Can You Protect Your Home?
Jim and Gloria are a married couple, both age 60 and have two adult children. Together they have roughly $200,000 in cash assets that represent their life savings. They also have about $500,000 in retirement accounts. Their home is paid off and is worth about $700,000, which is their biggest asset. Since they are almost at retirement age, they soon will have access to their social security, plus their retirement accounts to live on once they stop working. Both Jim and Gloria are healthy for their age, they do not have any long-term care insurance, but they do have their “Big 3” documents (click here to download to find out what the “Big 3” documents are).
The problem that Jim and Gloria are facing is that they’re afraid of losing their home if they need long-term care. If both or one of them ever ended up needing nursing home care, their home’s equity could be lost to Medicaid liens and/or nursing home payments.
Little do Jim and Gloria know is that there is a solution to this! The Medicaid trust, also known as the irrevocable income-only trust will protect their home from Medicaid/ MassHealth (MH) liens after the property has been in trust for 5 years. Since it does take 5 years, the transfer must be made right away, so the clock can start ticking. Once 5 years pass, their house will be FULLY protected. It will not be a countable asset for MassHealth purposes, and it won’t be available for a MassHealth lien. To learn more about these trusts, click here.
To begin this process, Jim and Gloria will have to name a trustee of the trust, and it has to be someone other than themselves. Since they have adult children, one or both of them can be used for this. Even though they are naming their children the trustees of the trust, Jim and Gloria still retain their control over the property. The home cannot be sold without their permission and they cannot be evicted. They still will maintain the right to sell, mortgage, rent, and deal with the property the same way they always have.
What if Jim and Gloria decide to downsize and sell their home? Good news! They can do so without restarting the 5-year “clock”.
Since this an expert-level trust, it must be drafted by an experienced elder law attorney, so it meets MassHealth specifications and passes all their tests. Otherwise, the trust is NOT effective. If Jim and Gloria decided to be their own trustees or if the trust were revocable, there would be NO MassHealth protection and their home wouldn’t be protected as they thought. Do not trust anyone besides a specialist to draft one of these trusts.
The 5-year clock doesn’t start until the property is transferred to the trust, so this is isn't a matter you should wait on. No one ever expects the unexpected, such as heart attacks or strokes. There are no major downsides in creating this trust. The benefits are HUGE. Spending a few thousand for an expert to draft the trust to protect a $700,000 home is a no-brainer.
Are you scared of losing your home to pay for long term care? Our firm can help protect you and your family. We’ve helped hundreds of people do the same thing. Go HERE to learn about our Strategic Planning Session so you can start the process of protecting your home.
Not ready to schedule an appointment just yet? That’s okay. Go HERE to download and request a free hard copy of Mike’s book on Estate Planning. Trust us, this information will help you.