Nirenstein, Horowitz & Associates trusts
When you think about asset protection trusts, the subject of lawsuits may come to mind. There are in fact trusts that can be used to protect assets from legal judgments, but in this blog post, we are going to look at a different form of asset protection.
Preserving Your Resources
Anyone can be the subject of a lawsuit, but there are some people who are more vulnerable than others. When you evaluate your life circumstances and your financial position, legal actions may not concern you very much.
Even if this is the case, asset protection trusts should be on your radar. This is because of the fact that long-term care costs can potentially consume everything that you consider to be your legacy.
Why should you be concerned about long-term care costs when you are going to qualify for Medicare when you reach the age of eligibility? It is true that most senior citizens will qualify for Medicare coverage at the age of 65, but this program does not pay for long-term care.
Many people question the logic behind this, since Medicare is supposed to help seniors with costs that they may well incur during the latter stages of their lives. Most elders will need help with their activities of daily living, so this is something that the majority of people face, but Medicare ignores this reality.
Paying out-of-pocket is a scary proposition when you look into the current state of long-term care costs. The average annual charge for a private room in a nursing home is over $90,000 nationally, but Hartford has some of the highest nursing home costs in the country. The median annual charge for a private room in the Hartford area is just over $166,356.
Medicaid planning is the solution for many people who are concerned about potential nursing home costs. Most people are aware of the fact that Medicaid is a health insurance program for financially needy people. The program does pay for long-term care, and even though it is a need-based program, many people who were never poor ultimately qualify for Medicaid.
This can be done in one of two ways. To be blunt, you could become poor paying for nursing home care out-of-pocket, and Medicaid would then step in to cover the rest of your care.
The other possibility would be to plan ahead in an intelligent fashion with future Medicaid eligibility in mind. This can be done by a careful, measured divestiture of assets.
After all, if you ultimately reside in a nursing home, it will be your last place of residence. The cost of your care will really be your final expense, so you could potentially give your loved ones their inheritances in advance.
Let’s look at the basic framework with regard to the eligibility parameters. The asset limit is $1,600 for an individual Medicaid applicant, but there are assets that are not counted toward this figure. If you own a home, your property would not be counted, but there is an equity limit.
The exact limit is at the discretion of each state to some extent, but here in Connecticut, we have a higher limit than many of the states. This limit is $955,000 in our state in 2022.
Household goods and personal effects do not count, and your heirloom jewelry, wedding ring, and engagement ring are not countable assets. A single vehicle that is used as a mode of transportation would not be counted, and unlimited term life insurance is allowed.
In many cases, a healthy spouse will be capable of independent living when his or her spouse requires nursing home care. Under these circumstances, the healthy spouse is entitled to a community Spouse Resource Allowance. This would equate to half of the couple’s shared countable assets up to $137,400.
Asset Protection Trusts
When it comes to assets that would be countable, you could choose to convey them into a Medicaid trust. This would be an irrevocable trust, so the assets would not be counted because you would no longer have access to them.
This can sound scary, but you would still be able to receive income that is earned by the principal that you conveyed into the trust before you apply for Medicaid. After your passing, beneficiaries of your choosing would assume ownership of the assets that remain in the trust.
However, to avoid penalties, you would have to fund the trust at least five years before you apply for Medicaid.
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