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My parents are about 5 years from retirement age. Their combined income is around $20,000 a year. They live in a very low cost-of-living area, so they live a pretty simple life without many frills. Not a lot of money in; not a lot of money out.

Recently, they've come across an opportunity to bank a lump sum of about $200,000 up front, with a continued income of about $2,000 per month for the next 15-20 years.

Here's the twist... My father is on experimental medication. He gets the medication for free from the pharma company because of their low income and inability to afford medical insurance. Even if they could afford medical insurance, it wouldn't cover the medicine because it's experimental. The medicine on its own would cost them a whopping $4,500 per month if they have an income greater than $97,000 per year.

What, if anything, could they do to keep as much of the money as possible without raising their reported yearly income? I know they could put $6000 directly into an IRA. Neither of them have a 401(k) plan available to them. Is there a way to "sneak" more of the money directly into retirement without counting it towards their reported yearly income?

Are there other options they can consider or should they just abandon the opportunity completely?

EDIT: For everyone's sanity, please note that the final decision will be made with the help of a hired professional. The purpose of this question is to educate myself and search for ideas from those in the community who are passionate about finances and might look at the situation in a different light, seeing an option that even a professional might not initially consider.

BrosephRoseph
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I think that you really have to take the deal, as the gas company will extract the land from neighboring parcels anyway.

Talk to an attorney about trusts or other vehicles to shelter the money. It may be possible to transfer the land into a trust to benefit your parents when they need the money. Also, this may be one of those rare circumstances where some sort of life insurance arrangement may be in order.

Also, pull the documentation from the pharmaceutical company -- what do they define as income? The payments from mining are usually referred to as "royalties".

In any event, seek professional advice.

duffbeer703
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Potentially they could setup a trust for themselves and their heirs, donate the land to the trust. It might be able to go into the trust using the current 'on the books' value of the land (what the county/state are basing taxes on), then the trust can negotiate with the natural gas folks for the mineral rights

An idea to bounce off your expert anyway.

Chuck van der Linden
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Two ideas.

  1. Give the land to you, and you take the deal. Then you can provide for your parents like so many young people do. This is the best option anyway because any of the left over money (when they pass) will end up with you.. which will the be taxed again.
  2. Maybe you can file it all under your mother and have your parents file taxes separately. Your dad would still be low income. But.. really.. the former option is better.

EDIT: you should also do alot of research about how to invest this money properly. Something low risk but will beat inflation by a margin.

user606723
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They may be able to transfer the land to a charitable remainder trust, which then enters into the transaction and pays them an income stream over their lifetime -- but definitely hire a professional before you attempt to do this.

Tony the Pony
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