Episode 79: Is It Ethical To Strategize To Use Government Benefits?

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From the brand new studio, Devin and John are talking about the moral or ethical considerations of using the rules and loopholes to qualify for government programs. Is this right? It cheating? Is it getting close to fraudulent?

Let’s look at our tax system. It’s generally considered acceptable to minimize your tax bill, for example by taking the mortgage interest deduction. No one says that’s an unethical loophole – it is just the way the rules are written.

Let’s apply this logic the Medicaid rules. Under the Medicaid rules, you can have a car of unlimited value and still be eligible for Medicaid. Instead of using that money to pay for nursing home care, you can spend that money on a handicap-adapted van so that you can transport the nursing home resident to doctor’s appointments and such, and let Medicaid pay for the nursing home care. That’s seems okay, right?

But what if the details a little different? What if the nursing home resident is not capable of leaving the nursing home. There’s no logical reason to to purchase a $70,000 accessible van, but you could also buy $70,000 fancy car. The rules say that you can own a car of any value. Is there a moral or ethical difference if the car purchased is a handicap-accessible van or a fancy car?

John says his job, as an attorney, is not to tell people what is right or wrong, but rather to tell people about their options. If someone comes to him and asks how to qualify for Medicaid benefits, then he explains the rules for qualifying for Medicaid. If they take that information, and decide to make a decision based upon the rules as they are written, then they’re exercising their rights under the laws of our country. People need to know what those options are, and it isn’t the job of advisors to withhold information.

You can be unhappy with the way the rules are written, but that is a legislative problem. If one person takes advantage of a rule, if you’re unhappy about it, you go and talk to your legislators about changing the rules. The rules are there. If someone takes advantage of the rules as written, that’s still (to John) just working within the rules.

If someone works within the rules results in an action that is truly a bad thing, then the legislators should get together and fix it, because they are the ones who provided the rules in the first place.

If you’re worried about what’s right or wrong for you, personally, then that’s another story. But you can’t make that decision if you don’t know what the rules are…

Obviously, there are some grey lines out there, and some lines that you may or may not want to cross, but you should know where the lines are.


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Every few weeks, Devin and John answer reader questions during the show.  Send your questions to questions@bigpictureretirement.net.