Is A Trust Right For Your Elderly Loved One?
No one wants to think about estate planning, but it becomes increasingly necessary as people age. In the United States in particular, it is crucial to approach estate planning with the realization that you may need long-term care, as Medicaid will only cover such care for those with small amounts of assets. A living trust is one way that an elderly person may be able to retain some control over their assets without having to give up their ability to get care through Medicaid.
Helpful For Medicaid Purposes
In order to receive long-term care through Medicaid, a person may have only a certain amount of income or assets in their name. If they have more, Medicaid simply assumes that they can afford long-term care themselves. In order to pass the Medicaid means test, people must legally “spend down” their assets – but simply giving them away for less than market value will incur a penalty.
A trust is a ‘fiduciary arrangement’ that allows assets to be held in the name of a third party, or the name of the trust itself, for the benefit of the beneficiary. A Medicaid trust is one in which a settlor (creator) retains the use of the assets during their lifetime, despite their being in the name of the trust – which removes those assets from the person’s estate for Medicaid purposes.
While a Medicaid trust can be a wonderful option for many elderly people, there are potential disadvantages, depending on the specific situation. For example, if your loved one may leave a sizable estate, a trust will not always protect from New York estate taxes – generally, a trust must be irrevocable in order to be exempt from state tax, but an irrevocable trust means the assets are not accessible once the trust is created.
Another disadvantage to a revocable living trust is that it must constantly be monitored, unlike a will, which can be executed and essentially forgotten. Any assets not specifically listed in the trust will wind up going through probate, which can be a time-consuming process that may not necessarily result in a person’s assets going to the beneficiaries they would wish to have them. Without someone to pay constant attention, a trust may wind up not being as well used as one might prefer.
Contact A Mahopac Estate Planning Attorney
Facing issues like providing for long-term care or determining who should receive your assets can be unpleasant or even frightening. An experienced Westchester County estate planning attorney from Meyer & Spencer, PC can provide compassionate and competent representation for these moments when you may require it most. Contact our office today at (914) 741-2288 to schedule a consultation.