Co-Mingling Funds
Clients sometimes combine their and their parents' assets as a matter of convenience—to make it easier to pay the parents' bills, for example, or to monitor how they're spending.
But such a move could have serious consequences, advisors say.
Chief among these concerns is that it could make the elderly parents ineligible for Medicaid and other forms of public aid because the caregivers assets could be looked upon as a gift, advisors say.
“When that happens, an adult child can be viewed as responsible for the parent’s credit cards, loans or mortgages and could make the parent ineligible for Medicaid,” Ballin said.
A means-based government program, Medicaid covers doctor visits, hospital expenses and long-term care costs—both in a nursing home and at home—which can cost upwards of $45,000 per year for assisted living residency and $49,200 a year to employ a home health-care aide, according to Genworth. “If a parent cannot qualify for Medicaid, your pre-retiree or retired client may be the one paying for the long-term care of the parent, which can prevent them for saving or cause them to dip into their retirement savings,” Chancey said.
Any gifts or transfers of assets made within five years of the date of application for Medicaid are subject to penalties.
“Putting yourself on your parent’s title for homes, investment or savings accounts can be viewed as a completed gift causing not only estate tax implications for the parents, but also for the child if they are assigned to distribute the parent’s assets among other siblings at the parent’s death, which can activate sibling rivalry or animosity” said Ballin.