irrevocable medicaid trusts
Are you looking to protect your assets from Medicaid? Properly forming a Medicaid Asset Protection Trust can assist you with qualifying for nursing home eligibility and other forms of long term care. Elder law asset protection is NOT simple. It cannot be done on your own, nor should it be entrusted to a general practice attorney.
You have worked your whole life for these assets, protect them from Medicaid and nursing homes. Avoid wasting money on “spend-down” schedules and form an irrevocable Medicaid trust today as part of your estate planning.
Our company is run in concert with Cloud Peak Law Group. We offer specialized Medicaid Trust services, and nothing else. Below you will find a variety of resource articles.
The facts and numbers are clear. If you live to be 65 or older, then chances are above 50% you will require long term care before you pass away. Do you have long-term care insurance? Don’t feel bad, most people don’t. Long-term care, whether in a nursing home or otherwise, is extremely costly. The average price is $8,000 per month, and often exceeds $10,000 per month. Further, the average person spends 2.5 years in a nursing home, and 8.5 if they have Alzheimer’s.
This means the average person will spend $250,000 to over $1,000,000 dollars on long term care. So, there may be no estate tax, but this is a hidden tax that can eat up more than you would imagine or ever care to pay. Further, while you may stay in your home while alive, the government will seize your home when you pass away.
Many at this point resort to unnecessary spend down plans or unnecessarily gifting away assets. Thus losing the control and benefit of them and being forced to rely on others to “do the right thing”. Your last years, and your life’s work, are too important to entrust with others.
A Medicaid Asset Protection Trust will allow you to qualify for Medicaid, while living off the income of your assets, and still enable you to add and remove beneficiaries at your discretion. The technical term is an Irrevocable Income Only Trust.
Broken down, this means your assets are placed into an irrevocable trust. You may live off the interest/income of the assets and even change the beneficiaries at your discretion. The trust may also be dissolved if you and the beneficiaries agree. For more on the difference between a revocable trust and an irrevocable trust click here. In short, the irrevocable part is what makes the assets exempted for Medicaid’s asset test, but does not mean you lose control.
It’s easy to feel overwhelmed at this point, but don’t stress. We have designed a simplified process which will ensure you qualify for Medicaid, enjoy the benefits of your assets and aren’t forced to give things away BEFORE you want to.
Our Medicaid Asset Protection Trusts (MAPT), aka Income Only Irrevocable Trust (IOIT), can prevent unnecessary expenditures and ensure you leave something for your children. Read the summaries below and feel free to click the links for more detailed information.
While many fixate on the Federal Estate Tax, another pernicious death tax goes unmentioned by lawmakers. The federally mandated “Medicaid Estate Recovery” program requires states recover long-term care costs paid by Medicaid. Put frankly, if you require assistance in meeting your care needs, the Government will demand your home or farm when you die.
Tactics for Avoiding Medicaid Clawbacks
Some transfers do not create a period of ineligibility for Medicaid. There are general exemptions that apply to any transfer, and other exemptions that apply only to the transfer of a residence. Covered will be personal care contracts, deeding a home, life estate deeds and more.
IRREVOCABLE INTEREST ONLY TRUST (“IOTT”) TAX ASPECTS
Here we cover capital gains exclusion of principal residence, interest mortgage deduction, gift tax, medicaid transfer, and a step-up in basis. We also cover why you should structure the IIOT as a grantor trust to avoid the detrimental tax aspects of trust tax.
Consider a Special Needs Trust or look into the differences between ILIT vs FLP for life insurance. We also have some small pages on probate, revocable living trusts, medicaid qualification strategies and living wills.
Conclusion and Warnings
There are additional techniques that may be appropriate depending on your circumstances. You should not attempt this by yourself. There is a good chance you will make one small error, atleast, and the courts will not care it was an error. Hiring professional help for your Irrevocable Medicaid Trust is a small price to pay.