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John Elder
John Elder, Estate & Elder Law
Category: Estate Law
Satisfied Customers: 4631
Experience:  Over 14 years experience in Medicaid, Estates, Trust.
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My mother is 83 years old and in relatively good health. My

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My mother is 83 years old and in relatively good health. My siblings and me are debating whether to put her home in an irrevocable trust to protect against medicaid reimbursements. We understand there is a five year window we have to get past. Would you be able to advise us on whether this would be and advantageous thing to do given the circumstances? Thank you.
Submitted: 1 year ago.
Category: Estate Law
Expert:  John Elder replied 1 year ago.
Welcome! Thank you for your question.

This could be extremely advantageous depending on the specific circumstances of your family. I will start by saying that this can only be done safely with the aid of an experienced Elder Law attorney. You can find one at www.naela.org.

There are a lot of factors that go into the decision to transfer some of your mother's assets to an irrevocable trust. First, you need to consider the total amount of assets that your mother has. Does she have enough liquid or other assets to last her for a few months or years should she need nursing home care prior to the expiration of the 5 year look back period. Second, who will the trustees be? Are there sufficient family trustees that will 100% look after the best interest of your mother above their own interest. Really the biggest downsides are mismanagement by the trustee and the risk of not getting past the 5 year look back.

Finally, once you have decided on a trust, the lawyer is really important to help you decide exactly what the trust should include. There are many different types of irrevocable trusts. They can be drafted so that the home passes through your mother's taxable estate so that the family will get a stepped up tax basis. While they are outside of her estate for state law purposes the federal tax system will still see the asset and so long as her total assets are below 5 million there will be no tax but the basis for capital gain purposes will increase. They can also be drafted so that they are fully out of your mother's name and out of her estate. Further, there are ways an attorney can include "dynasty" provisions so that they are outside he children's creditors and essentially the trust keeps passing down generations free of creditors and estate tax. The draw back to these provisions is that if the property is ever sold there could be a large amount of capital gain tax owed.

These trusts are great in protecting assets for your mother and her future generations. However, they are very complex. I would highly advise against doing this on your own or with an online document drafting service. Unless they give you a guarantee of the full amount of your monetary loss. Even if you choose a simple trust, one miss placed word and Medicaid can have an argument that the trust is an included asset for eligibility purposes. You want a lawyer to go back to for liability if the trust causes Medicaid elibility issues in the future.

I cannot provide you with legal advise. I have provided you with information about the law related to your question. My answer, and any information that you find online, should not take the place of having a consultation with a lawyer in your area to advise you regarding your specific issues.

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Thank you,

John

John Elder, Estate & Elder Law
Category: Estate Law
Satisfied Customers: 4631
Experience: Over 14 years experience in Medicaid, Estates, Trust.
John Elder and 2 other Estate Law Specialists are ready to help you

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