One of the most commonly utilized vehicles of asset transfer is the revocable living trust. These trusts are very popular because they facilitate the transfer of assets outside of probate.
When you use a last will to direct the transfer of your assets the will must be admitted to probate. Probate is the legal process of estate administration. The heirs to the estate don’t receive their inheritances until the estate has been probated and closed.
We should emphasize the fact that probate is not an inherently bad thing. The state of New York has provided us with a streamlined and effective probate process. In spite of this, people sometimes choose to avoid it. One way of doing this is through the creation of a revocable living trust.
You do not surrender control of the assets that you convey into a revocable living trust, and this is comforting to many people. This is because of the fact that the trust is in fact revocable. You can revoke the trust and it would no longer exist. It is also possible to change the terms.
Medicaid is the government health insurance program that will pay for long-term care. Medicare won’t pay for custodial care. As a result, seniors who were qualified for Medicare often rely on Medicaid late in their lives to pay for assisted living expenses.
Because Medicaid is a program that is intended for people with significant financial need, you cannot qualify if you have assets that exceed certain parameters.
People who want to qualify for Medicaid sometimes divest themselves of assets in advance to be able to meet the financial requirements. This can involve the creation of a trust.
You may assume that a revocable living trust would serve this purpose. However, this is not the case. A trust that would be useful for Medicaid planning would not be revocable.
If you still have control of the assets they would be looked upon as countable by the Medicaid program. The good news is that there are irrevocable trusts that can be used to set aside assets for the benefit of loved ones. Assets conveyed into this type of trust would not be counted by Medicaid.
Long-Term Care Costs
Many people who are going to be qualified for Medicare don’t worry about long-term care expenses. They assume that Medicare will cover living assistance costs. Eventually, they get a rude awakening.
Perhaps surprisingly, Medicaid serves as the solution for most of the people residing in long-term care facilities in the United States.
If you want to be comprehensively prepared for your senior years, you should certainly prepare for possible long-term care costs. The creation of an irrevocable Medicaid trust can be part of the plan.