Your Children May Inherit Your Money.
But You Must Act Three Years Before
Your Journey Into "Assisted Living."

By Henry J. Stern
February 11, 2005

Crime continues to go down, employment is up, and property values are rising sharply.  More New Yorkers are becoming millionaires by owning apartments or houses that they cannot afford to sell, because then they would then have no place to live, at least not in the City of New York.
 
When they die or go to a nursing home (often referred to as God's waiting room), their co-ops, condos or houses, if not snapped up by their children, will become available for sale, which will usually make the older person or couple millionaires, if they have not already achieved that status.  The consequence of their addedew wealth will be that it will take a longer stay at the nursing home of their choice to consume their savings, and thereby reduce them to the level where they will qualify for Medicaid.  At that time, the state will take over the responsibility for paying for their care, sometimes at a nursing home inferior to the one which exhausted their material assets.
 
Naturally, many adults would like to see their parents' life savings passed down to them and their children, rather than be consumed by their parents' final illness.  They resort to various schemes and devices to get their parents' money before the care-providers and the government become the real heirs.  The general rule is that fund transfers by seniors must be made three years in advance of entering a home, and must not be in contemplation of avoidance of financial responsibility.
 
In some European countries, we are told, children have some financial obligation to contribute to the support of their aged parents.  In view of the fact that the parents supported their children for many years, that is reasonable.  But the cost of nursing home care is so high that it may well exceed the children's total income.  Adults have legal obligations to pay child support.  Why not include elderly or incapacitated parents among those to whose support their adult children should be required to make a reasonable contribution?
 
The old story, which was told to many of us when we were children, is, how come years ago, one parent could raise and support eight children, but today, eight children can't support one parent?  The question may have been rhetorical, but its point was real: just how responsible should adult children be for supporting elderly, ill or indigent parents?
 
The problem has been intensified by the continuing development of medical advances which prolong life substantially, although at great cost.  Parts of people now survive when other organs go missing or lose their ability to function.  It now appears that life can be maintained with fewer and fewer of our organs actually working.  Patients live on in a kind of half-life, unaware of who they are or who their children are.  It appears that, with the aid of machinery, the heart and lungs can be kept going after the rest of the body has given up. Is an artificial pumping machine a human being?  And who decides these matters, anyway.  Do nursing homes have an economic interest in prolonging the life of patients for whose care they are being reimbursed, sometimes handsomely, depending on just what expenses they are allowed to bill.  Patients can now survive ten years or more as Alzheimer's disease advances through their brain.  Is that living?
 
Another saying that my parents brought up during my childhood is the Eskimo story.  When they got old, Eskimos were taken out of the igloo by their children and put on ice floes by their children, which then floated out to sea until they dissolved. "Would you put me on an ice floe?" my mother asked us.  "No, mommy," we answered.  That story made a point.  As we grow older, it continues to occur to us from time to time.
 
With advancing longevity and more complex and expensive medical care, the last stage of life is an increasing social and economic problem.  Having defied nature through chemistry and machinery, and aware that, for many people, the added years are enjoyable, with people now watching their grandchildren grow up, we are nonetheless left with the question: "Who pays for it?"
 
If you are poor, the government pays for it.  If you are rich, you pay for it and there will be plenty left for the kids and the lawyers, who will see that nobody else gets any of it unless you wanted that.
 
But if, like most of us, you are somewhere in the middle class, and your parents' wealth, accumulated by their life savings and the proceeds of the sale of their house, you have a problem. If your parents' assets are between, say, $20,000 and 2 million dollars, you run the risk of losing what you and your children may have expected to receive.  Maybe you don't need it, maybe it represents the grandchildren's college tuition, so they will not be burdened with huge loans.
 
However, if you are represented by counsel, particularly one trained in what is now called "elder law," you may be able to eat your cake and have it too.
 
It is to achieve results like this that people attend law school, although it is possible, but not recommended, to do it yourself with printed forms and a Cliffs Notes type of booklet.  If you do it wrong, you risk being caught by the Internal Revenue Service and being compelled to disgorge to avoid prosecution.  If you are rich and famous enough, you may be prosecuted anyway, particularly if your offense becomes public in early April, where a substantial effort is made to bring in terrorem cases to help induce taxpayers to follow their better nature and pay what they owe.
 
A swift departure, whether by heart attack, stroke, accident, suicide, homicide, or choking to death on a piece of meat, mitigates, alleviates and in some case eliminates the burden and expense of terminal care.  But none of us can rely on such a result, and few of us would want it, either for ourselves or our parents,  preferring at least some period of awareness (preferably without pain) before we expire, if only to set a few matters straight.
 
Many, if not most of us will spend some time in hospitals, nursing homes, hospices and other halfway houses.  That is why companies like GE send us so many letters, trying to sell us insurance policies as Medicare supplements to reduce the costs of these eventualities.

This insurance is usually not marketed to its real beneficiaries, our heirs.  And if seniors buy it, they can profit if the aleatory contract works out in their favor, since deficit reduction will postpone the moment when their fortunes become as exhausted as they are.
 
The means of life extension that we know today are the traditional ones: diet, exercise, no tobacco, modest alcohol, long-lived parents and healthy attitudes.  There are also supplements and elixirs of various types, in various colors.  Belief in God or the supernatural is said to increase longevity, but if you believed simply because you wanted to live longer, would God accept your prayers?
 
Our advice to you is to think ahead — not too far ahead, that would be grim — but far enough to make provisions for what is likely to happen to your body and your mind at one point or other, and try to see to it that the natural objects of your bounty, or the charities of your choice, be the recipients of your savings, rather than the politicians, lawyers and other strangers seeking your wealth.

Mayor Bloomberg has been quoted as saying that the ideal way to live, financially, is to so arrange your affairs that you will be able to do everything you want during your lifetime, and your check to the undertaker will bounce.  I doubt that any of us will achieve such precision, and we know he is speaking rhetorically, but he has a point.
 
If this column is helpful to any one of you, and preferably a few, it will have been worthwhile.  It would be helpful if you would send us your thoughts on these issues.  We would like to pass them on to all of you, in the hope of providing emotional assistance and financial benefit.
 
And always think of how good your life has been, rather than consuming yourself with regret, deploring lost opportunities, or contemplating your demise.
 
Cheers.

NOTE:  This column does not offer legal advice.  See a professional before transferring any assets.  The point we make is that you should not overlook this matter until it is too late to act.  And one never knows, does one?