Many elderly people add one or more adult children to their bank accounts, or sometimes on the advice of a “helpful” bank employee, who has no idea of the negative side of doing this. First, if that child gets sued, or divorced, or in rare cases simply takes some of that money, it could be gone forever. That child can then write checks or transfer funds and withdraw most of the money. If there are two or more children, that can cause animosity between them. Upon your death the children on a joint bank account do not have to share with siblings, even if your will says everything goes equally. Often people call about transferring their home to their children to protect it if long term care if needed. This is not eliminating risk at all. It is just transferring risk to your child or children. They may not be at high risk of long term care, but they can be sued, get divorced, or die themselves, and they cannot control or prevent any of those things. In addition, there may be tax advantages of having property in your name, or in a trust that has tax clauses that still treat the property as yours for income tax or estate tax purposes. For example, everyone in the U.S. has a $250,000 exemption for capital gains tax on the sale of their personal residence, as long as they have lived in it for two of the five years before sale. That is $250,000 per spouse, or $500,000 total. So a married couple who bought that home for $150,000 could sell it for $650,000 and not pay a penny of capital gains tax. But if it is in the child’s name, and the child does not live in the house, that child will pay big capital gains tax on sale.

Those with elderly parents are rightfully concerned about the possible need for long term care and for obtaining government assistance to keep those parents at home, or at a minimum in the least restrictive environment. So before a crisis develops, here are some ideas on how to approach these sensitive matters. To begin, it’s important if at all possible to have the whole family, parents and children on the same page. Having a discussion with the whole family could be very helpful. Subjects to discuss are where parents would like to live if one of them needs significant care. Home is ideal if the layout is safe, so that use of stairs is minimal or not needed, as falling is the single biggest reason many are forced to move from their home. The second issue is to decide who will be the main person in charge of finances and medical decision making if the parent becomes incapable of making those decisions. For that, it is vital to get a health care directive, often called a living will, and a full power of attorney in place with at least one reliable family member in charge, and at least one or more backups if that reliable family member is no longer able to act due to health issues or death.

Medicaid rules in Connecticut are very strict and with nursing home costs reaching $18,000 a month, it is a frightening thought for families whose loved ones are at an age where full care might be needed. There are numerous exceptions to the rules, such as not counting the family home (up to $955,000) if one spouse is living in it. But there are numerous sellers of “trusts” hinting that if you buy their trust, assets can be protected. In my experience, this is almost never true because most of these trusts are revocable, and that means the money put into it can be returned to the person who needs it during their lifetime.

When one spouse needs long term care, at home or in a nursing home, the other spouse is termed the “community spouse.” Then the Medicaid rules set out what the “community spouse” can keep for income and assets. The intent of the laws and regulations is to allow the community spouse to have enough income and assets so that he or she has enough income and assets to continue to live at home, whether that be a home, an apartment, or other living place.n.

A wonderful couple recently met with me about taking care of the wife’s parents. They have been dedicating all their spare time and more to help the parents at home and were frank that giving care full time is not an easy job. Another comment they made is that it is a big learning curve, which is true. It not only involves the physical, but the financial and legal aspects as well.

The physical part is what kind of care is needed and how much. Is it simply helping with household and personal tasks due to mobility, or cognitive issues? Or is it help with bathing, dressing, feeding, and more? If the parent is fully on board with getting help, that is a big plus. But if the parent is resistant to accepting help, that can be a big strain. And that often happens, because it is not easy for anyone to admit to themselves that they cannot do certain things safely or properly. It is a sign they are losing their independence and no one likes that. So the child caregiver has to learn how to suggest, encourage and motivate that parent who raised the child decades ago, to limit certain activities, such as using a stove, or going up and down stairs, or
bathing without supervision due to risk of a fall..

When a married couple is faced with long term care for one of them, whether at home or in a nursing home, the fear of financial ruin is strong. But Congress has passed what is called the spousal impoverishment rules, which is the opposite of how it sounds. The are designed to protect a significant portion of your life’s savings, and if used properly, these laws will protect most of a typical family’s assets, but they must be transferred into the healthy spouse’s name. That may require having the all important Power of Attorney if the sick spouse cannot sign.