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Should I Create an Irrevocable Trust Even Though I Do Not Own a Home?

Robin Burner Daleo • Oct 11, 2023

Question:

I do not own a home, but I am concerned about protecting my assets? Is it worth it to think about creating an Irrevocable Trust?

Answer:

Yes. As you know, an Irrevocable Trust, often referred to a Medicaid qualifying trust, is a trust that you create with the idea of protecting assets should a time come that you require long term care at home or in a nursing facility. You as the Grantor, also referred to as the Creator or the Settlor, create and fund the trust with assets that you are looking to protect. You must name someone other than yourself or your spouse as trustee to manage the assets that are held in the trust. You will also name beneficiaries just as you would in a last will and testament to state who will receive the trust assets upon the death of you and your spouse. Once you have transferred assets into a properly drafted Irrevocable Trust and they have been there for a period of five years, they will be considered unavailable if you need to apply for Medicaid to assist with the cost of your nursing home care. The assets are deemed protected the month after funding the trust if you are applying for Medicaid to assist with the cost of at home care. Oftentimes the trust is used primarily to protect the home and other assets are added to the trust as a secondary concern. However, for many of our clients who do not own real property, the trust can be just as useful in protecting assets. For example, most non-qualified (non-retirement) assets can be transferred into an Irrevocable trust, including brokerage accounts and non-qualified annuities. In addition to the benefit of asset protection, the trust will also provide for orderly management of your assets during your lifetime as well as avoidance of probate at death.

As the grantor, you are entitled to all income generated from trust assets and the income is taxable to the grantor directly. In fact, most financial institutions can arrange for the income to be sent to you directly on a regular basis, which eliminates the need for the trustee to periodically transfer the assets. In a properly drafted trust the grantor has the right to change beneficiaries and trustees at any point giving some flexibility to the otherwise ominous sounding “irrevocable trust.” So regardless of whether you own a home or not, you should visit with an elder law attorney to discuss the type of assets you own and how you can protect them.

https://www.nycourts.gov/ip/gfs/Article_81_Law_2008.pdf

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May is National Elder Law Month

by Robin Burner Daleo • 03 May, 2024

May is National Elder Law Month, for that reason we have decided to switch from our normal format and answer a question that we are oftentimes asked in our practice, “What is an Elder Law Attorney and why do I need one?” Answer: Elder Law is a fairly new and unknown area of the law. As baby boomers and their parents’ age, they are living longer and oftentimes, living with chronic medical conditions. As the cost of long term care continues to spiral out of control and families struggle to meet the needs of their aging members, an experienced Elder Law attorney can help you and your family members establish an estate plan that maximizes protection of assets while ensuring that your loved one has the best care available to them should they face a health crisis. While it is always best to plan proactively, Elder Law attorneys are adept at crisis planning and oftentimes can provide a solution which can preserve assets or save taxes where others you have consulted have told you that no solution existed. Elder Law attorneys must be familiar with multiple areas of the law - contract law, estate planning, trusts and estate administration, Medicare, Medicaid, health care insurance regulations, Public Health Law, Mental Hygiene Law, the Internal Revenue Code & State and local tax issues. In each instance the issues that we deal with are fact sensitive and the clients must be willing to give us the information that we need to formulate the Elder Law plan. This in itself is oftentimes a struggle as the clientele that we deal with tends to value privacy and are oftentimes reluctant to divulge information regarding their assets and private family issues. The various disciplines that make up the Elder Law practice are in a constant state of flux. As a result, it requires the Elder Law attorney to spend a great deal of time reading current journals and cases and continuously taking legal education courses. In addition, many Elder Law attorneys meet in informal study groups to read, understand and strategize. As the facts change, there will likely be different solutions for each client. What works for one client may be totally inappropriate for another. For instance, in one day, we may see two different clients, both clients are 86 years old, own their own homes, and need long-term care. Client A has a daughter, age 55 and Client B has a niece age 55. Client A, on the eve of going into a nursing facility, is advised to transfer her home to her caretaker daughter, who lives with her and has lived with her for more than 2 years. The transfer does not make Client A ineligible for Medicaid. Client B cannot follow the same plan because her niece is not her child. There are no exceptions for transfers to caregiver nieces. Because we do not have an exempt transfer available to us for Client B I advise Client B to sell the home and advise her that even though no pre-planning has been done, we will likely be able to save more than sixty percent of her aunt’s assets by engaging in crisis planning. Remember - one size fits all – is not the rule. Your Elder Law plan is personal, fact sensitive and requires a careful review of all of the facts and circumstances. By: Robin Burner Daleo, Esq.