For purposes of long-term care planning, is it better to transfer property to my children now or to place it in an irrevocable trust?
As you have likely discovered, the costs of skilled nursing care are rising – and Medicare will only cover approximately 120 days in a long-term care facility. Accordingly, many seniors are considering their options and have concluded that it may be beneficial to begin the process of qualifying for Medicaid – which is a government-sponsored needs-based healthcare program offering long-term care coverage to those who qualify.
One of the more difficult aspects of long-term care planning is determining the best course of action for reducing personal assets. Under Medicaid guidelines, an applicant may only have approximately $2,000 in personal assets, excluding the family home and one vehicle. For applicants with a second home, moderate personal wealth, or other valuable assets, this could mean disqualification from Medicaid coverage – or at least a significant penalty period.
In preparing for eventual long-term care, applicants must reduce their assets in order to get below the threshold. There are generally two ways to do this: gifting to family or placing assets in an irrevocable trust. When it comes to gifting, it is important to consider the recipient’s responsibility and maturity level, as an outright gift of valuable land or assets could be quickly squandered. Moreover, gift recipients may make decisions with regard to the assets that are in their own best interests as opposed to those of the one making the gift.
By contrast, an irrevocable trust is an option that allows the placement of assets in an irreversible trust controlled by a chosen trustee who is under a fiduciary duty to engage in fair dealing and loyalty to the trustor. Due to the irrevocable nature of the trust, the trustors are not permitted to control the assets. They can, however, rest assured that their real and personal property will be handled with prudence and wisdom.
If you are considering long-term care and would like to discuss your options, please contact one of our skilled attorneys at Hutchings Barsamian Mandelcorn, LLP at 781-431-2231.