Elder lawyers think of Medicaid as an interest-free loan. If Medicaid pays for your long term care, the State of Tennessee wants re-payment after your death from remaining assets that are probated.
Your home is an exempt asset to qualify for Medicaid; however, recovery of benefits paid out by a claim made against a probated estate. There are exceptions to a Medicaid recovery such as having 1) a disabled child or blind child living in the home, 2) or a sibling living in the home continuosly for 1-year that prevented you from requiring long term care, or 3) having a child living in your home continuously for 2-years that prevented you from requiring long term care.
Some elderly folks have wondered, "Why not give away the house now to my kids??? My children will get the house anyway." If you give away your house, you lose control of the asset. Your benefits may be penalized meaning you may end up paying out of pocket for your long term care for a period of time. Your children also lose the step up basis regarding capital gains. The asset is also at risk for your children's creditors including a bankruptcy. So what seems like a great idea is not so great an idea after all.
Estate planners use special tools such as a Revocable Living Trust, an Irrevocable Trust, and a Testamentary Special Needs Trust. A Revocable Living Trust allows you as the Grantor to create and manage your trust. If you lose competency, your successor Trustee can manage the Trust and assure your assets are maintained. This is valuable in scenarios where one spouse may not be capable of managing his/her financial affairs. The Revocable Living Trust avoids probate and is particularly recommended in cases where individuals own property in more than one state to avoid ancillary probates. The Revocable Living Trust however does not provide asset protection.
The Irrevocable Trust allows the Trustee to manage the asset and such assets are now owned by the Trust, not the individual. As such, the asset can achieve protection. This is an effective tool for Medicaid planning, family planning for blended families, protecting family farms, as well as other numerous examples.
A Testamentary Special Needs Trust is an effective estate planning tool that can avoid a Medicaid recovery and make provisions for caring for a special needs spouse or child without disrupting government benefits.
Attorney Olivia Wann knows how important it is for you to care for your loved one while preserving the assets you have worked so hard to attain. Schedule your appointment today to learn how you can plan your estate.