Big problems can arise when children take money from their parents. I regularly encounter many sad examples of funds going from elderly parents, some of whom are no longer mentally aware of how much money they have left, to pay for expensive cars, vacations, plastic surgeries and many other questionable expenditures. To be clear, if your parent is not competent, then taking money from them is theft… as in criminal. Furthermore, if you are in charge of taking care of mom or dad’s finances and give money to begging siblings, you too could be liable.
A common refrain I hear too often goes something like, “mom does not need the money, because the state will pay for the nursing home anyway.” This is a deeply flawed line of Financial abuse of a parent is generally perpetrated with lots of justifications. This justification is not different and sadly it is patently false. When someone requires nursing home care there are two options to cover the costs, self-pay or use state assistance. Regular medical insurance does not cover long term care. The state will only cover nursing home costs if 1. The person has less than 2,000 in assets (this DOES NOT include the home and several other exempt items); and 2. Has not given away money in the past five years.
Number two is particularly applicable for our discussion because when mom gives money, any money to children for ANY reason, the state will apply a penalty if that gift or theft was made in the last five years. The penalty is assessed by taking the amount of money given or taken and dividing it by the average cost a month in a nursing home, somewhere around 5,0000. So if mom pays for daughter’s breast enhancement at a cost of 20,000, the state will refuse to cover nursing home costs for four months. The state will not waive the penalty unless the individual applying for care sues the child for stolen funds or proves to the state in an official hearing that the penalty will cause them death or serious injury, not an easy bar to meet.
Sometimes children are actually trying to help their parents by moving money around. If you want to help or before moving any money, please speak to a knowledgeable attorney. The five year look-back period also applies when adding a child to the title of a home and many other seemingly simple transactions. Takeaway: Mommy is spelled M-O-M-M-Y not M-O-N-E-Y.