Question: I am 75 years old and have a modest amount of savings, a home without a mortgage and a small retirement pension plus my monthly social security check. I am in relatively good health, and quite candidly hope to live for another 10-15 years. I have one child who is in her 50s but can’t seem to keep a job or a marriage. She is again without a job and is now divorced for the 3rd time. My question is whether I should start gifting her my money and perhaps Elders Gift her my home as well in anticipation of my needing nursing home care in the future. What would you recommend I do from a financial planning perspective, factoring in the fact that elder care cost so much in California?”
Answer: It is great to hear that you are in good health, but your finances may not be as healthy as you are.
The good news is that your estate is under the current $5 million limit, so there are no estate tax issues.
The bad news is that, based on your information, you have very limited liquidity, and liquidity is the secret of financial survival. In my opinion, you need to have $1 million in liquidity, that is cash, stocks, or a pension plan, so that you are financially secure during retirement.
Also, there is a real concern about Medicare. Will it be around in 10 years and will it pay the lion’s share of your medical expenses in the future, and if not, will you be able to afford these Elders Gift?
Another concern that you should have is that California is bankrupt. What affect will this have on its ability to provide California residents with Medi-Cal benefits?
If you have not done so already, I would suggest that you do the following:
- Meet with a financial planner to develop a financial “road map”.
- Meet with an attorney to have the following legal documents prepared: Power of Attorney for Health, Power of Attorney for Finances, and a Living Trust (which can help your estate avoid the high cost of Probate)
Finally, regarding your daughter. I would suggest that at 50 years of age that she assume responsibility for herself–that she find a job, and perhaps start thinking about taking care of you and your elder care needs (Elders Gift).
Hope this helps.
Orlando J. Antonini, CPA/PFS, CFP, QFP, RIA, NCG
Antonini CPAs LLP
San Francisco, California