| 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. |