Does my trust protect me from the nursing home?
“Does my trust protect me from the nursing home?” is one of the most common points of confusion for my estate planning clients. If you know what I am talking about, then I’m sure you heard the radio ads or maybe your friend, sibling, parent, or your long lost cousin brought it up to you at some point.
First, you need to understand that there are two general categories of trusts:
(1) Revocable - meaning you can change or revoke the trust and
(2) Irrevocable - meaning you can not change or alter the trust
Revocable trusts are more commonly used to avoid probate and do not protect your assets from a nursing home care situation.
Most revocable trusts will actually have the word “revocable” in their title - for example, the John Smith 2022 Revocable Trust - and/or there will be a provision in your trust that specifically states whether the grantor or donor (the creator of the trust) has the ability to revoke the trust.
Since you have full control over revocable trust, they do not pass the “any circumstances” test and will be countable for MassHealth purposes. On a side note: in case you didn’t know, the Medicaid administrator of Massachusetts is called MassHealth so if you live in Massachusetts then you will hear the two words used interchangeably - not to be confused with “Medicare”)
Put differently, if you (as the donor/grantor) have access to principal in any way then the assets of the trusts are countable.
On the other hand…
Irrevocable trusts (the extra “ir” is important) may protect you from a nursing home bill if the irrevocable trust is structured correctly. In a broad sense, by structured correctly, I mean that if MassHealth does not view the Grantor/Donor as having access to the principal of this trust, then you are generally in the clear.
In plain English, this means that if you can sell an asset held in trust and have access to the proceeds from the sale of the asset (for example, your home) then that is definitely a countable asset, which would be an example of an improperly structured trust. There are many other indirect ways MassHealth might view you as having access to principal (for example, if you can borrow against the house that has been placed in trust) so you need to be extremely clear that your trust does not give you any powers (directly or indirectly) that could be viewed as giving you access to the principal of the trust. Otherwise, you may violate the “any circumstances” test and make the trust countable for MassHealth purposes.
Other common traps to avoid include general powers of appointment, naming the wrong trustee, or the ability to create an annuity.
Please keep in mind that MassHealth administrative law can change with little to no notice, so you must speak with an experienced estate planning attorney before considering this type of trust. I typically do not advise clients to use these types of trust because they often backfire in practice, but I believe you have the right to be informed of your options so I hope this article provides you with some clarity.
If you want further clarification on what your trust does or doesn’t protect you from, then give me a call at 781 202 6368, email jlento@perennialtrust.com, or click here to schedule your free personal consultation.
I’m always happy to help,
Joseph M. Lento, J.D.
Your Local Estate Planning Attorney
www.PerennialEstatePlanning.com
477 Main Street
Stoneham, MA 02180
