By Jan Warner and Jan Collins
Knight Ridder Newspapers

Q. My husband and I are in the process of placing my mother-in-law in a nursing home. Several years ago, she purchased three $10,000 Certificates of Deposit, each in her name with one of her three children as co-owner. When the CDs would mature, she renewed them in the same way. She has no other assets. We know that if she dies, each child will receive one CD, which was her plan. But we were told at a seminar we attended that since she made gifts to each child years ago, these accounts belong to the children and will not be counted if she goes into a nursing home. We were advised to go ahead and cash them in. Since she put one child's name on each CD, if she goes to a nursing home, will the CDs be taken and used for her care or will Medicaid pay immediately? Her only income is Social Security of $665 per month. Can her children cash in the CDs now?

A. You have received very bad advice. First of all, simply creating joint accounts with children does not amount to completed gifts. Here, the CDs were created with your mother-in-law's money, and she exercised control over these assets by making the decisions to renew the CDs and by retaining the right to change the manner in which the accounts were titled. As such, there were no completed gifts, and she owns the accounts.

If your husband and his siblings decide to cash in the CDs now, your mother-in-law will suffer a period of disqualification from Medicaid for a period to time equal to the total amount of the gifts divided by the average private pay nursing home rate in your state at the time the gifts are made. Had your mother-in-law transferred ownership of the accounts to her children and relinquished control years ago, there would have been gifts at that time, and the disqualification period would have passed. However, we do not believe that any elderly person should give up control of assets and become dependent upon children unless there is a very good reason and then only after a complete plan is in place.

Whether any of the money can be saved at this late date is a legal question that will depend on the law of your state of residence. Rather than rely on what you hear at a seminar from folks who don't know what they are talking about, we suggest that you contact an elder law attorney in your area to help guide you in the right direction.

Q. Over the past year, my sister and I have seen our 79-year-old mother failing rapidly. She no longer cooks for herself, wears the same clothing, won't bathe, and is losing weight and her memory. After reading your column, we hired a geriatric care manager to assess her, and it appears that after a stay in assisted living, a nursing home will be her only option in the not too distant future. In an attempt to preserve her assets (a home worth $120,000 and $25,000 in CDs) from being quickly depleted, my sister and I attended a seminar where we were told that we should transfer all of her assets into a living trust. Our question is whether a transfer of all her assets to a living trust will shelter her money from nursing home costs. Are there better options?

A. By making transfers of your mother's assets to a living trust as suggested at the seminar you attended, you will convert a non-countable resource - your mother's residence - into a countable resource that will help disqualify your mother from Medicaid benefits for a long time. Do yourself a favor and seek out a qualified elder law attorney in your area. You can find one at www.naela.org/

Q. My wife of 35 years was recently diagnosed with terminal cancer and is given less than a year to live. We were advised by our lawyer that if I put my stock portfolio (cost of $100,000 and value of $250,000) in her name and she wills it to me, I will receive the account back with a basis valued at her date of death and save capital gains taxes. My wife is perfectly willing to do this, but it seems too good to be true.

A. So long as your wife lives for at least one year from the date you transfer the assets to her, at her death, you will receive a stepped up basis. If she lives less than one year, you will not and your basis will be as if you had never given it to her.

Jan Collins is a writer and editor. Jan Warner is a matrimonial, tax and elder-law attorney. Both are based in Columbia, S.C. Please send your questions to P.O. Box 11704, Columbia, S.C. 29211, or e-mail to janwarner@nextsteps.net.