Paying medical expenses for relative receiving assistance
phillysleuth
makes his sister beneficiary of a $25K life insurance policy for 2
reasons: 1) his wife is bad with money and 2) people advised her that
it would be viewed as her asset when applying for various welfare
benefits, even before she collected it.
She has many, many outstanding bills and no income except a social
security payment of $1300/month, just above Medicaid levels, but she
has qualified for the Medicare buy-in, the Medically Needy category,
and a small amount of food stamps. Her health is terrible and she
needs two operations ASAP, but suddenly, she and her sister-in- law
are in a panic that they did something both illegal and immoral by the
latter receiving the insurance proceeds. The SIL is worried about
"getting caught" and is telling this woman to go back to the welfare
office and "confess". They are assuming that at that point she will
lose any benefits that she got originally, little as they are, can
then accept the insurance proceeds with a clear conscience, and when
she runs out of that (which will be eaten up by her knee replacement
in a few days I imagine), she will reapply for benefits.
I have a few questions:
1) Am I right that SIL has to be careful now not to give the woman any
payments > $13K in one year because it will be subject to gift tax
laws?
2) Was the initial change in beneficiary designation illegal? I've
heard very vaguely of some laws on spending down one's assets to
qualify for various governemtn programs, but I don't know which
programs nor whether they would be impacted by life insurance benefits
being managed by a relative.
3) Can the SIL pay for medical (or other) bills for this woman without
her having to fess up in advance to the provider agency (welfare
department I guess)? I'm not trying to dodge legalities, only find
out what is allowed. Since she doesn't have the money now, and SIL
won't send her any because she's so afraid of being caught doing
something illegal, the woman does not have additional income at the
moment. But the plan always was to use this money to take care of her
husband's final expenses and getting her past these medical procedures
so she can have some hope of restarting her life.
I know she needs, and have been pushing her, to get real legal advice
and she's tried to contact pro bono lawyers and advocate services down
there but the lines are constantly busy. She barely can walk at this
point and is in so much constant pain that her patience with the
bureaurocacy and her mental status are disintegrating with each day.
She has no support network of any sort. This is why I'm asking these
questions here, to try to stop her and/or her SIL from doing something
impulsive and possibly unnecessary, which is characteristic of how
this family has operated in the past. I would appreciate any
guidance, even if its just how to reach a lawyer in the North Port, FL
area who could tell her what her true legal status is regarding these
insurance proceeds that her SIL is now afraid to use for her benefit.
I'm up north so can't help except by researching various issues.
Thanks for any help.. but please, no arrows directed at me for being
in the middle of this. I've got health problems of my own and am
just trying to head off more of a disaster for this woman than she's
already in.
jo
m...@privacy.net
<philly...@verizon.net> wrote:
> A 68 yr old Florida woman's husband dies and just prior to his death
> makes his sister beneficiary of a $25K life insurance policy for 2
> reasons: 1) his wife is bad with money and 2) people advised her that
> it would be viewed as her asset when applying for various welfare
> benefits, even before she collected it.
Well if she is receiving Medicare, Medicaid is a totally different
program, and Social Security Retirement. No matter what assets or other
income she has it will not affect her benefits at all. If she does receive
Medicaid benefits from the State all she has to do is report any income or
assets she has. In some states Medicaid will pay the Social Security
Medicare Part B premium or she may qualify under Medicare Part D to have
her Prescriptions discounted or her monthly Part D costs covered.
If her sister is giving her money and she receives food stamps and/or
Medicaid from the State of Florida then she must report that money to the
State of Florida.
If she is solely receiving Federal Social Security and Medicare then she
is in the clear. If there is a problem then she could consult the AARP or
local Congressman's office for guidance.
Often times people are confused about Social Security and Medicare. SS
and Medicare are not income & asset dependent welfare programs but a
benefit to the worker that paid the money into social security and
Medicare. Food Stamps & Medicaid are welfare programs that depend on your
income and a person receiving them must report any income and assets to
the State when receiving benefits.
I once meet a lady that hid her money under her bed because she thought
she would lose her Medicare if she put it in the bank.
--
Best Regards, Keith
http://home.comcast.net/~kilowattradio/
Tired of Google Groups?
http://home.comcast.net/~kilowattradio/usenet.html
Stan K
> A 68 yr old Florida woman's husband dies and just prior to his death
> makes his sister beneficiary of a $25K life insurance policy for 2
> reasons: 1) his wife is bad with money and 2) people advised her that
> it would be viewed as her asset when applying for various welfare
First, I am not a lawyer and I don't play one on TV. What I'm going
to say is based on my own experience in dealing with a relative's last
few years. The best thing you can do is see a lawyer who specializes
in law regarding the elderly; in FL, they shouldn't be too hard to
find.
Offhand, I see nothing about the beneficiary change being part of
"assets given away during the preceeding 5 years to qualify for
Medicaid". What could be a problem is if the wife were owner of the
policy and the policy had a cash value, but this doesn't sound like
it's the case; it was never the wife's asset.
I also believe that gifts count toward income when determining public
assistance eligibility and benefits, so paying for her medical care
could cause problems. The $13K shouldn't be an issue, because of the
$1M lifetime exemption.
I'm sure that what I just wrote is based on the same kind of
speculation and experience that the people involved have heard from
others. See a lawyer specializing in elder law.
Barry Gold
>A 68 yr old Florida woman's husband dies and just prior to his death
>makes his sister beneficiary of a $25K life insurance policy for 2
>reasons: 1) his wife is bad with money and 2) people advised her that
>it would be viewed as her asset when applying for various welfare
>benefits, even before she collected it.
she needs two surgeries and her health is not good. Widow & her
sister are worried that they are violating the law.]
Okay, FIRST OF ALL: any informaiton you get here is only worth what
you pay for it.
THIS IS REALLY IMPORTANT, and it's a complicated area of law.
The widow and her SIL should see a lawyer who specializes in Elder
Law. The rules surrounding both Medicaid and other benefits provided
to the elderly poor are a special area of law, and you want the advice
of a specialist in that area. It's worth a few $100. (We paid $500
for an hour of the best specialist in Los Angeles, and just _one
piece_ of the advice he gave us was worth more than that.)
That said, here is my analysis. Keep in mind:
This is for discussion purposes only, and is not legal advice. I'm
not a lawyer. If you want legal advice, hire a lawyer.
>I have a few questions:
>1) Am I right that SIL has to be careful now not to give the woman any
>payments > $13K in one year because it will be subject to gift tax
>laws?
Yes, but no. If she gives more than $13K in a year, she will have to
fill out a gift tax return. But she won't have to pay any tax.
Instead, the excess over $13K will be deducted from her lifetime
exemption of around $3 million. So unless she has a large estate of
her own, it really won't matter.
If she *does* have a large estate of her own, she should talk to her
own lawyer or tax accountant about ways to minimize her tax. For
example, if SIL is married, she and her husband can *each* give $13K
to an individual.
*And*, if she waits until Jan 1, the exemption is unlimited. She
might not even have to file the form.
Anyway, the gift tax form is a lot simpler than 1040, especially when
you don't owe any tax. You just list the gifts, subtract the
exclusion, compute the tax (one subtraction, one multiplication) and
subtract the "unified credit" -- which leaves you an amount less than
zero. Everything else is zero.
>2) Was the initial change in beneficiary designation illegal? I've
>heard very vaguely of some laws on spending down one's assets to
>qualify for various governemtn programs, but I don't know which
>programs nor whether they would be impacted by life insurance benefits
>being managed by a relative.
My take is the initial change was legal. Keep in mind that the
insurance policy was not the widow's property until her husband died.
Up to that point, _he_ owned it, and he had the right to change the
beneficiary at any point.
A couple of exceptions: 1. If they lived in a Community Property
state, and he paid for the insurance policy with money earned during
the marriage, the policy might have been Community Property, in which
case she _might_ be considered to have owned half of it.
Again, see an Elder Law attorney for details.
>3) Can the SIL pay for medical (or other) bills for this woman without
>her having to fess up in advance to the provider agency (welfare
>department I guess)? I'm not trying to dodge legalities, only find
>out what is allowed.
*If* the proceeds belong entirely to the SIL, then SIL can make a gift
of money to pay medical bills for the widow.
Another area where you need the advice of an Elder Law attorney.
>She has no support network of any sort.
>This is why I'm asking these
>questions here, to try to stop her and/or her SIL from doing something
>impulsive and possibly unnecessary, which is characteristic of how
>this family has operated in the past.
That is very wise of you. *No*, the SIL should not "confess" or
otherwise make any contact with the bureaucracy until *after* she has
seen a lawyer.
>I would appreciate any
>guidance, even if its just how to reach a lawyer in the North Port, FL
>area who could tell her what her true legal status is regarding these
>insurance proceeds that her SIL is now afraid to use for her benefit.
To repeat: the MOST IMPORTANT thing is that the widow and
Sister-in-law should see a lawyer who specializes in these problems.
Herewith my standard advice on how to find a lawyer:
Her best bet is to ask her personal attorney -- the one who handles
routine matters like wills -- to recommend a specialist in
Elder Law. If she doesn't have a personal attorney, ask her friends,
relatives, and co-workers to ask their attorney for such a
recommendation. If several come back with the same name, call that
one first.
If all else fails, ask her county Bar Association for their referral
list, or look in the yellow pages. But a referral from somebody you
trust is better than relying on a YP ad, and the Bar Association just
lists every lawyer who _says_ he/she works in that speciality. Do
*not* hire a lawyer based on an ad you saw in TV, the newspaper, a
bus bench, or the Internet.
Call up and ask for an appointment. Ask how much he will charge
for the initial consulation.
I feel safe in saying that the charge for an hour of his time to help
them find the right path through the maze of laws and regulations
governing federal assistance for the elderly will be much less than
the cost of doing it wrong.
--
Barry Gold, webmaster:
Conchord: http://www.conchord.org
Los Angeles Science Fantasy Society, Inc.: http://www.lasfsinc.org
Cy Pres
<philly...@verizon.net> wrote:
[Rather complex fact pattern involving elderly Medicare beneficiary
who does not want to lose benefits by accepting proceeds of a life
insurance policy which was, in fact, paid out to her sister-in-law.]
You really need to talk to an elder law specialist, maybe at legal aid
or some other state agency, in your own jurisdiction. The
consequences of screwing this up are simply too dire to trust
anonymous Internet advice.
It's also a lot cheaper to pay for legal advice than legal counsel in
court. A couple hours of an elder law specialist's time could save
you lots of money down the road, either from lost benefits or suing to
get benefits back.
My impression based just on what you've said is that nothing fatal has
occurred yet. I believe someone is entitled to make whoever they want
the beneficiary of their life insurance. The only issue is if this
was basically a fiction and the real beneficiary was the Medicare
recipient. However, if the recipient has the legal authority to
refuse to turn the money over, she's just the beneficiary. She can
elect to do whatever she wants with that money.
But the appearance it will create and whether it will create a
financial situation that disqualifies the Medicare recipient is very
important. People trying to do this kind of thing correctly often
stray into the area of Medicare "fraud" completely inadvertently by
tripping over a technicality, even when there was a completely legal
way of accomplishing what they were trying to achieve.
phillysleuth
> On Sun, 13 Dec 2009 22:05:42 -0800 (PST), phillysleuth
>
Thanks to all who replied. The information about the lifetime gift
exemption is helpful. That part I didn't know about. In any event,
the SIL still needs to be aware that anything she gifts will have to
be reported to the IRS even if no tax is assessed.
I agree completely with the advice to see is a lawyer. My friend is
incapable to doing this because she's basically bedridden at this
point and has no help except a daughter who helps with errands up when
her husband permits it, if you can believe this. She has no funds for
it either (for anything), so it would depend on SIL agreeing to pay
for it, or SIL consulting her own attorney. SIL is the only person
in this equation who has any kind of network of friends, family,
coworkers from which to get a referral, or the mobility to get to
someone. There are supposed to be probono elder specialists in
Florida (and everywhere) but all my friend can do is call the agencies
and she can't get thru.
I understand the difference between Medicare and welfare. The only
part of welfare that she qualifies for right now is food stamps,the
Medicare premium payment (if that is part of the welfare system), and
the Medically needy program. What we're really trying to find out
is if the SIL can use the insurance proceeds to pay off the current
and future debts (in the thousands) without causing loss of these, or
if so, which would be terminated. She is not concerned with food
stamps.. it is the least of her problems, but seems very concerned
about being caught because of not revealing that the insurance
proceeds were turned over the the SIL at the last minute. This
certainly looks suspicious, and while the motives were, at that time,
not to hide anything from welfare, they were to take them out of any
future issues with losing a house to foreclosure last year. She and
her husband just had to walk away from it. I don't know anything
about foreclosure law, but see there are two kinds of 1099s you can
get, one that forgives the debt and one that doesn't. The parties
involved didn't know anything about that aspect, were just reacting
impulsively to what someone told someone who told someone.
So the motives weren't pure and now the two women are afraid that it
will catch up with them in some way. They also are fundamentalists
and morality has become a big topic (now it is.. interesting,
eh?).
I will not take anything posted here as any kind of definitive
guideline except the complete agreement that a lawyer needs to get
involved and that even if SIL did gift her, it would only be deducted
from her lifetime exemption.
Thanks for responding.
jo
The motivation behind designating SIL as the beneficiary was not all
that pure.
Stan K
(About a beneficiary of a life insurance policy giving the proceeds to
her sister-in-law)-
> �If she gives more than $13K in a year, she will have to
> fill out a gift tax return. �But she won't have to pay any tax.
> Instead, the excess over $13K will be deducted from her lifetime
> exemption of around $3 million. �So unless she has a large estate of
> her own, it really won't matter.
>
> *And*, if she waits until Jan 1, the exemption is unlimited. �She
> might not even have to file the form.
I believe you're confusing the GIFT tax with the ESTATE tax. It's the
ESTATE tax that has a $3M limit in 2009 and none in 2010. I believe
the GIFT tax has a lifetime limit of $1M.
slide
> On Sun, 13 Dec 2009 22:05:42 -0800 (PST), phillysleuth
> <philly...@verizon.net> wrote:
>
> [Rather complex fact pattern involving elderly Medicare beneficiary
> who does not want to lose benefits by accepting proceeds of a life
> insurance policy which was, in fact, paid out to her sister-in-law.]
>
>
> occurred yet. I believe someone is entitled to make whoever they want
> the beneficiary of their life insurance.
People ARE free to chose their beneficiary but in this case the sole
rationale for the change in beneficiary was to make the first person
eligible for public assistance. This could easily be a form of
fraudulent conveyance because the second aspect is that the second
person pays some of the first person's expenses.
Person A is about to receive money from Person C which will make him
ineligible for public assistance. To remain eligible, Person C gives the
money to Person B who then asks this group how he can pay Person A's
expenses without any problems arising. There is a clear pattern of
intent to defraud the public. You may consider this non-fatal, but I
think it's pretty stinky.
Barry Gold
>Person A is about to receive money from Person C which will make him
>ineligible for public assistance. To remain eligible, Person C gives the
>money to Person B who then asks this group how he can pay Person A's
>expenses without any problems arising. There is a clear pattern of
>intent to defraud the public. You may consider this non-fatal, but I
>think it's pretty stinky.
It probably _is_ pretty stinky. It is also legal, if done correctly.
But it's tricky, which is why nobody should try to do it without
consulting a lawyer.
An example: somebody I know had a stroke 4 years ago, and now lives
in a nursing home, on Medi-Cal (California's Medicaid program). The
rules for this program are:
. No more than $2,000 in a bank account or other "liquid" assets.
The account can rise to over $2,000, but must reach that level or
lower at least one day a month.
. No more than $35 of income a month. Any income in excess of that
goes to pay for the recipient's medical expenses.
So his Social Security and pension go to Medi-Cal to pay for his
nursing home care. So do the occasional royalties he gets for his
writings. He has many friends and acquaintances, but they can't give
him money -- if they did, it would have to go to Medi-Cal.
So a friend has established a fund. Friends give money to the fund,
and it is used to buy him clothes, toiletries, and other things that
would be very difficult to buy on $35/month. This is legal, as long
as that money is not intermixed with the recipient's own money.
Similarly, if you know a relative or friend will be on public assistance
of some sort, you can set up a trust fund to take care of his needs, as
long as the money is not his property or under his control.
phillysleuth
The stinkiness of it can be debated, but the motive initially was not
to make the first person eligible for public assistance, it was to
protect the insurance proceeds assets from any issues surrounding the
foreclosure of the house. They hadn't even gotten to the assistance
issues at that time because the husband was still alive. This is a
family who don't think, don't plan, and react on impulse to whatever
crisis seems the largest in any given day. I do think it's
ironic that both the widow and the SIL didn't become concerned with
the morality of it all until the welfare issues arose and I don't
completely trust that their concerns now are moral versus fear of
being caught. In any event, she hasn't received any public assistance
so far except the Medicare Buy In (is that the right name?) and she
got that a long time ago. Mechanics and justificiaton for getting that
particular benefit is unknown to me.
I think this will all blow over because she's headed for the hospital
for knee surgery as I write, and will be in rehab after that. During
that time, either the hospital's social workers can straighten
everything out, or SIL will consult an attorney who will tell her at
worst tell her to give the money back, in which case she will just use
it all up on medical bills in a very, very short time, and have to
reapply for public assistance all over again.
Charlie K
There is no gift tax on paying for someone's medical care, regardless
of the amount. The only requirement is that you pay the provider
directly. IRC Sec 2503(e)
Cy Pres
<dryads...@xxxxyahoo.com> wrote:
>Cy Pres wrote:
>> On Sun, 13 Dec 2009 22:05:42 -0800 (PST), phillysleuth
>> <philly...@verizon.net> wrote:
>> [Rather complex fact pattern involving elderly Medicare beneficiary
>> who does not want to lose benefits by accepting proceeds of a life
>> insurance policy which was, in fact, paid out to her sister-in-law.]
>> My impression based just on what you've said is that nothing fatal has
>> occurred yet. I believe someone is entitled to make whoever they want
>> the beneficiary of their life insurance.
>People ARE free to chose their beneficiary but in this case the sole
>rationale for the change in beneficiary was to make the first person
>eligible for public assistance. This could easily be a form of
>fraudulent conveyance because the second aspect is that the second
>person pays some of the first person's expenses.
In this case, it is the fraudulent conveyance, and not the choice of
beneficiary, which would be problematic. So far,
>Person A is about to receive money from Person C which will make him
>ineligible for public assistance. To remain eligible, Person C gives the
>money to Person B who then asks this group how he can pay Person A's
>expenses without any problems arising. There is a clear pattern of
>intent to defraud the public. You may consider this non-fatal, but I
>think it's pretty stinky.
This is why they need to consult legal counsel NOW, before doing this,
either to find out whether there is a way of doing it within the law,
or whether it is, in fact, completely prohibited. I've seen
situations where it was entirely possible to achieve this goal
legally, but parties have accidentally done it in such a way that it
greatly harmed the person they were trying to help.
I don't see how there can be a clear "patten of intent to defraud" or,
for that matter, a "pattern" of anything at all, when nothing has even
happened once yet, much less multiple times.
Barry Gold
>>> [Rather complex fact pattern involving elderly Medicare beneficiary
>>> who does not want to lose benefits by accepting proceeds of a life
>>> insurance policy which was, in fact, paid out to her sister-in-law.]
> slide <dryads...@xxxxyahoo.com> wrote:
>>Person A is about to receive money from Person C which will make him
>>ineligible for public assistance. To remain eligible, Person C gives the
>>money to Person B who then asks this group how he can pay Person A's
>>expenses without any problems arising. There is a clear pattern of
>>intent to defraud the public. You may consider this non-fatal, but I
>>think it's pretty stinky.
Cy Pres <c.p...@yahoo.com> wrote:
>This is why they need to consult legal counsel NOW, before doing this,
>either to find out whether there is a way of doing it within the law,
>or whether it is, in fact, completely prohibited. I've seen
>situations where it was entirely possible to achieve this goal
>legally, but parties have accidentally done it in such a way that it
>greatly harmed the person they were trying to help.
Yes. As an example (and remember, I'm not a lawyer much less an
expert in this sort of thing), on Medicaid a cash gift must be reported
and turned over to Medicaid. The same thing would happen if, e.g., a
third party paid one of the person's bills: this might be considered
equivalent to a "preferential transfer" and undone.
*But* a gift of something that the recipient can use _is_ allowed.
Even though a person on Medicaid is restricted to $35/month of income
(and/or gifts), with the rest being taken by Medicaid, people can give
them clothing, toiletries, etc. They can even receive gifts of
significant value, e.g., rare coins for a coin collection they
maintain (the rules explicitly allow the recipient to keep a hobby
collection).
So, if the third party made himerself *obligated* to pay the bill
before it was incurred, would this come under the exemption? I don't
know, but it might. So, for example, if the widow goes to the
hospital for an operation, and the SIL signs as "financially
responsible party" to get the hospital or doctor to perform an
operation they might not be willing to do for Medicaid compensation,
this might come under the exemption. Afterward, the SIL _can_ pay the
bill because it is her obligation, not the widow's.
Again: This widow and SIL *really* need to see a specialist in this
area. Soon.
phillysleuth
area. Soon.
--
Barry Gold, webmaster:
Conchord: http://www.conchord.org
Los Angeles Science Fantasy Society, Inc.: http://www.lasfsinc.org
<<
I couldn't agree with you more, and I've done everything I can do make
the widow realize this. She doesn't want me to contact her SIL
directly to explain the issues (something about SIL is a very private
person..?) and she herself is incapable of conveying anything but
immediate concerns to anyone. Since she has been making arrangements
for being away from home for a month for the first operation tomorrow
morning, I can get very little clear information about what she
actually has conveyed to SIL. It gets to a point where you just
have to let them deal with it and let the chips fall where they may.
It's frustrating for me because I'm a linear thinker and couldn't
imagine getting into a situation like this, but I have to remove
myself from the equation. She's not hearing anything practical I'm
telling her, and I've run out of patience.
Thanks for all your advice and opinions. I hope there is someone at
the hospital's social work department who will take on the role of
advocate for this woman. I think I'm just about done.
jo