Would you lie to preserve your money? [Archive]

flowerseverywhere

4-1-18, 9:55pm

So I had a weird experience today. Talking to an old friend, they are thinking of getting divorced on paper so the one that has long term care insurance could put all the assets in their name, and the other could go on Medicaid if they needed long term care. Purpose would be to leave all their assets to their children. They would still live together. If the non long term person needed care they would private pay for a few month then refuse to pay more and they thought the facility could not transfer them. But I did not believe that a facility has to keep you if they don’t take medicaid. They can’t dump you on the corner but they can transfer you.

background, two social securities, two smaller pensions, new paid for house, two newer cars, travel overseas about a month a year, going out to eat several times a week. Furniture and clothes newer and very nice. Have no problem hopping in the car and going on a day trip. Fly three or four times a year to see the grandkids. In other words, very nice upper middle class life.

For years i have listened to this person talk about how horrible everyone else’s values are, how everyone lies and cheats and so on. So I asked who did they think would pay? “ Medicaid plus the private pay patients. “ I questioned if they thought that was ethical? Well, “you would be surprised how many people do this”. Then they said”it’s so expensive they should charge less”. Well they don’t.

So what do you think? Would you do this? Under what circumstances?

Children are college educated, graduated with no loans. No unusual circumstances like a special needs child or illness. Frankly, I never thought about it. Spouse and I have talked about it and we would do everything we could to keep the other in the home with help.

Chicken lady

4-1-18, 10:19pm

I would do it if I was afraid my medical expenses would leave my spouse dependent on our children.

they can transfer you.

btw, I don’t see it as a lie. I see it as a legal divorce. People I love had to survive for years without the benefits of a paper marriage. The government makes the rules, the people play the game.

iris lilies

4-1-18, 11:22pm

I considered, and still will consider, a similar divorce but in these specific circumstances:

My spouse should not be impoverished by my own physical illness, that is my ethical stance. In the advent of me getting Alzheimers, a likely scenario, we might divorce and would split our assets in half. That seems reasonable and ethical to me, that he get half of the assets he is responsible for creating.

The last time I looked into it, a scenario which has me in a nursing home calls for all of our joint assets to pay for that before Medicaid kicks in. The only assets my spouse can keep are

1) his own income from Social Security
2) our family residence
3) cash up to $80,000

The rest of it must go to support me in the nursing home.* Well, that amount that he is allowed to keep is peanuts.

As it turns out, I have enough income to cover half the cost of a nursing home and would be able to pretty easily cover the rest for seven years, the average stay in a nursing home. That leaves my spouse with a Social Security income that is very modest BUT also leaves him with a lot of cash. Plus, he could always works a little if he needed to.

OP, the scenario you describe is not without risk for the spouse who ends up with no assets. I wouldnt do it because of that risk.

I pretty much agree with CL. The gubmnt makes the rules, it is a game to play the rules to your advantage. It isnt much different from us taking those Obamacare subsidies ( which are pretty hefty this year, we are paying $0 in premiums**) which are intended for folks of modest means. We are folks of modest income, but not modest means. But NannyG looks only at our income.

*I am not entirely sure if my spouse coukd keep his 401k assets in this scenario

** so far this year the preiums for our health insurance plunged to $0 and I dont know why, but it will all be revealed at tax time.

ToomuchStuff

4-1-18, 11:22pm

IANAL, nor am I up on current law. They should be seeking true legal advice and not what I suspect is advice from someone who comes to town to give a talk and sell books.
There used to be (and I believe there still is) a federal rule that required medicaid to go after recoverable assets, which at one time could go back five years (prior divorce).
That doesn't count that a divorce still requires approval from a judge, so it they see something they think of as fraud, they could issue judicial orders changing division of the property to what is required by their rules/law.
Money and a lot of the law is amoral. People values however are what your actually discussing/judging here.

bae

4-2-18, 1:02am

Government involvement in marriage is horrid, and thus I don't feel compel to concern myself about the morality of navigating around the rules of the institution in order to protect my family.

frugal-one

4-2-18, 2:11am

Government involvement in marriage is horrid, and thus I don't feel compel to concern myself about the morality of navigating around the rules of the institution in order to protect my family.

+1

Yppej

4-2-18, 5:12am

Some programs like Food Stamps look at household income regardless of marital status. I thought Medicaid did also in my state, but if not maybe it should.

I know a father whose son got cancer. He was either uninsured or underinsured so to ensure his son got the treatment he needed he turned custody of him over to the state. The state then placed him as a foster child with his own father. That wasn't dishonest, but is an example of government regulations standing in the way of family values, and the problems created by lack of comprehensive national health insurance. I wonder how single payer countries handle long term care.

I will never get legally married again because I don't want to be potentially impoverished by another person.

catherine

4-2-18, 8:25am

Now, if we had universal single-payer healthcare, all of this would be moot. We could all stay married. One of us gets sick and the taxes we have paid covers the cost of long-term care. Easy.

(Just a question: What makes the middle class "gaming the system" more ethical than the lower class doing the same thing? I hear a LOT of people shaming the lower classes for doing the same thing)

I knew a couple who divorced for the reasons in the OPs scenario. I was in my twenties at the time and I thought it was terrible, and I looked at the spouse as a cheater, liar and thief. Now I'm older and I see that there are always shades of gray in ethical decisions. So I've actually been thinking hard about this question. I remember how sad and angry I was when my great-aunt died, and had never changed the will to keep her sister, my grandmother, from inheriting it. My grandmother had been in a nursing home for a few years, and the State had to be paid back.

But here's a question: What about long-term care insurance? How good is it? If I got a policy now, at age 66, would that protect my husband if I found myself needing one down the road? Would that eliminate the need for a divorce?

I still want to say that people who get a divorce to take advantage of government healthcare services are acting unethically in the sense that they are gaming the system, but I agree that the whole government/marriage marriage isn't always very functional or reasonable. So, my first choice is get us Universal Single-Payer Healthcare, but in the absence of that, my second choice is for iris lilies' DH to get to live off the fruits of his labor for as long as he can, in any way he can.

But I wonder how this situation is different from the family that sells their home to pay for healthcare for any expensive disease? In life sh*t happens, right? I usually believe in Kant's Moral Imperative. So, I guess I still believe that lying to the government is unethical in the pure sense of the word, but OTOH marriage is such a complicating variable. We GET married for joint social security benefits, so why can't we get Unmarried for the benefits that the dissolution might get us. It's complicated.

But if we had Universal Single-Payer Healthcare, we wouldn't have to debate the ethics of the OPs query at all.

LDAHL

4-2-18, 9:04am

Isn't there a look-back period aimed at catching that kind of thing?

SteveinMN

4-2-18, 9:30am

(Just a question: What makes the middle class "gaming the system" more ethical than the lower class doing the same thing? I hear a LOT of people shaming the lower classes for doing the same thing)
Not to veer too far off-topic, but the upper classes game the system as well. Many huge companies and upper-class individuals go to great lengths to use the system to pay as little income tax as possible; sometimes even no tax at all. As well as other tax advantages and investment strategies. Though I wish it were different in Utopia, I see no reason the middle class needs to be any more ethical about this than other classes.

DW and I have discussed this as a strategy, but it has remained only discussion so far.

catherine

4-2-18, 9:35am

Not to veer too far off-topic, but the upper classes game the system as well.

Yeah, but we don't slam them for it. Well, Bernie Sanders does, but overall, cheating the government when you are rich is somehow less of a moral failure than when you are poor.

SteveinMN

4-2-18, 9:39am

overall, cheating the government when you are rich is somehow less of a moral failure than when you are poor.
True. When the 1% do it, it's "being smart". >8)

Sad Eyed Lady

4-2-18, 10:09am

Isn't there a look-back period aimed at catching that kind of thing?

I don't know if this changes state to state or not, but in my state the look-back period is 5 years. This is in regard to people placing their home in a child's name so that it is protected. It must be done at least 5 years prior to the person receiving nursing home care. I am not sure about other assets, if the same time frame is applicable or at all.

LDAHL

4-2-18, 10:51am

I don't know if this changes state to state or not, but in my state the look-back period is 5 years. This is in regard to people placing their home in a child's name so that it is protected. It must be done at least 5 years prior to the person receiving nursing home care. I am not sure about other assets, if the same time frame is applicable or at all.

I believe that it does vary by state. I believe mine protects a residence, a car and a certain level of assets from the draw-down requirement. I also think there is a look-back period that would look at significant asset transfers between spouses just prior to a divorce. We are a community property state anyway, which in itself could limit the strategy the OP describes. I would expect that in most states you would need some significant assets and fairly expensive advice well in advance of the event to make a Medicaid divorce a worthwhile strategy. Depending on a number of factors, such as being married less than ten years, you might be risking other benefits by divorcing.

At the risk of contributing to the class war rhetoric, I would say that such a strategy would work best for wealthier people.

iris lilies

4-2-18, 11:00am

True. When the 1% do it, it's "being smart". >8)
Yes, Medicaid fraud, food stamp fraud, welfare
fraud, those are all wrong and are “moral failures” if you like. But mainly, they are against the law and for good reason.

ApatheticNoMore

4-2-18, 11:13am

Not to veer too far off-topic, but the upper classes game the system as well.

uh though they aren't the super rich, these people sound like they might be classified as upper class as well.

LDAHL

4-2-18, 11:23am

I would also think it would be an interesting discussion to determine who gets the assets and insurance and who gets consigned to the Medicaid facility if they in fact do get transferred.

iris lilies

4-2-18, 11:27am

Some programs like Food Stamps look at household income regardless of marital status. I thought Medicaid did also in my state, but if not maybe it should.
.

New Style Medicaid, the program that came with OmabamaCare in the states that took it up, does not pay any attention to assets. There are multimillionaires on Medicaid. Some even on this website.

Being on Medicaid in this situation is just one step beyond what I am doing, paying $0 in premiums for Health insurance. Of course, if I actually USE any health care services I have to pay for them, and that is not a complaint. We essentially have a high deductible insurance policy (that really isnt very high.) The only catch, theoretically, is that I have to have lowish income to get it.

flowerseverywhere

4-2-18, 11:59am

Thanks everyone so much. So many of the points I was thinking about have been raised. DH and I had a long discussion about what our strategy should be. At this point we are looking into what our options are.

I think the thing that stunned me about this person is they are very outspoken about government benefits going to people who in their eyes don’t “need it.”
for instance multi millionaires getting social security which I have no problem with because they are the ones who have supported many social programs through the years and were forced to pay into it.

Also, we have a friend who died in his 30’s. He had good life insurance through work, his volunteer firefighting and a term policy. His wife put the social security survivor benefits they got into college accounts. She stayed in their modest paid off house and worked part time so she could spend more time with the kids. My friend thought she should not have gotten social security because she didn’t need it. Fast forward twenty years in the future and the kids are engineers and physicians. Could they have achieved that had she not wisely used the help given to them which was all legal? Of course no way of knowing that but it certainly must have helped those kids.

And like the estate tax. That was hugely criticized when it was raised as it only affects a small portion of society, but on the other hand why should they not benefit if they have paid all their legal taxes through the years and worked hard?

so many dilemmas to think about. I do find it funny though when people rail against social programs yet will jump at the chance to benefit themselves. That is human nature I guess.

ApatheticNoMore

4-2-18, 12:37pm

so many dilemmas to think about. I do find it funny though when people rail against social programs yet will jump at the chance to benefit themselves. That is human nature I guess.

not taking a social program one is eligible for free and clear is for most people pure stupidity that becomes one of those bad life choices that inevitably leads to poverty. But fraud is another matter, and yes fraud is illegal (and if a social program has restraints and isn't open to all, ie it's not a guaranteed income or Social Security and Medicare after a certain age, then it does punish anyone who is actually playing by the rules, and many will play by the rules out of sheer honesty, regardless of their politics). This straddles the line as I guess many things do.

iris lilies

4-2-18, 12:45pm

The problem with children receiving Social Security is that it is not a universal benefit, their father or mother had to pay into the system some amount or Quarters.

While I am sure these families use up a lot more $$$ than they paid in, at least something was paid in. It is a fairly middle class benefit.

I wonder a lot about all of the fatherless kids in our nearby ‘hood who lose fathers due to gun violence. I doubt they get much or any of a gubmnt benefit thru Social Security because their fathers did nothing to pay into the system. And secondarily, their parents were not married, but I dont know how this latter status affect soc security draw for orphans.

Teacher Terry has talked about this in the past but I forget details, maybe she will chime in.

Teacher Terry

4-2-18, 2:01pm

IL, the parents don't have to be married but must prove who the bio Dad is which is usually done on the birth certificate. Minus that they could use DNA. I am not sure how many quarters has to be paid in to be eligible but amount of payment is based on how much $ the person earned. Nursing homes can't throw people out if they take Medicaid but they can transfer if they don't. This is something I checked before placing my friend because I knew their $ would run out. Her husband liquidated all their assets not taken by medical bills before dying. Once her level of care increased the monthly payment doubled. I have a problem with your friend if she is trying to leave $ to her kids. I think that is unethical. Not impoverishing a spouse is a different matter and I would do it to protect that spouse. Medicaid has a 5 year look back period. When my friend died there was a lot of paperwork involved and they had to be sent bank statements, tax returns, etc to prove that there was no $ hidden.

flowerseverywhere

4-2-18, 4:08pm

Teacherterry, so what is considered reasonable spending in the lookback? For instance our grandchildren we give cash gifts for their birthdays and Christmas for their 529’s instead of gifts. They have multiple aunts, uncles, siblings,cousins etc that give them gifts. Would that be looked at?

my understanding of the Medicaid thing once you are in a home they can transfer you to another home, they can’t dump you in a hospital or on the street. Of course, the rules could vary by state

Agsin, a wonderful financial discussion to have. So many great comments.

flowerseverywhere

4-2-18, 4:11pm

razz

4-2-18, 4:17pm

What is this desire to leave $$ for the kids? If the kids have received $$$ for their education and they are presently employed and functioning adults, why is this not considered adequate support of the kids? To deny or negatively impact the wellbeing of the surviving parents in their later years to leave more for the kids is ridiculous, IMO.

I don't have the issue of US healthcare costs but nursing homes here come with very minimal services and it costs a lot for the so-called extras which are really basic services and come out of one's savings. If one partner requires nursing home care, often the remaining partner is unable to afford to maintain the family home and it is sold. I would be very uncomfortable having one partner by whatever means take over all the assets to avoid paying the cost of nursing home services.

dmc

4-2-18, 4:50pm

We are moving my dad into a assisted living place soon. They are still working on his cottage. I figure he should have enough to make it to 95 or so, then he would have to rely on the VA, SS, and Medicare.

Since he is a wartime veteran, he does qualify for additional funds if is assets get down to a certain point. I don’t plan on siphoning off any of his assets.

LDAHL

4-2-18, 4:50pm

Iris, the social security issue you brought us is a good thing. But here is something to think about. If a kids parent dies who wasn’t working and contributing, they probably would not have contributed much anyway to their upbringing or university education.

That partly depends on what you mean by “contribute”. My earnings amount to something like 98% of our family’s income, but I have no illusion of what a financial disaster my wife’s death would be. Replacing the services she performs would be extremely expensive, and we are insuring her life commensurately.

flowerseverywhere

4-2-18, 5:28pm

That partly depends on what you mean by “contribute”. My earnings amount to something like 98% of our family’s income, but I have no illusion of what a financial disaster my wife’s death would be. Replacing the services she performs would be extremely expensive, and we are insuring her life commensurately. agree with you 100%. I was referring to Irislilly’s idea that a kid with an absentee or deadbeat dad who was not monetarily contributing or a presence in the Childs life would skew that Childs life towards poverty due to little or no SS beingnavailable, as opposed to my example, where two involved parents were shouldering the burden, each in their own way. DH and I Had term life until our kids were well along in college. The burden would have been great if either one of us had passed. By the time they were out of college we were very close to FI and that is a whole different scenario.

Yppej

4-2-18, 5:41pm

There are two types of disability - SSI and SSDI. One you have earned and includes dependent benefits, one is akin to welfare. My ex was on the latter, not having paid into the system enough years before being declared disabled, and no child benefit was paid by the government. The courts awarded me the grand sum of $10 a week in child support because he was low income. So IL, yes it is hard for the custodial parent in such cases, not to mention the courts said when he failed to pay the $10 a week the disability payments could not be garnished.

Chicken lady

4-2-18, 6:27pm

flowerseverywhere

4-2-18, 6:37pm

So, I was talking to a fellow at the food bank today (volunteer, not customer). He gets VA care and just got out of the hospital. He’s in his 80’s. He and his wife apparently have almost no assets because they sold their house to the kids cheaply when the real estate market crashed, helped put the grandkids through college, and now they pay the kids rent. You’d have to really trust your kids!

so true. One of the things in my friends plan was that if all the assets were in one spouses name, the ex spouse with no assets could be in trouble. What if the one with the assets started having mental issues, or dementia. They could do something crazy like change the will to someone else, or leave all their money to a cat shelter and the assetless (kind of a crazy word) spouse could have little recourse, if any and would be screwed if the ex spouse died if they needed the house to live in, say. Would require trust and luck.

jp1

4-2-18, 8:40pm

so true. One of the things in my friends plan was that if all the assets were in one spouses name, the ex spouse with no assets could be in trouble. What if the one with the assets started having mental issues, or dementia. They could do something crazy like change the will to someone else, or leave all their money to a cat shelter and the assetless (kind of a crazy word) spouse could have little recourse, if any and would be screwed if the ex spouse died if they needed the house to live in, say. Would require trust and luck.

Yes, the risk for the one with no assets just seems too great. I can see splitting the assets and going through with this plan as iris lily mentioned, but not the original idea. Radiolab did an interesting episode a while back about a woman with parkinson's disease who developed a crazy gambling addiction as a result of the way a drug she was taking screwed up her brain. Imagine if that happened to the spouse who had all the assets in their name.

Teacher Terry

4-3-18, 2:34pm

Flowers, you have to be able to account for where the $ was spent.It sounds like your question would be one for a lawyer. If the home you choose has other Medicaid patients they can't dump you. If they take Medicaid they must keep you once you go on it. I was careful to place Diane in one that did because I knew as her care increased we would not have the extra $. As a past SW my advice is to trust no one and never put all your $ into anyone else's hands. Things can and do go wrong.

iris lilies

4-3-18, 2:47pm

Catherine asks about long term care i surance.

At your age, 66, the ship has sailed to buy it. It is very expensive now at your age, and besides there are not a lot of financial gurus recommending it for various reasons. Limited availability, sky high costs, and decreasing benefits are the main reasons.

It served my mother well, but she bought it in the ?1980’s. It paid for half of her nursing home costs for five years. Her income covered the other half, and she didnt have to spend assets until the last year before she died.

ApatheticNoMore

4-3-18, 3:19pm

Catherine asks about long term care insurance.

At your age, 66, the ship has sailed to buy it. It is very expensive now at your age, and besides there are not a lot of financial gurus recommending it for various reasons. Limited availability, sky high costs, and decreasing benefits are the main reasons.

as I understand it it is not a practical answer for most people, it's often notoriously hard to collect (so that you hear of people who paid for years and years and can't collect when they need it), you have to steadily pay into it for years and it is doubtful most people's incomes will be that steady etc.. So getting fake divorces to pass down an inheritance is a practical answer for most people? Well no, not really.

Rachel

6-1-18, 6:21pm

This is exactly why my partner and I will not marry. Too risky at our age.

Teacher Terry

6-1-18, 6:54pm

It actually was a benefit for my husband and I to marry 15 years ago as we now are entitled to each other’s pension.

Yppej

6-6-18, 5:45pm

Would you steal to preserve your money?

As a child I remember my mother complaining that a colleague and her husband, both working in professional jobs, were deliberately not repaying their student loans because at the time there were no consequences. She said that this debt burden fell on the taxpayers.

Later the government changed this. First they allowed garnishment of income tax refunds. When that didn't work well enough they passed additional laws. For instance, now student loan debt cannot be discharged in bankruptcy.

Did this make people pay? Not enough, so along came loan forgiveness programs and our deficit looms. I care because I do have a child who will inherit this mess.

Would you not repay a loan if you could get away with it?

Suze Orman really impressed me because she paid back loans she legally did not have to, and well before she was rich or famous.

jp1

6-6-18, 10:36pm

Personally I'd vote out any politician I could that gave mega tax breaks to the wealthiest among us and do everything I could to point out how they try to pit everyone against each other with faux outrage over minor differences in the style of "mommy, his piece of cake is bigger than mine!" argument.

Yppej

6-6-18, 10:42pm

Comparing cake to cake is one thing, but this is more like apples and gorillas.

$170,000 is more than I paid for my house and every car I have ever owned combined.

Ultralight

6-6-18, 10:51pm

Ultralight

6-6-18, 10:52pm

Comparing cake to cake is one thing, but this is more like apples and gorillas.

$170,000 is more than I paid for my house and every car I have ever owned combined.

You own a house? Do you know how many poor people can't afford houses?

Ultralight

6-6-18, 10:55pm

Comparing cake to cake is one thing, but this is more like apples and gorillas.

$170,000 is more than I paid for my house and every car I have ever owned combined.

I enjoy being your bogey man. haha

Remember how Reagan and his cronies created the myth of the welfare queen and how working folks bought into it and then "welfare queens" became their bogey? All the while he ripped up the unions and sold working folks out to the mega-rich and the corporations? lol

Well, I guess I am a student loan king. Your bogey man! Boo! Scared ya!