Author Topic: Helping dad with his little nest egg, any help appreciated.  (Read 1073 times)

gonegila

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Dad sold his only investment, his house, now has $125,000 representing his life savings. He is 75, healthy, no investment experience. His main goal is to see as much as possible see its way to me, his only child. His next goal is to see it grow at wisely as possible in the mean time.

My pittance of MMM knowledge has me thinking either invest in index fund or transfer tax free gifts to me over the next few years and I invest in index.

Any thoughts appreciated.
Thanks!

bacchi

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #1 on: May 15, 2018, 07:52:57 PM »
He's not going to need it for living expenses or assisted living?

barbaz

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #2 on: May 16, 2018, 01:20:05 AM »
He's not going to need it for living expenses or assisted living?
Exactly, what is his income and insurance situation?

Basically, there are two ways to approach this.

1: old people should only hold save investments (eg bond ETFs), because they need the money and can’t recover from a crash.

2: he doesn’t need the money at all, so he might as well put everything in stocks to get high returns for you

Physicsteacher

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #3 on: May 16, 2018, 04:24:29 AM »
Research the Medicaid look back period before considering accepting gifts from your father. Unless your father has an amazing long term care insurance plan already, he needs to keep this money for his own needs. Even if his income exceeds his expenses substantially at this point, end of life care, which he could need next month or two decades from now, can be insanely expensive.

lizzzi

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #4 on: May 16, 2018, 05:30:09 AM »
He needs to keep that money for himself. There are all kinds of issues that could arise where he needs some kind of care--he needs to keep that nest egg for things like a private pay aide, medical equipment, assistive devices, etc.  that he may want that insurance won't pay for...maybe even a new car at some point. Or a new apartment that is more accessible as he ages, but that is more expensive. $125,000 is not all that huge a sum, as these things go. It is nice that he is thinking of you, but he needs, at this point, to be thinking of himself first. 75 is a precarious age. He might be fit and healthy at the moment, and have a health issue come out of nowhere and bite him in the toe tomorrow. And as someone else said, in the case of gifts (which I advise against, for the above reasons), it could impact his ability to access Medicaid if needed. You could check on the look back period, and consult an eldercare/estate planning attorney who is well-versed on Medicaid issues in your area...but again, I would rather see your dad keep his money for himself. 

gonegila

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #5 on: May 16, 2018, 01:23:04 PM »
Thank you all for thoughts. I have had similar thoughts.

Answers to questions: He has a modest state job pension and decent insurance, not sure about long term care insurance. Mostly he doesn't want the $&@($&# health care industry or government to get his money. :)

Even if he keeps it for his expenses, am I hearing bonds versus something with potentially more return like index?

Thanks again for your time!

MustacheAnxiety

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #6 on: May 16, 2018, 02:35:29 PM »

Mostly he doesn't want the $&@($&# health care industry or government to get his money. :)


It sounds like his current expenses are covered by Social Security and a pension.  If the goal is to have the health care industry and government keep their grubby hands off of his life saving, have him start giving the money to you each year.  The annual gift tax threshold is 15K, but it is basically irrelevant since he will never hit the lifetime exemption.  I don't know how best to structure giving you the money, if you are the only heir and the 125K is basically all the money I would say to just transfer as a lump sum and hope your Dad stays healthy for 5 years.  But it is worth your time to do some research on the tax man and Medicare look backs.

Once the transfer hapeens DO NOT spend the money you get from Dad.  There is a 5 year look back period if your Dad ends up needing a Medicare bed in a nursing home, so he may need the money back.  But if you just leave it in his accounts there is about a 70% chance it will get eaten up by long term healthcare costs eventually. 

From what I have looked into having savings that is substantial (100-300K) but still likely to run out at the high burn rate of a nursing home, isn't particularly helpful when trying to find a long term care facility.  Nursing homes will not guarantee a medicare bed to private paying clients if/when their money runs out.  So the cash could get you in the door of a nice facility only to have you searching for a place a year or a few years later when your aging relative is in worse shape and their money is gone.

I am generally pretty bullish (even if equity returns for the next 10 years are likely to be subdued), so I would still throw it in a low fee index fund instead of bonds. 

lizzzi

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #7 on: May 16, 2018, 03:10:49 PM »
Mustache Anxiety, you are confusing Medicare and Medicaid. Not the same animals by a long shot.

mxt0133

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #8 on: May 16, 2018, 03:38:09 PM »
Medicaid can only clawback assets it can prove that were transferred to shelter them from the 5 year look back period.  So if you dad pulls out $125K in cash to go blow it on coke and hookers in Vegas as a final hura and they look into any next of kin's accounts.  If there are no large or many small deposits around that time then they can't really prove that the assets were transferred for the purposes of sheltering assets from the look back period.

I myself have never heard of Medicaid going after assets where the deceased decided to pay for a family vacation before they were eligible for Medicaid.

Cassie

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #9 on: May 16, 2018, 03:49:25 PM »
I was my good friends guardian when her DH died and she had Alzheimer's. First when you go into a home if you can not private pay you will have real trouble finding a decent one. Second many places will let you stay once you need Medicaid if you have been able to private pay for at least a year. This is one of the questions you should ask.  When she died Medicaid did indeed look back and every penny that was spent had to be accounted for. Your Dad needs to keep his $.

jeroly

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #10 on: May 16, 2018, 03:51:46 PM »
If you are married and/or have children, then the tax free gift exclusion of $15k can be multiplied by the number of folks in your family. If you have two kids, even with generous assumptions about rates of return on those assets, you should be able to deplete the $125K in 3 years. Then if your dad makes it a total of 8 years before and if he needs to go to a skilled nursing facility, those gifts won't be considered as assets when Medicaid considers eligibility for coverage.

Cassie

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #11 on: May 16, 2018, 03:53:45 PM »
Yes and if he can't private pay for a year first he will be in a shit hole.

lizzzi

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #12 on: May 16, 2018, 05:00:25 PM »
He should hold onto his money. It gives him a better shot at the  independence he seems to want from the bureaucracies he does not want to have it. For instance, he could use it to pay for the help he may need to stay in his own home and avoid placement in a facility. Sometimes just an aide to come in in the morning, help with personal care, clean the house, do shopping and laundry, fix his breakfast, leave a plate of sandwiches for lunch...and leave him for the rest of the day with a Voice of Help button on his wrist or around his neck in case of a problem. His money could pay for that. And if the family is involved--able to take him to appointments, check in to make sure he's all right--help out so he doesn't need too many aide hours--he would be in even better shape. There are a lot of ways to take care of yourself without going to a nursing home, giving it to your kids, or giving it to the government. Assuming he is in his right mind and making reasonably good decisions, it is best that he hold on to his money for himself. 125K is enough to be useful, but not really a huge fortune. After he is gone is the time for the kids to get the inheritance if any is left. Not while he may well need it to help him stay independent at home.

gonegila

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #13 on: May 17, 2018, 05:51:03 AM »
This was my first time posting on MMM and I have not been disappointed.

Thank you all for your time and energy!


Laura33

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #14 on: May 17, 2018, 07:58:45 AM »
Mustache Anxiety, you are confusing Medicare and Medicaid. Not the same animals by a long shot.

True.  But Medicare does not cover nursing homes at all.  It will cover hospital stays and rehab and short-term assistance to help you manage, treat, and recover from an illness or injury, but it will not cover long-term care in an assisted living facility.  So everything that Mustache Anxiety wrote is entirely accurate about what happens when you get to the point of needing nursing home care -- you pay for your own private facility yourself, and then when your money runs out, you qualify for Medicaid and need to go to whatever facility will provide you a Medicaid bed.  And Medicaid will absolutely claw back any assets that were transferred to others within that 5-year lookback period.

So if the primary goal is to transfer those assets to you and not having to spend them down on nursing care, the best approach is definitely to have him transfer his assets to you quickly, given the 5-year lookback.*  And then you can leave it untouched for the next five years, at a minimum (because you don't want to have to turn over money that you've already spent).  Personally, I'd mentally earmark the money as a "dad care" fund -- even if he says he doesn't want the money to go to his own future care, it is good to have those options when the time comes.  So if it turns out that he does need assistance at some point, if you have the money, you can then choose to spend it yourself to provide those things to him.** 

*Yes, of course he could choose to blow the money on parties and trips and so on, and Medicaid won't come after him for that.  But the stated goal was to pass down the money to his family, not spend it all.

**This is sort of what my dad and uncle have done for my Granny.  They bought her a condo, and she insists on paying them rent.  And, you know, you don't mess with Granny; if she says that's how it's going to be, that's how it's going to be.  So they take the rent checks and put them in a separate fund that they use for condo repairs, medical care, and any other stuff that she needs.  She is of course sharp enough to have figured out their workaround, but it allows everyone to save face.

wenchsenior

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Re: Helping dad with his little nest egg, any help appreciated.
« Reply #15 on: May 17, 2018, 08:31:15 AM »
I am not recommending this strategy (particularly given the OP's father's age), but just proving info.

B/C of the clawback period to qualify for Medicaid to pay for nursing home/LTC, the gifter could hypothetically gift their money to a giftee IF the giftee was reliable and agreed to hold the money safe for that 5 year period (i.e., not use any of it and keep it in safe investments).  That way were the gifter to need Medicaid within the window, the assets would still be available to claw back. If no Medicaid is needed in that window, then the giftee is in the clear to use the money and the gifter would qualify for Medicaid if needed after the window has passed.