- What is a Family Trust?
A Family Trust is a plan developed by you to have the assets you want to protect held in an irrevocable trust for your benefit during your lifetime. The Family Trust also provides for the distribution of the assets upon your death.
- Does the Trust have to be Irrevocable?
The law requires the Trust to be “irrevocable” for asset protection in the event long term care is needed. However, the term “irrevocable” is misleading. Irrevocable means that the Trust cannot be revoked by the Grantor (creator) of the Trust alone. But, the Trust can be revoked by all of the interested parties, which includes the Grantor and the named beneficiaries. For example, if Jane Doe set up a family trust, she cannot revoke it alone. Since she cannot revoke it, it is protected for Medicaid purposes. Jane Doe, together with her beneficiaries can revoke the Trust at any time.
- Does my Family Trust have a name?
Yes. For example, if Tom and Mary Jones created a Family Trust for their benefit, it would be known as the “Tom and Mary Jones Trust”, and if John Smith alone created a Family Trust for his own benefit, if would be named the “John Smith Trust”.
- Do I select my trustee?
Yes. You select the trustee or trustees you want to administer the Family Trust. You can have as many trustees as you want. You can provide whether your trustees may each act alone or whether they must act together. Typically, your closest family members serve as trustees. You can also designate successor trustees.
- Which assets do I place in the Family Trust?
You select the assets you want to transfer to the Family Trust. The Family Trust is a safe place to hold family assets. Property such as the family home, summer cottage, bank accounts, life insurance, stocks, bonds and securities can be transferred to the Family Trust.
Your checking account, working bank accounts, retirement accounts, automobiles and social security and pension income remain in your own individual name. You continue to pay your own bills and make your own decisions.
- Who is involved in my Family Trust?
Just you and the trustee you select. No outsiders are involved.
- Where are the Family Trust assets kept?
They can be kept in the same form and in the same place as when they were in your name, only the title on the account changes. They may be maintained as bank accounts, stocks, bonds, securities, real estate, etc. They earn the same interest or pay the same dividends as before. You can continue your relationship with your same financial planner.
- Can Family Trust assets be changed?
Just as you can buy or sell property, so can your Family Trust. For example, the Family Trust can buy and sell stocks or real estate, open or close bank accounts, etc.
- Can I use the assets in my Family Trust?
The Family Trust is created to give you financial security. The Family Trust can be set up so that you may receive the income from the Trust. Principal may be used in a variety of ways including, but not limited to, taxes, insurance and capital improvements on real estate owned by the Trust.
- What are the income tax consequences of a Family Trust?
Your income tax should not be affected by the Family Trust. The income earned by the Family Trust is taxed to you and reported on your personal income tax return. The Trust will file an information only tax return. The Family Trust can also have tax free investments. Your trustees are not taxed in any way.
- Does a Family Trust replace my Will?
Your Family Trust replaces your Will to the extent you transfer assets from your name to the Family Trust. In the Family Trust you name your beneficiaries in the same manner as a Will. You retain the right to change your beneficiaries. When the Family Trust terminates, the Trust assets will be distributed to the beneficiaries without probate.
A will is still an important document for assets not in the Trust where you have not designated a beneficiary.
- What happens to my Family Trust assets if I become ill and need home health care or nursing home care?
Our Family Trusts are specifically designed to protect Trust assets in the event of illness. Most other trusts do not protect assets in the event of illness and the assets would have to be used to pay for your cost of care.
- The cost of nursing home care may now exceed $10,000 a month. Who pays this bill?
If you have planned in advance with a properly designed Family Trust, your trust assets will be protected and you will be eligible for Medicaid. Once your assets outside of the Trust have met Medicaid’s financial eligibility requirements, you will be eligible for Medicaid.
Otherwise, most of your life savings and assets will have to be used to pay for your care.
- Is legal assistance necessary for the preparation of a Family Trust?
The Medicaid laws are very complex and constantly changing. Thorough knowledge of these laws is essential to make certain your Family Trust protects your assets in the event of a catastrophic illness. Your life savings, family residence and other assets may be lost without knowledgeable legal assistance.
- How much in life savings do I need in order for it to make sense for me to set up an Irrevocable Trust?
There is no minimum amount of life savings. The Koldin Law Center has many clients who just put their house in the Trust. With the cost of Nursing Homes approaching over $12,000 per month in upstate New York, it does not take long to wipe out someone’s entire life savings. Therefore, any amount that you want to protect makes sense.
- Does a Revocable Trust protect my life savings?
No. We have many clients coming to us with trusts prepared by other attorneys. Many of these clients are under the impression that their assets are protected when they have done a revocable trust in the past. A revocable trust can be an excellent planning tool for other purposes such as to avoid probate. Sometimes a revocable trust with long term care insurance is a good option. Since you can freely withdraw funds from your revocable trust, those funds are considered available by the Medicaid Agency to be spent towards the cost of your care.
- Is it better to transfer my life savings to my children or to a Trust?
Many attorneys are not familiar with the specially designed family trust and encourage their clients to transfer the family home and other assets directly to the children. There are many pitfalls to transferring the home or other assets to the children that could put your life savings in jeopardy such as:
(1) Bankruptcy of a child
(2) Lawsuits involving a child
(3) Divorce of a child
(4) Health problems of a child
(5) Death of a child before a parent
Furthermore, transferring your assets to your child could have negative tax consequences for your child and the potential loss of college financial aid for your grandchildren.
The loss of life savings and the family residence can have a devastating financial and emotional impact on the entire family. The money saved from a lifetime of hard work may be spent in a matter of months when a family member is faced with long-term nursing home care.
With knowledgeable and experienced legal advice and proper pre-planning, it is possible to preserve all of part of the life savings, the family residence and other assets and still qualify for Medicaid.
You have certain legal rights under the Medicaid law. Protect those rights with proper legal advice – or lose them.
- What is Medicaid?
Medicaid is a government funded program based upon financial need. To be eligible, a person must not exceed the income or assets criteria set by federal or state law.
- Will Medicare pay for all or part of nursing home care?
No. Except under certain limited circumstances, Medicare will not pay for nursing home care. Medicare will only pay for a very short stay in a nursing home for rehabilitation and therapy. Medicare does not pay for long term nursing home care.
- Once illness strikes are there still planning options available?
Yes, even if you are already in a nursing home, often you have legal options to protect some or all of your life savings. Protecting Assets After Illness
- If a person qualifies for Medicaid, will Medicaid pay for nursing home or hospital care?
Yes. Subject to certain legal requirements, Medicaid will pay for the cost of care.
- What kind of assets could Medicaid require be spent before a person is eligible?
Such assets as cash, bonds, savings, stocks, life insurance, real property, etc. With proper preplanning, all or some of these assets can be preserved.
- If a person applies for Medicaid will that person be allowed to keep any savings?
Yes. A Medicaid applicant can keep $14,400 (2013 figure). Also, a burial trust fund can be created.
- What happens to the family residence?
The family residence may be exempt under Medicaid law. There are special rules for the family home including when a spouse, child or sibling is currently living in the home. You can also submit an “Intent to Return Home.”
Intent to Return Home
If you sign a statement saying that you intend to return to your home at some point in the future, the Medicaid Agency will not force the sale of your home. The home will not be counted for eligibility purposes, but the Medicaid Agency will place a lien on your home. If you do not return home, then whenever your home is sold, while you are living or after death, Medicaid will have the right to be reimbursed from the proceeds of the sale for any expenses it paid toward your care. If you do return home, then the Medicaid Agency must withdraw the lien.
- Does the family automobile have to be sold to qualify for Medicaid?
No. The law allows for one exempt automobile, and sometimes a second automobile can be protected.
- If the applicant for Medicaid has a spouse, must the spouse’s income and assets be included?
The spouse is entitled to an income allowance of $2,898 and a resource allowance of between $74,820 and $115,920 depending on the circumstances. (2013 figures) The spouse is also entitled to keep the family home. Any income and resources above the spousal allowance might need to be spent towards the cost of care, but some or all can often be protected if the individual knows his/her legal rights.
- Is the community spouse legally responsible for the support of the spouse receiving Medicaid?
Yes, but the spousal support rules are complex and there are resource protection options available if the individual knows his/her legal rights.
- Is a child legally responsible for the support of a parent?
- Can a person transfer a family residence, savings, or other assets prior to applying for Medicaid and still be eligible?
The Medicaid Transfer rules are very complex. It is advisable that you obtain legal advice from an attorney who is knowledgeable and experienced in Medicaid law.
- Must all funds in a joint account be spent before a person is eligible for Medicaid?
Joint account rules are very complex and there are different rules for joint bank accounts and other types of joint assets. Joint bank accounts are presumed to belong entirely to the Medicaid applicant and usually must be spent towards the cost of care.
- Why is pre-planning important?
With proper preplanning, it is possible to save all the family assets and still qualify for Medicaid in the event illness strikes.
- Is the Medicaid Application a legal document?
Yes. The way the document is prepared can make the difference between saving or losing assets.
- Do I need an attorney who practices extensively in Medicaid law?
The Medicaid laws are complex and constantly changing. Thorough knowledge of these laws is essential to protect your legal rights. Your life savings, family residence and other assets may be lost without knowledgeable and experienced legal assistance.
- My wife receives home care costing $2,000 a month. We own our home and have savings of $150,000. Our life savings are being used up. Can she be eligible for Medicaid?
She could be immediately eligible for Medicaid by properly transferring and protecting your life savings. By protecting your savings, you could avoid impoverishment and could be able to afford to keep your wife at home.
- My mother is a widow and is paying $10,000 a month for nursing home care. She has a family home valued at $50,000 and $70,000 in savings. My mother is very depressed at the thought of losing our family home. Is it too late for us?
It is possible to protect the home and/or a portion of the savings using various asset preservation methods.
- My only asset is $200,000 in IRA’s. My wife is in a nursing home. I have been told that I have to cash in my IRA’s and spend them down to the spousal allowance of $74,820. What should I do?
You have been given wrong information. By putting the IRA in payout status pursuant to the Medicaid authorized tables, you can keep the entire $200,000 of IRA’s. Your wife is immediately eligible for Medicaid. However, you may be subject to the spousal income support rules.
- Can assets be transferred without affecting Medicaid eligibility for home care?
Yes. There is no waiting period. You can be immediately eligible for Medicaid.
- Can assets be transferred by a spouse or a single person without affecting Medicaid eligibility for nursing home care?
There is a 5 year lookback period on transfers of assets for nursing homes. However, there are exceptions that allow substantial transfers of assets during this 5 year lookback period.
- I am a widow and in ill health. I was told that my life savings of $50,000 is not worth saving. Can you help me?
Yes, of course it’s worth saving. It could be protected and used to supplement Medicaid to keep you at home or to be available if you return home from a nursing home. Otherwise, you will have to spend your life savings down to $14,400 (2013 figure).
- We have over $100,000 in resources. My husband is in a nursing home. I have been told that the only way my husband will be eligible for Medicaid is to pay for the cost of his care privately until my life savings is down to the spousal allowance of $74,820. Is this true?
No. The spousal resource allowance of $74,820 is only a minimum figure. There are many provisions in the law to permit additional resources to be protected. You may be able to keep all of your resources and avoid impoverishment.
- Is it possible for me to transfer assets to my children and still be eligible for Medicaid?
The transfer rules are very complex. Only make transfers with the assistance of an attorney who is knowledgeable and experienced in Medicaid.
- Can I make annual $14,000 gifts to my children without a Medicaid transfer penalty?
This $14,000 figure is the current amount that can be gifted without filing a gift tax return. This rule only applies to taxes, not Medicaid. Medicaid presumes all gifts made within 5 years of applying for Medicaid for a nursing home were made to try to protect the money from being lost to the nursing home and may impose a transfer penalty period of ineligibility for Medicaid coverage.
- My relative was in the hospital for 3 days before going to the nursing home for rehabilitation but they were not admitted and just held for observation. I was told Medicare will not pay for any nursing home rehabilitation. Is that true?
Yes. You must be admitted to the hospital for at least 3 days in order to get any Medicare coverage for rehabilitation in the nursing home. Being held for observation, but not being admitted, does not count toward the 3 day requirement. Without Medicare coverage, you will either have to pay privately or apply for Medicaid.
- My daughter has been living with me for several years and helping to care for me. Can I transfer my house to her?
Under the Medicaid law, your home can be transferred to your child if he/she was residing in your family home, using it as his/her primary residence for a period of at least 2 years immediately before the date you became institutionalized, and provided care to you which permitted you to reside at home, rather than in a nursing home.
- I have an adult child who is disabled. Can I transfer my life savings to that child without affecting my Medicaid eligibility?
Normally, any transfers of assets within the Medicaid 5 year look back period will affect Medicaid eligibility for a nursing home. However, there are some exceptions, including making transfers to a child who is disabled. Medicaid has strict rules for determining when a person is considered to be legally disabled. Keep in mind, however, that if your child is receiving certain government benefits, such as Supplemental Security Income (SSI) or Medicaid, transferring your money or property to your child may cause him/her to lose his/her own benefits. In this situation, you may want to consider transferring your assets to a supplemental needs trust for the benefit of your child.
- Can I prepay for my funeral without affecting Medicaid eligibility?
Yes. You also may be able to prepay for funeral expenses for certain other family members as well. However, Medicaid has strict rules for what burial expenses are permissible and how the prepayment account must be titled.
- How does Medicaid treat annuities?
It depends on (1) when the annuity was purchased and whether there have been any changes made to the annuity, (2) is the annuity annuitized to provide you with monthly payments, (3) is the annuity owned as part of your retirement account. In many circumstances, Medicaid will require that the Medicaid Agency be named as a beneficiary of your annuity.
- Does the Medicaid five year look back period apply to home care and assisted living or just nursing home care?
Under current law, the Medicaid five year look back period only applies to nursing home care, not to home care or assisted living. Although there is no transfer penalty for home care or assisted living Medicaid eligibility, the transfer penalty does apply if you subsequently enter a Nursing Home. The Medicaid Agency is entitled to look at all your financial transactions for the 5 years immediately preceding your Medicaid application for Nursing Home coverage. The Medicaid Agency can review your bank statements and question each of your deposits and withdrawals for the past 5 years. Therefore, if you have transferred assets to qualify for Medicaid Home Care or assisted living coverage and enter a Nursing Home within 5 years from the date of the transfer, those transferred funds may need to be returned to you before you apply for Medicaid Nursing Home coverage.
- Do I need to have enough funds to pay privately for a year or two in order to get into the nursing home of my choice?
Legally, nursing homes cannot require a guaranteed amount of private pay. However, having funds to pay privately for a period of time can make it easier to get into your preferred nursing home.
- Is it easier to get into a nursing home from a hospital than from your own home?
Generally, it is easier to get into a nursing home from a hospital than from your own home.
- Is the person serving as my Power of Attorney personally financially liable for my nursing home bills?
No. Your Power of Attorney does not have to use his or her own assets to pay for your nursing home bill, unless your Power of Attorney is also your spouse.
- Will Medicare pay for my nursing home costs?
Medicare only pays for a limited period in a Nursing Home and only when you are receiving skilled care such as therapy or rehabilitation. For most Nursing Home costs, you will need to pay privately or apply for Medicaid coverage when you are financially eligible.
- Is my life insurance safe from Medicaid if I need to enter a Nursing Home?
No. If your life insurance has a cash value, it will be considered an available asset that must be cashed in and spent towards your care.
- If I have long term care insurance, do I need to worry about losing my life savings to Medicaid?
Possibly. Unless you have unlimited coverage, there is a risk that your policy coverage could run out while you are in a Nursing Home. Many people have excellent policies that may cover a substantial portion of nursing home costs, but we have seen many clients with policies that will only cover a small part of the costs. It is important to review the actual terms of the policy and explore other options that may be available.
- My Dad is in a nursing home and we have done no planning, is it too late to protect his life savings from being lost towards the cost of his care?
This is a very costly misconception many people have. Even if a family member is already in a nursing home, there still may be ways to protect assets. At the , we offer a no fee consultation to review the possible options. It is never too late. There is something you can do.
- Do I need a lawyer when I apply for Medicaid?
Applying for Medicaid is a complex process. When handled improperly, it can cause families to lose much of their life savings unnecessarily.
Many people have social workers from Nursing Homes or Hospitals handle the Medicaid application. Some have private companies who are not lawyers handle this very difficult process. These non-lawyer companies are not your advocates. They do not provide you with legal advice on how to protect some or all of your life savings. The job of these companies is to monitor the spending away of your life savings on your Nursing Home bills down to the Medicaid eligibility levels ($14,850 for a single person in 2015) and then handling the Medicaid application process on your behalf.
The Koldin Law Center serves as advocates for our clients and our goal is to obtain Medicaid coverage as quickly as possible while protecting as much of your life savings as possible.
- My mother remarried later in life and has always kept her life savings in her own name. They also have a prenuptial agreement. Her second husband is now in a nursing home. Will she lose her life savings?
The Medicaid law does not care if this is a second marriage and does not care if they have a prenuptial agreement. They are treated like any other married couple and your mother’s life savings is at risk of being spent down to the Medicaid allowance levels.
Families and individuals needlessly spend their life savings down to the minimum levels to become eligible for Medicaid. It is possible for a person already in a nursing home or receiving home care to protect a substantial portion of his/her life savings above these levels and still be eligible for Medicaid. Misinformation is a major cause of asset loss and impoverishment. The Koldin Law Center, P.C. is able to help you preserve a substantial portion of your assets and still qualify for Medicaid.
Still Have More Questions?
Contact our experienced Upstate New York elder law attorneys to schedule a free initial consultation.
Our firm focuses our practice on estate planning and Medicaid planning. We are also very experienced in handling elder law, irrevocable trust , revocable trust, basic estate planning (Will, Power of Attorney, Health Care Proxy), Medicaid law, and children with disabilities/supplemental (special) needs trust matters.
Koldin Law Center, P.C., handles the entire Medicaid application process for the client with the goal of preserving and protecting some or all of the family life savings from the costs of nursing home care.