2015 Medicaid Series: Beware of Transferring Too Much Too Early

My next several posts will be centered on Medicaid planning. This will cover topics affecting people who are planning for future transfers to their children, people with ailing parents, as well as those who have neither living parents nor natural beneficiaries. Let’s start from the top.

People preparing precautionary Medicaid planning for themselves are typically (hopefully) planning several years in advance: They have reached their mid-late seventies and are starting to enjoy a less frenetic lifestyle, or may have long-term health concerns that are just starting to manifest. They have worked hard for their money, have a possible surplus of assets, and have no desire to use these asset to pay for what they perceive Medicaid will cover in the future. So they start funding Medicaid trusts that lock-in their principle and limit their spending options or (gasp) gift funds outright to their children.

Allow me to remind everyone that I do not consider ANY client “old” prior to their ninetieth (90) birthday. Yes, 90 is old, but 88, 85, 82 are NOT “old.” The circumstance of being more sedentary does not necessitate divesting one’s control over the majority of one’s assets for a number of reasons:

  • The client may wish to make token gifts in the future to grandchildren,
  • New activities may be discovered, and (most importantly)…
  • …High quality part time care and services that are NOT covered by Medicaid may be desired.

Once funds are transferred to Medicaid Asset Protection Trusts the client can only collect income from the Trust. When assets are transferred to children the client takes the risk that their children may spend the money in a way that is self-serving or in a way they believe is in mom and dad’s “best interests”, perceptions which may differ greatly from what the client wanted. And several attorneys who are consulted focus on the monetary goal of protecting (i.e. transferring) the optimal amount of money. Under these circumstances a sedentary lifestyle is not chosen: A sedentary lifestyle is enforced, and it happens at a time when the parent is in particular need of new mental and physically-stimulating activities.

Simply speaking: Resist the urge to transfer too much to your children too early. Let them know you plan on spending your assets for your golden years, and they should feel the same way about their wealth as they age. Children have several years remaining to build their own wealth, there is no affirmative legal obligation to transfer wealth to adult children, and you have every right to spend what is yours as you desire.

Q FOR U: When was the last time you discussed your wealth with a family member? Did it feel natural, or strange and unsettling?

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