Protecting Assets from the Cost of Long Term Care
The average cost of a nursing home these days is $13,000 to $14,000 per month. It goes without saying that very few people can afford this. Our firm has written a book about the nursing home and Medicaid laws, called “Estate Planning for the Informed Consumer.” This book describes the Medicaid laws in detail, and you can download it at no charge from another area of this website.
There is a five-year waiting period for most techniques of Medicaid Planning to take effect. For those people who can wait for five years, the pre-eminent Medicaid Planning technique is the Irrevocable Medicaid Trust. With a Medicaid Trust, you receive all of the income, but only the income, from the trust. The trust can buy and sell assets, including real estate, stocks, bonds, CDs, and the like. In fact, this type of trust can own and sell any type of asset or investment other than a tax-deferred retirement account such as an IRA. Upon your death, the trust assets will pass to your heirs without probate, and the trust will terminate. During your lifetime, however, the trust is irrevocable and is subject to the five-year lookback.
Everyone uses the Medicaid Trust differently. Almost without exception, clients put their house and other real estate (such as a lake cottage or condo in Florida) into the Medicaid trust, and leave their liquid assets in the Revocable Trust. Some people put their real estate and a portion of their liquid assets in the Medicaid trust and the remainder in their revocable living trust. The point is that the Revocable Living Trust/Medicaid Trust combination can be tailored to each individual situation.