Example: Bill and Betty have savings and investments of
$300,000, mostly from the recent sale of their home. They currently live
off the income from that sale plus their social security. They worry that
if either of them requires nursing home care, their funds will quickly be
dissipated.
After consulting with an experienced elder law attorney,
Bill and Betty decide to transfer $200,000 of their assets to a Medicaid
Asset Protection Trust. The trust provides that all the income from those
assets - and only the income - will be paid to the two of them during
their lives, and that if either enters a nursing home, the income will be
paid to the healthy spouse. After the death of both, the trust will
terminate, and whatever is left in the trust will be paid to their
children. In this way they can protect their assets and provide a stream
of income for the remainder of their lives.
There are some disadvantages to this type of planning.
Gifts (including gifts to a Medicaid Asset Protection Trust) can cause the
donors to be ineligible for Medicaid benefits for a limited period of
time. The length of the ineligibility period depends upon the value of the
assets given away. After the ineligibility period has expired, the assets
in the Medicaid Asset Protection Trust should be protected from nursing
home costs. The other drawback to this kind of trust is that neither
spouse can have access to the principal (or assets) of the trust. It is
precisely this lack of access that protects the trust assets from nursing
home costs. The Trustee can, however, be permitted under some
circumstances to distribute trusts assets to the couple's children.
The Medicaid Asset Protection Trust is not for everyone,
but in the right circumstances it can be an outstanding means of
protecting a family's financial security. The legal rules that apply to
these trusts are complicated. If you decide to use this method of
protecting your assets, it is important that you use an attorney who is
familiar with the intricacies of the Medicaid laws and who has experience
in creating this type of trust.
Please note: The Irrevocable Medicaid Asset Protection
Trust referred to above is very different from the revocable "living
trust" that is currently being sold through "Living Trust
Seminars." A revocable "living trust" provides no
protection from nursing home costs.
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to Ways To Pay for Long Term Care Page-
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to Using Trusts
in Estate Planning Page-
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Marshall & Associates www.paelderlaw.com
