Planning for nursing home expenses is an important task with many options. Eligibility for Medicaid benefits is often a topic of conversation with estate planning attorneys and their clients. Be mindful that there is no “right answer” for most clients, and a variety of options must be discussed. The question raised in the article “Fact or Fiction: I Can Protect My Assets from a Nursing Home with a Revocable Trust” from New Hampshire Business Review is frequency asked, and the reason for it is understandable. Any form of long-term home care is costly and can quickly decimate a lifetime of savings. There are ways to protect assets, but a revocable trust is not one of them. This applies in Massachusetts as well as in other states. Often, people will have the mistaken belief that any trust [or all trusts] will help them in the event nursing home care is required.
Most clients will want to continue to own and control some, or most, of their assets. The primary trust used to keep ownership and control of assets will be some form of a revocable trust. There are many legal advantages to revocable trusts, however, revocable trusts are not typically used for Medicaid eligibility. Despite this, there are many reasons to own a revocable trust. It is highly recommended if you intend to own and control your assets outright during your life. You and your loved ones can use assets in it to pay for in-home care, assisted living facilities or private care. If the grantor (the person who creates a trust) is also the trustee, then there is no loss of control. It is quite similar to outright ownership, except it carries probate-avoidance so that when you die, the assets in the trust do not go through the probate process. A revocable trust also lets you make specific provisions for beneficiaries and beneficiaries with special needs. However, revocable trusts standing alone will not help with Medicaid or MassHealth eligibility.
Not all trusts are the same. Irrevocable Trusts are often used by clients for tax advantages and to protect assets from long term care expenses. There are many kinds of irrevocable trusts. When creating irrevocable trusts that are designed to protect assets from nursing home expenses, be mindful that transfers should occur five  years prior to applying for benefits. Despite the many advantages of irrevocable trusts, once it is created, you (the grantor) may not be able to change it. Once an asset is placed in the trust, most kinds of irrevocable trusts will dramatically limit your ability to directly control the assets. Typically, you as the grantor may not serve as the trustee of the trust. It cannot be overstated that there are many kinds of irrevocable trusts to consider, and each will have different levels of ownership and control over assets placed within.
Clients on Cape Cod and Plymouth have often asked whether it is a good idea to give their assets to their children outright. There are many problems to this approach. It is, essentially, outright gifting. Completed gifts carry over the cost basis for capital gains purposes. Gifts entail the total loss of control over assets. Further, if the gift recipient [donee] are sued, divorce, run into debt problems, or become disabled, then the gifts may be lost. Completed gifts will also impair Medicaid eligibility for the donor [gift-giver].
The best course of action is to meet with an estate planning attorney and discuss your overall estate plan. You should have a frank conversation about your wishes, what kind of a legacy you want to leave behind and your bigger picture for the world after you’ve passed. The attorney will help work out a plan that will protect you, your spouse, your assets and your family.
Remember that an estate plan is not a one-and-done document. Every three or four years, or as “life happens” and changes occur in your life, you should touch base with your attorney. A new family member by marriage, birth or adoption, may call for some changes to your estate plan. It might also be affected by the sadder events of life; death, divorce, or a significant health change. All require a phone call and a discussion to ensure that your estate plan still achieves your goals and protects those you love.
Reference: New Hampshire Business Review (July 30, 2020) “Fact or Fiction: I Can Protect My Assets from a Nursing Home with a Revocable Trust”