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  1. #11
    Join Date
    Oct 2006
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    16,474

    Default Re: How Should Debts of an Estate be Paid Out of Retirement Accounts

    Quote Quoting Blossom
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    Yes, there is a 5 year look back period to review for any improper transfers of assets. Any improper transfers will make the applicant ineligible for long term care Medicaid for a period of time.

    It's not as simple as just transferring title of a house to become eligible for Medicaid.

    I'm wondering if the Medicaid caseworker was not informed of the transfer and didn't happen to catch it.
    Medicaid will not take the home if there is someone else living there as well and that person was either a spouse or caregiver to the Medicaid recipient, so the home was safe. Medicaid also cannot take more than the RMD from the IRAs towards the person's care, and probably did.

  2. #12
    Join Date
    Jun 2011
    Posts
    157

    Default Re: How Should Debts of an Estate be Paid Out of Retirement Accounts

    A surviving spouse yes, a caretaker, only in very limited circumstances. I still think the OP needs advice from an elder law or estate planning attorney before proceeding further.

  3. #13
    Join Date
    Oct 2006
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    16,474

    Default Re: How Should Debts of an Estate be Paid Out of Retirement Accounts

    Quote Quoting Blossom
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    A surviving spouse yes, a caretaker, only in very limited circumstances. I still think the OP needs advice from an elder law or estate planning attorney before proceeding further.
    Its not "very limited circumstances". There is one condition:

    What is the Caregiver Child Exemption?
    The Caregiver Child Exemption, also known as the Caretaker Child Exception, enables an elderly individual to transfer their home to their adult child without violating Medicaid's 5-year look back rule on asset transfers. Therefore, they can transfer their home and continue to be or gain eligibility for Medicaid.
    The Caregiver Child Exemption allows adult children to care for their parent at home as opposed to moving them into a Medicaid-funded assisted living residence or nursing home. It is a Medicaid-sanctioned method that enables the adult child to be compensated for their caregiving in the form of a transfer of the parent's home. The home would have otherwise have to be sold and the proceeds used to pay for nursing home / assisted living care.
    To qualify for the Caregiver Child Exception, the caregiver child must live in the home with his or her parent for at least two years prior to the parent’s admittance to a nursing home or assisted living facility, and they must provide a level of care that prevents the senior from needing to relocate during this time period.
    Medicaid's 5-year look back is a rule that considers the asset transfers a Medicaid applicant has made in the 60 months prior to their application. The Caregiver Child Exception is an exception to this rule.

  4. #14
    Join Date
    Aug 2016
    Posts
    23

    Default Re: How Should Debts of an Estate be Paid Out of Retirement Accounts

    So just to close this up, after talking with a lawyer who specializes in the transfer of these funds there is no way out of paying off the estates current debt without first splitting the ira (as it was going to be) and then cashing some of it out in order to pay off the credit card and last month or so of the nursing home. We still expect the nursing home to be reimbursed eventually by the insurance.

  5. #15
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: How Should Debts of an Estate be Paid Out of Retirement Accounts

    Quote Quoting seki
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    So just to close this up, after talking with a lawyer who specializes in the transfer of these funds there is no way out of paying off the estates current debt without first splitting the ira (as it was going to be) and then cashing some of it out in order to pay off the credit card and last month or so of the nursing home. We still expect the nursing home to be reimbursed eventually by the insurance.
    So, you are saying that you and your sibling are NOT listed as beneficiaries on the IRA? Because that is not accurate if you are listed as beneficiaries on the IRA.

    You will want to get a second opinion from another attorney.

  6. #16
    Join Date
    Aug 2016
    Posts
    23

    Default Re: How Should Debts of an Estate be Paid Out of Retirement Accounts

    Quote Quoting llworking
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    So, you are saying that you and your sibling are NOT listed as beneficiaries on the IRA? Because that is not accurate if you are listed as beneficiaries on the IRA.

    You will want to get a second opinion from another attorney.
    "They" (parent/aunt) are beneficiaries of the IRA. The issue is even though the estate had some debt to be paid, the IRA cannot be used to pay for any of that debt until it is first transferred to the beneficiaries, and then cash out what ever money is needed. We were trying to avoid the taxes incurred during the cash out procedure because we would be turning right around and paying tax AGAIN on paying off the debt of services. Was hoping to go right out and liquidate some of it while it is in the control of the estate to avoid any of the inheritance taxing.

  7. #17
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: How Should Debts of an Estate be Paid Out of Retirement Accounts

    Quote Quoting seki
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    "They" (parent/aunt) are beneficiaries of the IRA. The issue is even though the estate had some debt to be paid, the IRA cannot be used to pay for any of that debt until it is first transferred to the beneficiaries, and then cash out what ever money is needed. We were trying to avoid the taxes incurred during the cash out procedure because we would be turning right around and paying tax AGAIN on paying off the debt of services. Was hoping to go right out and liquidate some of it while it is in the control of the estate to avoid any of the inheritance taxing.
    You seem to have missed something that most of the responders here have told you. You are NOT responsible to pay the debts of the estate. The estate has no money to pay the debts, therefore the creditors are SOL unless you want to voluntarily pay debts you do not need to pay. The beneficiaries of the IRA do not have to pay the debts. The owner of the house does not have to pay the debts. You certain may pay them if you feel that you must, but the law does not require it of you.

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