It’s no secrete that many people are concerned that they may suffer some injury or disability that may require hospital or nursing home care. This is not an attractive prospect. Depending on the level of ones stay or care, both may be very costly. Although nobody expects to end up in either facility, the possibility of such a prospect is always looming as people get older. Therefore, the question is, how do you protect your assets in the event you have no insurance or are receiving Medicaid Benefits.
Placing assets into an irrevocable trust is the best strategy. It not only protects family assets from creditors, it also eliminates the countable assets for Medicaid eligibility purposes and therefore accelerates the time when Medicaid benefits can kick-in. An irrevocable trust is a legal structure that cannot be amended or undone once signed into existence. It is a structure recognized by Medicaid administrators as being validly used by families to protect assets from hospital bills and/or the nursing home spend-down. Establishing an irrevocable trust and placing a portion of your assets in that trust is an effective strategy for protecting those assets from Medicaid and/or creditors.
It is not unusual to transfer the major portion of family assets into the trust, even the family house, so as to leave only a small amount of assets outside the trust. A transfer into an irrevocable trust can be considered a gift for Medicaid eligibility purposes. This gift status will be helpful for people applying for Medicaid assistance. In particular, both “penalty period” and 60 months “look-back period” rules apply.
You should think ahead and determine whether you believe that you will need Medicaid sometimes in the near future. If so discuss the matter with your loved ones and seek legal advise from an attorney who is an expert in Estate and Trust matters. If necessary, you should have an irrevocable trust prepared well ahead of the time Medicaid assistance is expected to be needed for the most comprehensive protection. If the person needs nursing home care during the 5 year look-back period and there are no funds available to pay for that care because they have all been placed in the trust, a common tactic is for other family members to finance that interim care. It may be possible to draft the trust deed so as to allow the trust to distribute income to those family beneficiary members to cover for this eventuality. A Medicaid irrevocable trust is a binding, rigid structure for the outside world and relatively flexible for the beneficiaries when drafted correctly. If assets placed in the trust are suddenly needed, they will be difficult to access by outside creditors, but the assets can be accessed by the beneficiaries if implemented properly. Thus, it is critical to have an expert do the trust writing and in some instances, maintain some assets outside the trust. Trust assets will no longer be “owned” by the person that established the trust, although they may still receive the benefit of the assets as a beneficiary. They will, in time, upon the grantor’s death, transfer to the beneficiaries in accordance with the terms in the trust.
This article is strictly a way to assist in your estate matters. Please note that the content is written on a broad level and is general in scope, therefore your personal information is not considered. You should not consider the content personal advice or guidance, nor should you consider it personal financial advice or personal financial guidance. We recommend that you consult with an attorney or a professional who is familiar with your individual circumstances before making any final personal decisions or financial decisions.