Should I Give Away My Life Savings

Video Transcript: Should I Give Away My Life Savings

I meet with people all of the time who have loved ones who will need extra care, but, like deer caught in headlights, they are too uncertain to make any move at all, especially when they don’t have the right help. As months go by, senior veterans and their families may be losing out on the Aid and Attendance Pension Benefit because they don’t know enough to make the right steps, so they take no steps at all.

So what do they do? In many cases, the family steps in and provides actual care without compensation. In other cases, the family provides care by paying for it out of their pocket. In still other cases, the veteran may actually go without the care they need. When there is help from the Veterans Administration, all of these scenarios should be considered unacceptable.

And it is just as unacceptable that a veteran having “too much” in assets is now being forced to spend down their life savings to qualify for the same exact benefit that other veterans will receive. Fortunately, the “too much” in assets problem is relatively easy to solve.

How Much is Too Much?

In our office, we handle a lot of Medicaid Planning, and the numbers can be a little harsh but they are exact. An individual seeking nursing home Medicaid can keep their own liquid accounts totaling less than $2,000. This can be comprised of checking accounts, savings accounts, mutual funds, and a variety of other investments. But there is that firm number of less than $2,000.

And what about the spouse? How much can a spouse keep? Well, it varies from state to state, but it also is an exact number. For North Carolina at the time of this printing, the amount of liquid “countable” assets a spouse can keep and still qualify for Medicaid is $119,220. But each state has its own number.

But what about the Aid and Attendance Pension Benefit? How much can be kept? The way it has come out is somewhere between $40,000 and $80,000. But cases with $20,000 in assets were rejected because the assets were too high. And technically it is possible for someone with more than $80,000 in assets could be approved. The subjective test is: “the service representative is encouraged to analyze the veteran’s household needs for maintenance and weigh those needs against assets that can be readily converted to cash and whether the income from that cash will cover the difference in the household income and the cost of medical care over the recipient’s remaining life span.” (How to Apply for Department of Veterans Affairs Benefits for Senior Veterans and Their Survivors, by Senior Veterans Service Alliance, 2015 edition).

Not very exact, is it?

It isn’t. In fact, it is completely left to the discretion of the case worker reviewing the case. But here are some items to consider:

* It is rare that a case worker will simply reject a claim because the assets kept were somewhere above the $40,000 level. But it can happen. Again, it is all based on the service representative’s evaluation of needs.

* Any assets kept above $80,000 require a written report from the service representative explaining why they believe the applicant should be allowed to keep more than $80,000. The fact is that it is extremely rare that a service representative will go through that extra work, especially considering the rules on transfers.

* The actual asset limit where an application will be accepted will often (but by no means always) fall in the $50,000-$70,000 range.

Because of the subjective nature of the claims process with the service representative, it is again a good idea to have experienced professionals review and analyze your particular case and recommend specific amounts and compositions of assets to keep.

And now a word about the house. As long as the veteran or the spouse or widower is occupying the house, there is no problem. However, there have been multiple cases of the house being left empty because the care needs were great enough that assisted living was required, and when the VA finds out it can cut off the Aid and Attendance Pension Benefit because the house is now an available asset.

Asset Transfers

When it comes to Medicaid, there is a “five year look back period” on all gifts. This means that Medicaid will impose periods of ineligibility for nursing level Medicaid for a specific period of time based on the total value of gifts from the five years prior to applying. In this sense, the “gift” is counted as a transfer of assets to anyone, usually a close family member but it still counts as a gift if the money is placed in a trust.

But here’s the good thing about the Aid and Attendance Pension Benefit—currently, the five-year lookback period does not apply. This means that you can give away all of your assets to family members (other than a spouse) and still qualify for the pension!

“Fantastic!” I often hear. “I’ll go out and give my assets away today!”

Hold on a minute, though. There are a lot of considerations to think about first, and often the best, safest way to handle the transfers is to put the assets in specific irrevocable trusts.

But in the meantime, here are some reasons why we generally recommend transferring assets into one or more irrevocable trusts rather than giving the money to a friend or family member directly:

* Car Accidents and Lawsuits: Once your money is transferred to your children or other family members, it belongs to them. If they are sued, then your assets could be lost in that lawsuit. If the assets are transferred into an irrevocable trust, then they are protected from lawsuits against the children or family members.

* Inheritance Contingencies. Often our veteran clients trust their child or children enough to transfer assets to them, but what happens if that child passes on? Most of my clients want their assets to go to their children or chosen beneficiaries after they are gone. But if their child dies before you, will the money eventually go to your child’s children upon your death? Or will it go to your child’s spouse?

* Death of a Child/Family Member: What if the assets do go to your child’s spouse. Will their spouse continue to hold the money and use it for your supplemental care and other needs? Or will they have their own needs and expenses? What if your child’s spouse gets remarried? Will their new spouse be OK with that money being spent on you? I have been in the awkward position of having to tell the widows and widowers of a child who passed on that they have no legal obligation to continue to use their mother-in-law’s or father-in-law’s gifted money for their care… and I’ve had to tell them this in front of the other children.

* A “Stepped-Up” Tax Basis for Real Estate: With regard to real estate specifically, one of the worst things to do tax-wise can be gifting a house and land to a child or children. When they receive the real estate as a gift, then they also get the giver’s cost basis, meaning if the house were purchased for $20,000 forty years ago but is worth $300,000 when the giver eventually passes on, then the capital gains taxes when the children would be the applicable rate for the $280,000 gain between purchase and sale. On the other hand, with the specifically drafted irrevocable property trust holding the real estate, the capital gains taxes will only be the gain or loss from the fair market value on the giver’s date of death to the date of sale, and not from the date of the original purchase.

* Income Taxes on Retirement Accounts. Another major factor to consider is that while retirement accounts can be drained and the assets transferred, there are income tax consequences to doing so. That is why income taxes from tax-deferred accounts is often a major topic of discussion when reviewing assets for the Aid and Attendance Pension Benefit.

Because there is currently no lookback period like there is with Medicaid, there is no reason for the asset test to be of great consideration with the exception of income taxes. That is, it is not a problem regarding whether or not to transfer the assets, but the bigger question is where to send the assets. The next lesson will review comprehensive solutions.

If you do have further questions, you can email them to my office or call me directly. Call my office at 919-518-8237 and ask for Jeff, but please mention you are calling in response to my V.A. Pension Benefit Planning e-mails. Thanks again and enjoy the information. The next section will be on the typical Planning toolbox we create for clients who may require The V.A. Pension Benefit.

Jeffrey G. Marsocci

The Care Assistance Center, LLC

8406 Six Forks Road, Suite 102

Raleigh, NC 27615


Jeffrey G. Marsocci was born in Fort Worth, Texas but was raised in Lincoln, Rhode Island and graduated from Mount Saint Charles Academy High School. He graduated from Hofstra University with an undergraduate degree in Business, and two years later earned his law degree from the same school. He also earned a Certificate Degree in Non-Profit Management from Duke University in 2004, he was the Alumni of the Month for Hofstra University in June of 2013, and his firm was honored by the City of Raleigh with the 2011 Human Relations Business Award. Mr. Marsocci also became a Certified Medicaid Planner™ in 2014, a certification granted by the CMP™ Governing Board*, and he is an attorney accredited by the Veterans Administration to practice before the V.A. and its applicable administrative and legal tribunals.

In addition to working in his estate planning, estate administration, and Care Assistance Planning practice in Raleigh, NC since 1996, Mr. Marsocci is the author of numerous books including Estate Planning Basics, The Veteran’s Long Term Care Solution and other planning books found on Mr. Marsocci frequently holds seminars for clients, financial advisors and other attorneys on topics related to the life and estate planning field as well as developing and presenting continuing legal education courses for attorneys and life insurance agents. Mr. Marsocci is a member of the North Carolina Bar Association, the Wake County Bar Association, and the National Italian American Bar Association. He and his wife Kathleen live in Raleigh, North Carolina and work with various charitable and non-profit groups including Kiwanis. Both are recipients of the President’s Call to Service Award through the Points of Light Foundation for completing more than 4,000 hours of service during their lifetimes.

*Certification is granted based upon a qualified candidate demonstrating a mastery of the skills and knowledge of the subject matter. To achieve certification, a CMP™ must meet certain education and/or experience requirements, show proficiency in Medicaid Planning through a thorough examination, and commit to adhere to the highest in professional standards.  A CMP™ also subjects himself or herself to discipline by the CMP™ Governing Board. A Certified Medicaid Planner™ is not necessarily an attorney, so this designation is not governed or regulated by any state bar association.

Professional advice on how to access Medicaid and VA Benefits without giving up the house or assets using a trusted step-by-step process that literally walks you through a complex and bureaucratic system.

Get your free information packet “How a Little Known VA Benefit Can Provide Monthly Financial Support”

David Cole of the Senior Veterans Council and I have put together a useful packet of information along with my book “The Veteran’s Long Term Care Solution: The Truth Behind Long Term Care Planning for Veterans with the Aid and Attendance Pension Benefit” which includes:

  • 20-minute DVD outlines how the benefit can provide financial assistance towards the cost of in-home care, Assisted Living, or possibly independent living facility costs.
  • VA Aid and Attendance Benefit Rate Table
  • How to access immediate funds while applying for government assistance
  • Using a NOVA Professional Advocate to Pre-Plan Your VA Claims
  • Special Industry Report: Medicaid Secrets Reveals: Learn proven strategies to save your home and protect your life savings from devastating nursing home costs
  • The Promise to America by Lyndon B. Johnson
  • National Care Planning Council
  • Book by Jeffrey G. Marsocci – The Veteran’s Long Term Care Solution: The Truth Behind Long Term Care Planning for Veterans with the Aid and Attendance Pension Benefit

Yes, I want a free information packet “How a Little Known VA Benefit Can Provide Monthly Financial Support”

Disclaimer: The information contained in this email is provided “as is” with no warranties or guarantees. This information should not be considered as actual legal, tax or investment advice and you should always contact a certified accountant, tax professional, or attorney before making any financial decisions. While every attempt has been made to provide current and accurate information, neither the author nor the publisher can be held accountable for any errors or omissions. You agree that you are solely liable for any and all reliance, use, or action on this information.