Trusts and Nursing Home Costs

 

No matter your current age, you will likely need long-term care at some point. Long-term care can be very costly — and it can take a financial, physical, and emotional toll on your family. If you want to protect your assets from being spent for your or your spouse’s long-term care, you may think a living trust or revocable living trust will shield your assets. 

However, when you create a living trust for when you need care, these assets are generally treated as available for Medicaid repayment. The truth of the matter is careful planning is crucial, as a large percentage of people run out of money for long-term care. 

Currently, the average annual cost of nursing homes in Utah is $63,930 per year, however, most people can’t afford to pay $63,000+ per year for the long-term care they need. To that end, when your funds are exhausted, Medicaid takes over and pays for the remainder of your care. After you pass on, Medicaid expects some form of repayment for their coverage.

Because Medicaid will review your assets to prove that you qualify for their assistance, if you have any assets, including physical assets such as a house, car, or other items of value, you need to plan ahead to distribute and protect these assets.

Today, we’ll take a look at what Filial Responsibility Laws are, along with trust options — and explain how they work so you can make informed decisions regarding the best options for you and your loved ones’ future care.

 

Filial Responsibility Laws

Filial responsibility is defined as, “the duty owed by an adult child to their parents for life’s necessities.” In this context, it is when a parent requires long-term health care but cannot pay for it. 

Utah is one of thirty states that have filial responsibility laws. There are a few exceptions, but the law requires that the living children are responsible for necessities such as food, clothing, shelter, and medical attention. 

This responsibility extends past the immediate family. If the elder has children, they are responsible. If the elder has no children, then brothers and sisters are called on to be responsible. This extends all the way to the grandchildren.

Elderly woman pondering nursing home costs

What Are My Options?

You do have legal options to avoid Medicaid from seizing your assets to pay for your care. Let’s take a look at these options and how they can benefit you and your family.

Irrevocable Trusts

An irrevocable trust is a type of trust that cannot be changed or canceled once the document is signed. Whereas a revocable trust can be altered or terminated during the grantor’s life, it can only be irrevocable when the trust maker or grantor dies. 

When an irrevocable trust is created, the grantor relinquishes control of the assets placed in the trust. It is a separate tax entity, the trust pays taxes, and a trustee manages it.

Most people name one or more children as the trustee. It is similar to naming someone a power of attorney or executor of their will. While the trustee doesn’t own the assets, they manage them according to the terms of the trust. 

You can name a professional trustee, such as a lawyer or a bank. You can add a provision that allows you to fire the current trustee and appoint a new one in the even that the trustee is found to not be managing the trust in good faith.

Irrevocable trusts are typically used to reduce or avoid estate taxes. When it comes to long-term care, it can protect those assets from being sold to pay for the care before Medicaid takes over.

Special Needs Trust

When a person has special needs, they can use a special needs trust to allow the beneficiary to receive Medicaid and other government programs while also receiving funds from the trust. This type of trust is tailored to the person with special needs and designed to manage assets for their benefit. 

There are three types of special needs trusts:

  • First-party trust: this trust holds assets belonging to the person with special needs such as inheritance or an accident settlement.
  • Third-party trust: a third-party trust holds funds belonging to other individuals helping the person with special needs.
  • Pooled trust: this type of trust holds funds for multiple beneficiaries with special needs and provides funds for their needs.
Trusts and Nursing Homes

VA Trust

If the beneficiary is a veteran, a VA trust may be drafted. A VA trust is designed to protect a veteran’s assets while still receiving their VA benefits. This is an irrevocable trust, meaning that assets cannot be removed from the trust once they are placed there. 

These funds are not considered when determining the veteran’s eligibility for government assistance programs like Medicaid and Veteran’s Aid & Attendance benefits for long-term care when needed.

Medicaid Asset Protection Trust

A Medicaid Asset Protection Trust (MAPT) is designed to protect assets from being used for Medicaid eligibility. It allows a person to qualify for long-term care benefits while protecting assets from distribution for long-term care. 

As long as the trust is created and funded five years before applying for Medicaid, the person needing care will not be penalized for transferring assets.

Know Your Options and Rights

There are many more options for protecting your assets when you need long-term care. Only an attorney can help you determine which is right for you.


At ProvenLaw, our years of expertise and proven practices are employed to offer clarity, resolution, and peace for our clients and their loved ones. Whether you need to adjust an existing trust or are looking to create a new one, to draft a power of attorney, a trust or a will, or to plan for your estate in any other capacity, please contact us for your complimentary personal consultation and we’ll get you on the road to peace of mind.

Posted in ,