I was exploring our new real estate data app this weekend (email us if you want to be part of the beta) and noticed that many homes were titled “XYZ Trust” or “ABC Living Trust.” This was a surprise to me. I have heard about the idea of entitling your house in a trust in order to prevent your assets going through probate court as well as protecting the estate from the costs of a nursing home, I just didn’t realize how prevalent it was.
As I understand it, if you want to protect your estate from being depleted when paying for a nursing home you can form a trust, but you need to be sure that you form the right kind of trust.
Revocable Trusts: These are trusts that you form, move your assets into and act as the trustee. The big key here is that you can revoke your assets from the trust if you change your mind. The means if you need to pay for a nursing home, you will be required to deplete these assets before qualifying for Medicaid, the government insurance program that helps pay for long-term care.
Irrevocable Trusts: As the name suggests, once the assets have been placed into the trust, they cannot be revoked and you name someone else as the trustee. Because you no longer own the assets personally, the nursing home cannot expect you to use these assets to pay for the care. You can still, however, get paid the income that the assets in the trust produce. There is a catch here though. There is a 5-year look-back period whereby they can look back at your assets for 5 years to determine if you qualify for Medicaid.
As always when dealing with serious items like this, you should consult an attorney.