How Can I Protect My Property for My Sons if I Need Long-Term Care?

 In Asset Protection, Long-Term Care Planning

Question:

I am 72 years old in good health at the present time. However I own a piece of land estimated value $1,000,000 but do not own a home or anything else of value. What is the best way that I can avoid Medicaid taking the property if I have to go to a nursing home? I would like to leave this to my two sons. I have considered creating an LLC or a gifting Trust. Any advice?

Response:

An irrevocable trust probably makes the most sense. You could also give the property directly to your sons, but there are tax advantages to their receiving it only after you pass away, namely the step-up in basis which is explained here. But be aware that the transfer to the trust will make you ineligible for Medicaid benefits for the subsequent five years and that you will no longer have access to the principal of the trust, meaning that you won’t be able to borrow against it or receive distributions if the property is sold. On the other hand, you can receive income that the property generates, whether that’s rent, farm income, timber rights, or anything else.

Every state Medicaid agency applies the rules around trusts differently, so make sure that you work with an experienced elder law practitioner. One good source of elder law attorneys is www.elderlawanswers.com.

Showing 2 comments
  • Gail C Meyers
    Reply

    My parents set up a revocable trust in 2010 which is their home only, no other assets. My parents were named trustees, with my brother in first position thereafter. My mother passed away and now my father needs to go into Senior Care. I understand it may be more likely that he will qualify for an income-based housing cost, even Medicaid, with an irrevocable trust rather than revocable one. My question is, would the effective date of the trust remain in force if we changed it from revocable to irrevocable.Is that advisable?

      • Harry Margolis
        Reply

        Dear Ms. Meyers,
        Unfortunately, the answer is no. Medicaid would deem the change of the trust to irrevocable to be a transfer of assets causing up to five years of ineligibility for benefits for your father. However, I’d recommend that you consult with a local elder law attorney, first to confirm that this is true in your state and, second, to see if there are other strategies available to protect the house. Even if you learn that there’s nothing you can do, you’ll be able to rest easier knowing that you didn’t miss an opportunity to protect the house.

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