Using estate planning for asset protection

by | Feb 9, 2018 | Firm News |

Many people in East Hanover may be planning for the fact that they may eventually need to enter a nursing home. While they may put a lot of thought into which facility would provide them with the best quality of care, they also will have to consider how they will pay for nursing home care. And nursing homes aren’t cheap. A 2012 survey reported that, depending on where they are located, a stay in a nursing home could cost anywhere from $6,600 to $15,000 monthly. This is a huge expense that must be accounted for.

Some people may decide to pay for such care through Medicaid. However, in order to qualify for this government program, there is a limit to how much a person can have in the way of “countable assets.” Generally, this limit is capped at $2,000 for a single person or $3,000 for married spouses, although the exact limit will vary from state-to-state.

People should note that there are ways that a person could qualify for Medicaid without necessarily putting themselves or their partner into poverty. The following are some estate planning tools that may help in this endeavor.

One way to protect assets is through an irrevocable trust. In an irrevocable trust, the trust is funded with assets that are controlled by a trustee. Irrevocable trusts also protect funds from certain life events that could deplete them, such as a divorce or a lawsuit. Readers should note, however, that there is a “look back” period when it comes to Medicaid eligibility of five years.

Promissory notes and private annuities are also ways to protect assets. These may be useful when it comes to affording nursing home care while a person is ineligible for Medicaid. Pooled trusts are also an option. In addition, spousal transfers will not be penalized by Medicaid. However, a spousal refusal may need to be executed.

With the right planning, people in New Jersey and nationwide can be in a good position to qualify for Medicaid, if that is what they choose. Keep in mind that each person’s situation is unique, so those interested in Medicaid planning and asset protection may want to consult with an attorney first.

Source: Investopedia, “Top 5 Strategies To Pay For Elder Care,” accessed Feb. 5, 2018