Mom recently decided to move out of her house and into an elder living facility. Not because she needs assistance now, but in case she needs it in the future. This whole process of making a down-payment and determining how to fund the monthly charges prompted some research by me, which I will share with you.

RMDs (required minimum distributions) from qualified accounts must commence at age 70 ½, most people take the minimum amount, leaving the remainder to grow tax-deferred. If there is a big difference in income and therefore tax rates between mom and the kids it may be wise to take more out of the IRA and place the excess in a Roth IRA. How much more? A good target is keeping mom at the top of the 15% tax bracket. For 2016 that is $37,650 for single filers.

Insurance premiums need to get paid. Medigap is supplemental health insurance that covers many medical treatments that mom may need. Visit www.medicare/gov for more information. Long-term care can be useful as well, unfortunately when mom most needs coverage it may be difficult or impossible to obtain a new policy. However, if a policy is already in force, be sure to continue paying the premiums. This may be best ensured by having the premium notice go to you or a sibling. Lastly, if mom has a life insurance policy – keep it in force even if you have to foot the premiums. Some policies have accumulated cash values which may be a useful source of funds. And, the death benefit may provide tax-free funds that you can use to replenish monies spent on mom.

Though mom did not need to do this, a home equity is also a potential source of funds either thru a reverse mortgage or by actually buying the home and renting it to mom at a reasonable rate.

Except between spouses, joint accounts are usually a bad idea. Anything that is joint requires everyone’s signature to effect changes. Each party to a joint account can make withdrawals and joint ownership can only be undone by all parties involved and is subject to each joint tenant’s creditors. Also, at mom’s passing, the surviving joint tenant will be the sole owner of the asset(s), this ownership right supersedes or overrides the will.

In conclusion, there is no one “best” answer as every situation differs. And, if you find yourself contemplating choices – we can assist!


Michael Guilsher

Senior Financial Advisor