How to pass on inheritance to your children

Dear Liz: I may inherit $500,000, but I don’t necessarily need the money for my retirement. Is there a way to pass on that inheritance, or part of it, to my two children without causing a taxable event for me or them? I may want to ask my parents to add that to their will.

Answer: You can “reject” or refuse to accept an inheritance in whole or in part. If done correctly, the assets will pass to the next beneficiary as directed by the estate documents (or by state law, in the absence of a will or living trust). If you think you would like this option, be sure to discuss it with your parents and their estate attorney so that the documents can be properly drafted.

Keep in mind that few families have enough assets to be affected by gift or estate taxes. For example, only people who give away millions of dollars in their lives have to pay gift taxes. If you decide not to decline and later give the full $500,000 to your children, you won’t have to pay any gift tax until you’ve given away significantly more. In addition, gifts are tax-free for the recipients.

Gift and estate laws are always subject to change, so be sure to consult a tax advisor before making a decision on either.

Medicare Advantage questions

Dear Liz: You have posted a letter against Medicare Advantage plans. The letter suggested that you go to their doctors, which is incorrect. You can leave the network with a higher deductible. I will also tell you that most of those same doctors accept your deductible. I always do this when I’m at my summer house.

Answer: As mentioned earlier, Medicare Advantage plans are offered by private insurers as an alternative to traditional Medicare. The plans may differ in what they cover and how.

For example, if your Medicare Advantage plan is a preferred provider, you may indeed have some coverage if you use a medical provider outside of the plan’s network. If the Medicare Advantage plan is a health maintenance organization, the plan may not cover out-of-network care except in an emergency. HMOs may also require you to get a referral to see a specialist.

Compare that to traditional Medicare, which shows you any medical provider that accepts Medicare (which most are). One of the drawbacks of traditional Medicare is the coinsurance, which includes deductibles and co-payments. However, you can purchase a supplemental or Medigap policy from a private insurer to cover it. There are a number of Medigap plans, but what they cover is standardized.

Medicare Advantage plans often pay for things Medicare doesn’t, such as hearing, eye care, and dental care. Many people who sign up for Medicare Advantage are, like you, satisfied with their coverage. However, others are not. Read more:

Dear Liz: As for the pros and cons of traditional Medicare versus Medicare Advantage options, I want to share a personal horror story about my parents. Both are now deceased and I went through hell with their Medicare Advantage plans.

These plans often mail stylish color brochures to seniors approaching 65, inviting them over for a free lunch to hear all about the excellent care they’ll supposedly receive when they sign up for these health plans — all with no extra monthly premiums! Both of my parents fell for the promises these “free” plans offered.

As you wrote in your response, there are serious and inconvenient limitations on the quality of care and the hospitals and physicians covered by these networks. It was frustrating.

My mother’s GP always seemed exhausted and never explained anything correctly. He seemed annoyed when we asked him to repeat information. My father’s plan told him it hadn’t signed a contract with the hospital closest to him and referred him to a much more distant hospital. His GP was rude, disrespectful and indifferent.

As my father’s health advocate, I always argued with his insurer. My father was depressed by the poor quality of care and lack of support from this company. I think he just gave up. He died in 2018 of prostate cancer, which had spread to his lower back. If he had had the proper tests when it was supposed to be done, the cancer may have been detected and treated early. It was too far away to treat by the time it was diagnosed.

If you stick with traditional Medicare, there are additional health plans that cost a few hundred dollars a month. I have heard from friends and relatives that care is better through paid supplemental plans.

Bottom line: you get what you pay for. Probably best to stick with plain old Medicare; maybe you just live longer.

Answer: Like all private health insurance plans, Medicare Advantage plans can vary widely in quality. You cannot assume that one person’s experience with Medicare Advantage will be the same as another’s.

However, you can assume that any insurance with lower initial costs will have a higher cost or more restrictions, or both, if you need a lot of care. If you want more freedom to choose your medical providers and you can afford the premiums, traditional Medicare with supplemental policies may be a better fit.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Inquiries can be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact Us” form at asklizweston.com.

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