December 16, 2014
Many of our older clients approach us with concerns about protecting their homes should they find themselves in need of long term care at a nursing home or assisted living center. As estate planning attorneys, we can implement a detailed estate plan to address the provisions of Title19/Medical Assistance. Through pre-planning well in advance of the need for long term care, your home and other assets can be protected for you, your loved ones and your descendants.
Plan Ahead to Protect Your Home
Protecting your home is a complex area of the law, involving federal law and state trust laws. The specific rules governing this area of law require careful attention and a thorough discussion of all of the valid options for protecting your house or other assets.
Stop Nursing Homes From Taking Your Assets
With proper advanced planning, you can protect your assets from nursing homes.
Perhaps the biggest concern when considering this approach is to make sure that our clients understand that the estate planning must be in place at least five years in advance of the need for long term care. Admittedly, when someone will need long term care can be difficult, if not impossible to predict. Hence, at Wokwicz Law Offices LLC, we recommend preparing an estate plan as soon as possible.
Our experience is that if you wait and we are forced to perform “crisis” planning, the options of what can be protected may be greatly diminished by federal and state laws.
Discuss Your Options With Us and If Pre-Planning is Right For You
We can discuss a number of options that may be available to you when you pre-plan, well in advance of the need for long term care. One of those options is the use of a specially drafted Irrevocable Trust. We can discuss with you the different types of Irrevocable Trusts, and their respective advantages and disadvantages. We can explore if an Income Only Irrevocable Trust is right for you under the current law, and how other issues or potential changes could affect the use of Irrevocable Trusts with or without Income rights.
Advantages of Irrevocable Trusts and Income Only Irrevocable Trusts
The advantage of using an Irrevocable Trust to protect assets through pre-planning is fairly obvious, as a properly drafted Irrevocable Trust specifically and correctly drafted to protect assets from a nursing home (Title 19/Medical Assistance) will allow for your home or other assets to be protected and saved for yourself or your children and grandchildren. Other positives include potential tax advantages over outright gifting as well as the ability to determine who receives the irrevocable trust assets upon your death.
A couple of other advantages of Irrevocable Trusts are avoiding probate on the assets placed into the trust, and providing for your intended distribution to your children or grandchildren or other beneficiaries upon your death.
Disadvantages of Irrevocable Trusts and Income Only Irrevocable Trusts
Some of the negative aspects involve losing direct control over the irrevocable trust assets since your trustee, who is often a child of yours, will be in control of guarding the assets and administering the trust. Risks that having someone else as the Trustee may pose as well as the “five year look back period” before the house and/or other assets transferred to the irrevocable trust are “protected” from long term care and the nursing home/Title 19/Medical Assistance.
A Revocable Trust Does Not Provide Nursing Home Protection
It is important to point out that a Revocable Trust does not provide nursing home protection (Title 19/Medical Assistance protection). A Revocable Trust is often used to avoid probate and to allow for the orderly distribution of your assets to your loved ones. However, many professionals and potential clients are told or believe that a Revocable Trust will provide asset protection if they require a long term stay in a nursing home. This is false.
A Revocable Trust can provide asset protection for your beneficiaries upon your death, including children and grandchildren. However, it does not provide asset protection for you as the creator of the trust. A properly drafted Irrevocable Trust can provide limited asset protection for you and for your beneficiaries.
What Plan Is Right For You
When we meet with our clients, we discuss all of the estate planning options that are available and help our clients determine what type of plan is best. Some clients want to keep control of their assets and only want a simple Will. Many of our clients want to keep control of their assets but also want to avoid probate. Yet others want to protect certain assets from a nursing home.
As we work to best serve our clients with the most appropriate estate planning approach, we often combine a number of estate planning options to meet our clients’ goals. It is common for a client to complete a Revocable Trust to avoid probate on most assets, while placing certain selected assets, such as a house or cabin in a nursing home protected Irrevocable Trust in order to obtain nursing home protection.
What Should You Do to Establish or Update An Estate Plan
Please call our estate planning attorneys to discuss your pre-planning options and to sit down and talk about your situation and your goals. We can talk and review your situation and help determine what type of estate plan would be best for your situation and what you want to accomplish. Each plan must be customized to your situation, taking into account your personal desires and risk tolerance, as well as your financial situation, assets, health, and family situation.
Finally, we limit our estate planning and trust practice to Wisconsin residents and serve the greater Kenosha and Racine areas.