Is this plan for the future a viable financial one?

1 answer | Last updated: Oct 26, 2016
Desertjeep asked...

Thank you all for this awesome site. I have learned a ton already but have questions also.

My 74 Year Old mother has broken vertebrae recently in her lower back. She will be released from a rehab facility this next week. We realize we have serious long term issues to deal with coming.

Mom has approx 60K in equity in her home. Approx. 150K in savings, IRA's etc.

1) I've read about the "1/2 a loaf approach" Gifting 50% of assets and retaining 50% for, if necessary, long term care to cover the Look Back Period. Is this a viable option?

2) There may come a time when Mom can't prepare meals for herself, etc. Is the "Life Estate" a viable option? I thought, purchase a duplex or something similar. My wife and I live in one side and Mom can live in the other side. We are right there to help if necessary and can prepare meals, etc.

I realize, of course, these are items that must be handled by an Elder Care Lawyer but just trying to get more information prior to moving forward.

thank you for your time!!

Expert Answers

Steve Weisman hosts the nationally syndicated radio show A Touch of Grey, heard on more than 50 stations, including WABC in New York City and KRLA in Los Angeles. He is a practicing lawyer specializing in estate planning and is admitted to practice before the United States Supreme Court. He's a public speaker and commentator who has appeared on many radio and television shows throughout the country, and he's the legal editor of Talkers magazine, the preeminent trade publication of talk radio. His latest book is The Truth About Avoiding Scams.

Medicaid is a joint state and federal program that has rules that differ somewhat from state to state. However, the once prominent tactic of half a loaf giving to protect assets from being counted in determining Medicaid eligibilty is no longer an effective strategy.

However, some form of divided ownership of a home in which you, your wife and your mother all would live is certainly a viable strategy that could provide for a shelter for her assets should your mother require Medicaid in the future for long term care. It also would be a good way to keep her from having to be institutionalized as long as possible, which is much desired by most people. A life estate or other manner of holding title between the three of you is promising, but you should consult a lawyer for the most effective way to do this in your state.

Another thing you may wish to consider is a caregiver contract through which your mother pays for the services you will provide her while she is living with you. Although this may sound mercenary, in fact, it will permit the further sheltering of assets from Medicaid consideration in the future as well as compensate you and your wife for services that you perform. Again, you should contact an Elder Law lawyer for assistance with this. The rules for caretaker agreements can be quite complicated.