“Hide” is a Four-Letter Word

Q. I read in USA Today about an 83-year-old man who hid $1.1 million in offshore accounts to avoid paying taxes. I have also read about others who attempt to hide their assets to qualify for Medicaid, as a way to pay for long-term care. Isn’t it wrong and unlawful to hide assets in order to qualify for Medicaid, and if that is the case, how is Medicaid planning ethical?

A. You are correct that hiding assets – whether in an effort to avoid paying income tax or in an effort to get Medicaid – is illegal and unethical.  And people who do this – including elders such as the 83-year old man you mention above, should get what’s coming to them legally.  However, there is a HUGE difference between hiding assets, which is clearly against the law, and legally protecting your assets using legitimate legal and ethical asset protection strategies.  Just as there are hundreds of legal ways to minimize your income taxes and maximize your income tax deductions, there are dozens of legal and ethical Medicaid asset protection strategies that Elder Law attorneys such as myself help people employ every day.

The USA Today story you mentioned involves an 83-year-old Florida man, Bernard Kramer, who pleaded guilty to hiding at least $1.1 million from the IRS in Swiss and Israeli bank accounts, and evading U.S. taxes for more than 25 years. According to the article, Kramer pleaded guilty to conspiracy and agreed to cooperate with government investigators and pay a civil penalty of $588,042 along with past due taxes. He potentially faces a maximum eight-year prison term at a Manhattan federal court sentencing set for Feb. 6, 2015. Kramer is the latest of dozens of wealthy Americans prosecuted for allegedly avoiding taxes on income held in accounts overseas. The crackdown is in large part due to the introduction of Foreign Account Tax Compliance Act (FATCA), which requires foreign banks to disclose American accounts holding over $50,000.

“Hiding” Assets vs. Medicaid Asset Protection

Millions of people are enrolled in Medicaid and use it to cover the cost of long-term care. However, the program is also the victim of fraud. According to the Virginia Attorney General’s Office, as much as 10% of all health-care expenses are the result of fraudulent claims.

Some seniors do attempt to “hide assets” to qualify for Medicaid; but this is absolutely illegal and can result in criminal and civil fraud charges being brought against the seniors and anyone who assists the senior in this type of illegal behavior.

Those who attempt to “hide” assets to become eligible for Medicaid should heed this wise advice quoted from Forbes: “Asset protection should only be done by a professional who is skilled in the area, and those who rely on financial planners or other non-attorneys for asset protection planning are likely to be sadly disappointed.”

Ethical Medicaid Planning

As you can see, “hiding assets” in order to qualify for Medicaid is illegal criminal behavior. However, it is extremely prudent to legally protect your assets in an effort to qualify for Medicaid nursing home benefits when needed.

Using an experience Elder Law attorney to help you do  Medicaid planning is not about “hiding” assets or “cheating” or “gaming” the system; it is about preserving a client’s dignity and self-worth in the face of our unfair and arbitrary American health insurance system.

Our Discriminatory Health Insurance System

Our American health insurance system essentially discriminates against people suffering from certain types of chronic illnesses, i.e., chronic illnesses that routinely result in the need for long-term “custodial” care, such as: Alzheimer’s disease and other types of dementias; Parkinson’s disease and other types of degenerative disorders of the central nervous system; Huntington’s disease, ALS (big in the news these days because of the “ice-bucket challenge”) and other progressive neurodegenerative disorders; and many genetic disorders such as Multiple Sclerosis, Muscular Dystrophy, and Cystic Fibrosis.  So Americans suffering the misfortune of one of these horrible diseases must also suffer the misfortune of having the “wrong” disease according to our American health insurance system.  Is it an ethical social policy that arbitrarily distinguishes among these different types of illnesses?  Is it an ethical social policy that provides full coverage for most illnesses – whether chronic or acute – but forces Americans with certain chronic conditions (many of them elders) to become impoverished in order to gain access to the long-term care necessitated by their particular type of chronic illness?  Is it any surprise that clients suffering the “wrong type” of chronic illness look for legal ways to preserve the efforts of their lifetime in order to protect themselves and their families from having to go broke under this unfair and arbitrary social policy?

The answer is no, and in fact Congress accepts the realities of Ethical Medicaid Planning through: laws that partially protect spouses of nursing home residents; laws that allow Medicaid Asset Protection via the purchase of Long-Term Care Insurance “Partnership Policies”: laws that allow the exemption of certain types of assets; and a myriad of other laws that, when properly understood and navigated with the help of an experienced Elder Law attorney, permit individuals to qualify for Medicaid while still protecting significant assets from the devastating expenses of long-term care.

For more details, please read about Ethical Medicaid Planning on our Website.

If you or a loved one become a client of the Farr Law Firm, you may rest assured that everything that we do is absolutely, unquestionably, 100% legal and ethical. Don’t ever hide your assets and don’t make the mistake of attempting to “protect” your assets on your own. Make the wise choice and call the Fairfax and Fredericksburg Medicaid Asset Protection Law Firm of Evan H. Farr, P.C. at 703-691-1888 in Fairfax or 540-479-1435 in Fredericksburg to make an appointment for a no-cost introductory consultation.

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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