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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3868
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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My dad is incapacitated due to stroke and will likely need

Resolved Question:

My dad is incapacitated due to stroke and will likely need long term care. My question concerns the transfer of asset restrictions with my mother's benefit in mind. I think I understand the general rules quite well, however I would like to know if my mother has POA over my dad's affairs and uses money he has in his IRA to pay down a mortgage in both of their names, would this be likely to cause a penalty treatment given that the funds remain within their existing asset pool but are just moved around. I'm wondering whether this would be a way for my mother to use the housing protections to shelter some of my dad's IRA funds. I have a second question: I see if my Dad is on medicaid my mom is entitled to circa 99K of wealth that she can have. Currently she has 50K in her own IRA. How would the 50K affect the 99K allowance, if at all. If it reduces the allowance by 50k can she freely gift her 50K considering it is exclusively hers and then be eligible for the 99k allowance in the future once my dad needs to apply for medicaid - which will probably be in about 1 year.
Submitted: 3 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 3 years ago.

Dear Friend,

 

First of all, if your mother has POA over your dad's affairs and if IRA money is used to pay down the mortgage, you will have documented proof that the Money is not being move around but are"actually" paid for mortgage, which is your mother's primary residence and thus, it should not pose any problem for her. There are certain assets that are exempt and this is one of them. http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P12_3045

 

Secondly, with regard to your mother's IRA, the principal balance is exempt when her assets are counted. Retirement accounts - (e.g. IRAs) the principal balance in an IRA is an exempt asset as long as the individual is taking regular income distributions from their IRA account. Your mother would still be eligible for the allowance, spousal allowance that you are referring even if she has IRA money. However, if she gifts, she herself will have to wait for 60 months just in case if she needs to apply herself for medicaid.

 

I hope this helps...

Warm Regards,

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3868
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and 2 other Finance Specialists are ready to help you
Customer: replied 3 years ago.
Hello,

Thank you very much for your answers, which were most helpful.

I am gladly pushing the Accept Answer button regardless, but am curious whether you know one other thing.

My dad has taken a turn for the worse and is now going to hospice. He has an IRA account which he is required to start drawing down on this year. My mother is only 67 and has some years before she reaches this point. When my dad passes, which will be soon, will my mom still have to draw down on his IRA or will it switch to corresponding with her age? Not a problem if you don't know or can't answer a further question. I just thought I would ask.

Thanks again for your help.
Customer: replied 3 years ago.
Thank you very much for your answers which were very helpful. I'm sorry I wanted to tip and give you a high rating but I went in once to the Accept Answer section and back out to write this message and now can't get back in as the answer is 'already accepted'.

Anyway, thank you again. I wanted to ask one other small thing. My dad's situation has taken a turn for the worse and he will not go to hospice so the above concerns are no longer relevant. He is due to start drawing down on his IRA this year. However, my mother is only 67. When my dad passes will my mom still need to draw down on his IRA or will it switch to correspond with her age requirements. Not a problem if you can't answer. Thank you again.
Expert:  Rakhi Vasavada replied 3 years ago.

Dear Friend,

 

Sorry to hear about your father's health.

 

Please note that your mother, i.e. the "Surviving Spouse" has much flexibility as to how to deal with the IRAs or 401-Ks. She has a choice to do any of the following:

 

1. Rolling the account over into the surviving spouse's own retirement account

2. Electing to continue to treat the account as the deceased spouse's account

3. Funding the account into the A or B Trust established in the deceased spouse's estate plan -- If applicable.

 

In my opinion, the option No. 1., i.e. to rollover the account into her own account should be beneficial as all the deferred taxes would continue to remain deferred.

 

You may have full reference of this at http://wills.about.com/od/howtoavoidprobate/a/deathandretire.htm

 

I hope this helps...

Warm Regards,

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