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Mom has alzheimers and my sister is the POA. Mother is in a home for Alzheimer patients. Sister would like to cash in existing CDs to distribute funds to mothers 3 children as was the original intent in the form of annual gift.

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Not enough detail here. If there is a lot of wealth, OK. If it results in Mom needing Medicaid, bad idea. If it exceeds the gift limit, huge IRS tax implications for everyone.
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Whatever the original intent was doesn't matter now; the CD's are in mom's name and tied into her SS#. It's her asset. And the interest on the CD's are reportable to IRS, so no way they will not come up as an asset. If in the future from now to the year 2020 mom needs to apply for Medicaid to pay for her stay, the disposition of the cashed in CD's will be a issue and cause a transfer penalty from Medicaid.

For my mom's application, the review was 3 years & 6 months for bank statements. AND ALSO another item required was the disposition of any & all accounts at her bank that was closed. This was in the form of a letter on bank letterhead, signed off by bank officer (basically spent a morning @ the bank for this). It read like CD # 1234 expired on 2/2/08 for $ 5,302.89 and deposited into Checking account # 5678 in the amount of $ 5,302.89 on 2/2/08. Every CD, Tbill, etc as they expired were not renewed but plowed into mom's main drawing account. It was just lucky that all was done this way as they expired as it made it all clear & straightforward for Medicaid. But if any CD had been just cashed out, I'm sure there would have been a penalty inquiry to deal with and a transfer penalty imposed. Now if mom should need to apply for Medicaid & has a transfer penalty, someone will have to private pay @ the facility for the penalty period.

Really if they live long enough, they will run out of money unless they are generationally wealthy. Easily over 100K annual costs for NH between their room & board charges, medications, doctor/PT/OT etc costs. They will just flat run out of $ and will apply to Medicaid.
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Don't do it, any gifts within 5 years will disqualify her from Medicaid.
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If you're asking if this sounds like an okay idea, I'd have to say that you should be cautious as Medicaid does a 5 year look back. Gifting the money could create problems later for Mom, should she need Medicaid. Sadly, while our parents intended to leave assets to their children, all too often that money is actually needed for the parent's care.
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Your mother may need that money for her care. Why distribute funds, now? NH care is expensive and my own mother is going through money faster than anyone would have ever thought. She is 95.
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