any money wizards out there?

[BlackVert]

college expenses for 2 kids are looming. my son is graduating from high school in 2009, and my daughter graduates in 2011

i refinanced my mortgage last year, taking out enough extra cash to be able to pay for their colleges, and i was in good shape. but then i got blown out of the water ...

medicaid has this rule that in order to qualify for medicaid to pay for your nursing home expenses, you have to have run out of money, and you also have to have not given away anything valuable (like a beach house) in the last 5 years. otherwise, they will not pay for the nursing home.

my in-laws gave us their beach house about a year ago, so we have about 4 years to go before they will be eligible for medicaid.

at the time, they did not need nursing homes, and they had enough savings to pay for 5 or more years of assisted living, about $5000 per month because they could live together in assisted living.

a couple of months ago, my mother in law took a turn for the worse, and she now needs to be in a nursing home, which costs a little less than $10,000 PER MONTH. tacking that on to my father in law's $4,000 per month assisted living cost (he is still there), and all of a sudden, i am looking at closer to $15,000 per month. at this new rate, their savings will only last about 2 years.

my father in law is ok, for now, but who knows if (or when) he will need a nursing home.

so it looks like they are going to run out of money probably 2 years before medicaid will pay their expenses. so in order for my wife and i to be able to keep the beach house, we will have to pay her parent's healthcare expenses for about 2 years.

that is probably going to run about $250,000, and maybe more if her father has to go into a nursing home.

i have no idea how to swing that ... we are thinking about taking out a second loan, which would suck, or sell our home and buy one that costs about $250K less than whatever we get for our home. my wife does not at all want to sell the beach house. another option is to take the money out of my 401K retirement plan, but that is obviously not something i want to do either.

and i guess i could use the college money and go the student loan route. at least that would make the second loan amount lower ...

any money wizards out there?

 

[iwashmycar]

student loans suck, as i am about 50K in debt at 23. Thanks mom and dad!

I will no doubt be thinking of my kids futures before hand, like you did, but I see you have other things that have come up...

loans are good, but it seems hard to find a GOOD one, that wont screw you later...might be the only way to save the house and still come out with all the stuff you want..

 

[HGFireHazard]

I think in this case you have to look at things as a want or a necessity.

As much as your wife (or you) don't want to hear it, it sounds like your best option is to sell the beach house.

There isn't anything that says you can't buy another beach house in a few years when things are looking better for you financially.

Pulling money out of your retirement, away from your kids college, taking out a loan when you already have a viable (and unnecessary) asset to sell, or selling your current home for something much less, well, I think the choice is moderately simple.

I think a person would be crazy to sell there current home for a smaller one when they have another house to sell as it is.

In any case, it is no easy decision. I wish you the best of luck and I'll pray for your family to overcome this tough obstacle placed in front of you.

 

[Yobi1Kanobi]

why would your money, influence their situation as long as they dont have that beach house in their name then you shouldnt have to touch that. and stop claiming them on your taxes....now they should qualify as long as THEY are out of money....your finances should not affect them and you shouldnt sacrifice your kids for them.

 

[rio95]

why would your money, influence their situation as long as they dont have that beach house in their name then you shouldnt have to touch that. and stop claiming them on your taxes....now they should qualify as long as THEY are out of money....your finances should not affect them and you shouldnt sacrifice your kids for them.

The reason is that beacuse they had the beach house. A huge asset. They do not qualify for coverage. How would you like it if someone wanted money from you and they had something worth as much as a beach house that they just gave away to someone, leaving them in a situation needing money.

I would certainly take some of the college money out if needed. Yourkids can always get loans for the additional amount just like most kids have too. They should have to pay for part of it anyway. I have seen many times where kids won't try as hard since no money is coming out of their pockets. Also, if you need to get a loan, a school loan will be the cheapest route interest ratewise and it won't look as bad either in my opinion.

 

[blksn955.o]

Get in touch with a financial advisor/planner to help find solutions. There are so many things you can do and screw yourself further down the road worse.

If you own the beach house or it is in your name you could look at a 200k HELOC if the value of the home is worth a good chunk more than that. Things are getting tight on HELOC's but if you have a TON of equity in it it may be an option.

Sucks to hear you getting saddled with parental care issues.

I would vote 110% do not touch anything your using for retirement.

 

[Pokageek]

The young ones come first. For starters...reverse mortgage the beach house until they are outta money. Then let the medicaid kickin.

p.s. .. I am hesitant to say this as it could be an emotional issue for you... Don't go into your retirement and DONT have the kids suffer because of the elders. I am of course looking at this objectively without knowing any of these people so I don't have an emotional tie.

 

[topless95]

Consult an Elder Law Attorney ASAP

My parents went through the same thing with my grand parents, and my dad knew a good elder law attorney and has saved them tons of money.

 

[BlackVert]

thanks guys.

i'm looking for an elder care lawyer. that is probably the best place to start

i'm also considering taking a 15 year mortgage out on the beach place to cover the cost of the health care. my wife will be getting a job in a few years after the kids are in college, so she will be able to pay that mortgage

 

[BlackVert]

i have an appointment with the elder care guy on the 15th.

basically the idea is to transfer all their money to us in a legal way. that way, when they apply for medicaid, medicaid will see that they have no money and that they did not just give it away.

there are some strategies for doing that ... things like they can come live with us, and we can charge them rent ... even if it is only half what the nursing home/assisted living was charging them, that would still be $7000 per month. we can also charge them for things like paying their bills, going to the store for them, doing their laundry, driving them around ...

while it may seem wrong to charge them to do things we would normally do (and have been doing) for free, that is exactly what the nursing homes do, and they will gladly take every penny from them. they would rather pay us to do the same things for them as the nursing home does.

 

[Yobi1Kanobi]

now that is what im talking about....think outside the box and dont jeapodize you and your wifes future or ur kids college money,

 

[Adam95GT]

student loans suck, as i am about 50K in debt at 23. Thanks mom and dad!

I will no doubt be thinking of my kids futures before hand, like you did, but I see you have other things that have come up...

loans are good, but it seems hard to find a GOOD one, that wont screw you later...might be the only way to save the house and still come out with all the stuff you want..

I know how that is my parents have no money im in my 3rd year of school and in about 60ish b4 the interest.

 

[toyman]

i have an appointment with the elder care guy on the 15th.

basically the idea is to transfer all their money to us in a legal way. that way, when they apply for medicaid, medicaid will see that they have no money and that they did not just give it away.

there are some strategies for doing that ... things like they can come live with us, and we can charge them rent ... even if it is only half what the nursing home/assisted living was charging them, that would still be $7000 per month. we can also charge them for things like paying their bills, going to the store for them, doing their laundry, driving them around ...

while it may seem wrong to charge them to do things we would normally do (and have been doing) for free, that is exactly what the nursing homes do, and they will gladly take every penny from them. they would rather pay us to do the same things for them as the nursing home does.

I don't know a thing about US tax laws but I would guess that those funds would be taxable income in your hands. Since the dollars are fairly large I would definitely seek professional advice before proceeding.

 

[BlackVert]

I don't know a thing about US tax laws but I would guess that those funds would be taxable income in your hands. Since the dollars are fairly large I would definitely seek professional advice before proceeding.

actually, amounts $10000 or less are not taxable.

 

[Methodical]

Pokageek beat me to it. Look into a reverse mortgage. I don't know all the ins and outs of them but it could buy some time. Do a google and get tons of info on it.

 

[toyman]

actually, amounts $10000 or less are not taxable.

Okay, but aren't you saying $7000/month or $84K /year. Can't imagine that the IRS doesn't want a piece of that.

 

[parchisi]

Tell your kids to get into a military academy.....haha, just joking unless they REALLY want to.

But hey, its a free education (we actually GET paid) and a damned decent education at that.

 

[BlackVert]

Okay, but aren't you saying $7000/month or $84K /year. Can't imagine that the IRS doesn't want a piece of that.

yeah, the IRS will definately want a piece of that

Tell your kids to get into a military academy.....haha, just joking unless they REALLY want to.

But hey, its a free education (we actually GET paid) and a damned decent education at that.

i believe you. we looked into that actually. it seems that they are mostly technical. my son is not technical, his strengths are english and history

 

[reddy351]

Okay, but aren't you saying $7000/month or $84K /year. Can't imagine that the IRS doesn't want a piece of that.

I think you'd be able to "shelter" most of that $84k by showing that it COSTS you money to take care of them.

I have a rental property. It looks like I take in an extra ~$10000 a year but, when I take the ~$7200 for the mortgage, it comes down to $2800 that it looks like I've "made". The rest will be covered by stuff like a new privacy fence, new flooring, new bathroom fixtures and such. I'll do as much of that as I can, every year.

In a similar manner, any miles that you drive for them, are a tax write-off. Your time driving them around and such, you can charge. Any extra expenses to modify your home to accomodate them. Think of it like it is a business. Take a "credit" wherever you can get it.

And don't think for even a second that you are charging THEM to take care of them. You are protecting their hard earned life's savings from the Evil IRS monster. It's better in your hands, than Uncle Sam's.

You should make sure that (in several years) when they do pass, that your name is on any account that holds their money. That way, you AND they are joint owners of the account. You simply say that they gave it to you, a long time before. This is how a lot of people avoid paying the 55% bs: , btw.) "death tax". If you ARE charged "income" tax, it will be at a much lower rate than 55%.