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Will a Trust Protect My Assets From Nursing Home Expenses?

Posted by Brad Sarkauskas | Aug 05, 2021 | 0 Comments

It depends. The important thing to understand is there are different types of trusts. The trust most people are familiar with, the revocable living trust, will NOT protect your assets from nursing home expenses.

An irrevocable trust may be able to protect your assets from nursing home expenses. 

Revocable Living Trust

A revocable living trust allows the trust creator to remain in control of the trust assets, dictate the terms of the trust, and amend the trust. Because this trust creator exercises such a great degree of continuing control over the trust assets, the Medicaid system expects that person to exercise that control to access those assets and spend them on nursing care. Therefore, Medicaid benefits cannot be obtained if the trust assets exceed the Medicaid limitations. THE ASSETS WOULD STILL NEED TO BE SPENT regardless of whether they are in a revocable living trust.

Irrevocable Trust

Contrast this to an irrevocable trust. With certain types of properly designed irrevocable trusts, the trust creator can relinquish a sufficient degree of control over the trust assets so they are no longer considered to be owned by the trust creator. Because they are no longer controlled or owned by the trust creator, they can be PROTECTED and PRESERVED from Medicaid's spend-down and Medicaid benefits may be available without having to liquidate the assets in an irrevocable trust.

Who Owns the Assets of an Irrevocable Trust?

You may ask yourself: Who owns the assets of an irrevocable trust?

The answer is the trust itself does. The trust is an entity in and of itself capable of owning assets. Think of it almost like a corporation. A corporation is a separate entity that can own and manage assets with its own identity. An irrevocable trust acts similarly.

Rules and Regulations

There are some rules and regulations that need to be followed to obtain Medicaid benefits when using an irrevocable trust. For example, a transfer to an irrevocable trust is considered a gift to the trust and can cause a divestment or ineligibility period for obtaining Medicaid benefits if 5 years have not yet passed since the assets were transferred into the trust.

Estate Planning Strategies With Heritage Law Office

Proper planning and consultation with professionals is important due to the intricacies and added complexities of irrevocable trusts versus revocable trusts.

Contact one of our attorneys at our Wisconsin (414-253-8500), Minnesota (612-204-2300), or California (310-438-4020) locations to make sure your assets are properly protected or for more information on a Trust, Will, Life Estate, Medicaid Planning, or Estate Planning.

About the Author

Brad Sarkauskas

As the founding member of the Heritage Law Office of Wisconsin, LLC, attorney Brad Sarkauskas is equipped with the tools--through his extensive background in finance--to effectively represent his clients legal economic interests. With over 20 years of experience in finance, insurance, and taxati...


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