As people age, they must face the possibility of losing some or all of their assets to a nursing home. A Medicaid Irrevocable Trust provides protection against loss of assets to nursing homes. With an irrevocable trust, you can protect a specific amount of your assets by ensuring that they are not used for your health care. In an irrevocable trust, your children are named the trustees and manage the trust. Your children, creditors, and ex-spouses do not have access to the trust and can only pay you income.
Protecting Assets from Nursing Homes
The irrevocable trust establishes two significant blocks:
- You must appoint a trustee—anyone aside from yourself or your spouse can hold this title. Trustees for a Medicaid Irrevocable Trust are usually the adult children of the settler (the person creating the trust). The settler maintains the right to change the trustee at any time.
- You can only receive income from the trust. For example, if you place stock in the trust, you will only receive dividends; or, if you place your house in the trust, then you receive the exclusive right to live there for your lifetime.
Note that you still maintain a certain amount of control over the assets in the trust because you can always direct the trustee to manage the assets differently. For example, you could direct the trustee to sell your house in New York and use the funds to purchase a condo in Florida.
Retrieving Assets from the Medicaid Irrevocable Trust
Generally, you cannot take assets out of the trust because, if you could do so, then so could the nursing home. However, there are two ways to get assets out of the irrevocable trust if necessary:
- Gift an asset to another person who isn’t your spouse. That person is then free to spend the asset on you.
- Revoke the trust. Although called an irrevocable trust, you can actually revoke the trust and get all your assets back if all the people named in the trust agree to do so in writing.
Setting up the Irrevocable Trust
If you are interested in learning more about a Medicaid Irrevocable Trust or want to open one for yourself, contact an experienced estate lawyer who can help you decide what is best for your situation.