For those of you who are unfamiliar with the 2005 Tax Reduction Act, some provisions deal with specific transfers by seniors under the new Medicaid Homes for Seniors provisions. Under the new provisions, before seniors can qualify for Medicare assistance in a retirement home, they must use their assets. These new restrictions have a balance sheet of five years. The assessment was 3 years.
By a vote of 216 to 214, the US House of Representatives passed a bill that will impose new punitive restrictions on the ability of seniors to transfer assets before they can receive Medicaid coverage of home care. of retirement. You can access the new Budget Deficit Reduction Act, 2005 in PDF format, click on: http://www.rules.house.gov/109/text/s1932cr/109s1932_text.pdf . The section on transfer provisions begins on page 222.
WHAT IS MEDICAID?
What is Medicaid? Medicaid is a government assistance program for people over 65 years old or disabled. Medicaid&39;s help was designed for those who can not afford medical expenses (for the poor), but Medicaid has become the default solution for the middle class. The middle class has become the new poor.
Medicaid planning and Medicaid rules are complicated. The government requires a five-year follow-up of any transfers you may have made to prevent you from entering the retirement home. Before the 2005 tax reduction law, he was 3 years old. The transfer of all property by the elderly has taken the form of a "fraudulent transfer" or, in the language of government, of "deprivation of resources".
These new rules are spousal impoverishment programs designed to punish a healthy spouse. If one of the spouses gets sick, all resources must be spent before they can claim help from the government. These new restrictive rules punish the healthy spouse to leave the healthy spouse at the mercy of social assistance or his children. It is very humbling that seniors planned their retirement based on their ability to keep their home.
The assets you need to spend
Assets that you must spend before you can qualify for assistance in a nursing home. Everything you own on your behalf or with your spouse. Cash, Savings, Auditing, Certificate of Deposit, US Savings Bonds, Credit Union Shares, Individual Retirement Accounts (IRAs), Retirement Home Trust Funds, Annuities, Revocable Living Assets, Any Trust revocable Medicaid estate planning, real estate held by a house, other real estate that you hold as investment property or income producing business, cash value of your life insurance policy, face value your life insurance policy, household effects and effects, works of art, burial sites, canceled, motor vehicles, land contracts, real estate property, trailers, mobile homes, real estate commercial and other, and anything that is in your name or in your possession.
WHAT DO YOU MEAN "FRAUDULENT TRANSPORT"?
What do you mean by "fraudulent transfer" or "deprivation of resources"? If you give away your assets and you do not receive an equal amount (value), the transfer is a deprivation of resources and you have committed a fraudulent transfer (you give your home to your children for $ 100.00 when the fair value the worth of your house is $ 150,000). If you gave your home to your children for $ 100 sixty (5) years before entering the retirement home, you "have deprived your resources" of retirement home expenses. Unwittingly, you also had to pay a gift tax equal to the difference between $ 100,000 and $ 150,000. In addition, you may have misappropriated the government&39;s inheritance tax.
How does the federal gift tax apply?
The tax rules relating to donations apply to the donation transfer of any property. You make a donation if you give a property (including money), or you give the use of a property, or give the income of a property without expecting to receive something of value at least equal in return. If you sell something at less than its total value, or if you take out an interest-free or low-rate loan, you may be giving away a gift.
The general tax rules for donations state that any gift is a taxable gift. However, there are many exceptions to this rule. As a general rule, the following gifts are not taxable gifts:
– Gifts whose exclusion does not exceed $ 12,000 per year for the calendar year beginning in 2006 (annual exclusion for any 12-month period, see below).
– Tuition or medical expenses that you pay directly to a medical or educational institution for a person,
– gifts to your spouse,
– Donations to a political organization for its use, and
– Donations to charities.
– Tax exclusion of annual donation. A separate annual tax exemption for gifts applies to every person you give a gift to. For 2007, the annual donation tax exclusion is $ 12,000. As a result, you can generally donate up to $ 12,000 each to an unlimited number of people in 2007 and none of the gifts will be taxable. However, future interest donations can not be excluded under the annual exclusion provisions. A gift of a future interest is a gift that is limited so that its use, possession or pleasure begins at some point in the future. A federal tax return on donations is filed on Form 709 for taxable gifts exceeding the annual exclusion.
FILING OF A TAX DECLARATION
Generally, you must file a tax return on a Form 709 if you are in one of the following situations:
– You have made gifts to at least one person (other than your spouse) whose "financial" value is greater than the $ 12,000 annual exclusion for the 2007 taxation year.
– You and your spouse divide a gift.
– You have made someone (other than your spouse) a gift of a future interest that he / she can not actually own, enjoy, or receive from income until a later date.
– You have given your spouse an interest in a property that will end in a future event.
– the entirety of your interest in a property, if no other interest has been transferred for less than adequate consideration (less than its fair value "in cash") or for a use other than charitable; or
– a qualified conservation contribution that is a restriction (granted forever) to the use of real estate
HOW IS THE TAX APPLIED?
Inheritance tax can apply to your taxable estate upon your death. Your taxable estate is your gross estate less allowable deductions. On the date of your death, everything in your name is taxable. Take stock of your assets: cash, savings and checking accounts, CDs, stocks, mutual funds, bonds, treasury bills, exemptions, jewelery, cars, stamps, boats, paintings and more collectibles, real estate … principal residence, vacation place, real estate investment, your business, interests in other businesses, limited partnerships, partnerships, mortgages and notes receivable that you hold, retirement plan benefits, IRA, or any amount you expect to inherit from others.
Many people prefer not to think about what will happen to their deaths, but none of us is immortal and if we do not plan properly, we risk leaving behind a mess that needs to be resolved at great expense by our loved ones. and disadvantages, at a time when they are emotionally bankrupt.
Your federal estate tax (up to 55%) is based on the "fair value in cash" of your property on the date of your death, not on what you originally paid. State probate and death taxes are based on the "location" of your property. Thus, if you own property in different states, each state must be registered and everyone will want its fair share. The only real alternative to a will is to put in place a lifelong trust structure that, with careful planning, can eliminate probate periods, administrative costs and taxes, while providing a many additional benefits. For these reasons, the use of trusts has increased significantly.
WHAT IS YOUR GROSS PROPERTY?
Your gross estate includes the value of all property in which you had an interest at the time of death. Your estate will also include:
– life insurance proceeds payable to your estate or, if you own the policy, to your heirs;
– the value of certain annuities payable to your estate or your heirs; and
– The value of some property that you transferred in the 3 years prior to your death.
WHAT IS YOUR DOMAINE IMPOSABLE?
The allowable deductions used to determine your taxable estate include:
– Funeral expenses paid on your estate,
– The debts you owed at the time of your death,
– the matrimonial deduction (usually the value of the property that passes from your estate to your surviving spouse), and
– The charitable deduction (in general, the value of property that passes from your estate to the United States, to a state, to a political subdivision of a state or to an eligible charity for exclusively charitable purposes ).
HOW GIFT TAXES AND PROPERTY TAXES APPLY TO MY DOMAIN:
If you die during the 2007 taxation year, your "taxable estate exemption" raises to $ 2,000,000, your "donation tax exemption", $ 1,000,000 and your inheritance tax does not exceed 45%.
If you die during the 2008 tax year, your "taxable estate exemption" raises to $ 2,000,000, your "donation tax exemption", $ 1,000,000 and your inheritance tax does not exceed 45%.
If you die during the 2009 tax year, your "taxable estate exemption" raises to $ 3,500,000, your "gift tax exemption" is $ 1,000,000 and your estate tax does not exceed 45%.
If you die during the 2010 taxation year, your "taxable estate exemption" is $ 0.00 (that is, it is repealed), your "tax exemption for donations" is $ 0.00 (that is, it is also repealed) and you have a maximum estate tax of 55%.
13 times in 32 years, the congress changed the rules. Congress always has fun with the "transfer fee". For more information on what is included in your gross estate and allowable deductions, see Form 706.
HOW TO AVOID THESE ADVERSE RESULTS?
You can avoid all the unpleasant results above and filing requirements with an irrevocable trust set up 60 months before you qualify for the retirement home.
By reposing your assets (transfer of your assets) to you in an irrevocable trust, you will no longer own the assets:
– you are not eligible for the approval process, and
– you do not have to file a declaration of succession,
– because on the date you qualify for the retirement home, you do not own ANY assets,
– at the time of your death, you have NO assets for the probate procedure,
– and on the date of your death, you have NO property to report on your tax return.