Long term nursing care is expensive. The ever-rising cost of nursing care paired with increased life expectancies has caused a number of people to lose large portions of or even their entire estate. Those costs can be taken care of by Medicaid benefits, but only after the recipient has emptied their accounts and lost all of their assets.
However, there are ways to preserve your assets, protect your loved ones, and pass an inheritance on to your children. Through proper planning, with outlets including trust funds and transferring assets, you can protect a significant portion of assets and still receive Medicaid benefits.
Medicaid benefits can cover all nursing costs if the bank account of the person receiving the care is empty. Before you receive Medicaid, the government will look into your financial history for any transfers that you have made. This investigation is called a look back period, and in 2006, this time frame was extended from 3 years to 5 years. Basically, the law now imposes a penalty if assets are transferred, relocated, or repositioned for a period of 5 years before one applies for Medicaid. This new law applies to all transfers made after February 8th, 2006. Any transfers made before that point fall under the 3-year look-back period. The penalty for these transfers could be an ineligibility to receive benefits. The larger the transfers, the longer the ineligibility.
In order to protect their assets and still receive Medicaid benefits, many seniors are making use of revocable or irrevocable trust funds. With a revocable trust, all of the assets are moved to a trust fund, but with some strings attached. The owner of the assets is the trustee, grantor, and the beneficiary of the trust. This type of trust will not allow you to receive Medicaid benefits because you are still in charge of the assets.
In contrast, an irrevocable trust allows seniors to reposition their assets to a trustee. This type of trust is difficult to accept for some seniors because they give up control of their assets. However, the trustee is normally a son or daughter who is a trustworthy protector of the funds. Though they have to give up ownership, the assets are not lost. Instead, the funds are held inside the trust. If the senior needs the money, then the son or daughter who is the trustee can use the assets to pay for the parent’s expenses.
The irrevocable trust is a better arrangement than making gifts to children. If a child who receives a gift dies, divorces, or files bankruptcy, then those funds could be at risk. However, if those assets are owned by the trustee … who is normally a son or daughter … then the funds inside of the trust are protected in nearly all cases.
If you are looking for additional information on Medicaid or advice for Nursing Home planning, contact Lovett & House by phone at (937) 667-8805, or e-mail your questions to [email protected].