Irrevocable living trusts can be used to protect a person’s assets against nursing home expenses under certain conditions. Since the property transferred is owned by the trust, assets in such a trust are not considered when applying for Medicaid, and assets are shielded from depletion when receiving long-term care.
Preparing for Nursing Home Expenses
Paying for long-term care in a nursing home can become quite costly for elderly people and their families. Since nursing home costs average around $50,000 a year, many families struggle with the burden of long-term care costs and they often deplete their estates to keep up with the expenses.
Medicaid provides financial assistance to help cover nursing home care for low-income individuals. If one’s assets are determined to be over the minimum government limit, the person may not be able to qualify for this assistance. However, there are several ways seniors can protect their assets from being wholly consumed by nursing care costs.
Putting assets in a living trust is one of the most common ways of protecting one’s estate from nursing home costs. For a living trust to be effective in protecting an estate, however, specific circumstances must apply.
- The living trust would have to be irrevocable. The original owner of the assets must permanently transfer ownership of the property to the protective umbrella of the trust.
- The timing of the ownership transfer will have to be done at least 5 years prior to applying for government assistance.
There are two main types of living trusts.
Revocable Living Trusts
Revocable living trusts offer more control to the trust holder over the estate. While revocable trusts can protect property from probate, they offer little to no protection against nursing home costs. The person typically has access to the assets in the trust at all times. Assets in a revocable trust are still viewed as the person’s property, and they will typically need to be used up before one can qualify for Medicaid.
Irrevocable Living Trusts
When assets are placed in irrevocable living trusts, the person’s ownership is permanently severed and someone else is named as trustee. As a result, these trusts can be used to shield assets against nursing home costs.