TH E
Blitz
APRIL 2023
Information on Tax and Estate Planning from the Masonic Charities of the Grand Lodge of Pennsylvania
I said, “John and Sue, I hate to break this news to you, but we can’t take all that money from you. "You must understand that the Medicaid guidelines provide that if you apply for Medicaid, the government will look back five years to determine how much you have given away during that period, and any gifts (including a gift annuity) in excess of $500 a month will be counted against Medicaid payments, thereby delaying when those payments will kick in.”
John looked perplexed. He said, “Al, Sue and I have $1 million. How could we ever go on Medicaid in the next five years?” To which I replied, “John, if you and Sue got dementia and were moved to the memory care area in the Masonic Health Care Center, it would cost both of you $30,000 a month to stay there. That is $360,000 a year or $1.8 million in five years. In other words, you would have no funds in less than three years and would have to apply for Medicaid. This scenario is highly unlikely, but being an attorney, I think of the worst and hope for the best.”
WHEN A GIFT IS RE ALLY
NOT A GIFT I was visiting Brother John and his lovely wife, Susan, who live on our Masonic Village at Elizabethtown campus, to discuss their estate plan with them. They had about $1 million in assets, namely a $500,000 brokerage account and a $500,000 traditional IRA owned by John. They saw that the charitable gift annuity rates increased on Jan. 1 and wanted to increase their income by buying a $100,000 annuity each year for five years to cover their monthly expenses. They said since they wanted to leave their assets to Masonic Villages in their estate plan, it would be a great way to increase their income while taking care of their favorite charity. My response to their idea wasn’t what they expected.
Sue then replied, “Well, what should we do, Al?”
I told them they should find a middle ground for purchasing the gift annuities (or giving away their assets to anyone). Since they were both in decent health with no signs of dementia, I suggested they consider a gift annuity of $25,000 for each of the next four years and go from there. I also reminded them that there is a similar limitation to giving assets away in the Resident Agreement for the Masonic Villages, since it could be on the hook for any disqualified Medicaid payments as a result of such gifts. Based on my recommendation, John and Sue then purchased a $25,000 two-life charitable gift annuity from the Masonic Villages and told me they were thankful they live here, because they knew they would have good care as they age.