FAQ

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.

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.

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”.

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.

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.

Just you and the trustee you select. No outsiders are involved.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

Yes. Subject to certain legal requirements, Medicaid will pay for the cost of care.

Such assets as cash, bonds, savings, stocks, life insurance, real property, etc. With proper preplanning, all or some of these assets can be preserved.

Yes. A Medicaid applicant can keep $14,400 (2013 figure). Also, a burial trust fund can be created.

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.

No. The law allows for one exempt automobile, and sometimes a second automobile can be protected.

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.

Yes, but the spousal support rules are complex and there are resource protection options available if the individual knows his/her legal rights.

No.

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.

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.

With proper preplanning, it is possible to save all the family assets and still qualify for Medicaid in the event illness strikes.

Yes. The way the document is prepared can make the difference between saving or losing assets.

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.

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.

It is possible to protect the home and/or a portion of the savings using various asset preservation methods.

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.

Yes. There is no waiting period. You can be immediately eligible for Medicaid.

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.

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).

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.

The transfer rules are very complex. Only make transfers with the assistance of an attorney who is knowledgeable and experienced in Medicaid.

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.

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.

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.

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.

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.

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.

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.

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.

Generally, it is easier to get into a nursing home from a hospital than from your own home.

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.

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.

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.

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.

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.

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.

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.