Borrowing on Trust
Finances
"Just don't report it. The government owes it to you anyway." I didn't expect to hear such words from a Christian attorney. After listening to my troubling questions about funding the cost of the nursing home for Mom and Dad Voorheis, he recommended that we cheat! How would you respond?
At the time, we had a year or more until the move to the nursing home had to be made. Financial questions, however, pressed upon us. Dad and Mom had never written a will. In fact, they served as ministers in a era when written wills were thought to betray a lack of faith. For persons who had always depended upon God to take care of them, the idea of protecting their limited assets and passing them on to their children contradicted a lifetime of trust. Still, Dad's conservative nature had permitted him to save the cash to buy into a retirement home and retain a small nest egg in long-term low-interest bonds. The home, the bonds, and the personal property of the car, furniture, and clothing, when added together, made up the sum total of their estate.
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Friends of Mom and Dad had already moved to the retirement village with subsidized rentals or to the nursing home under Medicare. When we began to inquire about the qualifications for financial assistance in these facilities, the answer confused us. Some of the residents qualified by poverty. Others still owned homes, which they rented out. And still others had children controlling the wealth that they had amassed in their lifetime. Only a few seemed to pay the full price of monthly care.
We needed counsel, so I found a Christian attorney whom several of the residents had retained. He listened carefully as I presented our case and ran down my prepared list of questions. He recommended that Dad and Mom prepare a will — a formidable task in itself. Then he proposed that Dad and Mom might start giving their assets to their children and grandchildren in order to reduce estate taxes and qualify eventually for rental subsidies and Medicaid.
"What about the home and car?" I inquired.
"Well, this is the gray area," the attorney answered. "You can keep your house without penalty if you intend to return to it and your car if you will drive it again. Who knows? To answer your question, I would say, just don't report it. The government owes it to you anyway."
Planning Smart and Playing Fair
I left the attorney's office knowing how people beat the system. Even Christians can rationalize cheating the "federal monster" in the gray areas of the law. To hear this from a reputable Christian attorney, however, disheartened me. I vowed then and there to become a student of the law and the system in order to help Mom and Dad Voorheis. One caveat would rule: Whatever we did would be within the law.
A written will became the first order of business. How would I be able to convince Mom and Dad Voorheis that provision for the future did not constitute a lack of faith? The argument about the government
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getting their money wouldn't work. They didn't feel as if they had enough to matter. The same thought countered the motive to leave something to their children and grandchildren. The breach of faith and the hassle of a legal document mattered more than an inheritance. After weighing every option, I concluded that my only alternative was to test the trust that we had built in each other as in-laws. A hazard loomed. No matter how much our love and trust might have grown over the years, was there an inherent suspicion that a son-in-law might have been pursuing his own interest?
I took the chance, but couched my recommendation in a package of mutual need. My wife and I also needed to have our will updated to correspond with the different needs of our married and single children. A visit to another attorney assured me that Dad and Mom's will would be very simple. So armed with the information, I approached Dad with the plan. "Janet and I need to have our will updated now that two of the children are married. While I was with the attorney, I asked if a will for you would be complex. He said 'No, it would be very simple — at most a page or two.' So your Scotch son-in-law asked if he could do two at once. 'Sure,' he said, 'I'll do two for the price of one.' "
"What do you think, Dad? Should I have him do it?"
A frown, a thought, and probably a prayer, swept across Dad's face before he answered, "Okay, if you think we should. I'll have to talk Mom into signing it."
Initially Mom protested, but with Dad's urging she signed the simple will, dividing the assets equally between my wife and her older brother after their parents died.
Another crisis loomed. The local church offered to buy their house, which stood in the front yard as a visual barrier to the new sanctuary and educational unit. The thought of selling the home panicked Dad. So with the consultation of an attorney, I developed a plan for the folks to give the house to the church in exchange for low-interest bonds. Their taxable income would accrue to the children until the bonds matured, at which time the principal would be divided equally
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between Janet and her brother. To complete the transaction, however, I needed to have broad and durable power of attorney in order to protect Dad from the details. Broad power of attorney would provide me with the legal authority to borrow or give money, purchase items or property, file tax returns, and execute trusts and legal agreements; durable power of attorney would let me continue as "attorney in fact" if Dad became incapacitated and could not act for himself. Trust again came into play. With a word of confidence and a sigh of relief, Dad gave me the broad and durable power of attorney to make the decisions in accord with his wishes and to his and Mom's benefit. His show of trust is a commendation I cherish.
Next, we had to determine how to handle the remaining assets. As mentioned earlier, he gave away his car to a convert of his ministry who needed transportation. The bonds, which he had kept since Depression days without reinvesting the earnings, remained a problem. A check on the law informed us that a person who qualifies for Medicaid had to be limited to a very small bank account and burial insurance one year in advance of eligibility. Dad and Mom's specter of the "poorhouse" darkened my mind. To be eligible for Medicaid, a person had to be impoverished. But there was another side to the dilemma. If our parents still held the bonds as assets, they would have to be spent first and none of Dad's years of savings would benefit his children. Hobson's choice stood before us. Either give the bonds away to the children and claim poverty for the parents, or use the bonds to pay the nursing care cost for about one year and then plead poverty. In the latter case, the children would get nothing from the estate beyond the church bonds from the house.
Not wanting to use my power of attorney for a decision of self-interest, I laid out the options for Dad. Giving him the vow that we would always give him and Mom first-class care, whatever the cost, I told him that he would divide the bonds now as specified in his will to the benefit of the children, or take the risk that they would be
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used for taxes or for nursing home expenses until exhausted. He asked, "What would you do?"
"I've always planned to give something to our children and grandchildren," I answered. "Tax laws permit you to give gifts to them, so I'd have the joy of giving to them while I'm still alive."
"I agree. Let's do it," Dad decided. True to my prediction, he found great joy in cashing the bonds and writing the checks in small thousands to grandchildren just starting their homes and to his son and daughter as a gift of his love.
Time became our ally. Dad completed his gift program exactly twelve months before the nursing home decision had to be made. Although the laws may vary from state to state, when we applied for Medicare and filled in the sections about income, home, car, investments, pension, bank accounts, life insurance, and burial coverage, he and Mom qualified for full medical care based upon full reporting. Legally Mom would be classified as living below the poverty level, but in terms of the quality of total care in a Christian nursing home, she enjoyed the comfort and security that is wealth for an older person. At the same time, Dad Voorheis died with the satisfaction of helping build his church, while giving gifts to his children and grandchildren that helped buy first homes, fund graduate study, and start bank accounts.
Map Work in a No-Man's Land
Memories of those moments make me shudder. Overnight I found myself thrust into a fuzzy financial world with no clear markers and no easy answers. Although I felt the burden of responsibility for our parents' welfare, I didn't even know which questions to ask. By trial, error, and providence, I learned enough about financial planning to map out a course of action. At the very least I learned to ask these questions:
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1. Where is your parents' financial information, including everything from hidden documents in lock boxes to complicated contracts, agreements, and trusts?
2. What is their financial status — assets, liabilities, and net worth?
3. Who is their attorney, tax accountant, and financial consultant, if any?
4. Do they have an up-to-date will on file?
5. Have they developed a financial "nest egg" over the years? How are the funds invested? Has the financial plan been adjusted for retirement?
6. Have they given broad and durable power of attorney to a family member or a professional confidant?
7. Have they made plans for their assets to minimize estate taxes?
8. Are they receiving full entitlement for their Social Security benefits?
9. What are the provisions of their pension plans and life insurance?
10. Do they have adequate medical and hospital insurance, including catastrophic coverage and long-term care?
11. What are the monthly budget requirements to sustain a reasonable standard of living for them?
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12. Are they eligible for Medicare? Medicaid? Do they carry Medigap insurance?
13. Have they made funeral arrangements and purchased a cemetery plot?
14. If worse comes to worst, what are the contingency plans for financial shortfall or catastrophe?
No claim is made for the comprehensive coverage of these questions. Retirement manuals provide a better list, and financial consultants know every detail. For my part, I want to make a case for estate planning for Christians as an extension of biblical stewardship. Startling statistics show that a majority of Americans die "interstate," or without a will. Older Christians may add to that number by feeling as if a written will represents a lack of faith in God. They may resist the idea of using a legal will as an instrument assuring the pattern of their Christian stewardship after death. But each of us should consider the consequences of leaving our assets to the discretion of the federal government, If, while living, we tithe our income, add offerings of gratitude to God, sacrifice to support faith ministries, and give gifts to our children, it is inconceivable to think that death reverses the pattern and refutes our purpose. Although it may be too late to change the perspective of aging parents whose lifetime of success with economic conservatism limits the risk of shifting resources and exercising creative options, nevertheless, we should approach them with the question, "What are your wishes for your assets after death?" If they desire to continue their support for the family and their stewardship for the church, the way is open to discuss the provisions of their will or to engage a financial consultant who is particularly sensitive to Christian concerns. If our parents resist such a question, it is better to back off and pray that the Holy Spirit might open their minds to new truth, even in old age.
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For those of us whose children will be our caregivers in the future, we need to espouse the biblical principle of Christian stewardship for life and for eternity. Someone once said, "The real test of stewardship is our checkbook." I would add, "The ultimate test of stewardship is our written will." As our checkbook reveals our current priorities for ourselves, our families, and our God, our will puts the stamp of the future upon those priorities.
No financial formula will work for all aging parents. Differences in individual personalities, family relationships, financial assets, and state laws are enough to create an infinite variety of patterns to which sons and daughters must respond. Whatever the pattern, however, one common element will determine the quality of the outcome. That element is a "long-term trust" developed prior to the crisis of aging, active when the difficult decisions hang in the balance, and continuing to give assurance until death. Trust is the basis upon which assets are revealed, wills are written, power of attorney is granted, financial plans are accepted, assets are liquidated, and quality of life care is assured. Without that trust, money can be the monster that causes suspicion, divides families, wastes assets, and leaves our parents living with unavoidable miseries of old age. Sad to say, the Christian faith of parents and children does not guarantee the trust needed to deal with the financial dilemma of aging. While we need to see faith as a resource upon which trust is built, it still takes time and it must be earned. Old age is the test of that trust.
Chapter Nine || Table of Contents
