Saturday, April 17, 2010



Some of you couldn't pass the entrance test for Farrington High School so had to go to Punahou or Iolani. I can tell from the comments you've made.

Mostly, many are concerned about costs to care for the elderly. Some financial planners, social workers, lawyers and other professionals regularly urge clients to transfer their wealth to their children so that they can then qualify for Medicaid. Medicaid is welfare. This is fraudulent practice. And if someone recommends these types of actions, you should turn them in to the authorities and have them prosecuted to the full extent of the law.

Sparky, an 85 year old, visits his wife daily at the nursing home. He's unable to care for her at home but is able to spend time with her every day and makes sure that her needs are met. He also helps with other patients.

There is a difference, however, if someone transfers assets or control over assets to family members or to a charity to lower estate tax obligations. That is a legitimate planning move. The estate owner still has sizable amounts left to pay for his/her own long-term care so is not making such transfers in order to fraudulently qualify for welfare.

When a person transfers all of his assets to the children, other problems surface besides the fraud issue. The first, is that the person making the transfer loses his/her dignity because he/she becomes an instant pauper. They say that the difference between an elderly gent and an old man is money. That's because the elderly suddenly becomes a dependent and loses his position of respect and leverage in the family and societal structure. I'm aware of parents who are forced to live in, and take their meals in a single small room and not be allowed to eat with the rest of the family after giving their house to their children. Parental abuse like this is rarely reported because parents don't like to sue their children. And, children are often seen as being saints for "allowing the parents to live with them".

Then, problems between siblings often arise when one sibling has to take on the responsibility of caring for the elderly parents. That sibling/caregiver quits working and often has to pay for the elderly's medical needs and drugs out of his/her pocket. Suppose a person makes $50,000 a year. Becoming a fulltime caregiver means that the person loses that income. Further, drugs and out-of-pocket medical needs may cost another $12,000 or more a year. That caregiver should be entitled to take some of the assets and income the parent has, to compensate for the losses.

That's when greed surfaces. Siblings may not understand that the previously well-to-do caregiver/sibling is losing money and assets. Or don't care to understand that, because they have their eye on the potential inheritance from their parents. Or, siblings may have spouses who resent that their future "inheritance" is being spent by the caregiver. Sometimes lawsuits are filed. And, if it doesn't get to that stage, lawsuits are filed after the death of the elderly parent(s) causing financial and emotional grief that continue for years after the passing.

It is common for the caregiver to have to hire someone to cover for respite periods to allow the caregiver time to rest and take care of other chores required for daily living. If one hires a person for $10 an hour, 10 hours a day for 7 days a week, that comes up to $36,400 a year. The caregiver is now an employer and must also pay for workers comp insurance, unemployment insurance, Temporary Disability insurance, Social Security Taxes, Medicare taxes, provide medical insurance, etc. on top of the $36,400. Failure to do so exposes the caregiver to prosecution for tax fraud and breaking employment laws. Further, the "employee" may sue the caregiver for unemployment, worker comp claims, etc. after legal counsel advises of these entitlement possibilities. We can assume the actual cost to hire respite help to be about $65,000 annually if done legally and properly.

The caregiver is also exposed to lawsuits by siblings or other family members because accidents happen and often, the elderly falls regardless of how careful the caregiver is. The caregiver must spend money defending against such lawsuits and if proven to be negligent, must pay the judgment as well as the legal fees. Homeowners insurance generally won't cover such lawsuits, especially if it can be proven that some money is paid to the caregiver even if the money is used for the benefit of the elderly parent. The money exchange may constitute a business transaction.

Sometimes the elderly parent may not wish to release money to the caregiver because parents want to treat each child fairly and if money is given to one, then, in all "fairness", the same amount must be given to all the children. Sometimes, they even want to keep their assets intact so it can be a legacy for themselves and want all assets to be given to the grandchildren so they would be remembered fondly. The elderly often loses perspective and logic.

The solution is for thorough and complete communication among all interested family members and regular meetings should be conducted with each party receiving complete minutes of such meetings and that all financial matters be disclosed.

Some will still sue, but at least the documentation is there for the caregiver's defense. And, in most cases, there is a lifetime resentment that develops among the siblings because everyone can only see things from his/her perspective. The caregiver usually loses. As does the kupuna who has to witness the family greed.


Dana said...

wow...what a great entry! Thanks for teaching me so much...Dana


Thanks for your kind remarks. I doubt that I can teach an educator like you anything, though. Don.