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As tax preparation time begins, numerous seniors are asking to include Medicaid asset protection as part of their tax planning techniques. For those of you not familiar with the 2005 Tax Reduction Act, some of the provisions address specific transfers by seniors under the new Medicare nursing property provisions. Beneath the new provisions, before a senior qualifies for Medicare help into a nursing property, they should spend-down their assets. These new restriction have a five year look-back, used to be 3 years. And used to be that each spouse had a one-half interest in the marital property, it now appears that all the marital assets are to be spent-down. I have not noticed specific regulations but it appears that the wholesome spouse will be left with out any assets if one of them gets sick.

Ideas by seniors have been to transfer their assets to their young children. Although this option is obtainable, Im not confident that its a great alternative. What if the youngster decides to use the asset for themselves, what if they get divorced and the judge awards assets originally intended for the parents to the divorcing wifes decree, what if the youngster gets sued?

There are also tax implications. If the assets are transferred to the youngster for less than fair market place worth, then its a taxable gift. Even worse, if this kind of transfer to the youngster is completed before the five years-look back, -is it a fraudulent conveyance?

Medicaid asset protection has to be accomplished extremely carefully. Planning in this region is evolving. There are a lot of eldercare law firms popping up all over the location. I have been approached by such a firm to send them clientele. They claim that they can structure a new deal whereby the nursing house wont be in a position to attach assets even right after they enter the nursing property.

I know this considerably, any strategy employed to deflect assets from the original owner has to be completed at its fair market worth. For example you just cant transfer your residence from you to your kid. There are tax consequences. Did you just sell your property? Or did you just gift your home? Who will establish the fair marketplace value? Did you get a genuine appraisal? If as a result, its at much less than fair market value (prepared buyer and willing seller, neither below compulsion to purchase or sell, every acting in their very best interest) did you just generate a much more difficult difficulty?

Any strategy whereby theres an element of strings attached, its revocable and therefore you have done nothing to disassociate your self from your asset. One can challenge your intent, to divert assets for the objective of defrauding a potential creditor and failure to have filed a gift tax return has statutory penalties, and interest, worse- if Medicare intended, criminal?

I am conscious of only 1 method of disassociating your self from your asset (personal residence, your CDs, your investments, vacation spot) is to give it away. Period. You can gift it to your kids, pay the tax and thats it. The issue is that you no longer have any manage and you are at the mercy of your childs excellent intentions and a blessed spouse. Risky? You bet!

An irrevocable trust with an independent trustee (not associated to you by blood or marriage) will fit the bill.

An irrevocable trust, is an irrevocable contract amongst you and the independent trustee to manage the assets for the benefit of all beneficiaries. You and your spouse can become beneficiaries along with your youngsters and grand kids.

Timing is very critical. If the transfer (repositioning) of your beneficial assets is done prior to the 5 years, chances are very good that it will stand-up in court. What if its prior to the five years are up? Is your Medicaid asset protection plan nevertheless great? In my book its far better to have carried out something than nothing. medicare fraud reward fraud in medicare types of medicaid