How are CDs cashed with the least tax impact?

1 answer | Last updated: Nov 09, 2016
A fellow caregiver asked...

My wife has a 95 year-old dad in failing health and currently she has been the sole caregiver for him in his own house. He is to the point of needing full-time care now and her sisters are providing some assistance. None of the girls currently work, all are retired.

He has several CDs and some combined net worth of several hundred thousand dollars. How do the girls divide this money up prior to his death between them with the least tax impact? They are all on these CDs as owners and have been for some time, now.

Do they have to declare this money or does their Dad have to do any thing on his part? They all three are power of attorney over his affairs.

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.

Before dealing with the question of how the sisters divide their father's assets to have the least tax impact, they should  be ascertaining what their father wants to do with his own money.

If he is still mentally competent, it makes sense for him to consult with his lawyer regarding estate planning and his health care requirements.  Whether he will be able to be cared for at home, at what cost and by whom are central questions.  Planning should also be done with an eye toward what will the costs be if he requires long term care in a nursing home.  Transferring his assets to his children, even through a durable power of attorney can have adverse ramifications if Medicaid is applied for.  The fact that the sisters are all on the CDs does not change the fact that Medicaid would consider transfers of those assets to the girls as disqualifying transfers if he were to apply for Medicaid within the next five years.

If the girls are to perform caretaking activities for their father, a lawyer can prepare a contract whereby they can be paid for their services.

Ultimately, however, what should be controling is what is in their father's best interest.  If he is competent, he should consult with his lawyer.  If he is not, the girls should consult a qualified elder law attorney.