadn't left voluntarily, not really, and especially since it was somewhat over the attention he paid to his older members; he was really good but apparently some of the younger ones didn't like it) - which maybe is why the former song leader who sang at mom's said he couldn't at dad's - so the one big disappointment dad would have had would have been to have not had a live singer - ended up having to use 2 CD's but turns out the new preacher, who had made a effort to come meet dad - too late, but not his fault - but also to talk to others about him and find out about him, which I did appreciate it, was also leading the singing so had him lead in a congregational at his funeral, which was somewhat unusual but not totally unheard of, at least not for him, where he'd come from, nor for me, but I think somewhat nonplussed those who were there, who I don't think ever had but I think they rather liked it after it was over, at least I got good feedback on it, maybe not from anybody from his church, but at least from family, so...does make me wonder about him and how it went back at the church; haven't heard - anyway....hadn't thought about prepaying floral, course didn't have that with dad, had the flag, with him being a veteran, so of course no charge there but they whole pre-pay thing was dad's idea; mom hated it, so guess she never thought or was willing to pay for anything beyond just the bare necessities at the funeral home, which theirs doesn't do the floral, assuming yours did, that it was done through them but that would have really been nice though don't think we paid anywhere near $500, wonder if prices are just higher where you are; one thing we did do for mom, just because we just happened to find it and it fit it so appropriately, when we were down looking at the caskets they'd picked out we found the boards they put in - which I never knew that's what they were, had always assumed they were just part of the lining - and found one with pink roses, like she loved so much, that said Mother and Grandmother, that we bought - thought had to do some wrangling; they're normally ordered when you order the casket, though only ahead of time? didn't understand that; how many people actually do that? but anyway they finally agreed to let us have that one and order another one - I mean, really, what would be the odds that somebody else would come in and want to order off that one before they could get another one in? or for that matter, I've heard of just renting the things; I mean, after the funeral it wouldn't have really mattered, now would it? oh, we did end up paying the new preacher some as well that the funeral home took care but we did have to come up with that money as well but none of that really took any time. The one thing with mom was the actual guy that still owned the funeral home wasn't there - was out of town - and his son tried to tell us that her pre-policy wouldn't cover the funeral costs with inflation - or rather - the value of the policy had gone down with the stock market crash that had happened - oh, well, it's a contract they're supposed to honor and they finally did but I was concerned for a bit there but he must have got hold of dad or something because didn't hear anymore about it and even all those other little costs that came up later were covered then.
Your funeral story is pretty common. Really you have to see if old policies have kept up with the times. Most burial policies are like what yours had - an insurance policy that pays a FH upon death. To me burial polices are like annuities in that you have to be oh-so-very careful in doing this as contracts usually not in consumers best interest.
Mom was backside of 90 when she shattered her hip. Lewy Body Dementia.She refused to use her walker or to sit in her wheelchair to get about and would invariably shuffle along pulling either behind her. It was just a matter of time that there was going to be a bad fall. Although she could have ldone surgery, there still was significant anesthesia risk (she had rotor cuff surgery a decade before and sailed through surgery but had some anesthesia issues but did rehab real well), plus there was no way she could have done the required rehab as her cognition was just not there. It is the harsh reality of dementia. First few of weeks were bad but once they got a handle on pain management & bones healed, she was bedfast but good spirits. Being Lewy, she was still pretty knowing of people and time till maybe the last couple of months. Hospice really did a lovely job and they worked well in tandem with NH staff, so in many ways the last 18 months mom got lots of hands-on care.
But back to Shadowmay…… have you been able to go over your mom's financials to see what the situation is??