Medicaid Asset Protection Trusts: What NY Families Should Know
Opinion Advocates for ideas and draws conclusions based on the author/producer’s interpretation of facts and data.
By Alan D. Feller, Esq.
By the time you turn 50, certain truths are impossible to ignore. You either have patience to deal with life’s annoyances or you don’t. You can install a kitchen sink or you have to call a plumber. You care what strangers think of you or you don’t. Knowing who you are and what you need to live a satisfying life is the most important learning experience.
Medicaid planning offers similar binary choices. Either you set up a Medicaid Asset Protection Trust before something bad happens or we undertake emergency Medicaid planning after the health crisis has occurred. Option 2 happens….a lot. Option 1 will save a family’s home and finances.
Medicaid Asset Protection Trusts are safety zones for your assets. You transfer your home and selected financial holdings to a Medicaid Trust with its own IRS tax identification number and managed by Trustees that you choose – usually your adult children who are also the beneficiaries. You retain a life estate in your home, allowing you to keep paying the property’s expenses and taxes- taking the same deductions and maintaining your STAR exemption. Income earned by the assets that you placed in the trust can still be directed towards you. The point of all of this is to protect your finances before you become sick in the future.
You and I have no intention of ever seeking placement in a Nursing Home. The realities of a serious illness and the logistical challenges associated with staying at home tend to shatter those intentions. Not being prepared, in the Medicaid Planning sense, for a Nursing Home stay, could cost you and your family close to $20,000 per month. Medicaid Planning Trusts created and funded more than 5 years before a Nursing Home admission will save your home and assets while allowing you to obtain Medicaid eligibility without a penalty.
Community Based Home care and Assisted Living Medicaid rules, as of this writing, still allow for unpenalized asset transfers without a penalty at any time. However, the political winds concerning Medicaid could change at any time. Considering how well a Medicaid Asset Protection Trust works with Nursing Home planning, it also works well with Community Medicaid planning Adult children may not want to hold their parents’ money in their own name and pay income tax on gains or interest. If a parent goes to an Assisted Living facility and applies for Medicaid ALP Level 3, having the home placed in the Medicaid Asset Protection Trust helps to maintain their Medicaid eligibility.
Medicaid Asset Protection Trust holdings avoid Probate and Medicaid liens or Medicaid Estate Recovery actions. Creators of these trusts can set-up comprehensive rules that direct money and assets to loved ones with further protections.
Even if you are hesitant about giving up too much control to your family, understanding that you can pick and choose assets to place in the Trust should make you rest easier. The home is the easiest asset to grab if it remains out of the Trust and exposed to Medicaid. Just placing the home in Trust and nothing else will still save your family thousands of dollars. Speak to the professionals at The Feller Group, P.C. today for a more detailed discussion on Medicaid Trusts.
Alan D. Feller, Esq. is managing partner of The Feller Group, a law firm dedicated to the practice of elder law and estate planning, located at 625 Route 6 in Mahopac. He can be reached at afeller@thefellergroup.com.
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